1
EXHIBIT 10.5
EMPLOYEE MATTERS AGREEMENT
BETWEEN
RELIANT ENERGY, INCORPORATED
AND
RELIANT RESOURCES, INC.
2
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS.......................................................1
1.01 ACTION.................................................2
1.02 AFFILIATES.............................................2
1.03 AGREEMENT..............................................2
1.04 AICP...................................................2
1.05 ANCILLARY AGREEMENTS...................................2
1.06 ASO CONTRACTS..........................................2
1.07 BENEFIT RESTORATION PLAN...............................2
1.08 COBRA..................................................2
1.09 CODE...................................................2
1.10 COMMON STOCK...........................................2
1.11 DEFERRED COMPENSATION PLAN.............................2
1.12 DISTRIBUTION...........................................3
1.13 DISTRIBUTION DATE......................................3
1.14 DISTRIBUTION RATIO.....................................3
1.15 DOL....................................................3
1.16 EMPLOYMENT LIABILITIES.................................3
1.17 ERISA..................................................3
1.18 ESOP...................................................3
1.19 EXECUTIVE PLANS........................................3
1.20 FLEXIBLE BENEFITS PLAN.................................4
1.21 FMLA...................................................4
1.22 FOREIGN PLAN...........................................4
1.23 FRINGE BENEFITS........................................4
1.24 GOVERNMENTAL AUTHORITY.................................4
1.25 GROUP INSURANCE POLICIES...............................4
1.26 HCFA...................................................4
1.27 HEALTH AND WELFARE PLANS...............................4
1.28 HEALTH PLANS...........................................4
1.29 HMO....................................................5
1.30 HMO AGREEMENTS.........................................5
1.31 IPO....................................................5
1.32 IPO CLOSING DATE.......................................5
1.33 IRS....................................................5
1.34 LEAVE OF ABSENCE PROGRAMS..............................5
1.35 LIABILITIES............................................5
1.36 LICP...................................................5
1.37 LTIP...................................................5
1.38 NEW REI OPTION.........................................5
1.39 NORAM RABBI TRUSTS.....................................5
1.40 OPTION.................................................6
1.41 OUTSOURCE..............................................6
1.42 PARTICIPATING COMPANY..................................6
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1.43 PBGC........................................................................6
1.44 PERSON......................................................................6
1.45 PLAN........................................................................6
1.46 QDRO........................................................................6
1.47 QMCSO.......................................................................6
1.48 RECORD DATE.................................................................6
1.49 REI.........................................................................6
1.50 REI EMPLOYEE................................................................7
1.51 REI GROUP...................................................................7
1.52 REI STOCK VALUE.............................................................7
1.53 REI TERMINATED EMPLOYEE.....................................................7
1.54 REI WCP.....................................................................7
1.55 RESOURCES...................................................................7
1.56 RESOURCES EMPLOYEE..........................................................7
1.57 RESOURCES GROUP.............................................................7
1.58 RESOURCES RETIRED EMPLOYEE..................................................7
1.59 RESOURCES STOCK VALUE.......................................................8
1.60 RESOURCES TERMINATED EMPLOYEE...............................................8
1.61 RESOURCES UNION EMPLOYEES...................................................8
1.62 RESOURCES WCP CLAIMS........................................................8
1.63 RETIREMENT PLAN.............................................................8
1.64 SAVINGS PLAN................................................................8
1.65 SAVINGS RESTORATION PLAN....................................................8
1.66 SEC.........................................................................8
1.67 SEPARATION..................................................................9
1.68 SEPARATION AGREEMENT........................................................9
1.69 SEPARATION DATE.............................................................9
1.70 SEVERANCE PLANS.............................................................9
1.71 STOCK PLAN..................................................................9
1.72 STOCK PURCHASE PLAN.........................................................9
1.73 SUBSIDIARY..................................................................9
1.74 TAX ALLOCATION AGREEMENT....................................................9
1.75 UNION PLANS.................................................................9
ARTICLE II. GENERAL PRINCIPLES....................................................................9
2.01 ASSUMPTION OF RESOURCES LIABILITIES.........................................9
2.02 EMPLOYMENT LIABILITIES INDEMNIFICATION.....................................10
2.03 ESTABLISHMENT OF RESOURCES PLANS...........................................12
2.04 RESOURCES'S PARTICIPATION IN REI PLANS.....................................13
2.05 TERMS OF PARTICIPATION BY RESOURCES EMPLOYEES IN RESOURCES PLANS...........15
2.06 FOREIGN PLANS..............................................................15
2.07 UNION PLANS................................................................15
2.08 RELIANT ENERGY TEGCO, INC. EMPLOYEES.......................................16
2.09 VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATIONS..............................16
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ARTICLE III. DEFINED BENEFIT PLAN................................................................16
3.01 RESOURCES EMPLOYEES' PARTICIPATION IN RETIREMENT PLAN......................16
ARTICLE IV. DEFINED CONTRIBUTION PLAN............................................................17
4.01 RESOURCES SAVINGS PLAN.....................................................17
4.02 ESOP.......................................................................17
4.03 REMA SAVINGS PLAN..........................................................17
4.04 RESOURCES RETIRED EMPLOYEES................................................18
ARTICLE V. EXECUTIVE AND OTHER PLANS.............................................................18
5.01 EXECUTIVE PLANS............................................................18
5.02 DEFERRED COMPENSATION PLAN.................................................18
5.03 BENEFIT AND SAVINGS RESTORATION PLANS......................................19
5.04 RABBI TRUSTS...............................................................20
5.05 SEVERANCE PLANS............................................................20
ARTICLE VI. HEALTH AND WELFARE PLANS.............................................................20
6.01 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES..........................20
6.02 CLAIMS FOR HEALTH AND WELFARE PLANS........................................21
6.03 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS................................22
6.04 VENDOR AND INSURANCE ARRANGEMENTS..........................................23
6.05 COBRA AND HIPPA............................................................23
6.06 LEAVE OF ABSENCE PROGRAMS AND FMLA.........................................24
6.07 REI WORKERS' COMPENSATION PROGRAM..........................................24
ARTICLE VII. EQUITY AND OTHER COMPENSATION.......................................................26
7.01 REI OPTIONS................................................................26
7.02 REI RESTRICTED SHARES......................................................27
7.03 STOCK PURCHASE PLAN........................................................27
7.04 RESOURCES LONG-TERM INCENTIVE PLAN.........................................27
7.05 RESOURCES ANNUAL INCENTIVE COMPENSATION PLAN...............................28
ARTICLE VIII. FRINGE AND OTHER BENEFITS..........................................................28
8.01 FRINGE BENEFITS............................................................28
8.02 APPLIANCE LOANS............................................................28
8.03 CHAIRMAN'S SCHOLARSHIP FUNDS...............................................28
8.04 REI FOUNDATION.............................................................28
8.05 OTHER BENEFITS.............................................................28
ARTICLE IX.......................................................................................29
9.01 TRANSITION SERVICES AGREEMENT..............................................29
9.02 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS..................29
9.03 SHARING OF PARTICIPANT INFORMATION.........................................29
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9.04 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS....................29
9.05 AUDITS REGARDING VENDOR CONTRACTS..........................................30
9.06 BENEFICIARY DESIGNATIONS...................................................30
9.07 REQUESTS FOR IRS AND DOL OPINIONS..........................................30
9.08 FIDUCIARY MATTERS..........................................................30
9.09 CONSENT OF THIRD PARTIES...................................................30
9.10 TAX COOPERATION............................................................31
9.11 PLAN RETURNS...............................................................31
ARTICLE X. EMPLOYMENT-RELATED MATTERS............................................................31
10.01 TERMS OF RESOURCES EMPLOYMENT..............................................31
10.02 HR DATA SUPPORT SYSTEMS....................................................31
10.03 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS...............................31
10.04 CONFIDENTIALITY AND PROPRIETARY INFORMATION................................31
10.05 ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND COMMISSIONS...................36
10.06 PAYROLL AND WITHHOLDING....................................................36
10.07 PERSONNEL AND PAY RECORDS..................................................37
10.08 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES................37
ARTICLE XI. GENERAL PROVISIONS...................................................................37
11.01 EFFECT IF IPO AND/OR DISTRIBUTION DOES NOT OCCUR...........................37
11.02 RELATIONSHIP OF PARTIES....................................................37
11.03 AFFILIATED COMPANIES.......................................................37
11.04 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS...........................38
11.05 GOVERNING LAW..............................................................38
11.06 SEVERABILITY...............................................................38
11.07 AMENDMENT..................................................................38
11.08 TERMINATION................................................................38
11.09 CONFLICT...................................................................39
11.10 COUNTERPARTS...............................................................39
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EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS 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, the Board of Directors of REI and Resources have each
determined that it would be appropriate and desirable for REI to separate the
Resources Group from the REI Group;
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%;
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");
WHEREAS, in furtherance of the foregoing, REI and Resources
have agreed to enter into this Agreement to allocate between them assets,
liabilities and responsibilities with respect to certain employee compensation,
benefit plans and programs, and certain employment matters; and
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements set forth below, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Wherever used in this Agreement, the following terms shall
have the meanings indicated below, unless a different meaning is plainly
required by the context. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Separation Agreement. The
singular shall include the plural, unless the context indicates otherwise.
Headings of sections are used for convenience of reference only, and in case of
conflict, the text of this Agreement, rather than such headings, shall control:
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1.01 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.
1.02 AFFILIATES. "Affiliates" shall have the meaning set forth
in the Separation Agreement.
1.03 AGREEMENT. "Agreement" means this Employee Matters
Agreement, including all the Addenda, Schedules and Exhibits hereto, and all
amendments made hereto from time to time.
1.04 AICP. "AICP," when immediately preceded by "REI," means
the Reliant Energy, Incorporated Annual Incentive Compensation Plan, as amended
and restated effective January 1, 1999. When immediately preceded by
"Resources," "AICP" means the annual incentive compensation plan to be
established by Resources pursuant to Sections 2.03 and 7.05.
1.05 ANCILLARY AGREEMENTS. "Ancillary Agreements" shall have
the meaning set forth in the Separation Agreement.
1.06 ASO CONTRACTS. "ASO Contracts" is defined in Subsection
6.04(a) and Schedule 6.04(a).
1.07 BENEFIT RESTORATION PLAN. "Benefit Restoration Plan,"
when immediately preceded by "REI," means the Reliant Energy, Incorporated
Benefit Restoration Plan, as established effective June 1, 1985 and thereafter
amended from time to time. When immediately preceded by "Resources," "Benefit
Restoration Plan" means the frozen Resources Benefit Restoration Plan to be
established by Resources pursuant to Sections 2.03 and 5.03.
1.08 COBRA. "COBRA" means the continuation coverage
requirements for "group health plans" under Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended from time to time, and as codified
in Code Section 4980B and ERISA Sections 601 through 608.
1.09 CODE. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
1.10 COMMON STOCK. "Common Stock," when immediately preceded
by "REI," means the common stock, without par value of REI. When immediately
preceded by "Resources," "Common Stock" means the common stock, par value $.001
per share, of Resources.
1.11 DEFERRED COMPENSATION PLAN. "Deferred Compensation Plan,"
when immediately preceded by "REI," means the Reliant Energy, Incorporated
Deferred Compensation Plan, as established effective September 1, 1985, the
Reliant Energy, Incorporated Deferred Compensation Plan, as amended and restated
effective January 1, 1989, and the Reliant Energy, Incorporated Deferred
Compensation Plan, as amended and restated effective January 1, 1991, each such
plan as thereafter amended from time to time. Depending on the context, "REI
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Deferred Compensation Plan" shall mean all of such plans or a particular one of
such plans. When immediately preceded by "Resources," "Deferred Compensation
Plan" means the deferred compensation plan to be established by Resources
pursuant to Sections 2.03 and 5.02 that corresponds to the REI Deferred
Compensation Plan.
1.12 DISTRIBUTION. "Distribution" has the meaning set forth in
the Recitals hereof, as the same is further described in the Separation
Agreement.
1.13 DISTRIBUTION DATE. "Distribution Date" shall have the
meaning set forth in the Separation Agreement.
1.14 DISTRIBUTION RATIO. "Distribution Ratio" means the number
of shares of Resources Common Stock each holder of REI Common Stock on the
Record Date (or such holder's designated transferee or transferees) will be
entitled to receive in the Distribution determined by multiplying the number of
shares of REI Common Stock held by such holder on the Record Date by a fraction,
the numerator of which is the number of shares of Resources Common Stock
beneficially owned by REI on the Record Date and the denominator of which is the
number of shares of REI Common Stock outstanding on the Record Date.
1.15 DOL. "DOL" means the United States Department of Labor.
1.16 EMPLOYMENT LIABILITIES. "Employment Liabilities" means
all claims, causes of action, demands, liabilities, debts or damages (known or
unknown) related to all employment matters addressed in this Agreement,
including but not limited to claims arising under federal, state or local
statute (including, without limitation, Title VII of the Civil Rights Act of
1964, as amended ("Title VII"); the Age Discrimination in Employment Act of
1967, including the Older Workers Benefit Protection Act of 1990 ("ADEA"); the
Civil Rights Act of 1866, as amended, the Civil Rights Act of 1991, the
Americans with Disabilities Act of 1990 ("ADA"), the Energy Reorganization Act,
as amended, 42 U.S.C. Section 5851; the Workers Adjustment and Retraining
Notification Act of 1988; the Pregnancy Discrimination Act of 1978; ERISA; FMLA;
the Fair Labor Standards Act; the Occupational Safety and Health Act; the Equal
Pay Act); claims in connection with workers' compensation or "whistle blower"
statutes and/or contract, tort, defamation, slander, wrongful termination or any
other state or federal regulatory, statutory or common law or local ordinance.
1.17 ERISA. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
1.18 ESOP "ESOP" means the employee stock ownership plan
portion of the REI Savings Plan.
1.19 EXECUTIVE PLANS. "Executive Plans," when immediately
preceded by "REI," means the Houston Industries Incorporated Executive Life
Insurance Plan and the Houston Industries Incorporated Executive Benefits Plan.
When immediately preceded by "Resources," "Executive Plans" means the Resources
executive plans to be established pursuant to Sections 2.03 and 5.01 that
correspond to the respective REI Executive Plans.
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1.20 FLEXIBLE BENEFITS PLAN. "Flexible Benefits Plan," when
immediately preceded by "REI," means the Reliant Energy, Incorporated Flexible
Benefits Plan. When immediately preceded by "Resources," Flexible Benefits Plan
means the flexible benefits plan to be established by Resources pursuant to
Section 2.03 and Article VI that corresponds to the REI Flexible Benefits Plan.
1.21 FMLA. "FMLA" means the Family and Medical Leave Act of
1993, as amended from time to time.
1.22 FOREIGN PLAN. "Foreign Plan" means those Resources Plans
maintained by Resources for the benefit of its non-expatriate employees outside
the U.S.
1.23 FRINGE BENEFITS. "Fringe Benefits," when immediately
preceded by "REI," means the REI fringe benefits, plans, programs and
arrangements sponsored and maintained by REI (as set forth in Article VIII).
When immediately preceded by "Resources," "Fringe Benefits" means the fringe
benefits, plans, programs and arrangements established or to be established by
Resources pursuant to Section 2.03 and Article VIII that correspond to the
respective REI Fringe Benefits.
1.24 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.
1.25 GROUP INSURANCE POLICIES. "Group Insurance Policies" is
defined in Subsection 6.04(b) and the Schedule thereto.
1.26 HCFA. "HCFA" means the United States Health Care
Financing Administration.
1.27 HEALTH AND WELFARE PLANS. "Health and Welfare Plans,"
when immediately preceded by "REI," means the REI Health Plans, the REI Flexible
Benefits Plan, and the health and welfare plans listed on Schedule 1.27
established and maintained by REI for the benefit of employees and retirees of
any member of the REI Group, and such other welfare plans or programs as may
apply to such employees and retirees as of the Distribution Date. When
immediately preceded by "Resources," "Health and Welfare Plans" means the
Resources Health Plans, the Resources Flexible Benefits Plan, and the health and
welfare plans to be established by Resources pursuant to Section 2.03 and
Article VI that correspond to the respective REI Health and Welfare Plans.
1.28 HEALTH PLANS. "Health Plans," when immediately preceded
by "REI," means the Plans set forth on Schedule 1.28, and any similar or
successor plans, programs or arrangements. When immediately preceded by
"Resources," "Health Plans" means the health plans, programs and arrangements to
be established by Resources pursuant to Section 2.03 and Article VI that
correspond to the respective REI Health Plans.
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1.29 HMO. "HMO" means a health maintenance organization that
provides benefits under the REI Health Plans or the Resources Health Plans.
1.30 HMO AGREEMENTS. "HMO Agreements" is defined in Subsection
6.04(c) and Schedule 6.04(c).
1.31 IPO. "IPO" has the meaning set forth in the Recitals
hereof, as the same is further described in the Separation Agreement.
1.32 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.
1.33 IRS. "IRS" means the United States Internal Revenue
Service.
1.34 LEAVE OF ABSENCE PROGRAMS. "Leave of Absence Programs,"
when immediately preceded by "REI," means the personal, medical, military and
FMLA leave offered from time to time under the personnel policies and practices
of REI. When immediately preceded by "Resources," "Leave of Absence Programs"
means the leave of absence programs established and maintained by Resources.
1.35 LIABILITIES. "Liabilities" shall mean any and all
Indebtedness (as such term is defined in the Separation Agreement), 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.
1.36 LICP. "LICP" means the 1994 Houston Industries
Incorporated Long-Term Incentive Compensation Plan and the Houston Industries
Incorporated Long-Term Incentive Compensation Plan (Established Effective as of
January 1, 1989), each such plan as thereafter amended from time to time.
1.37 LTIP. "LTIP" means the Long-Term Incentive Plan of
Reliant Resources, Inc. as described in Section 7.04.
1.38 NEW REI OPTION. "New REI Option" shall have the meaning
set forth in Section 7.01.
1.39 NORAM RABBI TRUSTS. "NorAm Rabbi Trusts" means that
certain trust agreement dated as of August 8, 1989 by and between Arkla, Inc.
and Boatmen's Trust Company (also referred to as "Trust Agreement No. 1"), that
certain trust agreement dated as of August 8, 1989 by and between Arkla, Inc.
and Boatmen's Trust Company (also referred to as "Trust Agreement No. 2") and
that certain trust agreement dated as of August 8, 1989 by and between Arkla,
Inc. and Boatmen's Trust Company (also referred to as "Trust Agreement No. 3").
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1.40 OPTION. "Option," when immediately preceded by "REI,"
means an option to purchase REI common stock pursuant to a Stock Plan. When
immediately preceded by "Resources," "Option" means an option to purchase
Resources common stock pursuant to a plan providing such benefits to be
established by Resources pursuant to Section 2.03 and Article VII.
1.41 OUTSOURCE. "Outsource" is defined in Subsection 6.02(b).
1.42 PARTICIPATING COMPANY. "Participating Company" means: (a)
REI; (b) any Person (other than an individual) that REI has approved for
participation in, has accepted participation in, and which is participating in,
a Plan sponsored by REI; or (c) any Person (other than an individual) which, by
the terms of such a Plan, participates in such a Plan sponsored by REI or any
employees of which, by the terms of such a Plan, participate in or are covered
by such a Plan.
1.43 PBGC. "PBGC" means the Pension Benefit Guaranty
Corporation.
1.44 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.
1.45 PLAN. "Plan," depending on the context, may mean any
plan, policy, program, payroll practice, arrangement, contract, trust, insurance
policy, or any agreement or funding vehicle providing compensation or benefits
to employees, former employees or directors of REI or Resources.
1.46 QDRO. "QDRO" means a domestic relations order which
qualifies under Code Section 414(p) and ERISA Section 206(d) and which creates
or recognizes an alternate payee's right to, or assigns to an alternate payee,
all or a portion of the benefits payable to a participant under the REI Savings
Plan or the Retirement Plan.
1.47 QMCSO. "QMCSO" means a medical child support order which
qualifies under ERISA Section 609(a) and which creates or recognizes the
existence of an alternate recipient's right to, or assigns to an alternate
recipient the right to, receive benefits for which a participant or beneficiary
is eligible under any of the Health Plans.
1.48 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 Resources
Common Stock in the Distribution.
1.49 REI. "REI" means Reliant Energy, Incorporated a Texas
corporation. In all such instances in which REI is referred to in this
Agreement, it shall also be deemed to include a reference to each member of the
REI Group, unless it specifically provides otherwise; REI shall be solely
responsible to Resources for ensuring that each member of the REI Group complies
with the applicable terms of this Agreement.
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1.50 REI EMPLOYEE. "REI Employee" means an individual who, on
the Distribution Date, is or was employed with any member of the REI Group and
is not a Resources Employee.
1.51 REI GROUP. "REI Group" shall have the meaning set forth
in the Separation Agreement.
1.52 REI STOCK VALUE. "REI Stock Value" means the average over
the five trading days immediately preceding the Distribution Date of the high
and low sales price (with dividend) of a share of REI Common Stock on the New
York Stock Exchange - Composite Transactions reporting system, as reported in
The Wall Street Journal on each of the five trading days immediately preceding
the Distribution Date.
1.53 REI TERMINATED EMPLOYEE. "REI Terminated Employee" means
any individual who is a former employee of any member of the REI Group and who,
on the Distribution Date, is not a Resources Employee.
1.54 REI WCP. "REI WCP" means the REI Workers' Compensation
Program, comprised of the various arrangements established by a member of the
REI Group to comply with the workers' compensation requirements of the states in
which the REI Group conducts business.
1.55 RESOURCES. "Resources" means Reliant Resources, Inc., a
Delaware corporation. In all such instances in which Resources is referred to in
this Agreement, it shall also be deemed to include a reference to each member of
the Resources Group, unless it specifically provides otherwise; Resources shall
be solely responsible to REI for ensuring that each member of the Resources
Group complies with the applicable terms of this Agreement.
1.56 RESOURCES EMPLOYEE. "Resources Employee" means any
individual who, as of the Distribution Date, is: (a) either actively employed
by, or on a leave of absence from, any member of the Resources Group; (b) a
Resources Terminated Employee; (c) an alternate payee under a QDRO, alternate
recipient under a QMCSO, beneficiary, covered dependent, or qualified
beneficiary (as such term is defined under COBRA), of an employee described in
Subsection (a) or (b) above; or (d) an employee or group of employees designated
by REI and Resources, by mutual agreement, as Resources Employees; but not (e) a
Resources Retired Employee. An employee may be a Resources Employee pursuant to
this Section regardless of whether such employee is, as of the Distribution
Date, alive, actively employed, on a temporary leave of absence from active
employment, on layoff, terminated from employment, retired or on any other type
of employment or post-employment status relative to a REI Plan, and regardless
of whether, as of the Distribution Date, such employee is then receiving any
benefits from a REI Plan.
1.57 RESOURCES GROUP. "Resources Group" shall have the meaning
set forth in the Separation Agreement.
1.58 RESOURCES RETIRED EMPLOYEE. "Resources Retired Employee"
means any individual who would have qualified as a Resources Employee but who
retired on or
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after January 1, 2001 and on or before the Distribution Date and who is
identified as a Resources Retired Employee by mutual agreement between Resources
and REI on or before the Distribution Date.
1.59 RESOURCES STOCK VALUE. "Resources Stock Value" means the
average of the high and low sales price of a share of Resources Common Stock on
the New York Stock Exchange - Composite Transactions reporting system, as
reported in The Wall Street Journal, for each of the five trading days
immediately preceding the Distribution Date.
1.60 RESOURCES TERMINATED EMPLOYEE. "Resources Terminated
Employee" means any individual who is a former employee of any member of the REI
Group who was terminated from any member of the Resources Group on or after
January 1, 2001 and on or before the Distribution Date. Notwithstanding the
foregoing, "Resources Terminated Employee" shall not, unless otherwise expressly
provided to the contrary in this Agreement, include: (a) an individual who is a
REI Employee at the Distribution Date; (b) an individual who is otherwise a
Resources Terminated Employee, but who is subsequently employed by any member of
the REI Group on or prior to the Distribution Date; or (c) a Resources Retired
Employee.
1.61 RESOURCES UNION EMPLOYEES. "Resources Union Employees"
mean Resources Employees whose employment is covered by the terms of a
collective bargaining agreement.
1.62 RESOURCES WCP CLAIMS. "Resources WCP Claims" is defined
in Subsection 6.07(a)(i).
1.63 RETIREMENT PLAN. "Retirement Plan" means the Reliant
Energy, Incorporated Retirement Plan, a defined benefit plan.
1.64 SAVINGS PLAN. "Savings Plan" when immediately preceded by
"REI," means the Reliant Energy, Incorporated Savings Plan, a defined
contribution plan. When immediately preceded by "Resources," " Savings Plan"
means the savings plan to be established by Resources pursuant to Sections 2.03
and 4.01. When immediately preceded by "REMA," "Savings Plan" means the Reliant
Energy Mid-Atlantic Savings Plan for Non-Union Employees, a defined contribution
plan.
1.65 SAVINGS RESTORATION PLAN. "Savings Restoration Plan,"
when immediately preceded by REI, means the Reliant Energy, Incorporated Savings
Restoration Plan, as established effective January 1, 1991 and thereafter
amended from time to time. When immediately preceded by "Resources," "Savings
Restoration Plan" means the plan to be established by Resources pursuant to
Section 5.03(b) which corresponds to the REI Savings Restoration Plan.
1.66 SEC. "SEC" means the United States Securities and
Exchange Commission.
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1.67 SEPARATION. "Separation" shall have the meaning set forth
in the Separation Agreement.
1.68 SEPARATION AGREEMENT. "Separation Agreement" means the
Master Separation Agreement between REI and Resources entered into as of
December 31, 2000 of which this Agreement is an Exhibit.
1.69 SEPARATION DATE. "Separation Date" shall have the meaning
set forth in the Separation Agreement.
1.70 SEVERANCE PLANS. "Severance Plans," when immediately
preceded by "REI," means the severance pay plans established and maintained by
REI. When immediately preceded by "Resources," "Severance Plans" means the
severance pay plans established and maintained by Resources.
1.71 STOCK PLAN. "Stock Plan," when immediately preceded by
"REI," means the LICP, the Houston Industries, Incorporated Stock Plan for
Outside Directors, the Reliant Energy, Incorporated Business Unit Performance
Share Plan, and the Reliant Energy, Incorporated and Subsidiaries Common Stock
Participation Plan for Designated New Employees and Non-Officer Employees.
1.72 STOCK PURCHASE PLAN. "Stock Purchase Plan" means the
Reliant Resources, Inc. Employee Stock Purchase Plan as established by Resources
pursuant to Section 7.03.
1.73 SUBSIDIARY. "Subsidiary" shall have the meaning set forth
in the Separation Agreement.
1.74 TAX ALLOCATION AGREEMENT. "Tax Allocation Agreement"
means the Ancillary Agreement which is attached as an exhibit to the Separation
Agreement.
1.75 UNION PLANS. "Union Plans," means all Plans maintained by
REI or Resources for the benefit of certain of their bargaining unit employees.
ARTICLE II.
GENERAL PRINCIPLES
2.01 ASSUMPTION OF RESOURCES LIABILITIES. Except as specified
otherwise in this Agreement, or as mutually agreed upon by Resources and REI
from time to time, REI hereby assumes and agrees to pay, perform, fulfill and
discharge, in accordance with their respective terms, subject to Section 9.02
and to the indemnification provisions of Section 2.02, all Liabilities to or
relating to Resources Retired Employees, to the extent relating to, arising out
of or resulting from former employment with any member of the REI Group and/or
the Resources Group (including Liabilities arising under or relating to REI
Plans and Resources
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Plans). Except as specified otherwise in this Agreement, or as mutually agreed
upon by Resources and REI from time to time, Resources hereby assumes and agrees
to pay, perform, fulfill and discharge, in accordance with their respective
terms, all of the following: (a) subject to Section 9.02 and to the
indemnification provisions of Section 2.02, all Liabilities to or relating to
Resources Employees, in each case relating to, arising out of or resulting from
employment by any member of the REI Group before the Distribution Date,
(including Liabilities arising under or relating to REI Plans and Resources
Plans); (b) subject to Section 9.02 and to the indemnification provisions of
Section 2.02, all other Liabilities to or relating to employees of any member of
the Resources Group, to the extent relating to, arising out of or resulting from
future, present or former employment with any member of the Resources Group
(including Liabilities arising under or relating to REI Plans and Resources
Plans); (c) subject to Section 9.02 and to the indemnification provisions of
Section 2.02, all Liabilities relating to, arising out of or resulting from any
other actual or alleged employment relationship with any member of the Resources
Group; and (d) subject to Section 9.02 and to the indemnification provisions of
Section 2.02, all other Liabilities relating to, arising out of or resulting
from obligations, liabilities and responsibilities expressly assumed or retained
by any member of the Resources Group or a Resources Plan, pursuant to this
Agreement.
2.02 EMPLOYMENT LIABILITIES INDEMNIFICATION
(a) Indemnification by Resources. Except as otherwise
provided in this Agreement, including Subsection 2.02(c), Resources shall, for
itself and as agent for each member of the Resources Group, indemnify, defend
(or, where applicable, pay the defense costs for) and hold harmless the REI
Indemnitees (as such term is defined in the Separation Agreement) from and
against any and all Employment Liabilities that any third party seeks to impose
upon the REI Indemnitees, or which are imposed upon the REI Indemnitees, if and
to the extent such Employment Liabilities relate to, arise out of or result from
any of the following items (without duplication):
(i) any acts or omissions or alleged
acts or omissions by or on behalf
of any member or person employed by
a member of the Resources Group in
the conduct of the Resources
Business;
(ii) any claim by an officer of any
member of the Resources Group (who
is an officer as of the IPO Closing
Date) against any member or
employee of any member of the REI
Group except with respect to
benefit obligations of Resources
Employees assumed by REI pursuant
to a specific provision of this
Agreement; and
(iii) any breach by Resources or any
member or person employed by a
member of the
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Resources Group of this Agreement,
the Separation Agreement or any
other Ancillary Agreement.
In the event that any member of the Resources Group makes a
payment to the REI Indemnitees hereunder, and the Employment Liability on
account of which such payment was made is subsequently diminished, either
directly or through a third-party recovery, REI will promptly repay (or will
procure a REI Indemnitee to promptly repay) such member of the Resources Group
the amount by which the payment made by such member of the Resources Group
exceeds the actual cost of the associated indemnified Employment Liability.
(b) Indemnification by REI. Except as otherwise
provided in this Agreement, including Subsection 2.02(c), REI shall, for itself
and as agent for each member of the REI Group, indemnify, defend (or, where
applicable, pay the defense costs for) and hold harmless the Resources
Indemnitees (as such term is defined in the Separation Agreement) from and
against any and all Employment Liabilities that any third party seeks to impose
upon the Resources Indemnitees, or which are imposed upon the Resources
Indemnitees, if and to the extent such Employment Liabilities relate to, arise
out of or result from any of the following items (without duplication):
(i) any acts or omissions or alleged
acts or omissions by or on behalf
of any member or person employed by
a member of the REI Group in the
conduct of the REI Business;
(ii) any claim by an officer of any
member of the REI Group (who is an
officer as of the IPO Closing Date)
against any member or employee of
any member of the Resources Group;
and
(iii) any breach by REI or any member or
person employed by a member of the
REI Group of this Agreement, the
Separation Agreement or any other
Ancillary Agreement.
In the event that any member of the REI Group makes a payment
to the Resources Indemnitees hereunder, and the Employment Liability on account
of which such payment was made is subsequently diminished, either directly or
through a third-party recovery, Resources will promptly repay (or will procure a
Resources Indemnitee to promptly repay) such member of the REI Group the amount
by which the payment made by such member of the REI Group exceeds the actual
cost of the indemnified Employment Liability.
(c) Exceptions. In accordance with the current
practice in effect as of the execution of the Agreement, with respect to claims
for benefits or compensation, if an underlying act or omission as contemplated
in Subsections 2.02(a) or 2.02(b) occurs and
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such act or omission constitutes the principal basis for such a claim, then
Subsection 2.02(a) or (b) shall apply, as applicable, to establish
indemnification obligations. If, however, no specific act or omission occurs
that is attributable to REI or Resources and the principal underlying basis for
a claim for benefits or compensation involves plan administration or other
similar systemic type activities related to maintenance of plans,
notwithstanding Subsections 2.02(a) and (b), in accordance with the current
practice in effect as of the execution of the Agreement, Resources and REI shall
be responsible for their pro rata allocated share of costs to defend such claim.
In addition, if a claim relates specifically to the transfer or other movement
of employment between REI and Resources in connection with the Separation and to
the employee benefit changes made in connection therewith, then notwithstanding
Subsections 2.02(a) and (b), in accordance with the current practice in effect
as of the execution of the Agreement, Resources and REI shall be responsible for
their pro rata allocated share of costs to defend such claim.
(d) Relationship to Article III of Separation
Agreement.
(i) Unless expressly modified in this
Section 2.02, all other provisions
of Article III of the Separation
Agreement will apply to an
indemnifiable claim.
(ii) Any claim which is not an
Employment Liability will only be
subject to the provisions of the
Separation Agreement.
2.03 ESTABLISHMENT OF RESOURCES PLANS.
(a) Health and Welfare Plans and Retiree Medical.
Except as specified otherwise in this Agreement, effective as
of the Distribution Date or such other date(s) as REI and
Resources may mutually agree, Resources shall establish the
Resources Health and Welfare Plans. The foregoing Resources
Health and Welfare Plans as in effect as of the Distribution
Date shall be substantially comparable to the REI Plans as in
effect on the Distribution Date; provided, however, that
Resources shall not establish a substantially comparable
retiree life or retiree medical program (except as may be
required for certain, if any, Resources Union Employees) but
shall, in its discretion, make available a group insurance
arrangement through which eligible retired employees of the
members of the Resources Group may purchase retiree medical
insurance at group rates.
(b) Savings Plan and Fringe Benefits. Except as
specified otherwise in this Agreement, effective as of the
Distribution Date or such other date(s) as REI and Resources
may mutually agree, Resources shall establish the Resources
Savings Plan as more fully described in Article IV and the
Resources Fringe Benefits as more fully described in Article
VIII.
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(c) Equity and Other Compensation. Except as
specified otherwise in this Agreement, effective as of January
1, 2001, or such other date(s) as REI and Resources may
mutually agree, Resources shall establish the Resources AICP,
the Resources Stock Purchase Plan and the LTIP, and effective
as of the Distribution Date or such other date(s) as REI and
Resources may mutually agree, Resources shall establish such
Plans as may be determined to be appropriate, including,
without limitation, the Resources Deferred Compensation Plan,
Resources Savings Restoration Plan, Resources Benefit
Restoration Plan and Resources Executive Plans. The foregoing
Resources Plans shall be substantially comparable to the REI
Plans as in effect on the Distribution Date.
(d) Resources Under No Obligation to Maintain Plans.
Except as specified otherwise in this Agreement, nothing in
this Agreement shall preclude Resources, at any time from
amending, merging, modifying, terminating, eliminating,
reducing, or otherwise altering in any respect any Resources
Plan, any benefit under any Resources Plan or any trust,
insurance policy or funding vehicle related to any Resources
Plan (to the extent permitted by law).
2.04 RESOURCES'S PARTICIPATION IN REI PLANS.
(a) Participation in REI Plans.
(i) Except as specified otherwise in
this Agreement, or as REI and
Resources may mutually agree,
Resources shall adopt as a
Participating Company the REI Plans
in effect as of January 1, 2001, to
the extent that Resources has not
yet established substantially
comparable Plans. Effective as of
any date on or after January 1,
2001 and before the Distribution
Date (or such other date as REI and
Resources may mutually agree upon),
any member of the Resources Group
not described in the preceding
sentence may, at its request and
with the consent of REI and
Resources, become a Participating
Company in any or all of the REI
Plans, to the extent that Resources
has not yet established a
substantially comparable Plan.
(ii) On and after the Distribution Date,
Resources Retired Employees shall
continue to participate in the REI
Plans for which they are eligible
as of the Distribution Date,
including, but not limited to, the
Retirement Plan, REI Savings Plan
and any REI Plan as provided in
Article V.
(b) REI's General Obligations as Plan Sponsor.
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(i) To the extent that Resources is a
Participating Company in any REI
Plan(s), REI shall continue to
administer, or cause to be
administered, in accordance with
their terms and applicable law,
such REI Plan(s), and shall have
the sole and absolute discretion
and authority to interpret the REI
Plan(s), as set forth therein. REI
shall not, without first consulting
with Resources, amend or terminate
any material feature of any REI
Plan in which Resources is a
Participating Company, except to
the extent such amendment or
termination would not affect any
benefits of Resources Employees
under such Plan or as may be
necessary or appropriate to comply
with applicable law.
(ii) With regard to Resources Retired
Employees participating in REI
Plans after the Distribution Date,
REI shall continue to administer,
or cause to be administered, in
accordance with their terms and
applicable law, such REI Plans, and
shall have sole and absolute
discretion and authority to
interpret such Plans or amend or
terminate such Plans, as set forth
therein.
(c) Resources's General Obligations as Participating
Company. Resources shall perform with respect to its
participation in the REI Plans, the duties of a Participating
Company as set forth in each such Plan or any procedures
adopted pursuant thereto, including (without limitation): (i)
assisting in the administration of claims, to the extent
requested by the claims administrator of the applicable REI
Plan; (ii) cooperating fully with REI Plan auditors, benefit
personnel and benefit vendors; (iii) preserving the
confidentiality of all financial arrangements REI has or may
have with any vendors, claims administrators, trustees or any
other entity or individual with whom REI has entered into an
agreement relating to the REI Plans; and (iv) preserving the
confidentiality of participant information (including, without
limitation, health information in relation to FMLA leaves) to
the extent not specified otherwise in this Agreement.
(d) Termination of Participating Company Status.
Except as specified otherwise in this Agreement or otherwise
may be mutually agreed upon by REI and Resources, effective as
of the Distribution Date or such other date as Resources
establishes a substantially comparable Plan (as specified in
Section 2.03 or otherwise in this Agreement), Resources shall
automatically cease to be a Participating Company in the
corresponding REI Plan.
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2.05 TERMS OF PARTICIPATION BY RESOURCES EMPLOYEES IN
RESOURCES PLANS.
(a) Non-Duplication of Benefits. As of the
Distribution Date or such other date that applies to the
particular Resources Plan, the separate Resources Plans shall
be, with respect to employees of the Resources Group, in all
respects the successors in interest to, and shall not provide
benefits that duplicate benefits provided by, the
corresponding REI Plans. REI and Resources shall mutually
agree, if necessary, on methods and procedures, including
amending the respective Plan documents, to prevent employees
of the Resources Group from receiving duplicate benefits from
the REI Plans and the Resources Plans.
(b) Service Credit. Except as specified otherwise in
this Agreement, with respect to Resources Employees, each
Resources Plan shall provide that all service, all
compensation and all other benefit-affecting determinations
that, as of the Distribution Date, were recognized under the
corresponding REI Plan shall, as of the Distribution Date,
receive full recognition and credit and be taken into account
under such Resources Plan to the same extent as if such items
occurred under such Resources Plan, except to the extent that
duplication of benefits would result. The service crediting
provisions shall be subject to any respectively applicable
"service bridging," "break in service," "employment date," or
"eligibility date" rules under the Resources Plans and the REI
Plans.
2.06 FOREIGN PLANS. Resources intends to maintain all Foreign
Plans in existence as of January 1, 2001 in its discretion in accordance with
the applicable plan documents and applicable laws.
2.07 UNION PLANS. REI and/or Resources shall continue to
maintain all Union Plans in existence as of January 1, 2001 up to and after the
Distribution Date as required by the terms of the applicable collective
bargaining agreements and in accordance with the terms of those plans and
subject to collective bargaining. For example, but not by way of limitation,
Resources will establish qualified plans which mirror the Retirement Plan and
REI Savings Plan for the benefit of certain Resources Union Employees, and will
assume the sponsorship of certain other tax qualified plans for the benefit of
certain other Resources Union Employees.
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2.08 RELIANT ENERGY TEGCO, INC. EMPLOYEES. Notwithstanding any
provision of this Agreement to the contrary, effective as of January 1, 2001
through the Distribution Date, non-union employees of Reliant Energy Tegco,
Inc., a wholly owned subsidiary of REI, shall participate in all employee
benefit plans sponsored by REI and/or Resources in the same manner and to the
same extent as such employees would participate in such plans if such employees
were employed by a member of the Resources Group rather than a member of the REI
Group.
2.09 VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATIONS. REI shall
continue to sponsor and shall assume all assets and Liabilities associated with
and shall retain the Houston Industries Incorporated Group Welfare Benefits
Trust Agreement (as amended and restated effective January 1, 1989), Houston
Lighting and Power Company Union Retirees' Medical and Dental Benefits Trust
Agreement (effective December 1, 1995), Houston Lighting and Power Company
Non-Union Retirees' Medical and Dental Benefits Trust Agreement (effective
December 1, 1995) and the Houston Lighting and Power Company Retirees' Life
Insurance Benefits Trust Agreement (effective December 1, 1995).
ARTICLE III.
DEFINED BENEFIT PLAN
3.01 RESOURCES EMPLOYEES' PARTICIPATION IN RETIREMENT PLAN.
Effective as of February 5, 2001, REI shall amend the Retirement Plan to provide
that employees who become employed by any member of the Resources Group on or
after February 5, 2001 shall not be eligible to participate in the Retirement
Plan. Effective as of Xxxxx 0, 0000, XXX shall amend the Retirement Plan to
provide that eligible employees of any member of the Resources Group shall be
fully vested in their Cash Balance Accounts (as such term is defined in the
Retirement Plan) under the Retirement Plan and to provide that such employees
shall no longer participate in the Retirement Plan on and after such date. In
addition, the Retirement Plan shall be amended to generally provide a transition
benefit for certain eligible employees of the members of the Resources Group
who, as of December 31, 2000, were participating in the Retirement Plan, were
eligible for a Grandfathered Benefit under Section 7.6(a) of the Retirement Plan
and generally had attained the age of 42 and completed at least five years of
Vesting Service (as such term is defined in the Retirement Plan) under the
Retirement Plan to reflect the loss, if any, of such participants' Grandfathered
Benefit under Section 7.6(a) of the Retirement Plan and the value of such
participants' retiree medical accounts. Such transition benefit, if any, will be
added to each such eligible participant's Cash Balance Account under the
Retirement Plan or the REI Benefit Restoration Plan to the extent the benefit
limitations of the Code prevent such transition benefit from being paid under
the Retirement Plan. Such transition benefit shall not include extra age and/or
service which may be provided under an employment, severance or supplemental
pension agreement with an employee of any member of the Resources Group.
Effective as of the IPO Closing Date, REI shall assume all Liabilities to or
relating to the employees of any member of the Resources Group and the Resources
Retired Employees under the Retirement Plan. Notwithstanding the foregoing to
the contrary, this Section 3.01 shall not apply to Resources Union Employees.
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ARTICLE IV.
DEFINED CONTRIBUTION PLAN
4.01 RESOURCES SAVINGS PLAN. Effective as of March 1, 2001,
the account balances of the employees of the members of the Resources Group who
participate in the REI Savings Plan shall be fully vested, and Resources, as a
Participating Company in the REI Savings Plan, shall be responsible for
providing in cash and/or Resources Common Stock a fully vested employer matching
contribution on up to 6% of each such employee's eligible covered compensation.
In addition, Resources may provide a fully vested discretionary employer
contribution at the end of each plan year based upon such employees' eligible
covered compensation and/or a fully vested discretionary employer contribution
each payroll period based upon the first $85,000 of each such employee's
eligible covered compensation for the year 2001. Effective as of the
Distribution Date, Resources shall establish, or cause to be established, a
trust, which is intended to be qualified under Code Section 401(a), exempt from
taxation under Code Section 501(a)(1), and forming the separate Resources
Savings Plan. Except as provided in this Article IV, such Resources Savings Plan
shall be substantially comparable to the REI Savings Plan as applicable to
employees of members of the Resources Group immediately prior to the
Distribution Date. As soon as reasonably practicable following the Distribution
Date, REI shall cause to be determined for the REI Savings Plan the amount of
assets to be transferred from the REI Savings Plan to the Resources Savings
Plan. Such amount shall be equal to the greater of (a) the amount required under
Code Section 414(l), or (b) the amount within the sub-account(s) within the
Reliant Energy, Incorporated Savings Trust that has been separately maintained
and accounted for on behalf of employees of the members of the Resources Group
less the amount attributable to Resources Retired Employees. Notwithstanding the
foregoing to the contrary, this Section 4.01 shall not apply to Resources Union
Employees.
4.02 ESOP. On and after the Distribution Date, Resources
Employees shall no longer participate in the ESOP, and the Resources Savings
Plan shall not contain an ESOP. Therefore, the ESOP shall continue as a
component of the REI Savings Plan. After the Distribution Date, the ESOP will
hold shares of Resources Common Stock, and applicable law generally prohibits
such plans from holding securities that are not "qualifying employer securities"
within the meaning of Code Section 4975(e)(8) for more than 90 days after the
Distribution Date unless an extension is granted by the IRS. Accordingly, REI
will request that the IRS grant an extension of such 90-day period to such a
time as the REI Savings Plan's independent fiduciary deems prudent and the IRS
deems acceptable to allow the independent fiduciary to dispose of the Resources
Common Stock received by the ESOP on account of the Distribution and to reinvest
in qualifying employer securities in a manner consistent with the best interests
of the ESOP participants. Notwithstanding the foregoing to the contrary, this
Section 4.02 shall not apply to Resources Union Employees who may be eligible to
participate in the ESOP.
4.03 REMA SAVINGS PLAN. Effective as of Xxxxx 0, 0000, XXX
shall amend the REMA Savings Plan to provide the same benefit structure for
eligible employees under the REMA Savings Plan as will be provided as of such
date for eligible non-union employees of the members of the Resources Group
participating in the REI Savings Plan (as
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described in Section 4.01). Effective as of the Distribution Date, Resources
shall assume the sponsorship of the REMA Savings Plan and shall merge such plan
into the Resources Savings Plan as soon as practicable following the
Distribution Date.
4.04 RESOURCES RETIRED EMPLOYEES. Notwithstanding the above,
account balances of Resources Retired Employees, if any, shall remain in the REI
Savings Plan after the Distribution Date.
ARTICLE V.
EXECUTIVE AND OTHER PLANS
5.01 EXECUTIVE PLANS.
(a) Establishment of Resources Executive Plans.
Effective as of the Distribution Date or such other date as
REI and Resources may mutually agree, Resources shall
establish the Resources Executive Plans which shall be
substantially comparable to the REI Executive Plans. As of the
Distribution Date, Resources shall assume all Liabilities to
or relating to the Resources Employees under the REI Executive
Plans, and REI shall transfer the split dollar life insurance
policies under the Executive Life Insurance Plan attributable
to such Resources Employees to Resources. As of the
Distribution Date, REI shall assume all Liabilities to or
relating to Resources Retired Employees under the REI
Executive Plans.
(b) Participation in Executive Plans. Effective as of
the Distribution Date or such other date as Resources
establishes the Resources Executive Plans, eligible Resources
Employees determined in accordance with the terms of the
applicable plans shall only be eligible to participate in the
Resources Executive Plans.
5.02 DEFERRED COMPENSATION PLAN.
(a) Establishment of Resources Deferred Compensation
Plan. Effective as of the Distribution Date or such other date
as REI and Resources may mutually agree, Resources shall
establish the Resources Deferred Compensation Plan which shall
be substantially comparable to the REI Deferred Compensation
Plan. As of January 1, 2001, Resources shall assume all
Liabilities to or relating to the Resources Employees under
the REI Deferred Compensation Plan; provided, however, that
REI shall transfer a cash amount equal to the cost of such
Liabilities transferred to Resources as soon as practicable
following the Distribution Date or such other date as REI and
Resources may mutually agree. As of January 1, 2001, REI shall
assume all Liabilities to or relating to Resources Retired
Employees, and all corporate owned life insurance policies
associated with the REI Deferred Compensation Plan shall
remain at REI.
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(b) Participation in Deferred Compensation Plan.
Resources Employees who consent to an amendment to treat their
employment with Resources as continued employment under the
REI Deferred Compensation Plan shall not be treated as
terminated employees under such Plan(s) as of the Distribution
Date. Effective as of the Distribution Date or such other date
as Resources establishes the Resources Deferred Compensation
Plan, eligible Resources Employees determined in accordance
with the terms of the Plan shall only be eligible to
participate prospectively in the Resources Deferred
Compensation Plan.
5.03 BENEFIT AND SAVINGS RESTORATION PLANS.
(a) Benefit Restoration Plan. Effective as of March
1, 2001, employees of the members of the Resources Group shall
no longer accrue benefits under the REI Benefit Restoration
Plan. Effective as of March 1, 2001, or such other date as REI
and Resources may mutually agree, Resources shall establish a
frozen Resources Benefit Restoration Plan which shall be
substantially comparable to the REI Benefit Restoration Plan.
As of March 1, 2001, Resources shall assume all Liabilities to
or relating to the Resources Employees under the REI Benefit
Restoration Plan (except Liabilities under the REI Benefit
Restoration Plan associated with the transition benefit
described in Section 3.01); provided, however, that REI shall
transfer a cash amount equal to the cost of such Liabilities
transferred to Resources as soon as practicable following the
Distribution Date or such other date as REI and Resources may
mutually agree. Also, as of March 1, 2001, Resources shall
assume all Liabilities under the REI Benefit Restoration Plan
associated with the transition benefit described in Section
3.01; provided, however, that REI shall transfer a cash amount
equal to two-thirds (2/3) of the cost of such Liabilities
transferred to Resources as soon as practicable following the
Distribution Date or such other date as REI and Resources may
mutually agree. As of Xxxxx 0, 0000, XXX shall assume all
Liabilities to or relating to the Resources Retired Employees
under the REI Benefit Restoration Plan; provided, however that
Resources shall irrevocably and unconditionally guarantee, in
the event that REI becomes insolvent, the due and punctual
payment and satisfaction, when and as due, of all Liabilities
relating to the REI Benefit Restoration Plan for all persons
who have the status of retirees under the REI Benefit
Restoration Plan as of the Distribution Date or such other
date as REI and Resources may mutually agree. For purposes of
this Section 5.03(a), the Liabilities under the REI Benefit
Restoration Plan include any supplemental pension benefits
provided under an employment, severance or supplemental
pension agreement with (i) an employee of any member of the
Resources Group and (ii) any person who has the status of a
retiree under the REI Benefit Restoration Plan as of the
Distribution Date.
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(b) Savings Restoration Plan.
(i) Establishment of Resources Savings
Restoration Plan. Effective as of
March 1, 2001, or such other date
as REI and Resources may mutually
agree, Resources shall establish
the Resources Savings Restoration
Plan which shall be substantially
comparable to the REI Savings
Restoration Plan. As of March 1,
2001, Resources shall assume all
Liabilities to or relating to the
Resources Employees under the REI
Savings Restoration Plan. As of
Xxxxx 0, 0000, XXX shall assume all
Liabilities to or relating to the
Resources Retired Employees under
the REI Savings Restoration Plan.
(ii) Participation in the Resources
Savings Restoration Plan. Effective
as of March 1, 2001, or such other
date as Resources establishes the
Resources Savings Restoration Plan,
eligible Resources Employees
determined in accordance with the
terms of the applicable Plan shall
only be eligible to participate in
the Resources Savings Restoration
Plan.
5.04 RABBI TRUSTS. Effective as of the Distribution Date, or
such other date as REI and Resources may mutually agree, Resources may establish
a Rabbi Trust, which shall be substantially similar to the Reliant Energy,
Incorporated Executive Deferred Compensation Trust. Effective as of the
Distribution Date, REI shall continue to sponsor and shall assume all assets and
Liabilities relating to the NorAm Rabbi Trusts.
5.05 SEVERANCE PLANS. Resources shall establish such severance
plans as it deems necessary in its discretion. The REI Severance Plans shall
provide that no Resources Employee shall become eligible for severance benefits
on account of Resources ceasing to be a Subsidiary of REI as of the Distribution
Date.
ARTICLE VI.
HEALTH AND WELFARE PLANS
6.01 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.
(a) General - Health and Welfare Plans. Each REI
Health and Welfare Plan shall retain all Liabilities incurred
through the Distribution Date or
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such other date as REI and Resources may mutually agree under
each such REI Health and Welfare Plan, whether or not claims
are filed before the Distribution Date, by or on behalf of
Resources Employees or their spouses or dependents. Resources
shall indemnify each such plan against the pre-Distribution
Date Liabilities by paying the current cost of coverage
associated with such Resources Employees or their spouses or
dependents, to the extent not already paid.
(b) Substantially Similar Self-Insured Plans. Any
Health and Welfare Plan self-insured by REI and substantially
similar to any Resources Health and Welfare Plan established
as of the Distribution Date, or such other date as agreed upon
by REI and Resources, shall cease to be responsible for
Liabilities to or relating to Resources Employees under the
REI Health and Welfare Plans as of the Distribution Date, and
the corresponding Resources Health and Welfare Plans shall
assume such Liabilities as of the Distribution Date.
(c) Retiree Life and Medical. Effective as of the IPO
Closing Date, employees of the members of the Resources Group
shall no longer be eligible to participate in REI's retiree
life insurance plan and retiree medical plan, and REI shall
assume all Liabilities under REI's retiree medical plan for
certain eligible employees of the members of the Resources
Group who as of such date have generally attained the age of
55 with at least 5 years of service after age 50 under such
Plan, provided, however, that such employees shall not accrue
any additional benefits under such Plan. Except as otherwise
expressly provided above, no other employee of any member of
the Resources Group shall be entitled to benefits under the
REI retiree medical plan. Resources shall make available a
non-subsidized group insurance arrangement through which
eligible retired employees of the members of the Resources
Group may purchase retiree medical insurance at group rates.
Notwithstanding the foregoing to the contrary, Resources shall
maintain any retiree medical and retiree life insurance for
certain Resources Union Employees as may be required pursuant
to Section 2.07.
6.02 CLAIMS FOR HEALTH AND WELFARE PLANS.
(a) Administration of REI Claims. REI shall
administer claims incurred under the REI Health and Welfare
Plans by Resources Employees before the Distribution Date, but
only to the extent that Resources has not, before the
Distribution Date, established and assumed administrative
responsibility for a comparable Plan. Any determination made
or settlements entered into by REI with respect to such claims
shall be final and binding.
(b) Outsourcing of Claims by REI. REI shall have the
right to engage a third party administrator, vendor, or
insurance company to administer ("Outsource") claims incurred
under the REI Health and Welfare Plans, including claims
incurred by employees of the members of the Resources Group
before the Distribution Date. REI may determine the manner and
extent of such
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Outsourcing, including the selection of one or more third
party administrators, vendors, or insurance companies and the
ability to transfer the liability for such claims to one or
more independent insurance companies. REI has Outsourced
administration of many REI Health and Welfare Plans, as set
forth in Section 6.04 and the Schedule thereto.
(c) Outsourcing of Claims by Resources. REI shall use
its commercially reasonable best efforts for and on behalf of
Resources to negotiate for Outsourcing arrangements with its
third party administrators, vendors, or insurance companies
with comparable features to each of REI's current Outsourcing
arrangements.
6.03 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.
(a) Continuance of Elections, Co-Payments and Maximum
Benefits.
(i) As of the Distribution Date or such
other date as REI and Resources may mutually agree,
Resources shall cause the Resources Health and
Welfare Plans to maintain substantially comparable
coverage and contribution elections, if any, made by
Resources Employees under the REI Health and Welfare
Plans and apply such elections under the Resources
Health and Welfare Plans for the remainder of the
period or periods, if any, for which such elections
are by their terms applicable. The transfer or other
movement of employment between REI and Resources in
connection with the Distribution shall constitute
neither a "status change" under the REI Health and
Welfare Plans or the Resources Health and Welfare
Plans nor a "qualifying event," as defined under
COBRA.
(ii) On and after the Distribution Date,
Resources shall cause the Resources Health Plans to
recognize and give credit for all benefits paid to
Resources Employees under the REI Health Plans for
(A) all amounts applied to deductibles, out of pocket
maximums, co-payments and other applicable benefit
coverage limits with respect to which such expenses
have been incurred by Resources Employees under the
REI Health Plans for the remainder of the calendar
year in which the Distribution Date occurs and (B)
all benefits paid to Resources Employees under the
REI Health Plans for purposes of determining when
such persons have reached their lifetime maximum
benefits under the Resources Health Plans.
Notwithstanding the above, Resources's obligations
under this Subsection 6.03(a)(ii) shall be limited by
the market availability of health insurance products
or other arrangements satisfying the criteria
described above. Resources shall use its
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commercially reasonable best efforts to locate and
engage the services of a vendor whose policies or
other arrangements meet the requirements above.
(b) Flexible Benefits Plan. To the extent any
Resources Employee contributed to an account under the REI
Flexible Benefits Plan during the calendar year that includes
the Distribution Date, then effective as of the Distribution
Date, REI shall transfer to the Resources Flexible Benefits
Plan the account balances of Resources Employees for such
calendar year under the REI Flexible Benefits Plan, regardless
of whether the account balance is positive or negative.
(c) HCFA Administration. As of the Distribution Date,
Resources shall assume all Liabilities relating to, arising
out of or resulting from claims verified by REI or Resources
under the HCFA data match reports that relate to Resources
Employees.
6.04 VENDOR AND INSURANCE ARRANGEMENTS. REI shall use its
commercially reasonable best efforts for and on behalf of Resources to negotiate
for, effective as of the Distribution Date or such other date as REI and
Resources mutually agree upon: (a) third party ASO Contracts with comparable
features and costs to the ASO Contracts entered into by REI, as set forth in
Schedule 6.04(a) (the "ASO Contracts"); (b) Group Insurance Policies with
comparable features and costs to the Group Insurance Policies entered into by
REI, as set forth in Schedule 6.04(b) (the "Group Insurance Policies"); (c) HMO
Agreements with comparable features and costs to the HMO Agreements entered into
by REI, as set forth in Schedule 6.04(c) (the HMO Agreements"), and (d)
competitive premium rates for all Resources Health and Welfare Plans. In each
case, Resources shall, as of the Distribution Date or such other date as REI and
Resources mutually agree upon, establish, adopt and/or implement acceptable
contracts, agreements or arrangements. In accordance with Section 9.03, REI
shall on or before the Distribution Date provide upon the request of Resources,
copies of such contracts or successor arrangements thereto identified in
Schedules 6.04(a), (b) and (c).
6.05 COBRA AND HIPPA. REI shall be responsible, through the
Distribution Date, for compliance with the health care continuation coverage
requirements of COBRA, the portability requirements under the Health Insurance
Portability and Accountability Act of 1996 ("HIPPA") and the REI Health and
Welfare Plans with respect to employees of the members of the Resources Group
and qualified beneficiaries (as such term is defined under COBRA). REI shall
provide all necessary notices, or cause the notices to be provided, as soon as
administratively practical, but in no event later than required under COBRA.
Resources shall be responsible for providing REI or its agents with all
necessary employee change notices and related information for covered
dependents, spouses, qualified beneficiaries (as such term is defined under
COBRA), and alternate recipients pursuant to QMCSO, in accordance with
applicable REI COBRA policies and procedures. As soon as administratively
practicable after the Distribution Date, REI shall provide Resources, through
hard copy, electronic format or such other mechanism as is appropriate under the
circumstances, with a list of all qualified beneficiaries (as such term is
defined under COBRA) that relate to the members of the Resources
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Group and the relevant information pertaining to their coverage elections.
Effective as of the Distribution Date, Resources shall be solely responsible for
compliance with the health care continuation coverage requirements of COBRA and
the portability requirements under HIPPA for the Resources Health and Welfare
Plans for Resources Employees and their qualified beneficiaries (as such term is
defined under COBRA).
6.06 LEAVE OF ABSENCE PROGRAMS AND FMLA.
(a) Allocation of Responsibilities After Distribution
Date. Effective as of the Distribution Date, Resources shall
establish the Resources Leave of Absence Programs and FMLA
programs and shall be responsible for administering leaves of
absence and complying with FMLA with respect to Resources
Employees.
(b) Disclosure. As soon as administratively
practicable after the Distribution Date, REI shall provide to
Resources copies of all records pertaining to the leaves of
absence and FMLA with respect to all Resources Employees to
the extent such records have not been previously provided.
6.07 REI WORKERS' COMPENSATION PROGRAM.
(a) ADMINISTRATION OF CLAIMS.
(i) Through the Distribution Date or such
other date as REI and Resources may mutually agree,
REI shall continue to be responsible for the
administration of all claims that (A) are, or have
been, incurred under the REI WCP before the
Distribution Date by employees of the Resources Group
("Resources WCP Claims"), and (B) have been
historically administered by REI or its third party
administrator. However, REI will advise Resources of
and secure approval for any material changes to
current policy or practice with respect to the
administration of Resources WCP Claims.
(ii) Effective as of the Distribution Date
or such other date as REI and Resources may mutually
agree, Resources shall be responsible for the
administration of all Resources WCP Claims.
(iii) Each party shall fully cooperate with
the other with respect to the administration and
reporting of Resources WCP Claims, the payment of
Resources WCP Claims determined to be payable, and
the transfer of the administration of any Resources
WCP Claims to the other party.
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(b) SELF-INSURANCE STATUS.
REI shall maintain and amend, as necessary,
its certificates of self-insurance and any other applicable
policies to include Resources until the Distribution Date, and
Resources shall fully cooperate with REI in obtaining such
amendments. REI shall use its commercially reasonable best
efforts to obtain self-insurance status for workers'
compensation for Resources effective as of the Distribution
Date in those jurisdictions in which Resources conducts
business, in which REI is self-insured, and where REI and
Resources mutually agree that such status is beneficial to
Resources. Resources hereby authorizes REI to take all actions
necessary and appropriate on its behalf in order to obtain
such self-insurance status. All costs incurred by REI in
amending such certificates, including without limitation
filing fees, adjustments of security and excess loss policies
and amendments of safety programs, shall be shared pro rata by
REI and Resources.
(c) INSURANCE POLICY.
(i) Effective as of the Distribution Date,
in all states other than those states where Resources
is to be self-insured pursuant to Subsection 6.07(b)
above, REI shall use its commercially reasonable best
efforts to negotiate for workers' compensation
insurance policies on behalf of Resources from the
issuing insurance companies (as set forth in the
relevant portion of Schedule 6.04(b)) or different
insurance companies which are comparable to the
policies previously maintained by REI; provided that
the retention under such Resources policies shall be
as determined by Resources.
(ii) REI shall use its commercially
reasonable best efforts to cause the premium rates
for all workers' compensation insurance policies for
both REI and Resources in effect for periods through
the Distribution Date to be based on the aggregate
number of employees covered under the workers'
compensation insurance policies of both REI and
Resources. Any premiums due under the separate
workers' compensation insurance issued to Resources
shall be payable by Resources.
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ARTICLE VII.
EQUITY AND OTHER COMPENSATION
7.01 REI OPTIONS.
(a) Option Conversion. Outstanding REI Options
granted prior to the year 2001 that are unexercised and
unexpired as of the Distribution Date shall be replaced with
two options, subject to specific country tax and legal
requirements, one a New REI Option and one a Resources Option
as follows. In general, a REI Option that qualifies as an
incentive stock option under the Code will be replaced with a
New REI Option and a Resources Option which will qualify as
incentive stock options, provided, however, that in order for
incentive stock options to remain qualified and retain their
tax benefits under the Code, the adjustment formulas described
below may be required to be altered. With respect to each New
REI Option, (i) the number of shares of REI Common Stock
subject to such New REI Option shall equal the number of
shares of REI Common Stock subject to the REI Option
immediately before the Distribution Date, and (ii) the
per-share exercise price of such New REI Option shall equal
the per-share exercise price of the REI Option immediately
prior to the Distribution Date multiplied by 1 minus a
fraction, the numerator of which is the Distribution Ratio
multiplied by the Resources Stock Value and the denominator of
which is the REI Stock Value. With respect to each Resources
Option, (i) the number of shares of Resources Common Stock
subject to such Resources Option, shall equal the number of
shares of REI Common Stock subject to the REI Option
immediately before the Distribution Date multiplied by the
Distribution Ratio, and (ii) the per-share exercise price of
such Resources Option shall equal the Resources Stock Value
multiplied by a fraction, the numerator of which is the
per-share exercise price of the REI Option immediately prior
to the Distribution Date and the denominator of which is the
REI Stock Value. The exercise price per share of each such New
REI Option and Resources Option will be determined such that,
immediately following the Distribution Date, the difference
between the exercise price of each option and the fair market
value of the shares underlying each option approximately
equals, in the aggregate, the difference between the exercise
price of each REI Option and the fair market value per share
of REI Common Stock (with dividend) immediately prior to the
Distribution Date. In addition, the ratio of the exercise
price of the New REI Options to the fair market value of REI's
Common Stock immediately after the Distribution Date, and the
ratio of the exercise price of the Resources Options to the
fair market value of Resources's Common Stock immediately
after the Distribution Date, will both approximately equal the
ratio of the exercise price of the REI Options to the fair
market value of REI's Common Stock (with dividend) immediately
prior to the Distribution Date. Employment with Resources will
be treated as employment with REI for purposes of the New REI
Options, and employment with REI will be treated as employment
with Resources for purposes of the Resources Options. Other
than the adjustments described in this Section 7.01(a), all
other terms and conditions
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applicable to the REI Options (including, but not limited to,
the vesting schedule) shall remain applicable to the New REI
Options and the Resources Options following the Distribution
Date, and the Resources Options shall be issued pursuant to a
separate mirror transition option plan adopted specifically
for the purpose of issuing the Resources Options described in
this Section 7.01.
(b) Certain Non-U.S. Optionees. Except as may
otherwise be agreed upon by REI and Resources, this Section
7.01 shall govern the treatment of REI Options held by
Non-U.S. Resources Employees. In the event it is determined
that the local law applicable to any Non-U.S. Optionee
requires a different treatment, REI and Resources shall take
such steps as is required to comply with local law or may
cash-out those Options that cannot reasonably be conformed.
7.02 REI RESTRICTED SHARES. Performance shares (or bookkeeping
units representing such shares) outstanding under the LICP and the Reliant
Energy, Incorporated Business Unit Performance Share Plan shall vest for the
performance cycle ending December 31, 2000 according to the terms and conditions
of the applicable Plan. Assuming the Distribution Date occurs during the
calendar year 2001, the Plan administrator shall determine, as of the
Distribution Date, the level at which the performance objectives have or would
have been achieved through the end of the performance cycle ending December 31,
2001 and shall vest the outstanding performance shares for such cycle as of the
Distribution Date as though such performance objectives were achieved at that
level. As of the Distribution Date, the Plan administrator shall convert
outstanding performance shares (or bookkeeping units representing such shares)
for the performance cycle ending December 31, 2002 to a number of time-based
restricted shares equal to the number of performance shares that would have
vested if the performance objectives for the performance cycle were achieved at
the maximum level. Such time based restricted shares shall vest if the
participant holding such award remains continuously employed with Resources or
REI through December 31, 2002. Holders of these and other time-based restricted
shares granted prior to the year 2001 that are outstanding on the Distribution
Date shall receive shares of Resources Common Stock (or bookkeeping units
representing such shares) in the same ratio as REI shareholders, but such
Resources Common Stock shall be subject to the same time-based vesting schedule
and the other terms and conditions of the applicable Plan under which they were
granted.
7.03 STOCK PURCHASE PLAN. Effective January 1, 2001, Resources
shall establish a Stock Purchase Plan for the benefit of employees of the
members of the Resources Group which shall be comparable to the plan set forth
in Schedule 7.03.
7.04 RESOURCES LONG-TERM INCENTIVE PLAN. Effective on or
before January 1, 2001, or such other date as REI and Resources may mutually
agree, Resources shall establish the LTIP for the benefit of employees of the
members of the Resources Group which shall be comparable to the plan set forth
in Schedule 7.04. The LTIP is intended to comply with Code Section 162(m).
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7.05 RESOURCES ANNUAL INCENTIVE COMPENSATION PLAN. Effective
on or before January 1, 2001, or such other date as REI and Resources may
mutually agree, Resources shall establish the Resources AICP for the benefit of
employees of the members of the Resources Group which shall be comparable to the
plan set forth in Schedule 7.05. The AICP is intended to comply with Code
Section 162(m).
ARTICLE VIII.
FRINGE AND OTHER BENEFITS
8.01 FRINGE BENEFITS. Employees of the Resources Group shall
continue to participate in REI's employee assistance program, educational
assistance program, executive financial planning program and relocation program
and shall continue to have access to the credit union, The Employee Association
and the Wellness Activity Center (collectively, the "REI Fringe Benefits")
through the Distribution Date or such other date as REI and Resources may
mutually agree. Effective as of the Distribution Date, Resources shall establish
the Resources Fringe Benefits which Resources deems appropriate in its sole
discretion. Effective as of the Distribution Date, eligible Resources Employees
determined in accordance with the terms of the applicable plans or programs
shall only be eligible to participate in the Resources Fringe Benefits.
8.02 APPLIANCE LOANS. Effective as of the Distribution Date,
Resources will purchase or cause to be purchased, for an amount equal to the
outstanding principal amount thereof plus accrued and unpaid interest thereon
through the Distribution Date, all outstanding loans on the Distribution Date
made by REI to Resources Employees under any REI appliance purchase program.
From and after the Distribution Date, REI shall have no further responsibility
for such loans or for the administration of this program with respect to
Resources Employees.
8.03 CHAIRMAN'S SCHOLARSHIP FUNDS. The chairman's
scholarship funds shall remain at REI through and after the Distribution Date.
8.04 REI FOUNDATION. Effective as of January 1, 2001,
sponsorship of the REI Foundation shall be transferred to Resources.
8.05 OTHER BENEFITS. To the extent that REI maintains,
sponsors or provides other fringe benefits for its employees not specifically
identified in Section 8.01, then REI shall, to the extent permitted by law,
continue to make such benefits available to employees of the Resources Group on
substantially similar terms and conditions as are offered to the employees of
any member of the REI Group through the Distribution Date or such other date
upon which Resources and REI mutually agree. Resources and REI agree to make
commercially reasonable best efforts to mutually agree on whether, when, and on
what terms any member of the Resources Group shall maintain, sponsor or offer
fringe benefits.
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ARTICLE IX.
9.01 TRANSITION SERVICES AGREEMENT. On or about the date
hereof, REI and Resources shall enter into the Transition Services Agreement
covering the provisions of various services to be provided by REI to Resources.
The provisions of this Agreement shall be subject to the provisions of such
Transition Services Agreement.
9.02 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED
MATTERS.
(a) Shared Costs. Resources shall pay its share, as
determined by REI in good faith, of any contributions made to
any trust maintained in connection with a REI Plan while
Resources is a Participating Company in any such REI Plan.
(b) Contributions to Trusts. With respect to REI
Plans to which employees of Resources make contributions, REI
shall use reasonable procedures to determine Resources
Liabilities associated with such Plans, taking into account
such contributions, settlements, refunds and similar payments.
(c) Administrative Expenses Not Chargeable to a
Trust. To the extent not charged pursuant to this Article IX,
and to the extent not otherwise agreed to by REI and
Resources, and to the extent not chargeable to a trust
established in connection with a REI Plan, Resources shall be
responsible, through either direct payment or reimbursement to
REI, for its allocable share of expenses incurred by REI in
the administration of (i) the REI Plans while Resources
participates in such Plans, and (ii) the Resources Plans, to
the extent REI administers such Plans. For this purpose,
Resources's allocable share of such expenses shall be
calculated in accordance with current practice in effect as of
the date of this Agreement.
9.03 SHARING OF PARTICIPANT INFORMATION. In accordance with
the applicable provisions of the Separation Agreement, REI and Resources shall
share, or cause to be shared, all participant information that is necessary or
appropriate for the efficient and accurate administration of each of the REI
Plans and the Resources Plans during the respective periods applicable to such
Plans as Resources and REI may mutually agree. REI and Resources and their
respective authorized agents shall, subject to applicable laws of
confidentiality and data protection, be given reasonable and timely access to,
and may make copies of, all information relating to the subjects of this
Agreement in the custody of the other party or its agents, to the extent
necessary or appropriate for such administration.
9.04 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS.
While Resources is a Participating Company in the REI Plans, REI shall take, or
cause to be taken, all actions necessary or appropriate to facilitate the
distribution of all REI Plan-related communications and materials to employees,
participants and beneficiaries, including (without limitation) summary plan
descriptions and related summaries of material modification(s), summary annual
reports, investment information, prospectuses, notices and enrollment material
for the REI Plans. Resources shall provide all information needed by REI to
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facilitate such REI Plan-related communications. Resources shall take, or cause
to be taken, all actions necessary or appropriate to facilitate the distribution
of all Resources Plan-related communications and materials to employees,
participants and beneficiaries. Resources shall assist, and Resources shall
cause each other applicable member of the Resources Group to assist, REI in
complying with all reporting and disclosure requirements of ERISA, including the
preparation of Form Series 5500 annual reports, for the REI Plans, where
applicable.
9.05 AUDITS REGARDING VENDOR CONTRACTS. From the period
beginning as of the Distribution Date or such other date as REI and Resources
mutually agree upon and ending on such date as REI and Resources may mutually
agree, REI and Resources and their duly authorized representatives shall have
the right to conduct joint audits with respect to any vendor contracts that
relate to both the REI Health and Welfare Plans and the Resources Health and
Welfare Plans. The scope of such audits shall remain consistent with the current
practices and all documents and other information currently made available for
review shall continue to be made available. REI and Resources shall agree on the
performance standards, audit methodology, auditing policy and quality measures,
reporting requirements, and the manner in which costs incurred in connection
with such audits will be shared.
9.06 BENEFICIARY DESIGNATIONS. Subject to Section 9.09, all
beneficiary designations made by employees of the Resources Group for the REI
Plans (other than the Retirement Plan, except to the extent Resources may be
required to establish or assume the sponsorship of a retirement plan(s) pursuant
to Section 2.07) shall be transferred to and be in full force and effect under
the corresponding Resources Plans until such time, if ever, any such beneficiary
designations are replaced or revoked by the employees of the Resources Group who
made the beneficiary designations. All beneficiary designations made by
Resources Retired Employees for the Resources Plans shall be transferred to and
be in full force and effect under the corresponding REI Plans until such time,
if ever, any such beneficiary designations are replaced or revoked by the
Resources Retired Employees who made the beneficiary designations.
9.07 REQUESTS FOR IRS AND DOL OPINIONS. REI and Resources
shall make such applications to regulatory agencies, including the IRS and DOL,
as may be necessary or appropriate. Resources and REI shall cooperate fully with
one another on any issue relating to the transactions contemplated by this
Agreement for which REI and/or Resources elects to seek a determination letter
or private letter ruling from the IRS or an advisory opinion from the DOL.
9.08 FIDUCIARY MATTERS. REI and Resources each acknowledge
that actions contemplated to be taken pursuant to this Agreement may be subject
to fiduciary duties or standards of conduct under ERISA or other applicable law,
and no party shall be deemed to be in violation of this Agreement if such party
fails to comply with any provisions hereof based upon such party's good faith
determination that to do so would violate such a fiduciary duty or standard.
9.09 CONSENT OF THIRD PARTIES. If any provision of this
Agreement is dependent on the consent of any third party (such as a vendor) and
such consent is withheld, REI and Resources shall use their commercially
reasonable best efforts to implement the applicable
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provisions of this Agreement. If any provision of this Agreement cannot be
implemented due to the failure of such third party to consent, REI and Resources
shall negotiate in good faith to implement the provision in a mutually
satisfactory manner.
9.10 TAX COOPERATION. In connection with the interpretation
and administration of this Agreement, REI and Resources shall take into account
the agreements and policies established pursuant to the Separation Agreement and
the Tax Allocation Agreement.
9.11 PLAN RETURNS. Plan Returns shall be filed or caused to be
filed by REI or Resources as the case may be in accordance with the principles
established in the Tax Allocation Agreement. For purposes of this Section 9.11,
"Plan Returns" means any return, report, certificate, form or similar statement
or document required to be filed with a government agency with respect to an
employee benefit plan governed by the ERISA, or a program governed by Section
6039D of the Code.
ARTICLE X.
EMPLOYMENT-RELATED MATTERS
10.01 TERMS OF RESOURCES EMPLOYMENT. Employees of the
Resources Group shall be required to execute a new agreement regarding
confidential information and proprietary developments in a form approved by
Resources. In addition, nothing in the Separation Agreement, this Agreement, or
any Ancillary Agreement should be construed to change the at-will status of any
of the employees of any member of the REI Group or the Resources Group.
10.02 HR DATA SUPPORT SYSTEMS. REI shall provide human
resources data support for employees of the members of the Resources Group in
accordance with the terms of the Transition Services Agreement.
10.03 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS. Resources
will comply with all immigration laws and regulations of the Unites States of
America as such laws and regulations applied to employees of any member of the
REI Group in the United States of America pursuant to a work or training visa
regardless of visa category. Resources expressly assumes all obligations,
liabilities and undertakings arising from or under attestations made in each
certified and effective Labor Condition Application filed by REI. Resources
shall file amended petitions with the Immigration and Naturalization Service, as
may be necessary or appropriate. In such cases, the foreign national employee
will remain employed by a member of the REI Group and continue to participate in
the REI Plans until such amended petitions have been approved.
10.04 CONFIDENTIALITY AND PROPRIETARY INFORMATION.
(a) No provision of the Separation Agreement or any
Ancillary Agreement shall be deemed to release any individual
for any violation of the REI non-competition guideline or any
agreement or policy pertaining to confidential or proprietary
information of any member of the REI Group or Resources Group,
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or otherwise relieve any individual of his or her obligations
under such non-competition guideline, agreement, or policy.
(b) Employee Agreements. As used in this Section
10.04(b), "Employee Agreement" means any employment,
severance, supplemental pension agreement or confidentiality
agreement, and any corresponding agreements executed by REI or
Resources employees in connection with their employment.
Nothing in this Agreement, the Separation Agreement or any
other Ancillary Agreement shall be deemed to supercede any
provision regarding the conduct of employees mandated by the
Federal Energy Regulatory Commission or any other applicable
regulatory authority.
(i) Survival of REI Employee Agreement
Obligations and REI's Common Law Rights. The REI
Employee Agreements of all Resources Employees and
all former REI employees transferred to Resources on
or before the Distribution Date shall remain in full
force and effect according to their terms, and all
Liabilities thereunder shall be assumed by Resources.
Notwithstanding the foregoing to the contrary, none
of the following acts committed by former REI or
Resources employees within the scope of their
Resources employment shall constitute a breach of
such REI Employee Agreements: (i) the use or
disclosure of Confidential Information (as that term
is defined in the REI Employee Agreement) for or on
behalf of Resources, if such disclosure is consistent
with the assignment or license of rights, businesses
and assets granted to Resources and restrictions
imposed on Resources under the Separation Agreement,
any other Ancillary Agreement or any other agreement
between the parties, and (ii) the rendering of any
services, directly or indirectly, to Resources to the
extent such services are consistent with the
assignment or license of rights, businesses and
assets granted to Resources and the restrictions
imposed on Resources under the Separation Agreement,
any other Ancillary Agreement or any other agreement
between the parties. Further, REI retains any rights
it has under statute or common law with respect to
actions by its former employees to the extent such
actions are inconsistent with the assignment or
license of rights, businesses and assets granted to
Resources and restrictions imposed on Resources under
the Separation Agreement, any other Ancillary
Agreement or any other agreement between the parties.
(ii) Survival of Resources's Employee
Agreement Obligations and Resources's Common Law
Rights. The Resources Employee Agreements of all REI
Employees and all former Resources employees
transferred to REI on or before the Distribution Date
shall remain in full force and effect according to
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their terms; provided, however, that none of the
following acts committed by former Resources or REI
employees within the scope of their REI employment
shall constitute a breach of such Resources Employee
Agreements: (i) the use or disclosure of Confidential
Information (as that term is defined in the REI
Employee Agreement) for or on behalf of REI, if such
disclosure is consistent with the rights, businesses
and assets retained by REI and restrictions imposed
on REI under the Separation Agreement, any other
Ancillary Agreement or any other agreement between
the parties, and (ii) the rendering of any services,
directly or indirectly, to REI to the extent such
services are consistent with the rights, businesses
and assets retained by REI and the restrictions
imposed on REI under the Separation Agreement, any
other Ancillary Agreement or any other agreement
between the parties. Further, Resources retains any
rights it has under statute or common law with
respect to actions by its former employees to the
extent such actions are inconsistent with the rights,
businesses and assets retained by REI and
restrictions imposed on REI under the Separation
Agreement, any other Ancillary Agreement or any other
agreement between the parties.
(iii) Assignment, Cooperation for Compliance
and Enforcement.
(A)(1) REI retains all rights under the REI
Employee Agreements of all former REI employees necessary to
permit REI to protect the rights and interests of REI, but
hereby transfers and assigns to Resources its rights under the
REI Employee Agreements of all former REI employees to the
extent required to permit Resources to enjoin, restrain,
recover damages from or obtain specific performance of the REI
Employee Agreements or obtain other remedies against any
employee who breaches his or her REI Employee Agreement, and
to the extent necessary to permit Resources to protect its
rights and interests.
(2) REI and Resources agree, at their own
respective cost and expense, to use their reasonable efforts
to cooperate as follows: (A) Resources shall advise REI of:
(1) any violation(s) of the REI Employee Agreements by
Resources or former REI employees, and (2) any violation(s) of
the Resources Employee Agreements which affect REI's rights;
and (B) REI shall advise Resources of any violation(s) of the
REI Employee Agreements by current or former REI employees
which affect Resources's rights; provided, however, that the
foregoing obligations shall only apply to violation(s) which
become known to an attorney within the legal department of the
party obligated to provide notice thereof.
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(3) REI and Resources each may separately
enforce the REI Employee Agreements of Resources and former
REI employees to the extent necessary to reasonably protect
their respective interests, provided, however, that (i)
Resources shall not commence any litigation relating thereto
without first consulting with REI's General Counsel or his or
her designee and (ii) REI shall not commence any litigation
relating thereto against any former REI employee who is at the
time an employee of the Resources Group without first
consulting with Resources's General Counsel or his or her
designee. If either party, in seeking to enforce any REI
Employee Agreement, notifies the other party that it requires,
or desires, the other party to join in such action, then the
other party shall do so. In addition, if either party
commences or becomes a party to any action to enforce a REI
Employee Agreement of an employee of the Resources Group or
former REI employee, the other party shall, whether or not it
becomes a party to the action, cooperate with the other party
by making available its files and employees who have
information or knowledge relevant to the dispute, subject to
appropriate measures to protect the confidentiality of any
proprietary or confidential information that may be disclosed
in the course of such cooperation or action and subject to any
relevant privacy laws and regulations. Any such action shall
be conducted at the expense of the party bringing the action
and the parties shall agree on a case by case basis on
compensation, if any, of the other party for the value of the
time of such other party's employees as reasonably required in
connection with the action.
(B)(1) Resources retains all rights under
the Resources Employee Agreements of all former Resources
employees necessary to permit Resources to protect the rights
and interests of Resources, but hereby transfers and assigns
to REI its rights under the Resources Employee Agreements of
all former Resources employees to the extent required to
permit REI to enjoin, restrain, recover damages from or obtain
specific performance of the Resources Employee Agreements or
obtain other remedies against any employee who breaches his or
her Resources Employee Agreement, and to the extent necessary
to permit REI to protect its rights and interests.
(2) REI and Resources agree, at their own
respective cost and expense, to use their reasonable efforts
to cooperate as follows: (A) REI shall advise Resources of:
(1) any violation(s) of the Resources Employee Agreements by
REI or former Resources employees, and (2) any violation(s) of
the REI Employee Agreements which affect Resources's rights;
and (B) Resources shall advise REI of any violations of the
Resources Employee Agreements by current or former Resources
employees which affect REI's rights; provided, however, that
the foregoing obligations shall only apply to violations which
become known
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to an attorney within the legal department of the party
obligated to provide notice thereof.
(3) REI and Resources each may separately
enforce the REI Employee Agreements of REI and former
Resources employees to the extent necessary to reasonably
protect their respective interests, provided, however, that
(i) REI shall not commence any litigation relating thereto
without first consulting with Resources's General Counsel or
his or her designee and (ii) Resources shall not commence any
litigation relating thereto against any former Resources
employee who is at the time a REI Employee without first
consulting with REI's General Counsel or his or her designee.
If either party, in seeking to enforce any Resources Employee
Agreement, notifies the other party that it requires, or
desires, the other party to join in such action, then the
other party shall do so. In addition, if either party
commences or becomes a party to any action to enforce a
Resources Employee Agreement of a REI Employee or former
Resources employee, the other party shall, whether or not it
becomes a party to the action, cooperate with the other party
by making available its files and employees who have
information or knowledge relevant to the dispute, subject to
appropriate measures to protect the confidentiality of any
proprietary or confidential information that may be disclosed
in the course of such cooperation or action and subject to any
relevant privacy laws and regulations. Any such action shall
be conducted at the expense of the party bringing the action
and the parties shall agree on a case by case basis on
compensation, if any, of the other party for the value of the
time of such other party's employees as reasonably required in
connection with the action.
(C) REI and Resources understand and
acknowledge that matters relating to the making, performance,
enforcement, assignment and termination of employee agreements
are typically governed by the laws and regulations of the
national, federal, state or local governmental unit where an
employee resides, or where an employee's services are
rendered, and that such laws and regulations may supersede or
limit the applicability or enforceability of this Section
10.04. In such circumstances, REI and Resources agree to take
action with respect to the employee agreements that best
accomplishes the parties' objectives as set forth in this
Section 10.04 and that is consistent with applicable law.
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10.05 ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND
COMMISSIONS. Except as otherwise specified in an Ancillary Agreement, Resources
shall be responsible for all Liabilities relating to, arising out of, or
attributable to payroll, bonuses, profit sharing and commissions accrued by
employees of Resources through the Distribution Date. REI and Resources shall
agree on the manner and method of payment for all payroll, bonuses, profit
sharing and commissions agreed to on behalf of employees who have been employed
by Resources on or before the Distribution Date. REI shall provide or cause to
be provided to Resources in the same manner as in effect on the date of this
Agreement all payroll services as required in the Transition Services Agreement.
10.06 PAYROLL AND WITHHOLDING.
(a) Income Reporting, Withholding. REI shall perform
in the same manner as in effect on the date of this Agreement the income
reporting and withholding function under Resources's employer identification
number for employees of the Resources Group and other service providers as
required by the Transition Services Agreement.
(b) Delivery of, and Access to, Documents and Other
Information. Concurrently with the Distribution Date, REI shall cause to be
delivered to Resources, the employee information set forth on all IRS Forms W-4
executed by REI Employees designated as Resources Employees as of the
Distribution Date. For the period ending on the Distribution Date (and for such
additional period as REI and Resources may mutually agree), REI shall make
reasonably available to Resources all forms, documents or information, no matter
in what format stored, relating to compensation or payments made to any employee
or service provider of Resources. Such information may include, but is not
limited to, information concerning employee payroll deductions, payroll
adjustments, records of time worked, tax records (e.g., IRS Forms W-2, W-4, 940
and 941), and information concerning garnishment of wages or other payments.
(c) Consistency of Tax Positions; Duplication. REI
and Resources shall individually and collectively make commercially reasonable
best efforts to avoid unnecessarily duplicated federal, state or local payroll
taxes, insurance or workers' compensation contributions, or unemployment
contributions arising on or after the Distribution Date. REI and Resources shall
take consistent reporting and withholding positions with respect to any such
taxes or contributions.
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10.07 PERSONNEL AND PAY RECORDS. For the period beginning on
the date of this Agreement and ending on the Distribution Date (and for such
additional period as REI and Resources may mutually agree), REI shall make
reasonably available to Resources for review and reproduction, subject to
applicable laws on confidentiality and data protection, all current and historic
forms, documents or information, no matter in what format stored, relating to
pre-Distribution Date personnel and medical records. Such forms, documents or
information may include, but is not limited to: (a) information regarding
ranking or promotions of employees of the Resources Group; (b) the existence and
nature of garnishment orders or other judicial or administrative actions or
orders affecting an employee's or service provider's compensation; and (c)
performance evaluations.
10.08 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY
BENEFICIARIES. No provision of this Agreement, the Separation Agreement, or any
Ancillary Agreement shall be construed to create any right, or accelerate
entitlement, to any compensation or benefit whatsoever on the part of any
Resources Employee or other future, present or former employee of REI or
Resources under any REI Plan or Resources Plan or otherwise. Without limiting
the generality of the foregoing: (a) except as otherwise provided in this
agreement or applicable provisions of Plans, neither the Distribution nor the
termination of the Participating Company status of Resources or any member of
the Resources Group shall cause any employee to be deemed to have incurred a
termination of employment; and (b) no transfer of employment between REI and
Resources before the Distribution Date shall be deemed a termination of
employment for any purpose hereunder.
ARTICLE XI.
GENERAL PROVISIONS
11.01 EFFECT IF IPO AND/OR DISTRIBUTION DOES NOT OCCUR.
Subject to Section 11.08, if the IPO and/or Distribution does not occur, then
all actions and events that are, under this Agreement, to be taken or occur
effective as of the IPO Closing Date, and/or Distribution Date, or otherwise in
connection with the IPO and/or Distribution, shall not be taken or occur except
to the extent specifically agreed by Resources and REI.
11.02 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall
be deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, the understanding and agreement being that no provision contained
herein, and no act of the parties, shall be deemed to create any relationship
between the parties other than the relationship set forth herein. This Agreement
shall be binding upon and inure solely to the benefit of and be enforceable by
each party and its respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
11.03 AFFILIATED COMPANIES. Each of REI and Resources shall
cause to be performed, and hereby guarantee the performance of, any and all
actions of any and all members of the REI Group or the Resources Group,
respectively.
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11.04 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS. If a
dispute, claim or controversy results from or arises out of or in connection
with this Agreement, the parties agree to use the procedures set forth in
Article IX of the Separation Agreement in lieu of other available remedies, to
resolve same. The provisions of Article IX (Arbitration and Dispute Resolution),
and Sections 5.5 (Issuance of Stock), 10.2 (Further Instruments), 10.5 (Audit
Rights), 10.8 (Governmental Approvals), 11.1 (Limitation of Liability), 11.5
(Notices), 11.7 (Binding Effect; Assignment) and 11.11 (Authority) of the
Separation Agreement are hereby incorporated herein by reference, and unless
otherwise expressly specified herein, such provisions shall apply as if fully
set forth herein (references in this Section 11.04 to an "Article" or "Section"
shall mean Articles or Sections of the Separation Agreement, and, except as
expressly set forth herein, references in the material incorporated herein by
reference shall be references to the Separation Agreement).
11.05 GOVERNING LAW. To the extent not preempted by applicable
federal law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of Texas, irrespective of the choice of
law principles of the State of Texas, as to all matters, including matters of
validity, construction, effect, performance and remedies.
11.06 SEVERABILITY. If any term or other provision of this
Agreement is determined 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 and in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the fullest possible extent.
11.07 AMENDMENT. The Boards of Directors of Resources and REI
may mutually agree to amend the provisions of this Agreement at any time or
times, either prospectively or retroactively, to such extent and in such manner
as the Boards mutually deem advisable. Each Board may delegate its amendment
power, in whole or in part, to one or more Persons or committees as it deems
advisable. Accordingly, each Board hereby gives the chief executive officer of
Resources and the chief executive officer of REI the full power and authority to
mutually adopt an amendment to this Agreement (subject to each of their
authority to amend Plans).
11.08 TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the IPO Closing Date by REI in its
sole discretion. This Agreement may be terminated at any time after the IPO
Closing Date and before the Distribution Date by mutual consent of REI and
Resources. In the event of termination pursuant to this Section, no party shall
have any liability of any kind under this Agreement to the other party.
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11.09 CONFLICT. In the event of any conflict between the
provisions of this Agreement and the Separation Agreement, any Ancillary
Agreement, or Plan, the provisions of this Agreement shall control.
11.10 COUNTERPARTS. This Agreement may be executed in two or
more counterparts each of which shall be deemed to be an original, but all of
which together shall constitute but one and the same Agreement.
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IN WITNESS WHEREOF, each of the parties have caused this
Employee Matters Agreement to be executed on its behalf by its officers
thereunto duly authorized on the day and year first above written.
RELIANT ENERGY, INCORPORATED
By:
---------------------------------------
Name:
Title:
--------------------------
RELIANT RESOURCES, INC.
By:
---------------------------------------
Name:
Title:
--------------------------
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