Exhibit 10.38

 

RELIANT RESOURCES, INC.

LONG-TERM INCENTIVE PLAN

 

PERFORMANCE SHARE AWARD

2002-2004 PERFORMANCE CYCLE

 

Pursuant to this Award Agreement, RELIANT RESOURCES, INC. (the “Company”) hereby
grants to «legal» (the “Participant”), an employee of the Company, «shares»
performance shares of Common Stock (the “Target Performance Shares”), such
number of shares being subject to adjustment as provided in Section 15 of the
Reliant Resources, Inc. Long-Term Incentive Plan (the “Plan”), conditioned upon
the Company’s achievement of the Performance Objectives over the course of the
2002-2004 Performance Cycle pursuant to the Plan, and subject to the following
terms and conditions:

 

1. Relationship to the Plan; Definitions.

 

This grant of Performance Shares is subject to all of the terms, conditions and
provisions of the Plan and administrative interpretations thereunder, if any,
which have been adopted by the Committee and are in effect on the date hereof.
Except as defined herein, capitalized terms shall have the same meanings
ascribed to them under the Plan. To the extent that any provision of this Award
Agreement conflicts with the express terms of the Plan, it is hereby
acknowledged and agreed that the terms of the Plan shall control and, if
necessary, the applicable provisions of this Award Agreement shall be hereby
deemed amended so as to carry out the purpose and intent of the Plan. References
to the Participant herein also include the heirs or other legal representatives
of the Participant. For purposes of this Award Agreement:

 

“2002-2004 Performance Cycle” means the period from January 1, 2002 to December
31, 2004.

 

“Achievement Percentage” means the percentage of achievement determined by the
Committee in accordance with Section 3 that reflects the extent to which the
Company achieved the Performance Objectives during the performance cycle
applicable to this Award Agreement.

 

“Disability” means a physical or mental impairment of sufficient severity such
that the Participant is both eligible for and in receipt of benefits under the
long-term disability provisions of the Company’s benefit plans.

 

“Employment” means employment with the Company or any of its Subsidiaries.

 

“Performance Objectives” means the standards established by the Committee to
determine whether and to what extent the Participant’s right to Performance
Shares shall vest, which are attached hereto and made a part hereof for all
purposes.

 

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“Performance Shares” means the shares of Common Stock potentially deliverable to
Participant pursuant to this Award Agreement.

 

“Retirement” means termination of Employment on or after attainment of age 55
and with at least five years of service with the Company or Reliant.

 

“Target Performance Shares” means the actual number of Performance Shares
initially granted to the Participant pursuant to this Award Agreement, with such
number of Performance Shares to be awarded to the Participant at the close of
the 2002-2004 Performance Cycle if the Company attains an Achievement Percentage
of 100%.

 

“Vested Performance Shares” means the shares of Common Stock awarded to
Participant following Participant’s satisfaction of the vesting provisions of
Section 4 and, if applicable, the determination by the Committee of the extent
to which the Company has achieved the Performance Objectives for the 2002-2004
Performance Cycle pursuant to Section 3.

 

2. Establishment of Restricted Share Account. The grant of Target Performance
Shares pursuant to this Award Agreement shall be implemented by a credit to a
bookkeeping account maintained by the Company evidencing the accrual in favor of
the Participant of the unfunded and unsecured right to receive shares of Common
Stock of the Company, which right shall be subject to the terms, conditions and
restrictions set forth in the Plan and to the further terms, conditions and
restrictions set forth in this Award Agreement.

 

3. Award Opportunity. The Performance Objectives established for the 2002-2004
Performance Cycle are attached hereto and made a part hereof for all purposes.
Except as otherwise provided in Sections 4 and 5, the number of Performance
Shares awarded to Participant shall be the product of the number of Target
Performance Shares and a percentage (the “Achievement Percentage”) that is based
upon the Committee’s determination of whether and to what extent the Company
achieves the Performance Objectives during the 2002-2004 Performance Cycle.

 

As soon as practicable after the close of the 2002-2004 Performance Cycle, the
Committee shall determine the extent to which the Company has achieved the
Performance Objectives. If the Company has performed at or above the threshold
level of achievement, the Achievement Percentage shall be between 50% and 150%,
with a target level of achievement resulting in an Achievement Percentage of
100%. If the Company has performed below the threshold level of achievement, the
Achievement Percentage shall be 0%. In no event shall the Achievement Percentage
exceed 150%. Upon completing its determination of the level at which the
Performance Objectives have been achieved, the Committee shall notify the
Participant of the number of Vested Performance Shares that will be issued to
the Participant pursuant to Section 6.

 

4. Vesting of Performance Shares.

 

(a) Unless earlier forfeited or vested in accordance with paragraph (b) or
Section 5, Participant’s right to receive Performance Shares shall vest upon
Participant’s receipt of

 

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written notice from the Committee, as required by Section 3, of the level at
which the Performance Objectives established for the 2002-2004 Performance Cycle
have been achieved. Such notice shall be given by the Committee as soon as
practical after the close of the 2002-2004 Performance Cycle in accordance with
the terms of the Plan and this Award Agreement.

 

(b) If Participant’s Employment is terminated prior to the close of the
2002-2004 Performance Cycle:

 

(i) by the Company or any of its Subsidiaries for any reason or due to voluntary
resignation by the Participant, Participant’s right to receive Performance
Shares shall be forfeited in its entirety as of such termination.

 

(ii) due to death, Disability, or Retirement, Participant’s right to receive the
Target Performance Shares shall vest at the time of such termination in the same
proportion as the number of days elapsed in the 2002-2004 Performance Cycle as
of the date of such termination of Employment bears to the total number of days
in the 2002-2004 Performance Cycle and shall be delivered to Participant as soon
as possible following such termination. Participant’s right to receive
additional Performance Shares shall be forfeited at such time.

 

5. Cash Payment Upon a Change of Control. Notwithstanding anything herein to the
contrary, upon or immediately prior to the occurrence of any Change of Control
of the Company prior to the end of the 2002-2004 Performance Cycle,
Participant’s right to receive Performance Shares, unless previously forfeited
pursuant to Section 4, shall be settled by a cash payment to Participant equal
to the product of (i) the Fair Market value per share of Common Stock on the
date immediately preceding the date on which the Change of Control occurs and
(ii) 150% of the number of Target Performance Shares. Such cash payment shall
satisfy the rights of Participant and the obligations of the Company under this
Award Agreement in full.

 

6. Payment of Award.

 

(a) If Participant’s right to receive Performance Shares has vested pursuant to
Section 4, a number of shares of Common Stock equal to the number of Vested
Performance Shares shall be registered in the name of the Participant and
certificates representing such Common Stock shall be delivered to the
Participant as soon as practical after the date upon which the Participant’s
right to such shares vested according to the provisions of Section 4. The
Company shall have the right to withhold applicable taxes from any such payment
of Vested Performance Shares or from other compensation payable to the
Participant at the time of such vesting and delivery pursuant to Section 12 of
the Plan.

 

(b) Upon delivery of the Vested Performance Shares pursuant to paragraph (a),
above, Participant shall also be entitled to receive a cash payment equal to the
sum of all dividends, if any, announced or paid on the Vested Performance Shares
after the commencement of the 2002-2004 Performance Cycle but prior to the date
the Vested Performance Shares are delivered to the Participant.

 

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7. Notices. For purposes of this Award Agreement, notices to the Company shall
be deemed to have been duly given upon receipt of written notice by the
corporate secretary of the Company at 1111 Louisiana, Houston, Texas 77002, or
to such other address as the Company may furnish to the Participant.

 

Notices to the Participant shall be deemed effectively delivered or given upon
personal, electronic, or postal delivery of written notice to the Participant,
the place of Employment of the Participant, the address on record for the
Participant at the human resources department of the Company, or such other
address as the Participant hereafter designates by written notice to the
Company.

 

8. Shareholder Rights. The Participant shall have no rights of a shareholder
with respect to the Performance Shares, unless and until the Participant is
registered as the holder of shares of Common Stock representing the Vested
Performance Shares on the records of the Company as provided in Section 6.

 

9. Successors and Assigns. This Award Agreement shall bind and inure to the
benefit of and be enforceable by the Participant, the Company and their
respective permitted successors and assigns except as expressly prohibited
herein and in the Plan. Notwithstanding anything herein or in the Plan to the
contrary, the Performance Shares are transferable by the Participant to
Immediate Family Members, Immediate Family Members Trusts, and Immediate Family
Member Partnerships pursuant to Section 14 of the Plan.

 

10. No Employment Guaranteed. Nothing in this Award Agreement shall give the
Participant any rights to (or impose any obligations for) continued Employment
by the Company or any Subsidiary thereof or successor thereto, nor shall it give
such entities any rights (or impose any obligations) with respect to continued
performance of duties by the Participant.

 

11. Modification of Agreement. Any modification of this Award Agreement shall be
binding only if evidenced in writing and signed by an authorized representative
of the Company.

 

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