Document:

<PAGE>   1
                                                                     EXHIBIT 4.2

================================================================================

                             RELIANT RESOURCES, INC.

                                       AND

                            THE CHASE MANHATTAN BANK,

                                  RIGHTS AGENT

                                   ----------

                                RIGHTS AGREEMENT

                          DATED AS OF JANUARY 15, 2001

================================================================================

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          PAGE
                                                                                                          ----

<S>                                                                                                       <C>
Section 1.  Certain Definitions.............................................................................1

Section 2.  Appointment of Rights Agent.....................................................................8

Section 3.  Issue of Rights Certificates....................................................................8

Section 4.  Form of Rights Certificates.....................................................................9

Section 5.  Countersignature and Registration..............................................................10

Section 6.  Transfer, Split-Up, Combination and Exchange of Rights Certificates;
            Mutilated, Destroyed, Lost or Stolen Rights Certificates.......................................11

Section 7.  Exercise of Rights; Purchase Price.............................................................11

Section 8.  Cancellation and Destruction of Rights Certificates............................................13

Section 9.  Reservation and Availability of Capital Stock..................................................13

Section 10. Preferred Stock Record Date....................................................................15

Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
            Number of Rights...............................................................................15

Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....................................22

Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...........................23

Section 14. Fractional Rights and Fractional Shares........................................................25

Section 15. Rights of Action...............................................................................26

Section 16. Agreement of Rights Holders....................................................................27

Section 17. Rights Certificate Holder Not Deemed a Stockholder.............................................27

Section 18. Concerning the Rights Agent....................................................................28

Section 19. Merger or Consolidation or Change of Name of Rights Agent......................................28

Section 20. Duties of Rights Agent.........................................................................29
</TABLE>

                                      -i-
<PAGE>   3

<TABLE>
<CAPTION>
                                                                                                          PAGE
                                                                                                          ----

<S>                                                                                                       <C>
Section 21. Change of Rights Agent.........................................................................30

Section 22. Issuance of New Rights Certificates............................................................31

Section 23. Redemption and Termination.....................................................................32

Section 24. Exchange.......................................................................................32

Section 25. Notice of Certain Events.......................................................................33

Section 26. Notices........................................................................................34

Section 27. Supplements and Amendments.....................................................................35

Section 28. Successors.....................................................................................35

Section 29. Determinations and Actions by the Board of Directors, etc. ....................................35

Section 30. Benefits of this Agreement.....................................................................36

Section 31. Severability...................................................................................36

Section 32. Governing Law..................................................................................36

Section 33. Counterparts...................................................................................36

Section 34. Descriptive Headings...........................................................................36
</TABLE>

Exhibit A -- Description of Series A Preferred Stock from Article Four of
             Restated Certificate of Incorporation of Reliant Resources, Inc.

Exhibit B -- Form of Rights Certificate

Exhibit C -- Summary of Rights to Purchase Preferred Stock

                                      -ii-
<PAGE>   4

                                RIGHTS AGREEMENT

         This Rights Agreement, dated as of January 15, 2001 (the "Agreement"),
between Reliant Resources, Inc., a Delaware corporation (the "Company"), and The
Chase Manhattan Bank, a New York state bank (the "Rights Agent"),

                                   WITNESSETH:

         WHEREAS, effective as of April 27, 2001 (the "Rights Dividend
Declaration Date"), the Board of Directors of the Company authorized and
declared a dividend of one Right for each share of common stock, par value $.001
per share, of the Company (the "Common Stock") outstanding at the close of
business on April 27, 2001 (the "Record Date"), and has authorized the issuance
of one Right (as such number may hereinafter be adjusted pursuant to the
provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued (whether originally issued or delivered from the Company's
treasury) between the Record Date and the earlier of the Distribution Date (as
hereinafter defined) and the Expiration Date (as hereinafter defined), and, in
certain circumstances provided for in Section 22 hereof, after the Distribution
Date, each Right initially representing the right to purchase one Fractional
Share (as hereinafter defined) of Series A Preferred Stock of the Company, upon
the terms and subject to the conditions hereinafter set forth (the "Rights");

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:

         Section 1. Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:

         "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding, but shall not
include any Exempt Person; provided, however, that a Person shall not be or
become an Acquiring Person if such Person, together with its Affiliates and
Associates, shall become the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding solely as a result of a reduction in the number of
shares of Common Stock outstanding due to the repurchase of Common Stock by the
Company, unless and until such time as such Person or any Affiliate or Associate
of such Person shall purchase or otherwise become the Beneficial Owner of
additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock or any other Person (or Persons) who is (or
collectively are) the Beneficial Owner of shares of Common Stock constituting 1%
or more of the then outstanding shares of Common Stock shall become an Affiliate
or Associate of such Person, unless, in either such case, such Person, together
with all Affiliates and Associates of such Person, is not then the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding; and
provided, further, that if the Board of Directors, with the concurrence of a
majority of the members of the Board of Directors who are not, and are not
representatives, nominees, Affiliates or Associates of, such Person or an
Acquiring Person, determines in good faith that a Person that would otherwise be
an "Acquiring Person" has become such inadvertently (including, without
limitation, because (i) such Person was unaware that it beneficially owned a
percentage of Common Stock that would otherwise cause such Person to be

                                      -1-
<PAGE>   5

an "Acquiring Person" or (ii) such Person was aware of the extent of its
Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing or influencing control of the Company, and if such Person
as promptly as practicable divested or divests itself of Beneficial Ownership of
a sufficient number of shares of Common Stock so that such Person would no
longer be an "Acquiring Person," then such Person shall not be deemed to be or
to have become an "Acquiring Person" for any purposes of this Agreement.

         Notwithstanding anything in this definition of "Acquiring Person" to
the contrary, so long as Reliant Energy, together with all Affiliates and
Associates of such Person, remains the Beneficial Owner of 15% or more of the
outstanding shares of Common Stock, Reliant Energy and any of its Affiliates or
Associates shall not be or become an Acquiring Person unless and until such
Person, together with all Affiliates and Associates of such Person (other than
the Company and its subsidiaries), becomes the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock or any other Person (or Persons) who is (or collectively are) the
Beneficial Owner of shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock shall become an Affiliate or Associate of
such Person unless, such Person, together with all Affiliates and Associates of
such Person (other than the Company and its subsidiaries), is not then the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding.
In addition, notwithstanding anything in this definition of "Acquiring Person"
to the contrary, any Person who acquires 15% or more of the outstanding shares
of Common Stock from Reliant Energy and its Affiliates or Associates shall not
be or become an Acquiring Person unless and until such Person, together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of
additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock or any other Person (or Persons) who is (or
collectively are) the Beneficial Owner of shares of Common Stock constituting 1%
or more of the then outstanding shares of Common Stock shall become an Affiliate
or Associate of such Person unless, such Person, together with all Affiliates
and Associates of such Person, is not then the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding.

         At any time that the Rights are redeemable, the Board of Directors may,
generally or with respect to any specified Person or Persons, determine to
increase to a specified percentage greater than that set forth herein or
decrease to a specified percentage lower than that set forth herein or determine
a number of shares to be (but in no event less than or equal to the percentage
or number of shares of Common Stock then beneficially owned by such Person), the
level of Beneficial Ownership of Common Stock at which a Person or such Person
or Persons becomes an Acquiring Person.

         "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.

         "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement; provided, however, that no Person shall be deemed an
"Affiliate" of Reliant Energy solely by virtue of being an officer or director
of Reliant Energy unless and until such officer or director, as the case may be,
and Reliant Energy (or an Affiliate or Associate of Reliant Energy) (i) have any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding,

                                      -2-
<PAGE>   6

voting (except pursuant to a revocable proxy or consent as described in the
proviso to subparagraph (i) of the definition of "Beneficial Owner") or
disposing of any voting securities of the Company or (ii) are members of any
group (as that term is used in Rule 13d-5(b) of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement)
with respect to the Company or securities of the Company.

         "Associate" shall mean, with reference to any Person, (1) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a Subsidiary of the Company) of which
such Person is an officer or general partner (or officer or general partner of a
general partner) or is, directly or indirectly, the Beneficial Owner of 10% or
more of any class of equity securities, (2) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity and (3) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.

         A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," any securities:

                  (i) that such Person or any of such Person's Affiliates or
         Associates, directly or indirectly, is the "beneficial owner" of (as
         determined pursuant to Rule 13d-3 of the General Rules and Regulations
         under the Exchange Act as in effect on the date of this Agreement) or
         otherwise has the right to vote or dispose of, including pursuant to
         any agreement, arrangement or understanding (whether or not in
         writing); provided, however, that a Person shall not be deemed the
         "Beneficial Owner" of, or to "beneficially own," any security under
         this subparagraph (i) as a result of an agreement, arrangement or
         understanding to vote such security if such agreement, arrangement or
         understanding: (A) arises solely from a revocable proxy or consent
         given in response to a public (i.e., not including a solicitation
         exempted by Rule 14a-2(b)(2) of the General Rules and Regulations under
         the Exchange Act as in effect on the date of this Agreement) proxy or
         consent solicitation made pursuant to, and in accordance with, the
         applicable provisions of the General Rules and Regulations under the
         Exchange Act and (B) is not then reportable by such Person on Schedule
         13D under the Exchange Act (or any comparable or successor report);

                  (ii) that such Person or any of such Person's Affiliates or
         Associates, directly or indirectly, has the right or obligation to
         acquire (whether such right or obligation is exercisable or effective
         immediately or only after the passage of time or the occurrence of an
         event) pursuant to any agreement, arrangement or understanding (whether
         or not in writing) or upon the exercise of conversion rights, exchange
         rights, other rights, warrants or options, or otherwise; provided,
         however, that a Person shall not be deemed the "Beneficial Owner" of,
         or to "beneficially own," (A) securities tendered pursuant to a tender
         or exchange offer made by such Person or any of such Person's
         Affiliates or Associates until such tendered securities are accepted
         for purchase or exchange, or (B) securities issuable upon exercise of
         Rights at any time prior to the occurrence of a Triggering Event, or
         (C) securities issuable upon exercise of Rights from and after the
         occurrence of a Triggering Event which Rights were acquired by such
         Person or any of such Person's Affiliates or Associates prior to the
         Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
         "Original

                                      -3-
<PAGE>   7

         Rights") or pursuant to Section 11(i) or (p) hereof in connection with
         an adjustment made with respect to any Original Rights; or

                  (iii) that are beneficially owned, directly or indirectly, by
         (A) any other Person (or any Affiliate or Associate thereof) with which
         such Person or any of such Person's Affiliates or Associates has any
         agreement, arrangement or understanding (whether or not in writing) for
         the purpose of acquiring, holding, voting (except pursuant to a
         revocable proxy or consent as described in the proviso to subparagraph
         (i) of this definition) or disposing of any voting securities of the
         Company or (B) any group (as that term is used in Rule 13d-5(b) of the
         General Rules and Regulations under the Exchange Act, as in effect on
         the date of this Agreement) of which such Person is a member;

provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting (including,
without limitation, securities acquired pursuant to stabilizing transactions to
facilitate a public offering in accordance with Regulation M promulgated under
the Exchange Act, or to cover overallotments created in connection with a public
offering) until the expiration of forty days after the date of such acquisition.
For purposes of this Agreement, "voting" a security shall include voting,
granting a proxy, acting by consent, making a request or demand relating to
corporate action (including, without limitation, calling a stockholder meeting),
entering into a voting trust or voting agreement or otherwise giving an
authorization (within the meaning of Section 14(a) of the Exchange Act, as in
effect on the date of this Agreement) in respect of such security.

         "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York or Texas are
authorized or obligated by law or executive order to close.

         "Close of business" on any given date shall mean 5:00 p.m., New York
City time, on such date; provided, however, that if such date is not a Business
Day, it shall mean 5:00 p.m., New York City time, on the next succeeding
Business Day.

         "Closing Price" of a security for any day shall mean the last sales
price, regular way, on such day or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, on such day,
in either case as reported in the principal transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange, or, if such security is not listed or admitted to trading on the New
York Stock Exchange, on the principal national securities exchange on which such
security is listed or admitted to trading, or, if such security is not listed or
admitted to trading on any national securities exchange but sales price
information is reported for such security, as reported by Nasdaq or such other
self-regulatory organization or registered securities information processor (as
such terms are used under the Exchange Act) that then reports information
concerning such security, or, if sales price information is not so reported, the
average of the high bid and low asked prices in the over-the-counter market on
such day, as reported by Nasdaq or such other entity, or, if on such day such
security is not quoted by any such entity, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in such
security selected by the Board of Directors of the Company.

                                      -4-
<PAGE>   8

If on such day no market maker is making a market in such security, the fair
value of such security on such day as determined in good faith by the Board of
Directors of the Company shall be used.

         "Common Stock" shall mean the common stock, par value $.001 per share,
of the Company, except that "Common Stock" when used with reference to equity
interests issued by any Person other than the Company shall mean the capital
stock of such Person with the greatest voting power, or the equity securities or
other equity interest having power to control or direct the management, of such
Person.

         "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.

         "Company" shall mean the Person named as the "Company" in the preamble
of this Agreement until a successor Person shall have become such or until a
Principal Party shall assume, and thereafter be liable for, all obligations and
duties of the Company hereunder, pursuant to the applicable provisions of this
Agreement, and thereafter "Company" shall mean such successor Person or
Principal Party.

         "Current Market Price" shall have the meaning set forth in Section
11(d) hereof.

         "Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.

         "Distribution Date" shall mean the earlier of (i) the close of business
on the tenth day (or, if such Stock Acquisition Date results from the
consummation of a Permitted Offer, such later date as may be determined by the
Company's Board of Directors as set forth below at any time when the Rights are
redeemable) after the Stock Acquisition Date or (ii) the close of business on
the tenth Business Day (or such later date as may be determined by the Company's
Board of Directors as set forth below before the Distribution Date occurs) after
the date that a tender offer or exchange offer by any Person (other than any
Exempt Person) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act as then in
effect, if upon consummation thereof, such Person would be an Acquiring Person,
other than a tender or exchange offer that is determined before the Distribution
Date occurs to be a Permitted Offer. The Board of Directors of the Company may,
to the extent set forth in the preceding sentence, defer the date set forth in
clause (i) or (ii) of the preceding sentence to a specified later date or to an
unspecified later date to be determined by a subsequent action or event (but in
no event to a date later than the close of business on the tenth day after the
first occurrence of a Triggering Event).

         "Equivalent Preferred Stock" shall have the meaning set forth in
Section 11(b) hereof.

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         "Exchange Ratio" shall have the meaning set forth in Section 24 hereof.

         "Exempt Person" shall mean the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company,
and any Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan or for the purpose of funding any such
plan

                                      -5-
<PAGE>   9

or funding other employee benefits for employees of the Company or any
Subsidiary of the Company.

         "Expiration Date" shall mean the earliest of (i) the Final Expiration
Date, (ii) the time at which the Rights are redeemed as provided in Section 23
hereof, (iii) the time at which the Rights expire pursuant to Section 13(d)
hereof and (iv) the time at which all Rights then outstanding and exercisable
are exchanged pursuant to Section 24 hereof.

         "Final Expiration Date" shall mean the close of business on January 15,
2011.

         "Flip-In Event" shall mean an event described in Section 11(a)(ii)
hereof.

         "Flip-In Trigger Date" shall have the meaning set forth in Section
11(a)(iii) hereof.

         "Flip-Over Event" shall mean any event described in clause (x), (y) or
(z) of Section 13(a) hereof, but excluding any transaction described in Section
13(d) hereof that causes the Rights to expire.

         "Fractional Share" with respect to the Preferred Stock shall mean one
one-thousandth of a share of Preferred Stock.

         "Nasdaq" shall mean the National Association of Securities Dealers,
Inc. Automated Quotations System.

         "Original Rights" shall have the meaning set forth in the definition of
"Beneficial Owner."

         "Permitted Offer" shall mean a tender offer or an exchange offer for
all outstanding shares of Common Stock at a price and on terms determined, prior
to the time the Person making the offer or any Affiliate or Associate thereof is
an Acquiring Person, by at least a majority of the members of the Board of
Directors who are not officers or employees of the Company and who are not, and
are not representatives, nominees, Affiliates or Associates of, an Acquiring
Person or the Person making the offer, after receiving advice from one or more
investment banking firms, to be (a) at a price and on terms that are fair to
stockholders (taking into account all factors that such members of the Board
deem relevant including, without limitation, prices that could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (b) otherwise in the best interests of the Company
and its stockholders.

         "Person" shall mean any individual, firm, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other entity or any group of Persons acting in concert.

         "Preferred Stock" shall mean shares of Series A Preferred Stock, par
value $.001 per share, of the Company having the rights, powers and preferences
set forth in Article Four of the Company's Restated Certificate of
Incorporation, a copy of which is attached hereto as Exhibit A and, to the
extent that there is not a sufficient number of shares of Series A Preferred
Stock

                                      -6-
<PAGE>   10

authorized to permit the full exercise of the Rights, any other series of
Preferred Stock, par value $.001 per share, of the Company designated for such
purpose containing terms substantially similar to the terms of the Series A
Preferred Stock.

         "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.

         "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.

         "Record Date" shall have the meaning set forth in the recitals clause
at the beginning of this Agreement.

         "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.

         "Reliant Energy" shall mean Reliant Energy, Incorporated, a Texas
corporation, and its successors.

         "Rights" shall have the meaning set forth in the recitals clause at the
beginning of this Agreement.

         "Rights Agent" shall mean the Person named as the "Rights Agent" in the
preamble of this Agreement until a successor Rights Agent shall have become such
pursuant to the applicable provisions hereof, and thereafter "Rights Agent"
shall mean such successor Rights Agent. If at any time there is more than one
Person appointed by the Company as Rights Agent pursuant to the applicable
provisions of this Agreement, "Rights Agent" shall mean and include each such
Person.

         "Rights Certificates" shall mean the certificates evidencing the
Rights.

         "Rights Dividend Declaration Date" shall have the meaning set forth in
the recitals clause at the beginning of this Agreement.

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof.

         "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition and Section 23, shall
include, without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.

         "Subsidiary" shall mean, with reference to any Person, any corporation
or other Person of which an amount of voting securities sufficient to elect at
least a majority of the directors or other persons performing similar functions
is beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.

         "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.

                                      -7-
<PAGE>   11

         "Summary of Rights" shall mean the Summary of Rights sent pursuant to
Section 3(b) hereof.

         "Trading Day" with respect to a security shall mean a day on which the
principal national securities exchange on which such security is listed or
admitted to trading is open for the transaction of business, or, if such
security is not listed or admitted to trading on any national securities
exchange but is quoted by Nasdaq, a day on which Nasdaq reports trades, or, if
such security is not so quoted, a Business Day.

         "Triggering Event" shall mean any Flip-In Event or any Flip-Over Event.

         Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent (i) to act as agent for the Company and (ii) to take certain
actions in respect of the holders of the Rights (who, in accordance with Section
3 hereof, shall prior to the Distribution Date also be the holders of the Common
Stock) (although it is expressly agreed that the Rights Agent shall not act as
agent for such holders) in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such Co-Rights Agents as it may deem necessary or desirable.

         Section 3. Issue of Rights Certificates.

         (a) Until the Distribution Date, (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for Common Stock registered in the names of the holders of the
Common Stock and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as of the close
of business on the Distribution Date (other than any Person referred to in the
first sentence of Section 7(e)), at the address of such holder shown on the
records of the Company, one or more Rights Certificates, evidencing one Right
for each share of Common Stock so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
Common Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.

         (b) Promptly following the Record Date, the Company will send a copy of
a Summary of Rights, in substantially the form attached to this Agreement as
Exhibit C, by first-class, postage prepaid mail, to each record holder of Common
Stock as of the close of business on the Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Stock outstanding as of the Record Date, until the Distribution Date or
the earlier surrender for transfer thereof or the Expiration Date, the Rights
associated with the shares of Common Stock represented by such certificates
shall be evidenced by such certificates for Common Stock, and the registered
holders of the Common Stock shall also be the registered holders of the

                                      -8-
<PAGE>   12

associated Rights. Until the earlier of the Distribution Date or the Expiration
Date, the transfer of any of the certificates for Common Stock outstanding on
the Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.

         (c) Rights shall be issued in respect of all shares of Common Stock
that are issued (whether originally issued or delivered from the Company's
treasury) on or after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date or, in certain circumstances provided
in Section 22 hereof, after the Distribution Date. Certificates issued for
shares of Common Stock that shall so become outstanding or shall be transferred
or exchanged on or after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date shall also be deemed to be certificates
for Rights, and shall bear the following legend:

         This certificate also evidences and entitles the holder hereof to
     certain Rights as set forth in the Rights Agreement between Reliant
     Resources, Inc. (the "Company") and The Chase Manhattan Bank (the "Rights
     Agent") dated as of January 15, 2001, as it may from time to time be
     supplemented or amended (the "Rights Agreement"), the terms of which are
     hereby incorporated herein by reference and a copy of which is on file at
     the principal offices of the Company. Under certain circumstances, as set
     forth in the Rights Agreement, such Rights may be redeemed, may be
     exchanged, may expire or may be evidenced by separate certificates and will
     no longer be evidenced by this certificate. The Company will mail to the
     holder of this certificate a copy of the Rights Agreement, as in effect on
     the date of mailing, without charge promptly after receipt of a written
     request therefor. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
     AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO
     IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF
     (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), AND CERTAIN
     TRANSFEREES THEREOF, WILL BECOME NULL AND VOID AND WILL NO LONGER BE
     TRANSFERABLE.

With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone, and registered holders of Common Stock shall also be
the registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.

         Section 4. Form of Rights Certificates.

         (a) The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof), when, as and if issued,
shall be substantially in the form set forth in Exhibit B hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or quotation system
on which the Rights may from time to time be listed or

                                      -9-
<PAGE>   13

quoted, or to conform to usage. Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever issued, shall be dated as
of the Record Date and on their face shall entitle the holders thereof to
purchase such number of Fractional Shares of Preferred Stock as shall be set
forth therein at the price set forth therein (such exercise price per Fractional
Share (or, as set forth in this Agreement, for other securities), the "Purchase
Price"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.

         (b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by a Person described in the
first sentence of Section 7(e), and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any such Rights, shall contain (to the extent feasible) the
following legend, modified as applicable to apply to such Person:

     The Rights represented by this Rights Certificate are or were beneficially
     owned by a Person who was or became an Acquiring Person or an Affiliate or
     Associate of an Acquiring Person (as such terms are defined in the Rights
     Agreement). Accordingly, this Rights Certificate and the Rights represented
     hereby [will] [have] become null and void in the circumstances and with the
     effect specified in Section 7(e) of such Agreement.

The provisions of Section 7(e) of this Agreement shall be operative whether or
not the foregoing legend is contained on any such Rights Certificate. The
Company shall give notice to the Rights Agent promptly after it becomes aware of
the existence of any Acquiring Person or any Associate or Affiliate thereof.

         Section 5. Countersignature and Registration.

         (a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof, which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be countersigned by the Rights Agent, either
manually or by facsimile signature, and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall have
signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.

         (b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at the office or offices designated by the Rights Agent as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights

                                      -10-
<PAGE>   14

Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the certificate
number and the date of each of the Rights Certificates.

         Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.

         (a) Subject to the provisions of Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24 hereof, at any time after the close of business
on the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of Fractional Shares of Preferred Stock (or, following a Triggering Event,
Common Stock, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Rights Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office or offices designated
by the Rights Agent for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
thereof or of the Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e), Section 13(d), Section 14 and Section 24 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment by the holder of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split-up,
combination or exchange of Rights Certificates.

         (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will, subject to Section 4(b), Section 7(e), Section
13(d), Section 14 and Section 24, execute and deliver a new Rights Certificate
of like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.

         Section 7. Exercise of Rights; Purchase Price.

         (a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights

                                      -11-
<PAGE>   15

Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly completed and executed, to the Rights Agent at the
office or offices designated by the Rights Agent for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of
Fractional Shares of Preferred Stock (or other securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the Expiration Date.

         (b) The Purchase Price for each Fractional Share of Preferred Stock
pursuant to the exercise of a Right shall initially be $150, and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.

         (c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed, accompanied by payment, with respect to each Right
so exercised, of the Purchase Price per Fractional Share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly
(i)(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of Fractional Shares of Preferred Stock to be
purchased, and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the shares of Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing interests in such number of
Fractional Shares of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
Fractional Shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder and (iv) after receipt
thereof, deliver such cash, if any, to or upon the order of the registered
holder of such Rights Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii) hereof) may be made in cash
or by certified check, cashier's or official bank check or bank draft payable to
the order of the Company or the Rights Agent. In the event that the Company is
obligated to issue other securities (including Common Stock) of the Company, pay
cash and/or distribute other property pursuant to Section 11(a) or Section 13(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock would
be issued.

         (d) In case the registered holder of any Rights Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.

                                      -12-
<PAGE>   16

         (e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by or transferred to (i) an Acquiring Person or an Associate or Affiliate
of an Acquiring Person other than any such Person that became such pursuant to a
Permitted Offer and the Board of Directors in good faith determines was not
involved in and did not cause or facilitate, directly or indirectly, such
Triggering Event, (ii) a direct or indirect transferee of such Rights from such
Acquiring Person (or any such Associate or Affiliate) who becomes a transferee
after such Triggering Event or (iii) a direct or indirect transferee of such
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with such Triggering Event and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
such Acquiring Person (or such Affiliate or Associate) to holders of equity
interests in such Acquiring Person (or such Affiliate or Associate) or to any
Person with whom such Acquiring Person (or such Affiliate or Associate) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors of the Company determines
is part of a plan, arrangement or understanding that has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and void without
any further action, no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise, and such Rights shall not be transferable. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.

         (f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.

         Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.

         Section 9. Reservation and Availability of Capital Stock.

         (a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence

                                      -13-
<PAGE>   17

of a Triggering Event, out of its authorized and unissued shares of Common Stock
and/or other securities or out of its authorized and issued shares held in its
treasury), the number of shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) that, as
provided in this Agreement, including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding Rights.

         (b) So long as any shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights are listed on any national
securities exchange or quoted on any trading system, the Company shall use its
best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange, or quoted on such system, upon official notice of issuance upon such
exercise. Following the occurrence of a Triggering Event, the Company will use
its best efforts to list (or continue the listing of) the Rights and the
securities issuable and deliverable upon the exercise of the Rights on one or
more national securities exchanges or to cause the Rights and the securities
purchasable upon exercise of the Rights to be reported by Nasdaq or such other
transaction reporting system then in use.

         (c) The Company shall use its best efforts to (i) prepare and file, as
soon as practicable following the first occurrence of a Flip-In Event or, if
applicable, as soon as practicable following the earliest date after the first
occurrence of a Flip-In Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed 90 days after the date set forth in clause (i) of the
first sentence of this Section 9(c), the exercisability of the Rights in order
to prepare and file such registration statement and permit it to become
effective. In addition, if the Company shall determine that the Securities Act
requires an effective registration statement under the Securities Act following
the Distribution Date, the Company may temporarily suspend the exercisability of
the Rights until such time as such a registration statement has been declared
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or any required
registration statement shall not have been declared effective.

         (d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Fractional Shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall,

                                      -14-
<PAGE>   18

at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.

         (e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Rights Certificates and of
any certificates for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax that may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of Fractional Shares
of Preferred Stock (or Common Stock and/or other securities, as the case may be)
in respect of a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) in a name other than that of
the registered holder upon the exercise of any Rights until such tax shall have
been paid (any such tax being payable by the holder of such Rights Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.

         Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for a number of Fractional Shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of such shares (fractional or otherwise) of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.

         Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares or other
securities subject to purchase upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.

               (a)(i) In the event the Company shall at any time after the
     Rights Dividend Declaration Date (A) declare a dividend on the outstanding
     shares of Preferred Stock payable in shares of Preferred Stock, (B)
     subdivide the outstanding shares of Preferred Stock, (C) combine the
     outstanding shares of Preferred Stock into a smaller number of shares or
     (D) otherwise reclassify the outstanding shares of Preferred Stock
     (including any such

                                      -15-
<PAGE>   19

     reclassification in connection with a consolidation or merger in which the
     Company is the continuing or surviving corporation), except as otherwise
     provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price
     in effect at the time of the record date for such dividend or of the
     effective date of such subdivision, combination or reclassification, and
     the number and kind of shares of Preferred Stock or capital stock or other
     securities, as the case may be, issuable on such date, shall be
     proportionately adjusted so that the holder of any Right exercised after
     such time shall be entitled to receive, upon payment of the Purchase Price
     then in effect, the aggregate number and kind of shares of Preferred Stock
     or capital stock or other securities, as the case may be, which, if such
     Right had been exercised immediately prior to such date and at a time when
     the Preferred Stock transfer books of the Company were open, he would have
     owned upon such exercise and been entitled to receive by virtue of such
     dividend, subdivision, combination or reclassification. If an event occurs
     that would require an adjustment under both this Section 11(a)(i) and
     Section 11(a)(ii) hereof, the adjustment provided for in this Section
     11(a)(i) shall be in addition to, and shall be made prior to, any
     adjustment required pursuant to Section 11(a)(ii) hereof.

               (ii) Subject to Sections 23 and 24 of this Agreement, in the
     event any Person shall, at any time after the Rights Dividend Declaration
     Date, become an Acquiring Person, unless the event causing such Person to
     become an Acquiring Person is (1) a Flip-Over Event or (2) an acquisition
     of shares of Common Stock pursuant to a Permitted Offer (provided that this
     clause (2) shall cease to apply if such Acquiring Person thereafter becomes
     the Beneficial Owner of any additional shares of Common Stock other than
     pursuant to such Permitted Offer or a transaction set forth in Section
     13(a) or 13(d) hereof), then, unless applicable law prohibits the
     enforcement of the first sentence of Section 7(e), (x) the Purchase Price
     shall be adjusted to be the Purchase Price immediately prior to the first
     occurrence of a Flip-In Event multiplied by the number of Fractional Shares
     of Preferred Stock for which a Right was exercisable immediately prior to
     such first occurrence and (y) each holder of a Right (except as provided
     below in Section 11(a)(iii) and in Section 7(e) hereof) shall thereafter
     have the right to receive, upon exercise thereof at a price equal to the
     Purchase Price in accordance with the terms of this Agreement, in lieu of
     shares of Preferred Stock, such number of shares of Common Stock of the
     Company as shall equal the result obtained by dividing the Purchase Price
     by 50% of the Current Market Price per share of Common Stock on the date of
     such first occurrence (such number of shares, the "Adjustment Shares");
     provided that the Purchase Price and the number of Adjustment Shares shall
     be further adjusted as provided in this Agreement to reflect any events
     occurring after the date of such first occurrence.

               (iii) In the event that the number of shares of Common Stock that
     are authorized by the Company's certificate of incorporation but not
     outstanding or reserved for issuance for purposes other than upon exercise
     of the Rights is not sufficient to permit the exercise in full of the
     Rights in accordance with the foregoing subparagraph (ii) of this Section
     11(a), the Company shall, to the extent permitted by applicable law and
     regulation, (A) determine the excess of (1) the value of the Adjustment
     Shares issuable upon the exercise of a Right (computed using the Current
     Market Price used to determine the number of Adjustment Shares) (the
     "Current Value") over (2) the Purchase Price (such excess is herein
     referred to as the "Spread"), and (B) with respect to each Right, make
     adequate

                                      -16-
<PAGE>   20

     provision to substitute for the Adjustment Shares, upon the exercise of the
     Rights and payment of the applicable Purchase Price, (1) cash, (2) a
     reduction in the Purchase Price, (3) Common Stock or other equity
     securities of the Company (including, without limitation, shares, or units
     of shares, of preferred stock (including, without limitation, the Preferred
     Stock) that the Board of Directors of the Company has determined to have
     the same value as shares of Common Stock (such shares of preferred stock
     are herein referred to as "Common Stock Equivalents")), (4) debt securities
     of the Company, (5) other assets or (6) any combination of the foregoing,
     having an aggregate value equal to the Current Value, where such aggregate
     value has been determined by the Board of Directors of the Company based
     upon the advice of a nationally recognized investment banking firm selected
     by the Board of Directors of the Company; provided, however, if the Company
     shall not have made adequate provision to deliver value pursuant to clause
     (B) above within 30 days following the first occurrence of a Flip-In Event
     (the "Flip-In Trigger Date"), then the Company shall be obligated to
     deliver, upon the surrender for exercise of a Right and without requiring
     payment of the Purchase Price, shares of Common Stock (to the extent
     available) and then, if necessary, cash, which shares and/or cash have an
     aggregate value equal to the Spread. If the Board of Directors of the
     Company shall determine in good faith that it is likely that sufficient
     additional shares of Common Stock could be authorized for issuance upon
     exercise in full of the Rights, the 30-day period set forth above may be
     extended to the extent necessary, but not more than 90 days after the
     Flip-In Trigger Date, in order that the Company may seek stockholder
     approval for the authorization of such additional shares (such period, as
     it may be extended, the "Substitution Period"). To the extent that the
     Company or the Board of Directors determines that some action need be taken
     pursuant to the first and/or second sentences of this Section 11(a)(iii),
     the Company (x) shall provide, subject to Section 7(e) hereof, that such
     action shall apply uniformly to all outstanding Rights, and (y) may suspend
     the exercisability of the Rights until the expiration of the Substitution
     Period in order to seek any authorization of additional shares and/or to
     decide the appropriate form of distribution to be made pursuant to such
     first sentence and to determine the value thereof. In the event of any such
     suspension, the Company shall issue a public announcement stating that the
     exercisability of the Rights has been temporarily suspended, as well as a
     public announcement at such time as the suspension is no longer in effect.
     For purposes of this Section 11(a)(iii), the value of the Common Stock
     shall be the Current Market Price per share of the Common Stock on the
     Flip-In Trigger Date and the value of any Common Stock Equivalent shall be
     deemed to have the same value as the Common Stock on such date.

         (b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or shares having the same rights, privileges
and preferences as the shares of Preferred Stock ("Equivalent Preferred Stock"))
or securities convertible into Preferred Stock or Equivalent Preferred Stock at
a price per share of Preferred Stock or per share of Equivalent Preferred Stock
(or having a conversion price per share, if a security convertible into
Preferred Stock or Equivalent Preferred Stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred

                                      -17-
<PAGE>   21

Stock outstanding on such record date, plus the number of shares of Preferred
Stock that the aggregate offering price of the total number of shares of
Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Current Market Price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration, part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price that would then be in effect if such
record date had not been fixed.

         (c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent) of the portion of the cash,
assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to a share of Preferred Stock and the denominator
of which shall be such Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price that would have been in effect if such record
date had not been fixed.

               (d)(i) For the purpose of any computation hereunder, other than
     computations made pursuant to Section 11(a)(iii) hereof, the "Current
     Market Price" per share of Common Stock of a Person on any date shall be
     deemed to be the average of the daily Closing Prices per share of such
     Common Stock for the 30 consecutive Trading Days immediately prior to such
     date, and for purposes of computations made pursuant to Section 11(a)(iii)
     hereof, the "Current Market Price" per share of Common Stock on any date
     shall be deemed to be the average of the daily Closing Prices per share of
     such Common Stock for the 10 consecutive Trading Days immediately following
     such date; provided, however, that in the event that the Current Market
     Price per share of Common Stock is determined during a period following the
     announcement of (A) a dividend or distribution on such Common Stock other
     than a regular quarterly cash dividend or the dividend of the Rights, or
     (B) any subdivision,

                                      -18-
<PAGE>   22

     combination or reclassification of such Common Stock, and the ex-dividend
     date for such dividend or distribution, or the record date for such
     subdivision, combination or reclassification, shall not have occurred prior
     to the commencement of the requisite 30 Trading Day or 10 Trading Day
     period, as set forth above, then, and in each such case, the Current Market
     Price shall be properly adjusted to take into account ex-dividend trading.
     If the Common Stock is not publicly held or not so listed or traded,
     "Current Market Price" per share shall mean the fair value per share as
     determined in good faith by the Board of Directors of the Company, whose
     determination shall be described in a statement filed with the Rights Agent
     and shall be conclusive for all purposes.

               (ii) For the purpose of any computation hereunder, the "Current
     Market Price" per share (or Fractional Share) of Preferred Stock shall be
     determined in the same manner as set forth above for the Common Stock in
     clause (i) of this Section 11(d) (other than the last sentence thereof). If
     the Current Market Price per share (or Fractional Share) of Preferred Stock
     cannot be determined in the manner provided above or if the Preferred Stock
     is not publicly held or listed or traded in a manner described in clause
     (i) of this Section 11(d), the "Current Market Price" per share of
     Preferred Stock shall be conclusively deemed to be an amount equal to 1000
     (as such number may be appropriately adjusted for such events as stock
     splits, stock dividends and recapitalizations with respect to the Common
     Stock occurring after the date of this Agreement) multiplied by the Current
     Market Price per share of the Common Stock. If neither the Common Stock nor
     the Preferred Stock is publicly held or so listed or traded, Current Market
     Price per share of the Preferred Stock shall mean the fair value per share
     as determined in good faith by the Board of Directors of the Company, whose
     determination shall be described in a statement filed with the Rights Agent
     and shall be conclusive for all purposes. For all purposes of this
     Agreement, the Current Market Price of a Fractional Share of Preferred
     Stock shall be equal to the Current Market Price of one share of Preferred
     Stock divided by 1000.

         (e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments that by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a share of Common Stock or other share
or to the nearest ten-thousandth of a Fractional Share of Preferred Stock, as
the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which mandates such
adjustment or (ii) the Expiration Date.

         (f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive in respect of such Right any shares of capital stock other
than Preferred Stock, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (f), (g), (h),

                                      -19-
<PAGE>   23

(i), (j), (k) and (m) hereof, and the provisions of Sections 7, 9, 10, 13 and 14
hereof with respect to the Preferred Stock shall apply on like terms to any such
other shares.

         (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Fractional Shares of
Preferred Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

         (h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of Fractional
Shares of Preferred Stock (calculated to the nearest one ten-thousandth of a
Fractional Share) obtained by (i) multiplying (x) the number of Fractional
Shares of Preferred Stock covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.

         (i) The Company may elect, on or after the date of any adjustment of
the Purchase Price, to adjust the number of Rights in lieu of any adjustment in
the number of Fractional Shares of Preferred Stock purchasable upon the exercise
of a Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of Fractional Shares of Preferred
Stock for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest ten-thousandth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.

         (j) Irrespective of any adjustment or change in the Purchase Price or
the number of Fractional Shares of Preferred Stock issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per

                                      -20-
<PAGE>   24

Fractional Share and the number of Fractional Shares that were expressed in the
initial Rights Certificates issued hereunder.

         (k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, or the stated capital of
the number of Fractional Shares of Preferred Stock or of the number of shares of
Common Stock or other securities issuable upon exercise of a Right, the Company
shall take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable such number of Fractional Shares of Preferred Stock or such number
of shares of Common Stock or other securities at such adjusted Purchase Price.

         (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of Fractional Shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of Fractional Shares of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.

         (m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities that by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11 hereafter made by the Company to holders of its Preferred Stock shall
not be taxable to such stockholders.

         (n) The Company covenants and agrees that it shall not, at any time
that there is an Acquiring Person, (i) consolidate with any other Person, (ii)
merge with or into or be acquired pursuant to a share exchange by any other
Person, or (iii) sell, lease or transfer (or permit one or more Subsidiaries to
sell, lease or transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons, if (x) at the time of or immediately after such
consolidation, merger, share exchange, sale, lease or transfer there are any
rights, warrants or other instruments or securities of the Company or any other
Person outstanding or agreements, arrangements or understandings in effect that
would substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (y) prior to, simultaneously with or immediately after
such consolidation, merger, share exchange, sale, lease or transfer, the
stockholders or other equity owners of the Person who constitutes, or would
constitute, the "Principal Party" for purposes of Section 13(a) hereof shall
have received a distribution of Rights previously owned by such Person or any of
its Affiliates or Associates, or (z) the identity, form or

                                      -21-
<PAGE>   25

nature of organization of the Principal Party (including without limitation the
selection of the Person that will be the Principal Party as a result of the
Company's entering into one or more consolidations, mergers, share exchanges,
sales, leases, transfers or transactions with more than one party) would
preclude or limit the exercise of Rights or otherwise diminish substantially or
eliminate the benefits intended to be afforded by the Rights.

         (o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23, Section 24 or Section 27 hereof,
take (or permit any Subsidiary to take) any action if the purpose of such action
is to, or if at the time such action is taken it is reasonably foreseeable that
such action will, diminish substantially or eliminate the benefits intended to
be afforded by the Rights.

         (p) Notwithstanding Section 3(c) hereof or any other provision of this
Agreement to the contrary, in the event that the Company shall at any time after
the Rights Dividend Declaration Date and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock, (iii)
combine the outstanding shares of Common Stock into a smaller number of shares
or (iv) otherwise reclassify the outstanding shares of Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), the number of Rights
associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction (the "Adjustment
Fraction") the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event. In lieu of such
adjustment in the number of Rights associated with one share of Common Stock,
the Company may elect to adjust the number of Fractional Shares of Preferred
Stock purchasable upon the exercise of one Right and the Purchase Price. If the
Company makes such election, the number of Rights associated with one share of
Common Stock shall remain unchanged, and the number of Fractional Shares of
Preferred Stock purchasable upon exercise of one Right and the Purchase Price
shall be proportionately adjusted so that (i) the number of Fractional Shares of
Preferred Stock purchasable upon exercise of a Right following such adjustment
shall equal the product of the number of Fractional Shares of Preferred Stock
purchasable upon exercise of a Right immediately prior to such adjustment
multiplied by the Adjustment Fraction and (ii) the Purchase Price following such
adjustment shall equal the product of the Purchase Price immediately prior to
such adjustment multiplied by the Adjustment Fraction.

         Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate and (c) mail a
brief summary thereof to each registered holder of a Rights Certificate (or, if
prior to the Distribution Date, to each registered holder of a certificate
representing shares of Common Stock) in accordance

                                      -22-
<PAGE>   26

with Section 26 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained.

         Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash
Flow or Earning Power.

         (a) In the event that, from and after the time an Acquiring Person has
become such, directly or indirectly, (x) the Company shall consolidate with, or
merge with and into, any other Person, and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person shall consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of such consolidation
or merger, or the Company shall be party to a share exchange, and, in connection
with such consolidation or merger or share exchange, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of the Company or any other Person or cash or any other
property, or (z) the Company shall sell, lease or otherwise transfer (or one or
more of its Subsidiaries shall sell, lease or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any wholly owned Subsidiary of the Company or any
combination thereof in one or more transactions each of which complies (and all
of which together comply) with Section 11(o) hereof), then, and in each such
case (except as may be contemplated by Section 13(d) hereof), proper provision
shall be made so that: (i) the Purchase Price shall be adjusted to be the
Purchase Price immediately prior to the first occurrence of a Triggering Event
multiplied by the number of Fractional Shares of Preferred Stock for which a
Right was exercisable immediately prior to such first occurrence; (ii) on and
after the Distribution Date, each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the Purchase Price in accordance with the terms of this
Agreement, in lieu of shares of Preferred Stock or Common Stock of the Company,
such number of validly authorized and issued, fully paid, nonassessable and
freely tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
dividing the Purchase Price by 50% of the Current Market Price per share of the
Common Stock of such Principal Party on the date of consummation of such
Flip-Over Event; provided that the Purchase Price and the number of shares of
Common Stock of such Principal Party issuable upon exercise of each Right shall
be further adjusted as provided in this Agreement to reflect any events
occurring after the date of such first occurrence of a Triggering Event or after
the date of such Flip-Over Event, as applicable; (iii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Flip-Over
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iv) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Flip-Over Event; (v) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (vi) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the occurrence of
any Flip-Over Event.

                                      -23-
<PAGE>   27

         (b) "Principal Party" shall mean

         (i) in the case of any transaction described in clause (x) or (y) of
     the first sentence of Section 13(a), (A) the Person that is the issuer of
     any securities into which shares of Common Stock of the Company are
     converted in such merger or consolidation or share exchange, or, if there
     is more than one such issuer, the issuer the Common Stock of which has the
     greatest aggregate market value, or (B) if no securities are so issued, (x)
     the Person that survives such consolidation or is the other party to the
     merger and survives such merger, or, if there is more than one such Person,
     the Person the Common Stock of which has the greatest aggregate market
     value or (y) if the Person that is the other party to the merger does not
     survive the merger, the Person that does survive the merger (including the
     Company if it survives); and

         (ii) in the case of any transaction described in clause (z) of the
     first sentence of Section 13(a), the Person that is the party receiving the
     greatest portion of the assets or earning power transferred pursuant to
     such transaction or transactions, or, if each Person that is a party to
     such transaction or transactions receives the same portion of the assets or
     earning power so transferred, or if the Person receiving the greatest
     portion of the assets or earning power cannot be determined, the Person the
     Common Stock of which has the greatest aggregate market value;

provided, however, that in any such case, if the Common Stock of such Person is
not at such time and has not been continuously over the preceding twelve-month
period registered under Section 12 of the Exchange Act, and if (1) such Person
is a direct or indirect Subsidiary of another Person the Common Stock of which
is and has been so registered, "Principal Party" shall refer to such other
Person; (2) such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value; and (3) such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains of ownership having
an interest in such joint venture as if such party were a "Subsidiary" of both
or all of such joint venturers and the Principal Parties in each such chain
shall bear the obligations set forth in this Section 13 in the same ratio as
their direct or indirect interests in such Person bear to the total of such
interests.

         (c) The Company shall not consummate any Flip-Over Event unless each
Principal Party (or Person that may become a Principal Party as a result of such
Flip-Over Event) shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and each such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of such Flip-Over Event, the
Principal Party at its own expense will

         (i) prepare and file a registration statement under the Securities Act
     with respect to the Rights and the securities purchasable upon exercise of
     the Rights on an appropriate

                                      -24-
<PAGE>   28

         form, and will use its best efforts to cause such registration
         statement to (A) become effective as soon as practicable after such
         filing and (B) remain effective (with a prospectus at all times meeting
         the requirements of the Securities Act) until the Expiration Date;

         (ii) use its best efforts to qualify or register the Rights and the
     securities purchasable upon exercise of the Rights under the "blue sky"
     laws of such jurisdictions as may be necessary or appropriate;

         (iii) use its best efforts, if the Common Stock of the Principal Party
     is or shall become listed on a national securities exchange, to list (or
     continue the listing of) the Rights and the securities purchasable upon
     exercise of the Rights on such securities exchange and, if the Common Stock
     of the Principal Party shall not be listed on a national securities
     exchange, to cause the Rights and the securities purchasable upon exercise
     of the Rights to be reported by Nasdaq or such other transaction reporting
     system then in use; and

         (iv) deliver to holders of the Rights historical financial statements
     for the Principal Party and each of its Affiliates that comply in all
     respects with the requirements for registration on Form 10 under the
     Exchange Act.

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Flip-Over Event
shall occur at any time after the occurrence of a Flip-In Event, the Rights that
have not theretofore been exercised shall thereafter become exercisable in the
manner described in Section 13(a).

         (d) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in subparagraphs (x) and
(y) of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a Permitted Offer (or a
wholly owned Subsidiary of any such Person or Persons), (ii) the price per share
of Common Stock offered in such transaction is not less than the price per share
of Common Stock paid to all holders of Common Stock whose shares were purchased
pursuant to such Permitted Offer, and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.

         Section 14. Fractional Rights and Fractional Shares.

         (a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates or scrip evidencing fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the Closing Price
of one Right for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable.

                                      -25-
<PAGE>   29

         (b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than, except as provided in Section 7(c) hereof,
fractions that are integral multiples of a Fractional Share of Preferred Stock)
upon exercise of the Rights or to distribute certificates or scrip evidencing
fractional shares of Preferred Stock (other than, except as provided in Section
7(c) hereof, fractions that are integral multiples of a Fractional Share of
Preferred Stock). Interests in fractions of shares of Preferred Stock in
integral multiples of a Fractional Share of Preferred Stock may, at the election
of the Company in its sole discretion, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights, privileges and preferences
to which they are entitled as beneficial owners of the shares of Preferred Stock
represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock that are not integral multiples of a Fractional Share of
Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of one one-thousandth of the Closing Price of
a share of Preferred Stock for the Trading Day immediately prior to the date of
such exercise.

         (c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates or scrip evidencing fractional shares
of Common Stock. In lieu of fractional shares of Common Stock, the Company may
pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
Closing Price of one share of Common Stock for the Trading Day immediately prior
to the date of such exercise.

         (d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.

         Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock) and, where applicable, the Company; and any registered holder of
any Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), without the consent of the Rights Agent or of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the Common Stock),
may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by such
Rights Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement. After a Triggering Event,
holders of Rights shall be entitled to recover the reasonable costs and
expenses, including attorneys' fees, incurred by them in any action to enforce
the provisions of this Agreement.

                                      -26-

<PAGE>   30

         Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

         (a) prior to the Distribution Date, the Rights will not be evidenced by
Rights Certificates and will be transferable only in connection with the
transfer of Common Stock;

         (b) after the Distribution Date, the Rights Certificates will be
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices designated by the Rights Agent for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the form of
assignment set forth on the reverse side thereof and the certificate contained
therein duly completed and fully executed;

         (c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary; and

         (d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.

         Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Fractional
Shares of Preferred Stock or any other securities of the Company that may at any
time be issuable upon the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.

                                      -27-
<PAGE>   31

         Section 18. Concerning the Rights Agent.

         (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other reasonable disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.

         (b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it, after proper inquiry or examination, to be
genuine and to be signed, executed and, where necessary, guaranteed, verified or
acknowledged, by the proper Person or Persons.

         Section 19. Merger or Consolidation or Change of Name of Rights Agent.

         (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

         (b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.

                                      -28-
<PAGE>   32

         Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

         (a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.

         (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Current Market Price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.

         (c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct. In no event shall the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage and regardless of the
form of action.

         (d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.

         (e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
Section 13 hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after receipt of actual knowledge of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Preferred Stock
or Common Stock or other securities to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any shares of Preferred Stock or Common
Stock or other securities will, when so issued, be validly authorized and
issued, fully paid and nonassessable.

                                      -29-
<PAGE>   33

         (f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.

         (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.

         (h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

         (i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents (including the Company), and the Rights Agent
shall not be answerable or accountable for any act, omission, default, neglect
or misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, omission, default, neglect or misconduct; provided,
however, that reasonable care was exercised in the selection and continued
employment thereof.

         (j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.

         (k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

         Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company, and to each transfer
agent of the Common Stock and the Preferred Stock, by registered or certified
mail, and to the registered holders, if any, of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent (with or without cause) upon 30 days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock and the Preferred Stock, by registered or
certified mail, and to the registered holders of the Rights Certificates, if
any, by first-

                                      -30-
<PAGE>   34

class mail. If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor to the Rights
Agent. Notwithstanding the foregoing provisions of this Section 21, in no event
shall the resignation or removal of a Rights Agent be effective until a
successor Rights Agent shall have been appointed and have accepted such
appointment. If the Company shall fail to make such appointment within a period
of 30 days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the registered holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the Rights Agent or the registered holder of any Rights Certificate may
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (a) a corporation organized and doing business under the laws of
the United States or of the State of New York or Texas (or of any other state of
the United States so long as such corporation is authorized to conduct a stock
transfer or corporate trust business in the State of New York or Texas), in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50,000,000 or (b) an affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders, if any, of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.

         Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the Expiration Date, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement granted or awarded on or prior
to the Distribution Date, or upon the exercise, conversion or exchange of
securities issued by the Company on or prior to the Distribution Date, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, and (ii) no such Rights

                                      -31-
<PAGE>   35

Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

         Section 23. Redemption and Termination.

         (a) The Board of Directors of the Company may, at its option, at any
time prior to the time a Person becomes an Acquiring Person, cause the Company
to redeem all but not less than all the then outstanding Rights at a redemption
price of $.005 per Right, as such amount may be appropriately adjusted, if
necessary, to reflect any stock split, stock dividend or similar transaction
occurring after the Rights Dividend Declaration Date (such redemption price
being hereinafter referred to as the "Redemption Price"). The Company may, at
its option, pay the Redemption Price in cash, shares of Common Stock (based on
the Current Market Price of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors.

         (b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the redemption of the Rights (the
effectiveness of which action may be conditioned on the occurrence of one or
more events or on the existence of one or more facts or may be effective at some
future time), evidence of which shall be filed with the Rights Agent and without
any further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the
effectiveness of the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the registered holders of the then outstanding Rights by mailing such notice
to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Company for the Common Stock. Any notice that is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made.

         Section 24. Exchange.

         (a) The Board of Directors of the Company may, at its option, at any
time and from time to time after the occurrence of a Flip-In Event, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock or Common Stock Equivalents or any combination
thereof, at an exchange ratio of one share of Common Stock, or such number of
Common Stock Equivalents or units representing fractions thereof as would be
deemed to have the same value as one share of Common Stock, per Right,
appropriately adjusted, if necessary, to reflect any stock split, stock dividend
or similar transaction occurring after the Rights Dividend Declaration Date
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors may not effect such
exchange at any time after (i) any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then outstanding
or (ii) the occurrence of a Flip-Over Event.

                                      -32-
<PAGE>   36

         (b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to and in
accordance with subsection (a) of this Section 24 (the effectiveness of which
action may be conditioned on the occurrence of one or more events or on the
existence of one or more facts or may be effective at some future time) and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock and/or Common Stock
Equivalents equal to the number of such Rights held by such holder multiplied by
the Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the registered holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the shares of Common
Stock and/or Common Stock Equivalents for Rights will be effected and, in the
event of any partial exchange, the number of Rights that will be exchanged. Any
partial exchange shall be effected as nearly pro rata as possible based on the
number of Rights (other than Rights that have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.

         (c) In the event that the number of shares of Common Stock that are
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient to permit an exchange of Rights as contemplated in accordance with
this Section 24, the Company may, at its option, take all such action as may be
necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.

         (d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates or scrip evidencing fractional shares
of Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to the registered holders of Rights with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the value of a whole share of Common Stock. For
purposes of this Section 24, the value of a whole share of Common Stock shall be
the Closing Price per share of Common Stock for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24, and the value of any
Common Stock Equivalent shall be deemed to have the same value as the Common
Stock on such date.

         Section 25. Notice of Certain Events.

         (a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person

                                      -33-
<PAGE>   37

(other than a wholly owned Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof), or to effect any sale, lease or other
transfer of all or substantially all the Company's assets, cash flow or earning
power to any other Person or Persons (other than a wholly owned Subsidiary of
the Company in a transaction that complies with Section 11(o) hereof), or (v) to
effect the liquidation, dissolution or winding up of the Company, or (vi) to be
acquired pursuant to a share exchange, then, in each such case, the Company
shall give to each holder of record of a Rights Certificate, to the extent
feasible and in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, lease, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the shares of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock, whichever shall be the earlier.
The failure to give notice required by this Section 25 or any defect therein
shall not affect the legality or validity of the action taken by the Company or
the vote upon any such action.

         (b) In case any Flip-In Event or Flip-Over Event shall occur, then the
Company shall as soon as practicable thereafter give to each registered holder
of a Rights Certificate (or if occurring prior to the Distribution Date, the
registered holders of Common Stock), in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) or
Section 13(a) hereof, and all references in the preceding paragraph to Preferred
Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.

         Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by certified
mail, return receipt requested, postage prepaid, addressed (until another
address is filed in writing with the Rights Agent) as follows:

         Reliant Resources, Inc.
         1111 Louisiana
         Houston, Texas 77002
         Attention: General Counsel

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by certified mail, return receipt requested, postage prepaid, addressed
(until another address is filed in writing with the Company) as follows:

         The Chase Manhattan Bank
         600 Travis Street, Suite 1150
         Houston, Texas 77002
         Attention: Ms. Dierdre T. Green
                    Trust Officer

                                      -34-
<PAGE>   38

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.

         Section 27. Supplements and Amendments. Prior to the time a Person
becomes an Acquiring Person and subject to the penultimate sentence of this
Section 27, the Company may in its sole and absolute discretion and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement in any respect without the approval of any holders of Rights or
holders of Common Stock. From and after the time a Person becomes an Acquiring
Person and subject to the penultimate sentence of this Section 27, the Company
may and the Rights Agent shall, if the Company so directs, supplement or amend
this Agreement without the approval of any holders of Rights in order (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained herein
that may be defective or inconsistent with any other provisions herein, or (iii)
to change or supplement the provisions hereunder in any manner that the Company
may deem necessary or desirable; provided that no such amendment or supplement
shall materially and adversely affect the interests of the holders of Rights
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person). Upon the delivery of a certificate from an appropriate officer of the
Company which states that the proposed supplement or amendment is in compliance
with the terms of this Section 27, the Rights Agent shall execute such
supplement or amendment; provided, however, that the Rights Agent may, but shall
not be obligated to, enter into any such supplement or amendment that affects
the Rights Agent's own rights, duties or immunities under this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made that decreases the Redemption Price,
shortens the Final Expiration Date, increases the initial Purchase Price or
decreases the number of one one-thousandths of a share of Preferred Stock for
which a Right is initially exercisable. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.

         Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

         Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement. The Board of
Directors of the Company (or, as set forth herein, certain specified members
thereof) shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors of the Company or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to

                                      -35-
<PAGE>   39

(i) interpret the provisions of this Agreement and (ii) make all determinations
deemed necessary or advisable for the administration of this Agreement
(including, without limitation, a determination to redeem or not redeem the
Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors of the Company in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights, as such,
and all other parties, and (y) not subject the Board of Directors to any
liability to the holders of the Rights.

         Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).

         Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors of
the Company. Without limiting the foregoing, if any provision requiring that a
determination be made by less than the entire Board of Directors of the Company
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, such determination shall then be made by the entire Board
of Directors of the Company.

         Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.

         Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

         Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

                                      -36-
<PAGE>   40

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of this ___ day of April, 2001.

                                       RELIANT RESOURCES, INC.

                                       By:
                                          --------------------------------------
                                       Name:
                                       Title:

                                       THE CHASE MANHATTAN BANK

                                       By:
                                          --------------------------------------
                                       Name:
                                       Title:

                                      -37-
<PAGE>   41
                                                                       Exhibit A

                     DESCRIPTION OF SERIES A PREFERRED STOCK

                                      FROM

                                  ARTICLE FOUR

                                       OF

                      RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                             RELIANT RESOURCES, INC.

                            SERIES A PREFERRED STOCK

         1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series A Preferred Stock," and the number of shares
constituting such series shall be 2,000,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided,
however, that no decrease shall reduce the number of shares of Series A
Preferred Stock to less than the number of shares then issued and outstanding
plus the number of shares issuable upon exercise of outstanding rights, options
or warrants or upon conversion of outstanding securities issued by the
Corporation.

         2. Dividends and Distributions.

         (A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of any class or
series of stock of the Corporation ranking junior to the Series A Preferred
Stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of assets of the Corporation legally available for the purpose,
quarterly dividends payable in cash on the first day of January, April, July and
October in each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $10.00 or (b) the Adjustment Number (as defined below) times the
aggregate per share amount of all cash dividends, and the Adjustment Number
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. The "Adjustment Number" shall initially be
1,000. In the event the

                                      A-1
<PAGE>   42

Corporation shall at any time after April 27, 2001 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

         (B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.

         (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.

         3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:

         (A) Each share of Series A Preferred Stock shall entitle the holder
thereof to a number of votes equal to the Adjustment Number on all matters
submitted to a vote of the stockholders of the Corporation.

         (B) Except as otherwise provided in this Restated Certificate of
Incorporation or by law, the holders of shares of Series A Preferred Stock, the
holders of shares of any other class or series entitled to vote with the Common
Stock and the holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation.

                                      A-2
<PAGE>   43

         (C)(i) If at any time dividends on any Series A Preferred Stock shall
be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") that shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, (1) the number of directors shall be increased by two,
effective as of the time of election of such directors as herein provided, and
(2) the holders of Preferred Stock (including holders of the Series A Preferred
Stock) upon which these or like voting rights have been conferred and are
exercisable (the "Voting Preferred Stock") with dividends in arrears in an
amount equal to six quarterly dividends thereon, voting as a class, irrespective
of series, shall have the right to elect such two directors.

         (ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders, provided that
such voting right shall not be exercised unless the holders of at least thirty
three and one-third percent (33 1/3%) of the shares of Voting Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Voting Preferred Stock of such voting right.

         (iii) Unless the holders of Voting Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Voting Preferred Stock outstanding, irrespective of series, may
request, the calling of a special meeting of the holders of Voting Preferred
Stock, which meeting shall thereupon be called by the Chairman, the President, a
Vice President or the Corporate Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Voting Preferred Stock are
entitled to vote pursuant to this paragraph (C)(iii) shall be given to each
holder of record of Voting Preferred Stock by mailing a copy of such notice to
him at his last address as the same appears on the books of the Corporation.
Such meeting shall be called for a time not earlier than 20 days and not later
than 60 days after such order or request or, in default of the calling of such
meeting within 60 days after such order or request, such meeting may be called
on similar notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Voting Preferred
Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.

         (iv) In any default period, after the holders of Voting Preferred Stock
shall have exercised their right to elect directors voting as a class, (x) the
directors so elected by the holders of Voting Preferred Stock shall continue in
office until their successors shall have been elected by such holders or until
the expiration of the default period, and (y) any vacancy in the Board of
Directors may be filled by vote of a majority of the remaining directors
theretofore elected by the holders of the class or classes of stock which
elected the director whose office shall have become vacant. References in this
paragraph (C) to directors elected by the holders of a particular class or
classes of stock shall include directors elected by such directors to fill
vacancies as provided in clause (y) of the foregoing sentence.

                                      A-3
<PAGE>   44

         (v) Immediately upon the expiration of a default period, (x) the right
of the holders of Voting Preferred Stock as a class to elect directors shall
cease, (y) the term of any directors elected by the holders of Voting Preferred
Stock as a class shall terminate and (z) the number of directors shall be such
number as may be provided for in this Restated Certificate of Incorporation or
the Bylaws of the Corporation irrespective of any increase made pursuant to the
provisions of paragraph (C) of this Section 3 (such number being subject,
however, to change thereafter in any manner provided by law, or in this Restated
Certificate of Incorporation or the Bylaws of the Corporation). Any vacancies in
the Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining directors.

         (D) Except as set forth herein, holders of Series A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.

         4. Certain Restrictions.

         (A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not

               (i) declare or pay dividends on, make any other distributions on,
     or redeem or purchase or otherwise acquire for consideration any shares of
     stock ranking junior (either as to dividends or upon liquidation,
     dissolution or winding up) to the Series A Preferred Stock;

               (ii) declare or pay dividends on or make any other distributions
     on any shares of stock ranking on a parity (either as to dividends or upon
     liquidation, dissolution or winding up) with the Series A Preferred Stock,
     except dividends paid ratably on the Series A Preferred Stock and all such
     parity stock on which dividends are payable or in arrears in proportion to
     the total amounts to which the holders of all such shares are then
     entitled; or

               (iii) redeem or purchase or otherwise acquire for consideration
     any shares of Series A Preferred Stock, or any shares of stock ranking on a
     parity with the Series A Preferred Stock, except in accordance with a
     purchase offer made in writing or by publication (as determined by the
     Board of Directors) to all holders of Series A Preferred Stock, or to all
     such holders and the holders of any such shares ranking on a parity
     therewith, upon such terms as the Board of Directors, after consideration
     of the respective annual dividend rates and other relative power,
     preferences and rights of the respective series and classes, shall
     determine in good faith will result in fair and equitable treatment among
     the respective series or classes.

         (B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of capital stock
of the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner.

                                      A-4
<PAGE>   45

         5. Reacquired Shares. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors, subject to any
conditions and restrictions on issuance set forth in this Restated Certificate
of Incorporation.

         6. Liquidation, Dissolution or Winding Up. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $1,000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series A
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
the Adjustment Number. Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Preferred Stock and Common Stock, respectively, holders of
Series A Preferred Stock and holders of shares of Common Stock shall, subject to
the prior rights of all other series of Preferred Stock, if any, ranking prior
thereto, receive their ratable and proportionate share of the remaining assets
to be distributed in the ratio of the Adjustment Number to 1 with respect to
such Series A Preferred Stock and Common Stock, on a per share basis,
respectively.

         (B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences. In the event, however, that there
are not sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably to the
holders of Common Stock.

         (C) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6, but the
sale, lease or conveyance of all or substantially all of the Corporation's
assets shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of this Section 6.

         7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share equal to the Adjustment Number times the aggregate amount of

                                      A-5
<PAGE>   46

stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged.

         8. Redemption. The Corporation, at its option, may redeem shares of the
Series A Preferred Stock in whole at any time and in part from time to time, at
a redemption price equal to the Adjustment Number times the current per share
market price (as such term is hereinafter defined) of the Common Stock on the
date of the mailing of the notice of redemption, together with unpaid
accumulated dividends to the date of such redemption. The "current per share
market price" on any date shall be deemed to be the average of the closing price
per share of such Common Stock for the ten consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date; provided, however,
that in the event that the current per share market price of the Common Stock is
determined during a period following the announcement of (A) a dividend or
distribution on the Common Stock other than a regular quarterly cash dividend or
(B) any subdivision, combination or reclassification of such Common Stock and
the ex-dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, shall not have occurred prior
to the commencement of such ten Trading Day period, then, and in each such case,
the current per share market price shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sales price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange, or, if
the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange but sales price
information is reported for such security, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("Nasdaq")
or such other self-regulatory organization or registered securities information
processor (as such terms are used under the Securities Exchange Act of 1934, as
amended) that then reports information concerning the Common Stock, or, if sales
price information is not so reported, the average of the high bid and low asked
prices in the over-the-counter market on such day, as reported by Nasdaq or such
other entity, or, if on any such date the Common Stock is not quoted by any such
entity, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors. If on any such date no such market maker is making a market
in the Common Stock, the fair value of the Common Stock on such date as
determined in good faith by the Board of Directors shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business, or, if the Common Stock is not listed or admitted
to trading on any national securities exchange but is quoted by Nasdaq, a day on
which Nasdaq reports trades, or, if the Common Stock is not so quoted, a Monday,
Tuesday, Wednesday, Thursday or Friday on which banking institutions in the
State of New York or Texas are not authorized or obligated by law or executive
order to close.

         (B) In the event that fewer than all of the outstanding shares of the
Series A Preferred Stock are to be redeemed, the number of shares to be redeemed
shall be determined by the Board of Directors and the shares to be redeemed
shall be determined by lot or pro rata as may be determined by the Board of
Directors or by any other method that may be determined by the Board of
Directors in its sole discretion to be equitable.

                                      A-6
<PAGE>   47

         (C) Notice of any such redemption shall be given by mailing to the
holders of the shares of Series A Preferred Stock to be redeemed a notice of
such redemption, first class postage prepaid, not later than the fifteenth day
and not earlier than the sixtieth day before the date fixed for redemption, at
their last address as the same shall appear upon the books of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the number of shares
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on the close of
business on such redemption date. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the stockholder received such notice, and failure duly to give such notice by
mail, or any defect in such notice, to any holder of Series A Preferred Stock
shall not affect the validity of the proceedings for the redemption of any other
shares of Series A Preferred Stock that are to be redeemed. On or after the date
fixed for redemption as stated in such notice, each holder of the shares called
for redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the redemption price. If fewer than all the
shares represented by any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.

         (D) The shares of Series A Preferred Stock shall not be subject to the
operation of any purchase, retirement or sinking fund.

         9. Ranking. The Series A Preferred Stock shall rank junior to all other
series of Preferred Stock (other than any such series of Preferred Stock the
terms of which shall provide otherwise) in respect to dividend and liquidation
rights and shall rank senior to the Common Stock as to such matters.

         10. Amendment. At any time that any shares of Series A Preferred Stock
are outstanding, this Restated Certificate of Incorporation shall not be amended
in any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least sixty six and two-thirds
percent (66 2/3%) of the outstanding shares of Series A Preferred Stock, voting
separately as a class.

         11. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share that shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.

                                      A-7
<PAGE>   48

                                                                       Exhibit B

                          [Form of Rights Certificate]

Certificate No. R-                                               ________ Rights

NOT EXERCISABLE AFTER JANUARY 15, 2011 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.005 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.

                               RIGHTS CERTIFICATE

                             RELIANT RESOURCES, INC.

         This certifies that _____________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of January 15, 2001 as it may from time to time
be supplemented or amended (the "Rights Agreement"), between Reliant Resources,
Inc., a Delaware corporation (the "Company"), and The Chase Manhattan Bank, a
New York state bank (the "Rights Agent"), to purchase from the Company at any
time prior to 5:00 p.m. (New York City time) on January 15, 2011 at the office
or offices designated by the Rights Agent for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully paid, nonassessable share (a
"Fractional Share") of Series A Preferred Stock (the "Preferred Stock") of the
Company, at a purchase price of $150 per one one-thousandth of a share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and related Certificate set forth on the
reverse hereof duly executed. The Purchase Price may be paid in cash or by
certified check, cashier's or official bank check or bank draft payable to the
order of the Company or the Rights Agent. The number of Rights evidenced by this
Rights Certificate (and the number of shares that may be purchased upon exercise
thereof) set forth above, and the Purchase Price per Fractional Share set forth
above, are the number and Purchase Price as of April 27, 2001, based on the
Preferred Stock as constituted at such date. The Company reserves the right to
require prior to the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement) that a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.

                                      B-1
<PAGE>   49

         From and after the first occurrence of a Triggering Event (as such term
is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by or transferred to (i) an Acquiring Person
or an Associate or Affiliate of an Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person or an Affiliate or Associate of an
Acquiring Person, such Rights shall, with certain exceptions, become null and
void in the circumstances set forth in the Rights Agreement, and no holder
hereof shall have any rights whatsoever with respect to such Rights from and
after the occurrence of such Triggering Event.

         As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities or assets that may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.

         This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.

         This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office or offices designated by the Rights Agent for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Fractional Shares of Preferred Stock as the Rights evidenced
by the Rights Certificate or Rights Certificates surrendered shall have entitled
such holder to purchase. If this Rights Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not exercised.

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at its option at a
redemption price of $.005 per Right, payable, at the election of the Company, in
cash or shares of Common Stock or such other consideration as the Board of
Directors may determine, at any time prior to the time a Person becomes an
Acquiring Person or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, without par value, and/or other equity securities of the
Company deemed to have the same value as shares of Common Stock, at any time
prior to a person's becoming the beneficial owner of 50% or more of the shares
of Common Stock outstanding or the occurrence of a Flip-Over Event.

                                      B-2
<PAGE>   50

         No fractional shares of Preferred Stock are required to be issued upon
the exercise of any Right or Rights evidenced hereby (other than, except as set
forth above, fractions that are integral multiples of a Fractional Share of
Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment may be made, as
provided in the Rights Agreement.

         No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company that may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

         This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.

         WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.

Dated as of April 27, 2001.

ATTEST:                                RELIANT RESOURCES, INC.

                                       By:
------------------------------            --------------------------------------
Corporate Secretary                       Name:
                                          Title:

Countersigned:

THE CHASE MANHATTAN BANK

By:
   --------------------------------
   Authorized Signature

                                      B-3
<PAGE>   51

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

         (To be executed by the registered holder if such holder desires
          to transfer any Rights evidenced by the Rights Certificate.)

FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers unto ____________________________________________________
_______________________________________________________________________________
                  (Please print name and address of transferee)
_________ Rights evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
__________________ Attorney, to transfer the said Rights on the books of the
within-named Company, with full power of substitution.

Dated:              , 200
       -------------     --

                                       -----------------------------------------
                                       Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                      B-4
<PAGE>   52

                                   CERTIFICATE

         The undersigned hereby certifies by checking the appropriate boxes
that:

         (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined pursuant to the Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person or who is a direct or indirect
transferee of an Acquiring Person or of an Affiliate or Associate of an
Acquiring Person.

Dated:              , 200
       -------------     --            -----------------------------------------
                                       Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                     NOTICE

         The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.

                                      B-5
<PAGE>   53

                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                 Rights represented by the Rights Certificate.)

To: RELIANT RESOURCES, INC.

         The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) be
issued in the name of and delivered to:

Please insert social security
or other identifying number

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

         If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

Dated:              , 200
       -------------     --

                                       -----------------------------------------
                                       Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                      B-6
<PAGE>   54

                                   CERTIFICATE

         The undersigned hereby certifies by checking the appropriate boxes
that:

         (1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);

         (2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or who is a direct or indirect transferee of an
Acquiring Person or of an Affiliate or Associate of an Acquiring Person.

Dated:              , 200
       -------------     --

                                       -----------------------------------------
                                       Signature

Signature Guaranteed:

Signatures must be guaranteed by a member firm of a national securities
exchange, a member of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another eligible guarantor institution (as defined pursuant to Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended).

                                     NOTICE

         The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.

                                      B-7
<PAGE>   55

                                                                       Exhibit C

                                SUMMARY OF RIGHTS

         Effective April 27, 2001, the Board of Directors of Reliant Resources,
Inc. (the "Company") declared a dividend of one right ("Right") for each
outstanding share of the Company's Common Stock, par value $.001 per share
("Common Stock"), to stockholders of record at the close of business on April
27, 2001. Each Right entitles the registered holder to purchase from the Company
a unit consisting of one one-thousandth of a share (a "Fractional Share") of
Series A Preferred Stock, par value $.001 per share (the "Preferred Stock"), at
a purchase price of $150 per Fractional Share, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are set forth in a
Rights Agreement, dated as of January 15, 2001, as it may from time to time be
supplemented or amended (the "Rights Agreement"), between the Company and The
Chase Manhattan Bank, as Rights Agent.

         Detachment of Rights; Exercisability. Initially, the Rights will be
attached to all Common Stock certificates, and no separate certificates for the
Rights ("Rights Certificates") will be distributed. The Rights will separate
from the Common Stock and a "Distribution Date" will occur, with certain
exceptions, upon the earlier of (i) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership of
15% or more of the outstanding shares of Common Stock (the date of the
announcement being the "Stock Acquisition Date"), or (ii) ten business days
following the commencement of a tender offer or exchange offer that would result
in a person's becoming an Acquiring Person; provided, however, that Reliant
Energy, Incorporated ("Reliant Energy") or its successors, together with all
affiliated and associated persons of Reliant Energy, shall not be or become an
Acquiring Person unless and until Reliant Energy, together with its affiliated
and associated persons, becomes the beneficial owner of additional shares of
Common Stock constituting 1% or more of the then outstanding shares of Common
Stock; and provided, further, that any person who acquires 15% or more of the
outstanding shares of Common Stock from Reliant Energy and its affiliated and
associated persons shall not be or become an Acquiring Person unless and until
such person, together with its affiliated and associated persons, becomes the
beneficial owner of additional shares of Common Stock constituting 1% or more of
the then outstanding shares of Common Stock. In certain circumstances, the
Distribution Date may be deferred by the Board of Directors. Certain inadvertent
acquisitions will not result in a person's becoming an Acquiring Person if the
person promptly divests itself of sufficient Common Stock. Until the
Distribution Date, (a) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (b) new Common Stock certificates issued will contain a notation
incorporating the Rights Agreement by reference and (c) the surrender for
transfer of any Common Stock certificate will also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.

         The Rights are not exercisable until the Distribution Date and will
expire at the close of business on January 15, 2011, unless earlier redeemed or
exchanged by the Company as described below.

         As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Common Stock as of the close of business
on the Distribution Date and, from and after the Distribution Date, the separate
Rights Certificates alone will represent the Rights. All shares of Common Stock
issued prior to the Distribution Date will be issued with Rights. Shares of
Common Stock issued after the Distribution Date in connection with certain
employee benefit plans or upon conversion of certain securities will be issued
with Rights. Except as otherwise

                                      C-1
<PAGE>   56

determined by the Board of Directors, no other shares of Common Stock issued
after the Distribution Date will be issued with Rights.

         Flip-In. In the event (a "Flip-In Event") that a person becomes an
Acquiring Person (except pursuant to a tender or exchange offer for all
outstanding shares of Common Stock at a price and on terms that a majority of
the independent directors of the Company determines to be fair to and otherwise
in the best interests of the Company and its stockholders (a "Permitted
Offer")), each holder of a Right will thereafter have the right to receive, upon
exercise of such Right, a number of shares of Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a
Current Market Price (as defined in the Rights Agreement) equal to two times the
exercise price of the Right. Notwithstanding the foregoing, following the
occurrence of any Triggering Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by or
transferred to an Acquiring Person (or by certain related parties) will be null
and void in the circumstances set forth in the Rights Agreement.

         Flip-Over. In the event (a "Flip-Over Event") that, at any time from
and after the time an Acquiring Person becomes such, (i) the Company is acquired
in a merger or other business combination transaction (other than certain
mergers that follow a Permitted Offer), or (ii) 50% or more of the Company's
assets, cash flow or earning power is sold or transferred, each holder of a
Right (except Rights that are voided as set forth above) shall thereafter have
the right to receive, upon exercise, a number of shares of common stock of the
acquiring company having a Current Market Price equal to two times the exercise
price of the Right. Flip-In Events and Flip-Over Events are collectively
referred to as "Triggering Events."

         Preferred Stock. After the Distribution Date, each Right will entitle
the holder to purchase a Fractional Share of Preferred Stock, which will be
essentially the economic equivalent of one share of Common Stock.

         Antidilution. The number of outstanding Rights associated with a share
of Common Stock, or the number of Fractional Shares of Preferred Stock issuable
upon exercise of a Right and the Purchase Price, is subject to adjustment in the
event of a stock dividend on, or a subdivision, combination or reclassification
of, the Common Stock occurring prior to the Distribution Date. The Purchase
Price payable, and the number of Fractional Shares of Preferred Stock or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution in the event of certain
transactions affecting the Preferred Stock.

         With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preferred Stock that are not integral multiples
of a Fractional Share are required to be issued and, in lieu thereof, an
adjustment in cash may be made based on the market price of the Preferred Stock
on the last trading date prior to the date of exercise. Pursuant to the Rights
Agreement, the Company reserves the right to require prior to the occurrence of
a Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.

         Redemption of Rights. At any time until the time a person becomes an
Acquiring Person, the Company may redeem the Rights in whole, but not in part,
at a price of $.005 per Right,

                                      C-2
<PAGE>   57

payable, at the option of the Company, in cash, shares of Common Stock or such
other consideration as the Board of Directors may determine. Immediately upon
the effectiveness of the action of the Board of Directors ordering redemption of
the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the $.005 redemption price.

         Exchange of Rights. At any time after the occurrence of a Flip-In Event
and prior to a person's becoming the beneficial owner of 50% or more of the
shares of Common Stock then outstanding or the occurrence of a Flip-Over Event,
the Company may exchange the Rights (other than Rights owned by an Acquiring
Person or an affiliate or an associate of an Acquiring Person, which will have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock, and/or other equity securities deemed to have the same value as one share
of Common Stock, per Right, subject to adjustment.

         Substitution. If the Company has an insufficient number of authorized
but unissued shares of Common Stock available to permit an exercise or exchange
of Rights upon the occurrence of a Flip-In Event, it may substitute certain
other types of property for the Common Stock so long as the total value received
by the holder of the Rights is equivalent to the value of the Common Stock that
would otherwise have been received. The Company may substitute cash, property,
equity securities or debt of the Company, effect a reduction in the exercise
price of the Right or use any combination of the foregoing.

         No Rights as a Stockholder; Taxes. Until a Right is exercised, the
holder thereof, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends.
Stockholders may, depending upon the circumstances, recognize taxable income in
the event that the Rights become exercisable for Common Stock (or other
consideration) of the Company or for the common stock of the acquiring company
as set forth above or are exchanged as provided in the preceding paragraph.

         Amendment of Terms of Rights. Other than certain provisions relating to
the principal economic terms of the Rights, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company prior to the
time a Person becomes an Acquiring Person. Thereafter, the provisions of the
Rights Agreement may be amended by the Board of Directors in order to cure any
ambiguity, defect or inconsistency or to make changes that do not materially and
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person).

         Rights Agent. The Chase Manhattan Bank serves as Rights Agent with
regard to the Rights.

         Rights Agreement; Summary. A copy of the Rights Agreement has been
filed with the Securities and Exchange Commission as an exhibit to a
Registration Statement on Form S-1 of the Company (Registration No. 333-48038).
A copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.

                                      C-3<PAGE>   1

                                                                    EXHIBIT 10.1

                           MASTER SEPARATION AGREEMENT

                                     BETWEEN

                          RELIANT ENERGY, INCORPORATED

                                       AND

                             RELIANT RESOURCES, INC.

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE I     DEFINITIONS.................................................................2
<S>           <C>                                                                         <C>
      1.1     Action......................................................................2
      1.2     Affiliates..................................................................2
      1.3     Ancillary Agreements........................................................2
      1.4     Business Day................................................................2
      1.5     Business Separation Plan....................................................2
      1.6     Choice Date.................................................................2
      1.7     Code........................................................................2
      1.8     Commission..................................................................2
      1.9     Customer Care LLC...........................................................2
      1.10    Distribution................................................................2
      1.11    Distribution Agent..........................................................2
      1.12    Distribution Date...........................................................3
      1.13    Exchange Act................................................................3
      1.14    Final Order.................................................................3
      1.15    Genco Assets................................................................3
      1.16    Genco Business..............................................................3
      1.17    Genco; Genco Inc............................................................3
      1.18    Genco Liabilities...........................................................3
      1.19    Genco LP....................................................................4
      1.20    Genco Option................................................................4
      1.21    Genco Option Agreement......................................................4
      1.22    Genco Organization Date.....................................................4
      1.23    Genco Public Ownership Event................................................4
      1.24    Governmental Approvals......................................................4
      1.25    Governmental Authority......................................................4
      1.26    Group.......................................................................4
      1.27    Holding Company Restructuring...............................................4
      1.28    Indebtedness................................................................4
      1.29    Indemnifying Party..........................................................4
      1.30    Indemnitee..................................................................5
      1.31    Information.................................................................5
      1.32    Insurance Proceeds..........................................................5
      1.33    IPO.........................................................................5
      1.34    IPO Closing Date............................................................5
      1.35    IPO Prospectus..............................................................5
      1.36    IPO Registration Statement..................................................5
      1.37    Liabilities.................................................................5
      1.38    Losses......................................................................5
      1.39    Mortgage....................................................................6
      1.40    MRT Energy Marketing Assets and Liabilities.................................6
      1.41    NYSE........................................................................6
      1.42    Person......................................................................6
</TABLE>

                                      -i-
<PAGE>   3

<TABLE>
<S>           <C>                                                                         <C>
      1.43    PUCT........................................................................6
      1.44    RECI........................................................................6
      1.45    Record Date.................................................................6
      1.46    Regco.......................................................................6
      1.47    Regulated Retail Assets.....................................................6
      1.48    Regulated Retail Business...................................................6
      1.49    Regulated Retail Liabilities................................................6
      1.50    Regulatory Proceedings......................................................7
      1.51    REI's Auditors..............................................................7
      1.52    REI Business................................................................7
      1.53    REI Group...................................................................7
      1.54    REI Indemnitees.............................................................7
      1.55    REPG........................................................................7
      1.56    RERC........................................................................7
      1.57    RES.........................................................................7
      1.58    Resources Auditors..........................................................7
      1.59    Resources Balance Sheet.....................................................7
      1.60    Resources Business..........................................................7
      1.61    Resources Common Stock......................................................8
      1.62    Resources Debt Obligations..................................................8
      1.63    Resources Excluded Liabilities..............................................8
      1.64    Resources Group.............................................................8
      1.65    Resources Indemnitees.......................................................8
      1.66    Resources Liabilities.......................................................8
      1.67    Resources Rights Plan.......................................................9
      1.68    Retail Electric Provider LLC................................................9
      1.69    Retail Holdings LLC.........................................................9
      1.70    Separation..................................................................9
      1.71    Separation Date.............................................................9
      1.72    Subsidiary..................................................................9
      1.73    Taxes......................................................................10
      1.74    Tax Allocation Agreement...................................................10
      1.75    Third Party Claim..........................................................10
      1.76    Underwriters...............................................................10
      1.77    Underwriting Agreement.....................................................10
      1.78    Unregulated Retail Assets..................................................10
      1.79    Unregulated Retail Business................................................10
      1.80    Unregulated Retail Liabilities.............................................10
      1.81    Utilities Code.............................................................10

ARTICLE II    SEPARATION.................................................................10

      2.1     Separation Date............................................................10
      2.2     Restructuring Transactions.................................................11
      2.3     Release from Mortgage, etc.................................................11
      2.4     Instruments of Transfer and Assumption.....................................12
      2.5     Agreements.................................................................12
</TABLE>

                                      -ii-
<PAGE>   4

<TABLE>
<S>           <C>                                                                         <C>
ARTICLE III   MUTUAL RELEASES; INDEMNIFICATION...........................................13

      3.1     Release of Pre-Closing Claims..............................................13
      3.2     Indemnification by Resources...............................................15
      3.3     Indemnification by REI.....................................................15
      3.4     Indemnification Obligations Net of Insurance Proceeds and Other Amounts....16
      3.5     Procedures for Indemnification of Third Party Claims.......................17
      3.6     Additional Matters.........................................................18
      3.7     Remedies Cumulative........................................................18
      3.8     Survival of Indemnities....................................................18
      3.9     Indemnification of Directors and Officers..................................18

ARTICLE IV    THE IPO AND ACTIONS PENDING THE IPO........................................19

      4.1     Transactions Prior to the IPO..............................................19
      4.2     Use of Proceeds............................................................19
      4.3     Cooperation................................................................20
      4.4     Conditions Precedent to Consummation of the IPO............................20
      4.5     Cancellation of Outstanding Intercompany Indebtedness......................21

ARTICLE V     CORPORATE GOVERNANCE AND CERTAIN FINANCIAL
              REPORTING AND OTHER MATTERS................................................21

      5.1     Charter and Bylaws.........................................................21
      5.2     Rights Plan Amendments.....................................................21
      5.3     Charter/Bylaw Amendments...................................................22
      5.4     Resources Board Representation.............................................22
      5.5     Issuance of Stock..........................................................24

ARTICLE VI    HOLDING COMPANY RESTRUCTURING..............................................24

      6.1     Intent to Effect Holding Company Restructuring.............................24
      6.2     Restructuring Steps........................................................24
      6.3     Actions Prior to the Holding Company Restructuring.........................25
      6.4     Conditions to Holding Company Restructuring................................25
      6.5     Sole Discretion of REI.....................................................26

ARTICLE VII   THE DISTRIBUTION...........................................................26

      7.1     The Distribution...........................................................26
      7.2     Actions Prior to the Distribution..........................................27
      7.3     Sole Discretion of REI.....................................................27
      7.4     Conditions to the Distribution.............................................28
      7.5     Fractional Shares..........................................................28

ARTICLE VIII  GENCO TRANSACTIONS.........................................................29

      8.1     Organization of Genco LP...................................................29
      8.2     Genco Contracts............................................................29
      8.3     Instruments of Transfer and Assumption.....................................29
      8.4     Organization of Genco Inc..................................................30
      8.5     Releases and Indemnities...................................................30
</TABLE>

                                      -iii-
<PAGE>   5

<TABLE>
<S>           <C>                                                                         <C>
ARTICLE IX    ARBITRATION; DISPUTE RESOLUTION............................................30

      9.1     Agreement to Arbitrate.....................................................30
      9.2     Escalation.................................................................30
      9.3     Demand for Arbitration.....................................................31
      9.4     Arbitrators................................................................32
      9.5     Hearings...................................................................32
      9.6     Discovery and Certain Other Matters........................................33
      9.7     Certain Additional Matters.................................................34
      9.8     Arbitration of Genco Option Agreement Cases................................34
      9.9     Continuity of Service and Performance......................................35
      9.10    Law Governing Arbitration Procedures.......................................35

ARTICLE X     COVENANTS AND OTHER MATTERS................................................35

      10.1    Other Agreements...........................................................35
      10.2    Further Instruments........................................................35
      10.3    Agreement for Exchange of Information......................................36
      10.4    Auditors and Audits; Annual and Quarterly Statements and Accounting........38
      10.5    Audit Rights...............................................................40
      10.6    Preservation of Legal Privileges...........................................40
      10.7    Payment of Expenses........................................................41
      10.8    Governmental Approvals.....................................................41
      10.9    Regulatory Proceedings.....................................................41
      10.10   Continuance of REI Credit Support; Borrowings..............................43
      10.11   Certain Non-Competition Provisions; Freedom of Action......................43
      10.12   Clawback Payment...........................................................44
      10.13   Nuclear Decommissioning Trust and Investment...............................44
      10.14   Auctions of Capacity.......................................................45
      10.15   Confidentiality............................................................46
      10.16   1000 Main Lease............................................................47

ARTICLE XI    MISCELLANEOUS..............................................................48

      11.1    Limitation of Liability....................................................48
      11.2    Entire Agreement...........................................................48
      11.3    Governing Law..............................................................48
      11.4    Termination................................................................48
      11.5    Notices....................................................................48
      11.6    Counterparts...............................................................49
      11.7    Binding Effect; Assignment.................................................49
      11.8    Severability...............................................................49
      11.9    Failure or Indulgence Not Waiver; Remedies Cumulative......................49
      11.10   Amendment..................................................................49
      11.11   Authority..................................................................49
      11.12   Interpretation.............................................................49
      11.13   Conflicting Agreements.....................................................50
</TABLE>

                                      -iv-
<PAGE>   6

                           MASTER SEPARATION AGREEMENT

                  THIS MASTER SEPARATION AGREEMENT (this "Agreement") is entered
into as of December 31, 2000, between Reliant Energy, Incorporated, a Texas
corporation ("REI"), and Reliant Resources, Inc., a Delaware corporation
("Resources"). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in Article I hereof.

                                    RECITALS

                  WHEREAS, Resources is a wholly owned subsidiary of REI; and

                  WHEREAS, the Board of Directors of REI has determined that it
would be appropriate and desirable for REI to separate the Resources Group from
the REI Group, and, in that connection, for Resources or its Subsidiaries to
acquire certain entities currently associated with the Resources Business and
certain other assets from REI or its Subsidiaries and to assume related
liabilities; and

                  WHEREAS, the Board of Directors of Resources has also approved
such transactions; and

                  WHEREAS, REI and Resources currently contemplate that
Resources will make an initial public offering ("IPO") of an amount of its
common stock pursuant to a registration statement on Form S-1 filed pursuant to
the Securities Act of 1933, as amended, that will reduce REI's ownership of
Resources by less than 20%; and

                  WHEREAS, REI currently contemplates that, following the IPO,
REI's successor holding company will distribute to the holders of its common
stock, by means of a pro rata distribution, all of the shares of Resources
common stock it then owns (the "Distribution"); and

                  WHEREAS, REI and Resources intend that the Distribution will
qualify as a tax-free distribution under Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement is intended to
be, and is hereby adopted as, a plan of reorganization under Section 368 of the
Code; and

                  WHEREAS, the parties intend in this Agreement, including the
Exhibits and Schedules hereto, to set forth the principal arrangements between
them regarding the separation of the Resources Group from the REI Group, the
IPO, and the Distribution.

                  NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements set forth below, the parties hereto agree as follows:

<PAGE>   7

                                   ARTICLE I

                                   DEFINITIONS

         1.1 ACTION. "Action" means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international Governmental Authority or any arbitration
or mediation tribunal.

         1.2 AFFILIATES. An "Affiliate" of any Person means another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For this purpose
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of the Person controlled,
whether through ownership of voting securities, by contract or otherwise. The
fact that any Person may be deemed at any time an Affiliate of another Person
for purposes of the Utilities Code shall not create any implication that such
Persons are "affiliates" for purposes of this Agreement. Notwithstanding
anything herein to the contrary, no member of the Resources Group shall be
deemed an Affiliate of any member of the REI Group and no member of the REI
Group shall be deemed an Affiliate of any member of the Resources Group.

         1.3 ANCILLARY AGREEMENTS. "Ancillary Agreements" has the meaning set
forth in Section 2.5.

         1.4 BUSINESS DAY. "Business Day" means a day other than a Saturday, a
Sunday or a day on which banking institutions located in the State of Texas are
authorized or obligated by law or executive order to close.

         1.5 BUSINESS SEPARATION PLAN. "Business Separation Plan" means the
Business Separation Plan, as amended, filed by REI with the PUCT in accordance
with Section 39.051 of the Utilities Code and approved by the PUCT at its open
meeting on December 1, 2000 (Docket No. 21956).

         1.6 CHOICE DATE. "Choice Date" shall mean January 1, 2002, or such
other date as may be fixed by the PUCT for the commencement of customer retail
electric choice in the area served by REI's retail electric business.

         1.7 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.

         1.8 COMMISSION. "Commission" means the Securities and Exchange
Commission.

         1.9 CUSTOMER CARE LLC. "Customer Care LLC" means Reliant Energy
Customer Care Services LLC, a Delaware limited liability company all of the
membership interests in which are owned by Retail Holdings LLC.

         1.10 DISTRIBUTION. The "Distribution" has the meaning set forth in the
Recitals hereof.

         1.11 DISTRIBUTION AGENT. "Distribution Agent" has the meaning set forth
in Section 7.1.

                                       2
<PAGE>   8

         1.12 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth
in Section 7.1.

         1.13 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended.

         1.14 FINAL ORDER. Unless the context requires otherwise, "Final Order,"
"Order," "Injunction," "Decree," "Legal Restraint," "Prohibition," "Writ" or
other words of similar import shall mean final adjudication by a court or
regulatory agency that is no longer subject to rehearing or appeal.

         1.15 GENCO ASSETS. "Genco Assets" means all of the generation assets
(as that term is defined in Section 39.251(3) of the Utilities Code) of the
Reliant Energy HL&P Division of REI. The Genco Assets shall include, without
limitation, the generation plants and other assets set forth in Schedule 1.15
and contract and permit rights associated with those generation plants. The
methodology for determining the demarcation between Genco Assets and
transmission and distribution assets is set forth in Section D of the Business
Separation Plan.

         1.16 GENCO BUSINESS. "Genco Business" shall mean the electric
generation business and operations conducted with the Genco Assets.

         1.17 GENCO; GENCO INC. "Genco Inc." means the corporation to which the
membership interests in Genco GP LLC and Genco LP LLC will be contributed as
provided in Section 8.4. Genco means Genco Inc. or Genco LP, as the context may
require.

         1.18 GENCO LIABILITIES. "Genco Liabilities" shall mean (without
duplication)

                           (i) any and all Liabilities under contracts for the
                  purchase of fuel, equipment or other goods and services for
                  use in the Genco Business;

                           (ii) any and all Liabilities that are expressly
                  contemplated by this Agreement or any Ancillary Agreement as
                  Liabilities to be assumed by Genco LP, including Liabilities
                  under the Technical Services Agreement and the contracts,
                  agreements and permits included in the Genco Assets;

                           (iii) all Liabilities (other than Taxes based on, or
                  measured by reference to, net income), primarily relating to,
                  arising out of, or resulting from:

                                    (A) the operation of the Genco Business, as
                           conducted at any time prior to, on or after, the
                           Genco Organization Date (including any Liability
                           relating to, arising out of or resulting from any act
                           or failure to act by any director, officer, employee,
                           agent or representative (whether or not such act or
                           failure to act is or was within such Person's
                           authority));

                                    (B) the operation of any business conducted
                           by Genco at any time after the Genco Organization
                           Date (including any Liability relating to, arising
                           out of or resulting from any act or failure to act by
                           any director, officer, employee, agent or
                           representative (whether or not such act or failure to
                           act is or was within such Person's authority)); or

                                       3
<PAGE>   9

                                    (C) the ownership or use of the Genco
                           Assets.

         1.19 GENCO LP. "Genco LP" means a yet-to-be formed limited partnership,
being the limited partnership to which the Genco Assets will be transferred as
provided in Section 8.1.

         1.20 GENCO OPTION. "Genco Option" means the "Option" as defined in the
Genco Option Agreement.

         1.21 GENCO OPTION AGREEMENT. "Genco Option Agreement" means the Texas
Genco Option Agreement dated as of December 31, 2000 between REI and Resources.

         1.22 GENCO ORGANIZATION DATE. "Genco Organization Date" means the date
on which the Genco Assets are contributed to Genco LP as provided in Section
8.1.

         1.23 GENCO PUBLIC OWNERSHIP EVENT. "Genco Public Ownership Event" has
the meaning assigned to that term in the Genco Option Agreement.

         1.24 GOVERNMENTAL APPROVALS. "Governmental Approvals" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.

         1.25 GOVERNMENTAL AUTHORITY. "Governmental Authority" shall mean any
federal, state, local, foreign or international court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.

         1.26 GROUP. "Group" means either of the REI Group or the Resources
Group, as the context requires.

         1.27 HOLDING COMPANY RESTRUCTURING. "Holding Company Restructuring"
means the corporate restructuring consisting of the transactions set forth in
Section 6.2, as such transactions may be modified at the election of REI as
contemplated by Section 6.5.

         1.28 INDEBTEDNESS. "Indebtedness" of any Person means, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services, (f) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, or other encumbrance on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (g) all guarantees by such Person of Indebtedness of others,
(h) all capital lease obligations of such Person, and (i) all securities or
other similar instruments convertible or exchangeable into any of the foregoing,
but excluding daily cash overdrafts associated with routine cash operations.

         1.29 INDEMNIFYING PARTY. "Indemnifying Party" has the meaning set forth
in Section 3.4(a).

                                       4
<PAGE>   10

         1.30 INDEMNITEE. "Indemnitee" shall have the meaning set forth in
Section 3.4(a).

         1.31 INFORMATION. "Information" means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.

         1.32 INSURANCE PROCEEDS. "Insurance Proceeds" means those monies:

                  (a) received by an insured from an insurance carrier; or

                  (b) paid by an insurance carrier on behalf of the insured;

in any such case net of any applicable premium adjustments (including reserves
and retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.

         1.33 IPO. "IPO" has the meaning set forth in the Recitals hereof.

         1.34 IPO CLOSING DATE. "IPO Closing Date" means the first date on which
the proceeds of any sale of Resources Common Stock to the underwriters in the
IPO are received.

         1.35 IPO PROSPECTUS. "IPO Prospectus" means the prospectus included in
the IPO Registration Statement, including any prospectus subject to completion,
final prospectus or any supplement to or amendment of any of the foregoing.

         1.36 IPO REGISTRATION STATEMENT. "IPO Registration Statement" means the
Registration Statement on Form S-1 (Registration No. 333-48038) of Resources
filed with the Commission pursuant to the Securities Act of 1933, as amended,
registering the shares of Resources Common Stock to be issued in the IPO,
together with all amendments thereto.

         1.37 LIABILITIES. "Liabilities" shall mean any and all Indebtedness,
liabilities and obligations, whether accrued, fixed or contingent, mature or
inchoate, known or unknown, reflected on a balance sheet or otherwise,
including, but not limited to, those arising under any law, rule, regulation,
Action, order, injunction or consent decree of any Governmental Authority or any
judgment of any court of any kind or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking.

         1.38 LOSSES. "Losses" shall mean any and all damages, losses,
deficiencies, Liabilities, obligations, penalties, judgments, settlements,
claims, payments, fines, interest costs and expenses (including, without
limitation, the costs and expenses of any and all Actions and demands,
assessments, judgments, settlements and compromises relating thereto and the
costs and expenses of attorneys', accountants', consultants' and other
professionals' fees and expenses

                                       5
<PAGE>   11

incurred in the investigation or defense thereof or the enforcement of rights
hereunder), including direct and consequential damages, but excluding punitive
damages (other than punitive damages awarded to any third party against an
Indemnified Party).

         1.39 MORTGAGE. "Mortgage" means the Mortgage and Deed of Trust dated
November 1, 1944 between Houston Lighting & Power Company and The Chase
Manhattan Bank (successor to South Texas Commercial National Bank of Houston) as
Trustee, as amended and supplemented.

         1.40 MRT ENERGY MARKETING ASSETS AND LIABILITIES. "MRT Energy Marketing
Assets" shall mean the assets identified or described in Schedule 1.40 and "MRT
Energy Marketing Liabilities" shall mean the liabilities identified or described
in that Schedule.

         1.41 NYSE. "NYSE" means the New York Stock Exchange.

         1.42 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.

         1.43 PUCT. "PUCT" means the Public Utility Commission of Texas.

         1.44 RECI. "RECI" means Reliant Energy Communications, Inc., a Delaware
corporation all of the stock of which is owned by REI.

         1.45 RECORD DATE. "Record Date" means the close of business on the date
to be determined by the Board of Directors of REI as the record date for
determining the shareholders of REI entitled to receive shares of common stock
of Resources in the Distribution.

         1.46 REGCO. "Regco" means Reliant Energy Regco, Inc., a Texas or
Delaware corporation, the corporation organized by REI and, by means of a merger
of a wholly owned subsidiary of Regco with and into REI, that will become a
holding company for REI's regulated businesses, as described in Section 6.2;
provided, however, that if any provision of this Agreement referring to Regco
applies at a time when Regco has not become such a holding company, references
to Regco in such provision shall be deemed to refer to REI or the ultimate
parent entity of REI, as the case may be.

         1.47 REGULATED RETAIL ASSETS. "Regulated Retail Assets" shall mean the
assets identified or described in Schedule 1.47.

         1.48 REGULATED RETAIL BUSINESS. "Regulated Retail Business" shall mean
the businesses identified or described in Schedule 1.48.

         1.49 REGULATED RETAIL LIABILITIES. "Regulated Retail Liabilities" shall
mean (without duplication), any and all Liabilities, whether arising before or
after the Separation Date, of REI or its Subsidiaries or any of their
predecessor companies or businesses, including any employee-related Liabilities,
primarily relating to, arising out of or resulting from the ownership or use of
the Regulated Retail Assets or the operations or conduct of the Regulated Retail
Business

                                       6
<PAGE>   12

(including any such Liability relating to, arising out of or resulting
from any act or failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was within such
Person's authority)).

         1.50 REGULATORY PROCEEDINGS. "Regulatory Proceedings" shall mean
filings, notices, adjudicatory proceedings, rulemakings, enforcement actions
before an agency or in court relative to regulatory activity, and any other
proceedings at or before any regulatory or administrative agency. The term shall
also refer to appellate activities relative to any of the foregoing, including
actions seeking injunctions, writs of mandamus and appeals.

         1.51 REI'S AUDITORS. "REI's Auditors" means REI's independent certified
public accountants.

         1.52 REI BUSINESS. "REI Business" means any business of REI and its
Subsidiaries other than the Resources Business.

         1.53 REI GROUP. "REI Group" means REI, each Subsidiary of REI (other
than any member of the Resources Group) immediately after the Separation Date,
including the Subsidiaries set forth in Schedule 1.53, and each Person that
becomes a Subsidiary of REI after the Separation Date. After the Holding Company
Restructuring, references to the REI Group shall also include Regco and each
Subsidiary of Regco (other than any member of the Resources Group).
Notwithstanding anything herein to the contrary, after the closing of the
exercise of the Genco Option, the REI Group shall not include Genco Inc. or any
Subsidiary of Genco Inc.

         1.54 REI INDEMNITEES. "REI Indemnitees" has the meaning assigned to
that term in Section 3.2.

         1.55 REPG. "REPG" means Reliant Energy Power Generation, Inc. ("REPG"),
a Delaware corporation all of the stock of which is owned by REI.

         1.56 RERC. "RERC" means Reliant Energy Resources Corp., a Delaware
corporation all of the stock of which is owned by REI.

         1.57 RES. "RES" means Reliant Energy Services, Inc., a Delaware
corporation all of the stock of which is owned by RERC.

         1.58 RESOURCES AUDITORS. "Resources Auditors" means Resources'
independent certified public accountants.

         1.59 RESOURCES BALANCE SHEET. "Resources Balance Sheet" means the
combined balance sheet of Resources and affiliates as of September 30, 2000.

         1.60 RESOURCES BUSINESS. "Resources Business" means (a) the business
and operations conducted by Resources and its Subsidiaries after giving effect
to the transactions described in Article II, as described in the caption "Our
Business" in the IPO Prospectus, and including without limitation the following
assets and operations conducted by REI and its Subsidiaries prior to the
Separation:

                                       7
<PAGE>   13

                           (i) the non-Reliant Energy HL&P power generation
                  assets and related energy trading, marketing and risk
                  management operations in North America and Europe;

                           (ii) the retail electric operations; and

                           (iii) the eBusiness group, the communications
                  business and venture capital operations,

and (b) except as otherwise specifically provided herein, any terminated,
divested or discontinued business or operations that at the time of termination,
divestiture or discontinuation related primarily to the Resources Business as
then conducted.

         1.61 RESOURCES COMMON STOCK. "Resources Common Stock" means the Common
Stock, par value $.001 per share, of Resources.

         1.62 RESOURCES DEBT OBLIGATIONS. "Resources Debt Obligations" means all
Indebtedness of Resources or any other member of the Resources Group, excluding
all Indebtedness of any member of the REI Group to the extent it constitutes
Indebtedness of Resources by virtue of clause (f) or clause (g) of the
definition of Indebtedness. Resources Debt Obligations shall include, as of the
date of the most recent balance sheet of Resources included in the IPO
Prospectus, the Indebtedness of Resources reflected on such balance sheet.

         1.63 RESOURCES EXCLUDED LIABILITIES. "Resources Excluded Liabilities"
shall mean any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by
REI or any other member of the REI Group, and all agreements and obligations of
any member of the REI Group under this Agreement or any of the Ancillary
Agreements.

         1.64 RESOURCES GROUP. "Resources Group" means Resources, each
Subsidiary of Resources immediately after the Separation Date, including the
Subsidiaries set forth in Schedule 1.64, and each Person that becomes a
Subsidiary of Resources after the Separation Date.

         1.65 RESOURCES INDEMNITEES. "Resources Indemnitees" has the meaning
assigned to that term in Section 3.3.

         1.66 RESOURCES LIABILITIES. "Resources Liabilities" shall mean (without
duplication):

                           (i) any and all Liabilities that are expressly
                  contemplated by this Agreement or any Ancillary Agreement to
                  be assumed by Resources or any member of the Resources Group,
                  and all agreements, obligations and Liabilities of any member
                  of the Resources Group under this Agreement or any of the
                  Ancillary Agreements;

                           (ii) all Liabilities (other than Taxes based on, or
                  measured by reference to, net income) primarily relating to,
                  arising out of or resulting from:

                                       8
<PAGE>   14

                                    (A) the operation of the Resources Business,
                           as conducted at any time prior to, on or after the
                           IPO Closing Date (including any Liability relating
                           to, arising out of or resulting from any act or
                           failure to act by any director, officer, employee,
                           agent or representative (whether or not such act or
                           failure to act is or was within such Person's
                           authority));

                                    (B) the operation of any business conducted
                           at any time after the IPO Closing Date by any member
                           of the Resources Group (including any Liability
                           relating to, arising out of or resulting from any act
                           or failure to act by any director, officer, employee,
                           agent or representative (whether or not such act or
                           failure to act is or was within such Person's
                           authority));

                                    (C) any Resources Assets; or

                                    (D) the Resources Debt Obligations;

                  and in any case whether arising before, on or after the IPO
                  Closing Date; and

                           (iii) all Liabilities reflected as liabilities or
                  obligations of Resources in the Resources Balance Sheet,
                  subject to any discharge of such Liabilities subsequent to the
                  date of the Resources Balance Sheet.

Notwithstanding the foregoing, the Resources Liabilities shall not include the
Resources Excluded Liabilities.

         1.67 RESOURCES RIGHTS PLAN. "Resources Rights Plan" shall mean the
stockholders rights plan of Resources as evidenced by the Rights Agreement,
dated as of January 15, 2001, by and among Resources and The Chase Manhattan
Bank, as Rights Agent.

         1.68 RETAIL ELECTRIC PROVIDER LLC. "Retail Electric Provider LLC" means
Reliant Energy Retail Services LLC, a Delaware limited liability company all of
the membership interests in which are owned by Retail Holdings LLC.

         1.69 RETAIL HOLDINGS LLC. "Retail Holdings LLC" means Reliant Energy
Retail Holdings LLC, a Delaware limited liability company all of the membership
interests in which are owned by REI.

         1.70 SEPARATION. "Separation" means the transfer of the Resources
Business to Resources and its Subsidiaries and the assumption by Resources and
its Subsidiaries of the Resources Liabilities, all as more fully described in
this Agreement and the Ancillary Agreements.

         1.71 SEPARATION DATE. "Separation Date" has the meaning set forth in
Section 2.1 hereof.

         1.72 SUBSIDIARY. A "Subsidiary" of any Person means any corporation or
other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the

                                       9
<PAGE>   15

board of directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries.

         1.73 TAXES. "Taxes" has the meaning set forth in the Tax Allocation
Agreement.

         1.74 TAX ALLOCATION AGREEMENT. "Tax Allocation Agreement" means the Tax
Allocation Agreement dated as of December 31, 2000 between REI and Resources.

         1.75 THIRD PARTY CLAIM. "Third Party Claim" has the meaning set forth
in Section 3.5(a).

         1.76 UNDERWRITERS. "Underwriters" means the underwriters named in the
Underwriting Agreement.

         1.77 UNDERWRITING AGREEMENT. "Underwriting Agreement" has the meaning
set forth in Section 4.1(b) hereof.

         1.78 UNREGULATED RETAIL ASSETS. "Unregulated Retail Assets" shall mean
the assets identified or described in Schedule 1.78.

         1.79 UNREGULATED RETAIL BUSINESS. "Unregulated Retail Business" shall
mean the businesses identified or described in Schedule 1.79.

         1.80 UNREGULATED RETAIL LIABILITIES. "Unregulated Retail Liabilities"
shall mean (without duplication), any and all Liabilities, whether arising
before or after the Separation Date, of REI or its Subsidiaries or any of their
predecessor companies or businesses, including any employee-related Liabilities,
primarily relating to, arising out of or resulting from the ownership or use of
the Unregulated Retail Assets or the operations or conduct of the Unregulated
Retail Business (including any such Liability relating to, arising out of or
resulting from any act or failure to act by any director, officer, employee,
agent or representative (whether or not such act or failure to act is or was
within such Person's authority).

         1.81 UTILITIES CODE. "Utilities Code" means the Utilities Code of
Texas.

                                   ARTICLE II

                                   SEPARATION

         2.1 SEPARATION DATE. Unless otherwise provided in this Agreement, or in
any agreement to be executed in connection with this Agreement, the effective
time and date of each action in connection with the Separation shall be as of
11:59 p.m., Houston Time, December 31, 2000 or such other date as may be fixed
by REI (the "Separation Date").

                                       10
<PAGE>   16

         2.2 RESTRUCTURING TRANSACTIONS. In order to effect the Separation, REI
will take, or cause to be taken, the following actions:

                  (a) REI will transfer the Regulated Retail Assets to Resources
and Resources will assume the Regulated Retail Liabilities.

                  (b) Resources will transfer the Regulated Retail Assets to
Retail Holdings LLC and Retail Holdings LLC will assume the Regulated Retail
Liabilities.

                  (c) Retail Holdings LLC will transfer the Regulated Retail
Assets to Customer Care LLC and Customer Care LLC will assume the Regulated
Retail Liabilities.

                  (d) REI will transfer the Unregulated Retail Assets to
Resources and Resources will assume the Unregulated Retail Liabilities.

                  (e) Resources will transfer the Unregulated Retail Assets to
Retail Holdings LLC and Retail Holdings LLC will assume the Unregulated Retail
Liabilities.

                  (f) Retail Holdings LLC will transfer the Unregulated Retail
Assets to Retail Electric Provider LLC and Retail Electric Provider LLC will
assume the Unregulated Retail Liabilities.

                  (g) RERC will transfer to Resources the stock of each of its
Subsidiaries listed on Schedule 2.2(g) in exchange for the consideration listed
on Schedule 2.2(g).

                  (h) REI will contribute to Resources, as a contribution to
capital, (i) all of the stock of REPG, (ii) all of the stock of RECI, and (iii)
all of the stock and membership interests of each of its Subsidiaries listed on
Schedule 2.2(h).

                  (i) RES will contribute the MRT Energy Marketing Assets to the
capital of MRT Energy Marketing Company and MRT Energy Marketing Company will
assume the MRT Energy Marketing Liabilities.

                  (j) RES will distribute to RERC all of the stock of MRT Energy
Marketing Company.

                  (k) A newly formed wholly owned subsidiary of Resources will
merge with and into RES, with the result that RES will survive the merger as a
wholly owned subsidiary of Resources and RERC will receive cash in exchange for
all of the stock of RES.

                  (l) REI will contribute to Resources the Genco Option, and in
that connection REI and Resources will execute and deliver the Genco Option
Agreement.

                  (m) REI will contribute to Resources, as a contribution to
capital, the assets listed in Schedule 2.2(m).

         2.3 RELEASE FROM MORTGAGE, ETC. REI shall obtain such releases from the
Mortgage as may be necessary for the transfers referred to in Section 2.2(a) and
Section 2.2(c).

                                       11
<PAGE>   17

         2.4 INSTRUMENTS OF TRANSFER AND ASSUMPTION. REI and Resources agree
that (a) transfers of the Regulated Retail Assets, the Unregulated Retail Assets
and all other assets required to be transferred by this Agreement shall be
effected by delivery by REI or the other transferring entity, as applicable, to
the transferee, of (i) with respect to those assets that constitute stock,
certificates endorsed in blank or evidenced or accompanied by stock powers or
other instruments of transfer endorsed in blank, against receipt, (ii) with
respect to any real property interest or any improvements thereon, a general
warranty deed with general warranty of limited application limiting recourse and
remedies to title insurance and warranties by predecessors in title to REI, and
(iii) with respect to all other Assets, such good and sufficient instruments of
contribution, conveyance, assignment and transfer, in form and substance
reasonably satisfactory to REI and Resources, as shall be necessary to vest in
the designated transferee, all of the title and ownership interest of the
transferor in and to any such Asset, and (b) to the extent necessary, the
assumption of the Liabilities contemplated pursuant to Section 2.2 hereof shall
be effected by delivery by the transferee to the transferor of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to REI and Resources, as shall be necessary for the assumption by
the transferee of such Liabilities. Each of the parties hereto also agrees to
deliver to any other party hereto such other documents, instruments and writings
as may be reasonably requested by such other parties hereto in connection with
the transactions contemplated hereby. Notwithstanding any other provisions of
this Agreement to the contrary, (x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO IN
THIS ARTICLE II WILL BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY
NATURE (a) AS TO THE VALUE OR FREEDOM FROM ENCUMBRANCE OF, ANY ASSETS, (b) AS TO
ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR (c) AS TO THE LEGAL
SUFFICIENCY TO CONVEY TITLE TO ANY ASSETS, and (y) the instruments of transfer
or assumption referred to in this Section 2.4 shall not include any
representations and warranties other than as specifically provided herein. REI
and Resources hereby acknowledge and agree that ALL ASSETS ARE BEING TRANSFERRED
"AS IS, WHERE IS."

         2.5 AGREEMENTS. On the Separation Date, or as soon as practicable after
the Separation Date, REI and Resources shall execute and deliver (or shall cause
their appropriate Subsidiaries to execute and deliver, as applicable) the
agreements between them designated as follows:

                  (i) the Transition Services Agreement,

                  (ii) the Employee Matters Agreement,

                  (iii) the Tax Allocation Agreement,

                  (iv) the Retail Agreement,

                  (v) the Genco Option Agreement,

                  (vi) the Technical Services Agreement,

                  (vii) the Registration Rights Agreement,

                                       12
<PAGE>   18

                  (viii) the Miscellaneous Transitions Matters Agreement,

                  (ix) the REP Lease,

                  (x) the EDC Lease,

                  (xi) the EC/DC Lease,

                  (xii) the Intellectual Property Agreement, and

                  (xiii) such other agreements, documents or instruments as the
         parties may agree are necessary or desirable.

(collectively, the "Ancillary Agreements"). To the extent such documents are not
executed and delivered on the Separation Date, they shall be executed and
delivered as soon as practicable thereafter and (except as otherwise provided
therein) shall be effective as of the Separation Date.

                                  ARTICLE III

                        MUTUAL RELEASES; INDEMNIFICATION

         3.1 RELEASE OF PRE-CLOSING CLAIMS.

                  (a) Except as provided in Section 3.1(c), effective as of the
IPO Closing Date, Resources does hereby, for itself and each other member of the
Resources Group, their respective Affiliates (other than any member of the REI
Group), successors and assigns, and all Persons who at any time prior to the IPO
Closing Date have been shareholders, directors, officers, agents or employees of
any member of the Resources Group (in each case, in their respective capacities
as such), remise, release and forever discharge REI, each member of the REI
Group and their respective Affiliates (other than any member of the Resources
Group), successors and assigns, and all Persons who at any time prior to the IPO
Closing Date have been shareholders, directors, officers, agents or employees of
any member of the REI Group (in each case, in their respective capacities as
such), and their respective heirs, executors, administrators, successors and
assigns, from any and all Liabilities whatsoever to Resources and each other
member of the Resources Group, whether at law or in equity (including any right
of contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the IPO Closing
Date, including in connection with the transactions and all other activities to
implement any of the Separation, the IPO, the Restructuring and the
Distribution.

                  (b) Except as provided in Section 3.1(c), effective as of the
IPO Closing Date, REI does hereby, for itself and each other member of the REI
Group, their respective Affiliates (other than any member of the Resources
Group), successors and assigns, and all Persons who at any time prior to the IPO
Closing Date have been shareholders, directors, officers, agents or employees of
any member of the REI Group (in each case, in their respective capacities as
such), remise, release and forever discharge Resources, each member of the
Resources Group, and their respective Affiliates (other than any member of the
REI Group), successors and assigns, and all

                                       13
<PAGE>   19

Persons who at any time prior to the IPO Closing Date have been shareholders,
directors, officers, agents or employees of any member of the Resources Group
(in each case, in their respective capacities as such), and their respective
heirs, executors, administrators, successors and assigns, from any and all
Liabilities whatsoever to REI and each other member of the REI Group, whether at
law or in equity (including any right of contribution), whether arising under
any contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the IPO Closing Date, including in connection with the
transactions and all other activities to implement any of the Separation, the
IPO, the Restructuring and the Distribution.

                  (c) Nothing contained in Section 3.1(a) or (b) shall impair
any right of any Person to enforce this Agreement, any Ancillary Agreement or
any agreements, arrangements, commitments or understandings that are specified
in this Agreement or in any Ancillary Agreement. Nothing contained in Section
3.1(a) or (b) shall release any Person from:

                           (i) any Liability, contingent or otherwise, assumed,
                  transferred, assigned or allocated to the Group of which such
                  Person is a member in accordance with, or any other Liability
                  of any member of any Group under, this Agreement or any
                  Ancillary Agreement;

                           (ii) any Liability for the sale, lease, construction
                  or receipt of goods, property or services purchased, obtained
                  or used in the ordinary course of business by a member of one
                  Group from a member of any other Group prior to the IPO
                  Closing Date;

                           (iii) any Liability for unpaid amounts for products
                  or services or refunds owing on products or services due on a
                  value-received basis for work done by a member of one Group at
                  the request or on behalf of a member of another Group;

                           (iv) any Liability that the parties may have with
                  respect to indemnification or contribution pursuant to this
                  Agreement for claims brought against the parties by third
                  Persons, which Liability shall be governed by the provisions
                  of this Article III and, if applicable, the appropriate
                  provisions of the Ancillary Agreements; or

                           (v) any Liability the release of which would result
                  in the release of any Person other than a Person released
                  pursuant to this Section 3.1; provided that the parties agree
                  not to bring suit or permit any of their Subsidiaries to bring
                  suit against any Person with respect to any Liability to the
                  extent that such Person would be released with respect to such
                  Liability by this Section 3.1 but for the provisions of this
                  clause (v).

                  (d) Resources shall not make, and shall not permit any member
of the Resources Group to make, any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against REI or any member

                                       14
<PAGE>   20

of the REI Group, or any other Person released pursuant to Section 3.1(a), with
respect to any Liabilities released pursuant to Section 3.1(a). REI shall not
make, and shall not permit any member of the REI Group to make, any claim or
demand, or commence any Action asserting any claim or demand, including any
claim of contribution or any indemnification, against Resources or any member of
the Resources Group, or any other Person released pursuant to Section 3.1(b),
with respect to any Liabilities released pursuant to Section 3.1(b).

                  (e) It is the intent of each of REI and Resources by virtue of
the provisions of this Section 3.1 to provide for a full and complete release
and discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
IPO Closing Date, between or among Resources or any member of the Resources
Group, on the one hand, and REI or any member of the REI Group, on the other
hand (including any contractual agreements or arrangements existing or alleged
to exist between or among any such members on or before the IPO Closing Date),
except as expressly set forth in Section 3.1(c). At any time, at the request of
any other party, each party shall cause each member of its respective Group to
execute and deliver releases reflecting the provisions hereof.

         3.2 INDEMNIFICATION BY RESOURCES. Except as provided in Section 3.4,
Resources shall, and in the case of clauses (a), (b) and (c) below shall in
addition cause the Appropriate Member of the Resources Group to, indemnify,
defend and hold harmless REI, each member of the REI Group and each of their
respective directors, officers and employees, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "REI
Indemnitees") from and against any and all Losses of the REI Indemnitees
relating to, arising out of or resulting from any of the following (without
duplication):

                  (a) the failure of Resources or any other member of the
Resources Group or any other Person to pay, perform or otherwise promptly
discharge any Resources Liabilities in accordance with their respective terms,
whether prior to or after the IPO Closing Date or the date thereof;

                  (b) the Resources Business or any Resources Liability;

                  (c) any breach by Resources or any member of the Resources
Group of this Agreement or any of the Ancillary Agreements; and

                  (d) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
with respect to all information contained in the IPO Registration Statement or
any IPO Prospectus (other than information regarding REI provided by REI to
Resources for inclusion in the IPO Registration Statement or any IPO
Prospectus).

As used in this Section 3.2, "Appropriate Member of the Resources Group" means
the member or members of the Resources Group, if any, whose acts, conduct or
omissions or failures to act caused, gave rise to or resulted in the loss from
and against which indemnity is provided.

         3.3 INDEMNIFICATION BY REI. Except as provided in Section 3.4, REI
shall, and in the case of clauses (a), (b) and (c) below shall in addition cause
the Appropriate Member of the

                                       15
<PAGE>   21

REI Group to, indemnify, defend and hold harmless Resources, each member of the
Resources Group and each of their respective directors, officers and employees,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Resources Indemnitees") from and against any and all Losses
of the Resources Indemnitees relating to, arising out of or resulting from any
of the following (without duplication):

                  (a) the failure of REI or any other member of the REI Group or
any other Person to pay, perform or otherwise promptly discharge any Liabilities
of any member of the REI Group other than the Resources Liabilities, in
accordance with their respective terms, whether prior to or after the IPO
Closing Date or the date hereof;

                  (b) the REI Business or any Liability of any member of the REI
Group other than the Resources Liabilities;

                  (c) any breach by REI or any member of the REI Group of this
Agreement or any of the Ancillary Agreements; and

                  (d) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
with respect to information regarding REI provided by REI to Resources for
inclusion in the IPO Registration Statement or any IPO Prospectus.

As used in this Section 3.3, "Appropriate Member of the REI Group" means the
member or members of the REI Group, if any, whose acts, conduct or omissions or
failures to act caused, gave rise to or resulted in the Loss from and against
which indemnity is provided.

         3.4 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND OTHER
AMOUNTS. (a) The parties intend that any Loss subject to indemnification or
reimbursement pursuant to this Article III will be net of Insurance Proceeds
that actually reduce the amount of the Loss. Accordingly, the amount which any
party (an "Indemnifying Party") is required to pay to any Person entitled to
indemnification hereunder (an "Indemnitee") will be reduced by any Insurance
Proceeds theretofore actually recovered by or on behalf of the Indemnitee in
reduction of the related Loss. If an Indemnitee receives a payment (an
"Indemnity Payment") required by this Agreement from an Indemnifying Party in
respect of any Loss and subsequently receives Insurance Proceeds, then the
Indemnitee will pay to the Indemnifying Party an amount equal to the excess of
the Indemnity Payment received over the amount of the Indemnity Payment that
would have been due if the Insurance Proceeds recovery had been received,
realized or recovered before the Indemnity Payment was made.

                  (b) An insurer who would otherwise be obligated to pay any
claims shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that no
insurer or any other third party shall be entitled to a "windfall" (i.e., a
benefit they would not be entitled to receive in the absence of the
indemnification provisions) by virtue of the indemnification provisions hereof.
Nothing contained in this Agreement or any Ancillary Agreement shall obligate
any member of any Group to seek to collect or recover any Insurance Proceeds.

                                       16
<PAGE>   22

         3.5 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. (a) If an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including any Governmental Authority) who is not a member of the REI Group or
the Resources Group of any claims or of the commencement by any such Person of
any Action (collectively, a "Third Party Claim") with respect to which an
Indemnifying Party may be obligated to provide indemnification to such
Indemnitee pursuant to Section 3.2 or 3.3, or any other Section of this
Agreement or any Ancillary Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof within 20 days after becoming aware of
such Third Party Claim. Any such notice shall describe the Third Party Claim in
reasonable detail. Notwithstanding the foregoing, the failure of any Indemnitee
or other Person to give notice as provided in this Section 3.5(a) shall not
relieve the related Indemnifying Party of its obligations under this Article
III, except to the extent that such Indemnifying Party is actually prejudiced by
such failure to give notice.

                  (b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 3.5(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise, or settlement thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnitee except as set forth in the next sentence. In the event that the
Indemnifying Party has elected to assume the defense of the Third Party Claim
but has specified, and continues to assert, any reservations or exceptions in
such notice, then, in any such case, the reasonable fees and expenses of one
separate counsel for all Indemnitees shall be borne by the Indemnifying Party.

                  (c) If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in Section 3.5(b), such Indemnitee may
defend such Third Party Claim at the cost and expense (included allocated costs
of in-house counsel and other personnel) of the Indemnifying Party.

                  (d) Unless the Indemnifying Party has failed to assume the
defense of the Third Party Claim in accordance with the terms of this Agreement,
no Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.

                  (e) No Indemnifying Party shall consent to entry of any
judgment or enter into any settlement of the Third Party Claim without the
consent of an Indemnitee if the effect thereof is to permit any injunction,
declaratory judgment, other order or other nonmonetary relief to be entered,
directly or indirectly, against such Indemnitee.

                  (f) The provisions of Section 3.2 through 3.5 shall not apply
to Taxes (which are covered by the Tax Allocation Agreement).

                                       17
<PAGE>   23

         3.6 ADDITIONAL MATTERS. (a) Any claim on account of a Loss which does
not result from a Third Party Claim shall be asserted by written notice given by
the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall
have a period of 30 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 30-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party as contemplated by this Agreement and the Ancillary Agreements.

                  (b) In the event of payment by or on behalf of any
Indemnifying Party to any Indemnitee in connection with any Third Party Claim,
such Indemnifying Party shall be subrogated to and shall stand in the place of
such Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right, defense or claim relating to such Third Party
Claim against any claimant or plaintiff asserting such Third Party Claim or
against any other person. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense (including allocated
costs of in-house counsel and other personnel) of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.

                  (c) In the event of an Action in which the Indemnifying Party
is not a named defendant, if either the Indemnified Party or Indemnifying Party
shall so request, the parties shall endeavor to substitute the Indemnifying
Party for the named defendant, if at all practicable. If such substitution or
addition cannot be achieved for any reason or is not requested, the named
defendant shall allow the Indemnifying Party to manage the Action as set forth
in this Section and the Indemnifying Party shall fully indemnify the named
defendant against all costs of defending the Action (including court costs,
sanctions imposed by a court, attorneys' fees, experts' fees and all other
external expenses, and the allocated costs of in-house counsel and other
personnel), the costs of any judgment or settlement, and the cost of any
interest or penalties relating to any judgment or settlement.

         3.7 REMEDIES CUMULATIVE. The remedies provided in this Article III
shall be cumulative and, subject to the provisions of Article IX, shall not
preclude assertion by any Indemnitee of any other rights or the seeking of any
and all other remedies against any Indemnifying Party.

         3.8 SURVIVAL OF INDEMNITIES. The rights and obligations of each REI and
Resources and their respective Indemnitees under this Article III shall survive
the sale or other transfer by any party of any Assets or businesses or the
assignment by it of any Liabilities.

         3.9 INDEMNIFICATION OF DIRECTORS AND OFFICERS. For purpose of Sections
3.2 through 3.8, inclusive, and notwithstanding anything to the contrary
contained herein, Persons who serve on both the Board of Directors of Resources
and the Board of Directors of REI and persons who serve as officers of both
Resources and REI shall be deemed both Resources Indemnitees and REI
Indemnitees.

                                       18
<PAGE>   24

                                   ARTICLE IV

                       THE IPO AND ACTIONS PENDING THE IPO

         4.1 TRANSACTIONS PRIOR TO THE IPO. Subject to the conditions specified
in Section 4.4, REI and Resources shall use their reasonable commercial efforts
to consummate the IPO. Such efforts shall include, but not necessarily be
limited to, those specified in this Section 4.1:

                  (a) Resources has filed the IPO Registration Statement, and
shall use its best efforts to cause such IPO Registration Statement to become
effective, including by filing such amendments thereto as may be necessary or
appropriate, responding promptly to any comments of the Commission and taking
such other action in that connection as may be reasonably requested by REI. REI
and Resources shall also cooperate in preparing, filing with the Commission and
causing to become effective a registration statement registering the Resources
Common Stock under the Exchange Act, and any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans necessary or appropriate in
connection with the IPO, the Separation, the Restructuring, the Distribution or
the other transactions contemplated by this Agreement.

                  (b) Resources shall enter into an underwriting agreement with
the underwriters named in the IPO Registration Statement (the "Underwriting
Agreement"), in form and substance reasonably satisfactory to Resources, and
shall comply with its obligations thereunder.

                  (c) REI and Resources shall consult with each other and the
Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.

                  (d) Resources shall use its reasonable commercial efforts to
take all such action as may be necessary or appropriate under state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) in connection with the IPO.

                  (e) Resources shall prepare, file and use reasonable
commercial efforts to seek to make effective, an application for listing of the
Resources Common Stock issued in the IPO on the NYSE, subject to official notice
of issuance.

         4.2 USE OF PROCEEDS. Resources shall use the net proceeds from the IPO
(after deduction of all expenses in connection with the IPO payable by Resources
as provided in Section 10.7) initially to increase working capital and as and
when needed to fund capital expenditures, and, depending on the timing of future
acquisitions of generation facilities, may also use a portion of such net
proceeds to finance one or more such acquisitions. Should the net proceeds from
the IPO exceed $1,400,000,000, 50% of the net proceeds above such amount shall
be applied to prepay indebtedness owing from REPG to REI outstanding as of
December 31, 2000 in respect of the indebtedness of Reliant Energy FinanceCo III
LP, including accrued and unpaid interest on the amount so prepaid to the date
of prepayment (the amount thereof to be so prepaid, assuming exercise in full of
any underwriters' overallotment option, being called the "Specified
Indebtedness"). If the net proceeds are sufficient to result in the repayment in
full of all such indebtedness owing from REPG to REI outstanding as of December
31, 2000 in respect

                                       19
<PAGE>   25

of the indebtedness of Reliant Energy FinanceCo III LP in accordance with the
preceding sentence, any excess shall be retained by Resources.

         4.3 COOPERATION. Resources shall consult with, and cooperate in all
respects with, REI in connection with the pricing of the Resources Common Stock
to be offered in the IPO and shall, at REI's direction, promptly take any and
all actions necessary or desirable to consummate the IPO as contemplated by the
IPO Registration Statement and the Underwriting Agreement.

         4.4 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. As soon as
practicable after the Separation Date, the parties hereto shall use their
reasonable commercial efforts to satisfy the conditions listed below to the
consummation of the IPO. The obligations of the parties to use their reasonable
commercial efforts to consummate the IPO shall be conditioned on the
satisfaction, or waiver by REI, of the following conditions:

                  (a) The IPO Registration Statement shall have been filed and
declared effective by the Commission, and there shall be no stop order in effect
with respect thereto.

                  (b) The actions and filings with regard to state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) described in Section 4.1(d) shall have been taken and,
where applicable, have become effective or been accepted.

                  (c) The Resources Common Stock to be issued in the IPO shall
have been accepted for listing on the NYSE, on official notice of issuance.

                  (d) Resources shall have entered into the Underwriting
Agreement and all conditions to the obligations of Resources and the
Underwriters shall have been satisfied or waived.

                  (e) REI shall be satisfied in its sole discretion that (1) it
will own more than 80% of the outstanding Resources Common Stock following the
IPO, (2) it will control Resources within the meaning of Section 368(c) of the
Code, and (3) it will satisfy the stock ownership requirements of Section
1504(a)(2) of the Code with respect to the stock of Resources. All other
conditions to permit the Distribution to qualify as a tax-free distribution to
REI, Resources and REI's shareholders shall, to the extent applicable as of the
time of the IPO, be satisfied, and there shall be no event or condition that is
likely to cause any of such conditions not to be satisfied as of the time of the
Distribution or thereafter.

                  (f) Any material Governmental Approvals necessary to
consummate the IPO shall have been obtained and be in full force and effect.

                  (g) No order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Separation or the IPO or any of the other
transactions contemplated by this Agreement or any Ancillary Agreement shall be
in effect.

                  (h) The Separation shall have become effective.

                                       20
<PAGE>   26

                  (i) Such other actions as the parties hereto may, based upon
the advice of counsel, reasonably request to be taken prior to the IPO in order
to assure the successful completion of the IPO shall have been taken.

                  (j) This Agreement and all Ancillary Agreements have been
executed and shall not have been terminated.

                  (k) A pricing committee designated by the Board of Directors
of REI shall have determined that the terms of the IPO are acceptable to REI.

         4.5 CANCELLATION OF OUTSTANDING INTERCOMPANY INDEBTEDNESS. Prior to the
IPO Closing Date, REI shall convert into a capital contribution, without the
issuance of any additional shares of Resources Common Stock to REI, all
Indebtedness owed by Resources or its Subsidiaries to any member of the REI
Group as of December 31, 2000, including all amounts owed by REPG to REI as of
such date in respect of the indebtedness of Reliant Energy FinanceCo III LP
other than the portion thereof constituting "Specified Indebtedness" as defined
in Section 4.2 but excluding any Indebtedness as of such date consisting of (a)
borrowings made to provide cash collateral for margin obligations of RES and any
replacements or refinancings thereof or (b) reimbursement and other obligations
under letters of credit, surety bonds or similar instruments provided as
security for obligations of RES and its subsidiaries. If the terms of the IPO
include an underwriters' overallotment option and upon the exercise of such
option in full, the total net proceeds from the IPO would exceed $1,400,000,000
(whether or not the total net proceeds would exceed such amount if the option
were not exercised), then

                  (a) prior to the IPO Closing Date, no Specified Indebtedness
shall be converted into a capital contribution;

                  (b) if and to the extent the overallotment option is
exercised, 50% of the net proceeds attributable to such exercise shall
immediately be applied to the prepayment of any Specified Indebtedness not
otherwise prepaid on the IPO Closing Date; and

                  (c) if and to the extent the overallotment option expires or
terminates without being exercised, the entire remaining amount of Specified
Indebtedness not theretofore prepaid shall be converted into a capital
contribution without the issuance of any additional shares of Resources Common
Stock to REI.

                                   ARTICLE V

                        CORPORATE GOVERNANCE AND CERTAIN
                      FINANCIAL REPORTING AND OTHER MATTERS

         5.1 CHARTER AND BYLAWS. As of the IPO Closing Date, the Restated
Certificate of Incorporation and Bylaws of Resources shall be in the forms of
Schedule 5.1(a) and 5.1(b), respectively, with such changes therein as may be
agreed to in writing by REI.

         5.2 RIGHTS PLAN AMENDMENTS. Following the Closing Date and for so long
as REI beneficially owns shares representing at least 30% of the voting power of
all of the outstanding

                                       21
<PAGE>   27

shares of Resources Common Stock, without the prior written consent of REI,
Resources shall not amend or modify the Resources Rights Plan.

         5.3 CHARTER/BYLAW AMENDMENTS. So long as REI owns shares representing
30% of the voting power of all of the outstanding shares of Resources Common
Stock, Resources will not, without the prior consent of REI, adopt any
amendments to its Restated Certificate of Incorporation or Bylaws or take or
recommend to its stockholders any action during the terms of this Agreement
which would (i) impose limitations on the legal rights of REI or any other
member of the REI Group as a stockholder of Resources other than those imposed
pursuant to the express terms of this Agreement or the form of Resources'
Restated Certificate of Incorporation set forth as Schedule 5.1(a) hereto,
including, without limitation, any action which would impose restrictions (A)
based upon the size of security holding, the business in which a security holder
is engaged or other considerations applicable to REI or any other member of the
REI Group and not to security holders generally, or (B) by means of the issuance
of or proposal to issue any other class of securities having voting power
disproportionately greater than the equity investment in Resources represented
by such securities; (ii) involve the issuance or corporate action providing for
the issuance of any warrant, right capital stock or other security (A) which is,
or under specified circumstances will become, convertible into or represent the
right to acquire any securities of REI or any other member of the REI Group or
(B) which is dependent upon the amount of voting securities owned by REI or any
other member of the REI Group, (iii) deny any benefit to REI or any other member
of the REI Group proportionately as holders of any class of voting securities
generally; or (iv) alter voting or other rights of the holders of any class of
voting securities so that any such rights (or the vote required with respect to
any matter) are determined with reference to the amount of voting securities
held by REI or any other member of the REI Group; provided, that this Section
5.3 shall not prohibit Resources from adopting the Resources Rights Plan or
taking any action otherwise prohibited hereby, so long as REI and the other
members of the REI Group are, either expressly or as part of a class of
stockholders which includes REI and the other members of the REI Group, exempted
from such action or the limitations on legal rights imposed thereby.

         5.4 RESOURCES BOARD REPRESENTATION.

                  (a) Beginning on the IPO Closing Date, and for so long as REI
beneficially owns shares representing a majority of the voting power of all of
the outstanding Resources Common Stock, REI shall have the right to designate
for nomination by the Resources Board (or any nominating committee thereof) to
the Resources Board a majority of the members of the Resources Board. For so
long as REI beneficially owns shares representing less than a majority but at
least 20% of the voting power of all of the outstanding Resources Common Stock,
REI shall have the right to designate for nomination by the Resources Board (or
any nominating committee thereof) to the Resources Board a proportionate number
of members of the Resources Board, as calculated in accordance with Section 5.4.
Notwithstanding anything to the contrary set forth herein, Resources'
obligations with respect to the election or appointment of Resources' designated
members shall be limited to the obligations set forth under subsections (b) and
(c) below.

                  (b) Resources shall exercise all authority under applicable
law and shall use its best efforts to cause at least three persons designated by
REI to be elected to the Resources

                                       22
<PAGE>   28

Board effective as of the IPO Closing Date (or at the first regularly scheduled
meeting thereafter). For so long as REI beneficially owns shares representing a
majority of the voting power of all of the outstanding Resources Common Stock,
commencing with the annual meeting of stockholders of Resources to be held in
2002 and prior to each annual meeting of stockholders of Resources thereafter,
REI shall be entitled to present to the Resources Board or any nominating
committee thereof such number of designees of REI (each, an "REI Designee") for
election to the Resources Board (or if there is a classified board, the class of
directors up for election) at such annual meeting as would result in REI having
the appropriate number of REI Designees on the Resources Board as determined
pursuant to subsection (a) above.

                  (c) Resources shall at all such times exercise all authority
under applicable law and use its best efforts to cause all such designees to be
nominated as Board members by the nominating committee of the Resources Board if
there is such a committee. Resources shall cause each REI Designee for election
to the Resources Board to be included in the slate of designees recommended by
the Resources Board to holders of Resources Common Stock (including at any
special meeting of stockholders held for the election of directors) and shall
use its best efforts to cause the election of each such REI Designee, including
soliciting proxies in favor of the election of such persons. In the event that
any REI Designee elected to the Resources Board shall cease to serve as a
director for any reason, the vacancy resulting therefrom shall be filled by the
Resources Board with a substitute REI Designee, unless such vacancy was caused
by action of stockholders (in which case, in accordance with Resources' Restated
Certificate of Incorporation, the stockholders shall fill such vacancy). In the
event that as a result of any increase in the size of the Resources Board, REI
is entitled to have one or more additional REI Designees elected to the
Resources Board pursuant to subsection (a) above, the REI Board shall appoint
the appropriate number of such additional REI Designees, unless such increase in
size of the Resources Board was caused by the action of stockholders (in which
case, in accordance with Resources' Restated Certificate of Incorporation, the
stockholders shall elect such additional director or directors). The parties
hereto agree that the directors of Resources identified in the IPO Registration
Statement include at least three REI Designees.

                  (d) If at any time that REI Designees are serving on the
Resources Board, REI beneficially owns shares representing less than a majority
but at least 20% of the total voting power of all of the outstanding Resources
Common Stock, the number of persons REI shall be entitled to designate for
nomination by the Resources Board (or any nominating committee thereof) for
election to the Resources Board shall be equal to the number of directors
computed using the following formula (rounded to the nearest whole number): the
product of (1) the percentage of the voting power of all of the outstanding
shares of Resources Common Stock beneficially owned by REI and (2) the number of
directors then on the Resources Board (assuming no vacancies exist).
Notwithstanding the foregoing, if REI beneficially owns shares of Resources
Common Stock representing less than a majority of the total voting power of all
outstanding shares of Resources Common Stock and the calculation of the formula
set forth in the foregoing sentence would result in REI being entitled to elect
a majority of the members of the Resources Board, the formula will be
recalculated with the product being rounded down to the nearest whole number;
provided, however, that if REI, at any time, acquires additional shares of
Resources Common Stock so that REI beneficially owns shares of Resources Common
Stock representing a majority of the total voting power of all of the
outstanding shares of Resources Common Stock, then the number of persons REI
shall be entitled to designate for nomination by

                                       23
<PAGE>   29

the Resources Board (or any nominating committee thereof) for election to the
Resources Board shall be adjusted upward, if appropriate as a result of
rounding, in accordance with the provisions of this Section 5.4(d). If the
number of REI Designees serving on the Resources Board exceeds the number
determined pursuant to the foregoing sentences of this Section 5.4(d) (such
difference being herein called the "Excess Director Number), then REI in its
sole discretion shall instruct a number of REI Designees (the number of which
designees shall be equal to the Excess Director Number) to promptly resign from
the Resources Board, and, to the extent such persons do not so resign, REI shall
assist Resources in increasing the size of the Resources Board, so that after
giving effect to such increase, the number of REI Designees on the Resources
Board is in accordance with the provisions of this Section 5.4(d).

         5.5 ISSUANCE OF STOCK. Following the IPO Closing Date and prior to the
Distribution Date, without the prior consent of REI, Resources shall not issue
any stock of Resources or any securities, options, warrants or rights
convertible into or exercisable or exchangeable for stock of Resources if the
issuance would cause REI to fail to control Resources within the meaning of
Section 368(c) of the Code or if the issuance would cause REI to fail to satisfy
the stock ownership requirements of Section 1504(a)(2) of the Code with respect
to the stock of Resources.

                                   ARTICLE VI

                          HOLDING COMPANY RESTRUCTURING

         6.1 INTENT TO EFFECT HOLDING COMPANY RESTRUCTURING. REI intends to
cause the Holding Company Restructuring described in this Article VI to occur as
soon as the conditions precedent set forth in Section 6.4 are satisfied.

         6.2 RESTRUCTURING STEPS. The Holding Company Restructuring shall
consist of the following transactions:

                  (a) REI will form a new wholly owned Subsidiary ("Genco
Holding Company") to become a transitory holding company of Genco LP.

                  (b) Genco Holding Company will form two wholly owned limited
liability companies ("Genco GP LLC" and "Genco LP LLC") that form Genco LP of
which Genco GP LLC is the 1% general partner and Genco LP LLC is the 99% limited
partner.

                  (c) REI will contribute the Genco Assets to the capital of
Genco LP for the benefit of Genco Holding Company, Genco GP LLC and Genco LP
LLC.

                  (d) Regco will organize a wholly owned subsidiary
("MergerCo2") for purposes of effecting the Restructuring Merger.

                  (e) MergerCo2 will merge (the "Restructuring Merger") with and
into REI; in the merger the Regco stock owned by REI will be cancelled and each
outstanding share of common stock of REI will be automatically converted into an
outstanding share of common stock of Regco.

                                       24
<PAGE>   30

                  (f) REI will distribute to Regco the stock of the Genco
Holding Company and the stock of the Subsidiaries identified in Schedule 6.2(f)
owned by REI.

                  (g) Regco will expressly assume all obligations of REI under
this Agreement and under each of the Ancillary Agreements and all other
obligations under this Agreement and under each of the Ancillary Agreements
which are expressed as requiring performance by, or imposing obligations on,
Regco.

                  (h) Genco Holding Company will merge with and into Regco.

         6.3 ACTIONS PRIOR TO THE HOLDING COMPANY RESTRUCTURING. (a) If required
by applicable law, Regco shall file a Registration Statement on Form S-4 with
respect to the offer and sale of common stock of Regco in the Restructuring
Merger and use reasonable commercial efforts to cause the same to become
effective and the proxy statement and prospectus contained therein shall be
mailed to shareholders of REI in accordance with the requirements of the
Securities Act of 1933, as amended.

                  (b) Regco shall prepare and file, and use reasonable
commercial efforts to have approved, a listing of its common stock issued in the
Restructuring Merger on the NYSE, subject to official notice of issuance.

                  (c) REI and Regco shall use reasonable commercial efforts to
make appropriate filings and applications with the Commission in order to
satisfy the condition set forth in Section 6.4(b).

         6.4 CONDITIONS TO HOLDING COMPANY RESTRUCTURING. The following are
conditions to the Holding Company Restructuring. The conditions are for the sole
benefit of REI and shall not give rise to or create any duty on the part of REI
or the REI Board of Directors to waive or not waive any such condition.

                  (a) To the extent required by applicable law, the shareholders
of REI shall have approved an agreement and plan of merger necessary to effect
the Restructuring Merger.

                  (b) (i) The Commission shall have issued an order acceptable
to REI under Sections 9(a)(2) and 10 of the Public Utility Holding Company Act
of 1935, as amended, approving the acquisition by Regco of securities of "public
utility companies" in the Holding Company Restructuring and (ii) if no exemption
from the registration requirements of such Act is available to Regco, the
registration of Regco as a "holding company" under such Act shall have become
effective.

                  (c) Any other material Governmental Approvals necessary to
consummate the Holding Company Restructuring shall have been obtained and be in
full force and effect.

                  (d) No order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Holding Company Restructuring shall be in
effect and no other event outside the control of REI shall have occurred or
failed to occur that prevents the consummation of the Holding Company
Restructuring.

                                       25
<PAGE>   31

                  (e) Regco shall have obtained a private letter ruling from the
Internal Revenue Service in form and substance satisfactory to Regco (in its
sole discretion), to the effect that the transfer from REI to Genco LP of the
ownership of the nuclear decommissioning trust assets referred to in Section
10.13 and those Genco Assets that are subject to regulation by the Nuclear
Regulatory Commission will not adversely affect the tax status of Genco or of
the nuclear decommissioning trust or of further contributions to such trust.

                  (f) Such amendments, consents, waivers, approvals,
refinancings or other actions as may be necessary in connection with the Holding
Company Restructuring under debt obligations of REI and its Subsidiaries and
material contracts and agreements to which REI or any of its Subsidiaries are
parties shall have been obtained or taken.

         6.5 SOLE DISCRETION OF REI. REI currently intends, following the
consummation of the IPO, to complete the Holding Company Restructuring as
promptly as practicable after the IPO Closing Date. REI shall, in its sole and
absolute discretion, determine the date of the consummation of the Holding
Company Restructuring and the steps therein and all terms thereof, including,
without limitation, the form, structure and terms of any transaction(s) to
effect the Holding Company Restructuring and the timing of and conditions to the
consummation thereof. In addition, REI may at any time and from time to time
until the completion of the Holding Company Restructuring decide to abandon the
Holding Company Restructuring or modify or change the terms of the Holding
Company Restructuring including, without limitation, by accelerating or delaying
the timing of the consummation of all or part of the Holding Company
Restructuring. Resources shall cooperate with REI in all respects to accomplish
the Holding Company Restructuring and shall, at REI's direction, promptly take
any and all actions necessary or desirable to effect the Holding Company
Restructuring.

                                  ARTICLE VII

                                THE DISTRIBUTION

         7.1 THE DISTRIBUTION.

                  (a) Delivery of Shares for Distribution. Subject to Section
7.4 hereof, on or prior to the date the Distribution is made (the "Distribution
Date"), Regco will deliver to the distribution agent to be appointed by Regco,
or if no distribution agent is appointed, then Regco (the "Distribution Agent"),
to distribute to the shareholders of Regco the shares of Resources Common Stock
held by Regco pursuant to the Distribution for the benefit of holders of record
of common stock of Regco on the record date, a single stock certificate,
endorsed by Regco in blank, representing all of the outstanding shares of
Resources Common Stock then owned by Regco, and shall cause the transfer agent
for the shares of common stock of Regco to instruct the Distribution Agent to
distribute on the Distribution Date the appropriate number of such shares of
Resources Common Stock to each such holder or designated transferee or
transferees of such holder.

                  (b) Shares Received. Subject to Sections 7.4 and 7.5, each
holder of common stock of Regco on the Record Date (or such holder's designated
transferee or transferees) will be entitled to receive in the Distribution a
number of shares of Resources Common Stock equal to

                                       26
<PAGE>   32

the number of shares of common stock of Regco held by such holder on the Record
Date multiplied by a fraction the numerator of which is the number of shares of
Resources Common Stock beneficially owned by Regco on the Record Date and the
denominator of which is the number of shares of common stock of Regco
outstanding on the Record Date.

                  (c) Obligation to Provide Information. Resources and Regco, as
the case may be, will provide to the Distribution Agent all share certificates
and any information required in order to complete the Distribution on the basis
specified above.

         7.2 ACTIONS PRIOR TO THE DISTRIBUTION.

                  (a) Regco and Resources shall prepare and mail, prior to the
Distribution Date, to the holders of common stock of Regco such information
concerning Resources and the Distribution and such other matters as Regco shall
reasonably determine are necessary and as may be required by law. Regco and
Resources will prepare, and Resources will, to the extent required under
applicable law, file with the Commission any such documentation which Regco and
Resources determine is necessary or desirable to effectuate the Distribution,
and Regco and Resources shall each use its reasonable commercial efforts to
obtain all necessary approvals from the Commission with respect thereto as soon
as practicable.

                  (b) Regco and Resources shall take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.

                  (c) Resources shall prepare and file, and shall use its
reasonable commercial efforts to have approved, an application for the listing
of the Resources Common Stock to be distributed in the Distribution on the NYSE,
subject to official notice of distribution.

                  (d) Immediately prior to the Distribution, (i) each person who
is an officer or employee of any member of the REI Group and an officer or
employee of any member of the Resources Group immediately prior to the
Distribution (each a "Joint Employee") and who is to continue as an officer or
employee of any member of the REI Group after the Distribution shall resign from
each of such person's positions as an officer or employee with each member of
the Resources Group, and (ii) each such Joint Employee who is to continue as an
officer or employee of any member of the Resources Group, after the
Distribution, shall resign from each of such person's positions as an officer or
employee with each member of the REI Group.

         7.3 SOLE DISCRETION OF REI. REI currently intends, following the
consummation of the IPO, that Regco shall complete the Distribution as promptly
as practicable after the IPO Closing Date. Regco shall, in its sole and absolute
discretion, determine the date of the consummation of the Distribution and all
terms of the Distribution, including, without limitation, the form, structure
and terms of any transaction(s) and/or offering(s) to effect the Distribution
and the timing of and conditions to the consummation of the Distribution. In
addition, REI (or Regco) may at any time and from time to time until the
completion of the Distribution decide to abandon the Distribution or modify or
change the terms of the Distribution, including, without limitation, by
accelerating or delaying the timing of the consummation of all or part of the
Distribution. Resources shall cooperate with Regco in all respects to accomplish
the Distribution

                                       27
<PAGE>   33

and shall, at Regco's direction, promptly take any and all actions necessary or
desirable to effect the Distribution, including, without limitation, the
registration under the Securities Act of 1933, as amended, of the Resources
Common Stock on an appropriate registration form or forms to be designated by
Regco. REI shall select any investment banker(s) and manager(s) in connection
with the Distribution, as well as any financial printer, solicitation and/or
exchange agent and outside counsel for Regco; provided, however, that nothing
herein shall prohibit Resources from engaging (at its own expense) its own
financial, legal, accounting and other advisors in connection with the
Distribution.

         7.4 CONDITIONS TO THE DISTRIBUTION. The following are conditions to the
consummation of the Distribution. The conditions are for the sole benefit of
Regco and shall not give rise to or create any duty on the part of Regco or the
Regco Board of Directors to waive or not waive any such condition.

                  (a) IRS Ruling. Regco shall have obtained a private letter
ruling from the Internal Revenue Service in form and substance satisfactory to
Regco (in its sole discretion), and such ruling shall remain in effect as of the
Distribution Date, to the effect that (i) the contribution by REI of all of its
Resources Common Stock to Regco will qualify as a reorganization under Section
355 of the Code, (ii) the distribution by Regco of all of its Resources Common
Stock to the shareholders of Regco will qualify as a reorganization under
Section 355 of the Code; (iii) no gain or loss will be recognized by (and no
amount will otherwise be included in the income of) the shareholders of Regco
upon their receipt of Resources Common Stock pursuant to the Distribution; (iv)
no gain or loss will be recognized by REI upon the contribution of its Resources
Common Stock to Regco; and (v) no gain or loss will be recognized by Regco
pursuant to the Distribution.

                  (b) Holding Company Restructuring. The Holding Company
Restructuring shall have occurred.

                  (c) Governmental Approvals. Any material Governmental
Approvals necessary to consummate the Distribution shall have been obtained and
be in full force and effect;

                  (d) No Legal Restraints. No order, injunction or decree issued
by any court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Distribution shall be in effect
and no other event outside the control of Regco shall have occurred or failed to
occur that prevents the consummation of the Distribution; and

                  (e) No Material Adverse Effect. No other events or
developments shall have occurred subsequent to the IPO Closing Date that, in the
judgment of the Board of Directors of Regco, would result in the Distribution
having a material adverse effect on Regco or on the shareholders of Regco.

         7.5 FRACTIONAL SHARES. As soon as practicable after the Distribution
Date, Regco shall direct the Distribution Agent to determine the number of whole
shares and fractional shares of Resources Common Stock allocable to each holder
of record or beneficial owner of common

                                       28
<PAGE>   34

stock of REI as of the Record Date, to aggregate all such fractional shares and
sell the whole shares obtained thereby at the direction of Regco, in open market
transactions, at then prevailing trading prices, and to cause to be distributed
to each such holder or for the benefit of each such beneficial owner to which a
fractional share shall be allocable such holder's or owner's ratable share of
the proceeds of such sale, after making appropriate deductions of the amount
required to be withheld for federal income tax purposes and after deducting an
amount equal to all brokerage charges, commissions and transfer taxes attributed
to such sale. Regco and the Distribution Agent shall use their reasonable
commercial efforts to aggregate the shares of common stock of REI that may be
held by any beneficial owner thereof through more than one account in
determining the fractional share allocable to such beneficial owner.

                                  ARTICLE VIII

                               GENCO TRANSACTIONS

         8.1 ORGANIZATION OF GENCO LP. In connection with the Holding Company
Restructuring, REI shall cause the Genco Assets to be contributed to Genco LP,
free and clear of the lien of the Mortgage and all other liens and security
interests securing Indebtedness, and shall cause Genco LP to assume the Genco
Liabilities. The date on which such contribution and assumption occurs is
referred to herein as the "Genco Organization Date." On the Genco Organization
Date, all of the outstanding partnership interests in Genco LP shall be
indirectly owned by Regco.

         8.2 GENCO CONTRACTS. On the Genco Organization Date, Genco LP shall be
assigned, and will assume the obligations of REI under, the Technical Services
Agreement.

         8.3 INSTRUMENTS OF TRANSFER AND ASSUMPTION. Transfers of the Genco
Assets shall be effected by delivery by REI or the other transferring entity, as
applicable, to the transferee, of (i) with respect to those assets that
constitute stock, certificates endorsed in blank or evidenced or accompanied by
stock powers or other instruments of transfer endorsed in blank, against
receipt, (ii) with respect to real property interests and improvements thereon,
a general warranty deed with general warranty of limited application limiting
recourse and remedies to title insurance and warranties by predecessors in title
to REI, and (iii) with respect to all other Assets, such good and sufficient
instruments of contribution, conveyance, assignment and transfer, in form and
substance reasonably satisfactory to REI and Resources, as shall be necessary to
vest in the designated transferee, all of the title and ownership interest of
the transferor in and to any such Asset, (b) to the extent necessary, the
assumption of the Liabilities contemplated pursuant to Section 8.1 hereof shall
be effected by delivery by the transferee to the transferor of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to REI and Resources, as shall be necessary for the assumption by
the transferee of such Liabilities. Each instrument of transfer shall contain a
representation and warranty that the portion of the Genco Assets transferred
thereby shall be free and clear of the lien of the Mortgage and all other liens
and security interests securing Indebtedness. Each of the parties hereto also
agrees to deliver to any other party hereto such other documents, instruments
and writings as may be reasonably requested by such other parties hereto in
connection with the transactions contemplated hereby. Notwithstanding any other
provisions of this Agreement to the contrary, (x) THE TRANSFERS AND ASSUMPTIONS
REFERRED TO IN THIS ARTICLE VIII WILL

                                       29
<PAGE>   35

BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY NATURE (a) AS TO THE VALUE
OR FREEDOM FROM ENCUMBRANCE OF, ANY ASSETS, (b) AS TO ANY WARRANTY OF
MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OF, OR ANY OTHER
MATTER CONCERNING, ANY ASSETS OR (c) AS TO THE LEGAL SUFFICIENCY TO CONVEY TITLE
TO ANY ASSETS, and (y) the instruments of transfer or assumption referred to in
this Section 8.3 shall not include any representations and warranties other than
as specifically provided herein. REI and Resources hereby acknowledge and agree
that ALL ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS."

         8.4 ORGANIZATION OF GENCO INC. Prior to the Genco Public Ownership
Date, REI shall organize Genco Inc. and shall contribute to Genco Inc. all of
the membership interests in Genco GP LLC and Genco LP LLC. Immediately following
such transactions, all the outstanding common stock of Genco Inc. shall be owned
by Regco.

         8.5 RELEASES AND INDEMNITIES. In connection with the organization of
Genco LP or the Genco Public Ownership Event, REI and Genco will enter into
agreements regarding such mutual releases and indemnities similar in effect to
those set forth in Article III as REI shall specify.

                                   ARTICLE IX

                         ARBITRATION; DISPUTE RESOLUTION

         9.1 AGREEMENT TO ARBITRATE. Except as otherwise specifically provided
in any Ancillary Agreement, the procedures for discussion, negotiation and
arbitration set forth in this Article IX shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may rise out of or relate to, or arise under or in connection with this
Agreement or any Ancillary Agreement, or the transactions contemplated hereby or
thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or (for a period
of ten years after the date hereof) the commercial or economic relationship of
the parties relating hereto or thereto, between or among any member of the REI
Group and the Resources Group. Each party agrees on behalf of itself and each
member of its respective Group that the procedures set forth in this Article IX
shall be the sole and exclusive remedy in connection with any dispute,
controversy or claim relating to any of the foregoing matters and irrevocably
waives any right to commence any Action in or before any Governmental Authority,
except as expressly provided in Section 9.7(b) and except to the extent provided
under the Arbitration Act in the case of judicial review of arbitration results
or awards. Each party on behalf of itself and each member of its respective
Group irrevocably waives any right to any trial by jury with respect to any
claim, controversy or dispute set forth in this Section 9.1.

         9.2 ESCALATION. (a) It is the intent of the parties to use their
respective reasonable best efforts to resolve expeditiously any dispute,
controversy or claim between or among them with respect to the matters covered
hereby that may arise from time to time on a mutually acceptable negotiated
basis. In furtherance of the foregoing, any party involved in a dispute,
controversy or claim may deliver a notice (an "Escalation Notice") demanding an
in-person

                                       30
<PAGE>   36

meeting involving representatives of the parties at a senior level of management
of the parties (or if the parties agree, of the appropriate strategic business
unit or division within such entity). A copy of any such Escalation Notice shall
be given to the General Counsel, or like officer or official, of each party
involved in the dispute, controversy or claim (which copy shall state that it is
an Escalation Notice pursuant to this Agreement). Any agenda, location or
procedures for such discussions or negotiations between the parties may be
established by the parties from time to time; provided, however, that the
parties shall use their reasonable best efforts to meet within 30 days of the
Escalation Notice.

                  (b) The parties may, by mutual consent, retain a mediator to
aid the parties in their discussions and negotiations by informally providing
advice to parties. Any opinion expressed by the mediator shall be strictly
advisory and shall not be binding on the parties, nor shall any opinion
expressed by the mediator be admissible in any arbitration proceedings. The
mediator may be chosen from a list of mediators previously selected by the
parties or by other agreement of the parties. Costs of the mediation shall be
borne equally by the parties involved in the matter, except that each party
shall be responsible for its own expenses. Mediation is not a prerequisite to a
demand for arbitration under Section 9.3.

         9.3 DEMAND FOR ARBITRATION. (a) At any time after the first to occur of
(i) the date of the meeting actually held pursuant to the applicable Escalation
Notice or (ii) 45 days after the delivery of an Escalation Notice (as
applicable, the "Arbitration Demand Date"), any party involved in the dispute,
controversy or claim (regardless of whether such party delivered the Escalation
Notice) may deliver a notice demanding arbitration of such dispute, controversy
or claim (a "Arbitration Demand Notice"). In the event that any party shall
deliver an Arbitration Demand Notice to another party, such other party may
itself deliver an Arbitration Demand Notice to such first party with respect to
any related dispute, controversy or claim with respect to which the Applicable
Deadline has not passed without the requirement of delivering an Escalation
Notice. No party may assert that the failure to resolve any matter during any
discussions or negotiations, the course of conduct during the discussions or
negotiations or the failure to agree on a mutually acceptable time, agenda,
location or procedures for the meeting, in each case, as contemplated by Section
9.2, is a prerequisite to a demand for arbitration under Section 9.3. In the
event that any party delivers an Arbitration Demand Notice with respect to any
dispute, controversy or claim that is the subject of any then pending
arbitration proceeding or of a previously delivered Arbitration Demand Notice,
all such disputes, controversies and claims shall be resolved in the arbitration
proceeding for which an Arbitration Demand Notice was first delivered unless the
arbitrator in his or her sole discretion determines that it is impracticable or
otherwise inadvisable to do so.

                  (b) Except as may be expressly provided in any Ancillary
Agreement, any Arbitration Demand Notice may be given until one year and 45 days
after the later of the occurrence of the act or event giving rise to the
underlying claim or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence, discovered by the party
asserting the claim (as applicable and as it may in a particular case be
specifically extended by the parties in writing, the "Applicable Deadline"). Any
discussions, negotiations or mediations between the parties pursuant to this
Agreement or otherwise will not toll the Applicable Deadline unless expressly
agreed in writing by the parties. Each of the parties agrees on behalf of itself
and each member of its Group that if an Arbitration Demand Notice with

                                       31
<PAGE>   37

respect to a dispute, controversy or claim is not given prior to the expiration
of the Applicable Deadline, as between or among the parties and the members of
their Groups, such dispute, controversy or claim will be barred. Subject to
Sections 9.7(d) and 9.8, upon delivery of an Arbitration Demand Notice pursuant
to Section 9.3(a) prior to the Applicable Deadline, the dispute, controversy or
claim shall be decided by a sole arbitrator in accordance with the rules set
forth in this Article IX.

         9.4 ARBITRATORS. (a) Within 15 days after a valid Arbitration Demand
Notice is given, the parties involved in the dispute, controversy or claim
referenced therein shall attempt to select a sole arbitrator satisfactory to all
such parties.

                  (b) In the event that such parties are not able jointly to
select a sole arbitrator within such 15-day period, such parties shall each
appoint an arbitrator (who need not be disinterested as to the parties or the
matter) within 30 days after delivery of the Arbitration Demand Notice. If one
party appoints an arbitrator within such time period and the other party or
parties fail to appoint an arbitrator within such time period, the arbitrator
appointed by the one party shall be the sole arbitrator of the matter.

                  (c) In the event that a sole arbitrator is not selected
pursuant to paragraph (a) or (b) above, the two arbitrators will, within 30 days
after the appointment of the later of them to be appointed, select an additional
arbitrator who shall act as the sole arbitrator of the dispute. After selection
of such sole arbitrator, the initial arbitrators shall have no further role with
respect to the dispute. In the event that the arbitrators so appointed do not,
within 30 days after the appointment of the later of them to be appointed, agree
on the selection of the sole arbitrator, any party involved in such dispute may
apply to the Senior Judge of the U.S. District Court for the Southern District
of Texas to select the sole arbitrator, which selection shall be made by such
organization within 30 days after such application. Any arbitrator selected
pursuant to this paragraph (c) shall be disinterested with respect to each of
the parties and shall be reasonably competent in the applicable subject matter.

                  (d) The sole arbitrator selected pursuant to paragraph (a),
(b) or (c) above will set a time for the hearing of the matter which will
commence no later than 90 days after the date of appointment of the sole
arbitrator pursuant to paragraph (a), (b) or (c) above and which hearing will be
no longer than 30 days (unless in the judgment of the arbitrator the matter is
unusually complex and sophisticated and thereby requires a longer time, in which
event such hearing shall be no longer than 90 days). The final decision of such
arbitrator will be rendered in writing to the parties not later than 60 days
after the last hearing date, unless otherwise agreed by the parties in writing.

                  (e) The place of any arbitration hereunder will be Houston,
Texas, unless otherwise agreed by the parties.

         9.5 HEARINGS. Within the time period specified in Section 9.4(d), the
matter shall be presented to the arbitrator at a hearing by means of written
submissions of memoranda and verified witness statements, filed simultaneously,
and responses, if necessary in the judgment of the arbitrator or both the
parties. If the arbitrator deems it to be essential to a fair resolution of the
dispute, live cross-examination or direct examination may be permitted, but is
not generally

                                       32
<PAGE>   38

contemplated to be necessary. The arbitrator shall actively manage the
arbitration with a view to achieving a just, speedy and cost-effective
resolution of the dispute, claim or controversy. The arbitrator may, in his or
her discretion, set time and other limits on the presentation of each party's
case, its memoranda or other submissions, and refuse to receive any proffered
evidence, which the arbitrator, in his or her discretion, finds to be
cumulative, unnecessary, irrelevant or of low probative nature. Except as
otherwise set forth herein, any arbitration hereunder will be conducted in
accordance with the procedures of the Center for Public Resources of New York
("CPR"). Except as expressly set forth in Section 9.8(b), the decision of the
arbitrator will be final and binding on the parties, and judgment thereon may be
had and will be enforceable in any court having jurisdiction over the parties.
Arbitration awards will bear interest at an annual rate of the Prime Rate plus
2% per annum, subject to any maximum amount permitted by applicable law. To the
extent that the provisions of this Agreement and the prevailing rules of the CPR
conflict, the provisions of this Agreement shall govern.

         9.6 DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any party involved in a
dispute subject to this Article IX may request limited document production from
the other party or parties of specific and expressly relevant documents, with
the reasonable expenses of the producing party incurred in such production paid
by the requesting party. Any such discovery (which right to documents shall be
substantially less than document discovery rights prevailing under the Federal
Rules of Civil Procedure) shall be conducted expeditiously and shall not cause
the hearing provided for in Section 9.5 to be adjourned except upon consent of
all parties involved in the applicable dispute or upon an extraordinary showing
of cause demonstrating that such adjournment is necessary to permit discovery
essential to a party to the proceeding. Depositions, interrogatories or other
forms of discovery (other than the document production set forth above) shall
not occur except by consent of the parties involved in the applicable dispute.
Disputes concerning the scope of document production and enforcement of the
document production requests will be determined by written agreement of the
parties involved in the applicable dispute or, failing such agreement, will be
referred to the arbitrator for resolution. All discovery requests will be
subject to the parties' rights to claim any applicable privilege. The arbitrator
will adopt procedures to protect the proprietary rights of the parties and to
maintain the confidential treatment of the arbitration proceedings (except as
may be required by law). Subject to the foregoing, the arbitrator shall have the
power to issue subpoenas to compel the production or documents relevant to the
dispute, controversy or claim.

                  (b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to interpreting
or construing the applicable provisions of this Agreement or any Ancillary
Agreement, and will have no authority or power to limit, expand, alter, amend,
modify, revoke or suspend any condition or provision of this Agreement or any
Ancillary Agreement; it being understood, however, that the arbitrator will have
full authority to implement the provisions of this Agreement or any Ancillary
Agreement, and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided that the arbitrator
shall not have (i) any authority in excess of the authority a court having
jurisdiction over the parties and the controversy or dispute would have absent
these arbitration provisions or (ii) any right or power to award punitive or
treble damages. It is the intention of the parties that in rendering a decision
the arbitrator give effect to the applicable provisions of this Agreement and
the Ancillary Agreements and follow applicable law

                                       33
<PAGE>   39

(it being understood and agreed that this sentence shall not give rise to a
right of judicial review of the arbitrator's award).

                  (c) If a party fails or refuses to appear at and participate
in an arbitration hearing after due notice, the arbitrator may hear and
determine the controversy upon evidence produced by the appearing party.

                  (d) Arbitration costs will be borne equally by each party
involved in the mater, except that each party will be responsible for its own
attorney's fees and other costs and expenses, including the costs of witnesses
selected by such party.

         9.7 CERTAIN ADDITIONAL MATTERS. (a) Except as to arbitration of cases
arising under or related to the Genco Option Agreement, any arbitration award
shall be a bare award limited to a holding for or against a party and shall be
without findings as to facts, issues or conclusions of law (including with
respect to any matters relating to the validity or infringement of patents or
patent applications) and shall be without a statement of the reasoning on which
the award rests, but must be in adequate form so that a judgment of a court may
be entered thereupon. Judgment upon any arbitration award hereunder may be
entered in any court having jurisdiction thereof.

                  (b) Prior to the time at which an arbitrator is appointed
pursuant to Section 9.4, any party may seek one or more temporary restraining
orders in a court of competent jurisdiction if necessary in order to preserve
and protect the status quo. Neither the request for, or grant or denial of, any
such temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth herein and the arbitrator may dissolve, continue or
modify any such order. Any such temporary restraining order shall remain in
effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrator.

                  (c) Except as required by law, the parties shall hold, and
shall cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Article X and
except as may be required in order to enforce any award. Each of the parties
shall request that any mediator or arbitrator comply with such confidentiality
requirement.

                  (d) In the event that at any time the sole arbitrator shall
fail to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall be
repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined by
the replacement arbitrator.

         9.8 ARBITRATION OF GENCO OPTION AGREEMENT CASES. In cases arising under
or related to the Genco Option Agreement:

                  (a) The proposed final decision of the Arbitrator shall be
rendered pursuant to Section 9.4(d), but shall invite the parties to submit
findings of facts and conclusions of law for use by the Arbitrator in drawing up
his final arbitral award.

                                       34
<PAGE>   40

                  (b) The final award shall expressly set forth sufficient
findings of fact and conclusions of law to support a final judgment under Texas
law based upon the arbitration award. Any exercise of discretion shall be
limited by the standards applicable to trial court judges.

                  (c) A full record, including a stenographic transcription of
oral testimony, evidence shall be maintained by the Arbitrator and forwarded to
a court of competent jurisdiction in the event of appeal.

                  (d) The final award shall be appealable to the courts of Texas
to the full extent permitted by laws, and such courts shall have all of such
power to review, correct, reverse, modify, remand or otherwise adjudicate such
appeal as Texas law may allow.

         9.9 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article IX with respect
to all matters not subject to such dispute, controversy or claim.

         9.10 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
provisions of this Article IX, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 11.3.

                                   ARTICLE X

                           COVENANTS AND OTHER MATTERS

         10.1 OTHER AGREEMENTS. In addition to the specific agreements,
documents and instruments annexed to this Agreement, REI and Resources agree to
execute or cause to be executed by the appropriate parties and deliver, as
appropriate, such other agreements, instruments and other documents as may be
necessary or desirable in order to effect the purposes of this Agreement and the
Ancillary Agreements.

         10.2 FURTHER INSTRUMENTS. At the request of Resources and without
further consideration, REI will execute and deliver, and will cause its
applicable Subsidiaries to execute and deliver, to Resources and its
Subsidiaries such other instruments of transfer, conveyance, assignment,
substitution and confirmation and take such action as Resources may reasonably
deem necessary or desirable in order more effectively to transfer, convey and
assign to Resources and its Subsidiaries and confirm Resources' and its
Subsidiaries' title to all of the assets, rights and other things of value
contemplated to be transferred to Resources and its Subsidiaries pursuant to
this Agreement, the Ancillary Agreements, and any documents referred to therein,
to put Resources and its Subsidiaries in actual possession and operating control
thereof and to permit Resources and its Subsidiaries to exercise all rights with
respect thereto (including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer thereof
shall not have previously been obtained). At the

                                       35
<PAGE>   41

request of REI and without further consideration, Resources will execute and
deliver, and will cause its applicable Subsidiaries to execute and deliver, to
REI and its Subsidiaries all instruments, assumptions, novations, undertakings,
substitutions or other documents and take such other action as REI may
reasonably deem necessary or desirable in order to have Resources fully and
unconditionally assume and discharge the liabilities contemplated to be assumed
by Resources under this Agreement, any Ancillary Agreement or any document in
connection herewith and to relieve the REI Group of any liability or obligation
with respect thereto and evidence the same to third parties. Neither REI nor
Resources shall be obligated, in connection with the foregoing, to expend money
other than reasonable out-of-pocket expenses, attorneys' fees and recording or
similar fees. Furthermore, each party, at the request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.

         10.3 AGREEMENT FOR EXCHANGE OF INFORMATION. Each of REI and Resources
agrees to provide, or cause to be provided, to each other as soon as reasonably
practicable after written request therefor, any Information in the possession or
under the control of such party that the requesting party reasonably needs (i)
to comply with reporting, disclosure, filing or other requirements imposed on
the requesting party (including under applicable securities laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any Regulatory Proceeding, judicial proceeding or other proceeding or in
order to satisfy audit, accounting, claims, regulatory, litigation or other
similar requirements, (iii) to comply with its obligations under this Agreement
or any Ancillary Agreement or (iv) in connection with the ongoing businesses of
REI or Resources as it relates to the conduct of such businesses prior to the
Distribution Date, as the case may be; provided, however, that in the event that
any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.

                  (a) After the Separation Date, (i) each party shall maintain
in effect at its own cost and expense adequate systems and controls for its
business to the extent necessary to enable the other party to satisfy its
reporting, accounting, audit and other obligations, and (ii) each party shall
provide, or cause to be provided, to the other party and its Subsidiaries in
such form as such requesting party shall request, at no charge to the requesting
party, all financial and other data and information as the requesting party
determines necessary or advisable in order to prepare its financial statements
and reports or filings with any Governmental Authority.

                  (b) Any Information owned by a party that is provided to a
requesting party pursuant to this Section 10.3 shall be deemed to remain the
property of the providing party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights
of license or otherwise in any such Information.

                  (c) To facilitate the possible exchange of Information
pursuant to this Section 10.3 and other provisions of this Agreement after the
Distribution Date, each party agrees to use its reasonable commercial efforts to
retain all Information in its respective possession or control on the
Distribution Date substantially in accordance with its policies as in effect on
the

                                       36
<PAGE>   42

Separation Date. Resources shall not amend its or its Subsidiaries' record
retention policies prior to the Distribution Date without the consent of REI.
However, except as set forth in the Tax Allocation Agreement, at any time after
the Distribution Date, each party may amend their respective record retention
policies at such party's discretion; provided, however, that if a party desires
to effect the amendment within three (3) years after the Distribution Date, the
amending party must give thirty (30) days prior written notice of such change in
the policy to the other party to this Agreement. No party will destroy, or
permit any of its Subsidiaries to destroy, any Information that exists on the
Separation Date (other than Information that is permitted to be destroyed under
the current record retention policy of such party) without first using its
reasonable commercial efforts to notify the other party of the proposed
destruction and giving the other party the opportunity to take possession of
such Information prior to such destruction.

                  (d) No party shall have any liability to any other party in
the event that any Information exchanged or provided pursuant to this Section is
found to be inaccurate, in the absence of willful misconduct by the party
providing such Information. No party shall have any liability to any other party
if any Information is destroyed or lost after reasonable commercial efforts by
such party to comply with the provisions of Section 10.3(c).

                  (e) The rights and obligations granted under this Section 10.3
are subject to any specific limitations, qualifications or additional provisions
on the sharing, exchange or confidential treatment of Information set forth in
this Agreement and any Ancillary Agreement.

                  (f) Each party hereto shall, except in the case of a dispute
subject to this Article IX brought by one party against another party (which
shall be governed by such discovery rules as may be applicable under Article IX
or otherwise), use its reasonable commercial efforts to make available to each
other party, upon written request, the former, current and future directors,
officers, employees, other personnel and agents of such party as witnesses and
any books, records or other documents within its control or which it otherwise
has the ability to make available, to the extent that any such person (giving
consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other documents may reasonably be
required in connection with any Regulatory Proceeding, judicial proceeding or
other proceeding in which the requesting party may from time to time be
involved, regardless of whether such Regulatory Proceeding, judicial proceeding
or other proceeding is a matter with respect to which indemnification may be
sought hereunder. The requesting party shall bear all costs and expenses in
connection therewith.

                  (g) To the extent Resources or a member of the Resources Group
is deemed or determined by the PUCT by final order no longer subject to
rehearing by the PUCT to be an "affiliate" or a "competitive affiliate" of REI,
Resources and REI shall observe any applicable requirements of the Utilities
Code, PUCT rules and of the REI code of conduct and shall require their
respective personnel and contractor personnel to observe that code of conduct.
No member of the REI Group or the Resources Group shall directly or indirectly
make application or request to the PUCT to make such a finding or determination
nor will any member of the REI Group or the Resources Group directly or
indirectly take a position in support of such a finding or determination.

                                       37
<PAGE>   43

         10.4 AUDITORS AND AUDITS; ANNUAL AND QUARTERLY STATEMENTS AND
ACCOUNTING. (a) Each party agrees that, for so long as Resources remains a
Subsidiary of REI, and with respect to any financial reporting period during
which Resources was a Subsidiary of REI:

                           (i) Resources shall not select a different accounting
                  firm than the firm selected by REI to audit its financial
                  statements to serve as its independent certified public
                  accountants (the "Resources Auditors") for purposes of
                  providing an opinion on its consolidated financial statements
                  without REI's prior written consent (which shall not be
                  unreasonably withheld).

                           (ii) Resources shall use its reasonable commercial
                  efforts to enable the accounting firm that audits its
                  financial statements (the "Resources Auditors") to complete
                  their audit such that they will date their opinion on
                  Resources' audited annual financial statements on the same
                  date that REI's Auditors date their opinion on REI's audited
                  annual financial statements, and to enable REI to meet its
                  timetable for the printing, filing and public dissemination of
                  REI's annual financial statements. Resources shall use its
                  reasonable commercial efforts to enable the Resources Auditors
                  to complete their quarterly review procedures such that they
                  will provide clearance on Resources' quarterly financial
                  statements on the same date that REI's Auditors provide
                  clearance on REI's quarterly financial statements.

                           (iii) Resources shall provide to REI on a timely
                  basis all Information that REI reasonably requires to meet its
                  schedule for the preparation, printing, filing, and public
                  dissemination of REI's annual and quarterly financial
                  statements. Without limiting the generality of the foregoing,
                  Resources will provide all required financial information with
                  respect to Resources and its Subsidiaries to the Resources
                  Auditors in a sufficient and reasonable time and in sufficient
                  detail to permit the Resources Auditors to take all steps and
                  perform all reviews necessary to provide sufficient assistance
                  to REI's Auditors with respect to Information to be included
                  or contained in REI's annual and quarterly financial
                  statements. Similarly, REI shall provide to Resources on a
                  timely basis all Information that Resources reasonably
                  requires to meet its schedule for the preparation, printing,
                  filing, and public dissemination of Resources' annual and
                  quarterly financial statements. Without limiting the
                  generality of the foregoing, REI will provide all required
                  financial Information with respect to REI and its Subsidiaries
                  to REI's Auditors in a sufficient and reasonable time and in
                  sufficient detail to permit REI's Auditors to take all steps
                  and perform all reviews necessary to provide sufficient
                  assistance to the Resources Auditors with respect to
                  Information to be included or contained in Resources' annual
                  and quarterly financial statements.

                           (iv) Resources shall authorize the Resources Auditors
                  to make available to REI's Auditors both the personnel who
                  performed or are performing the annual audits and quarterly
                  reviews of Resources and work papers related to the annual
                  audits and quarterly reviews of Resources, in all cases within
                  a

                                       38
<PAGE>   44

                  reasonable time prior to the Resources Auditors' opinion date,
                  so that REI's Auditors are able to perform the procedures they
                  consider necessary to take responsibility for the work of the
                  Resources Auditors as it relates to REI's Auditors' report on
                  REI's financial statements, all within sufficient time to
                  enable REI to meet its timetable for the printing, filing and
                  public dissemination of REI's annual and quarterly statements.
                  Similarly, REI shall authorize REI's Auditors to make
                  available to the Resources Auditors both the personnel who
                  performed or are performing the annual audits and quarterly
                  reviews of REI and work papers related to the annual audits
                  and quarterly reviews of REI, in all cases within a reasonable
                  time prior to REI's Auditors' opinion date, so that the
                  Resources Auditors are able to perform the procedures they
                  consider necessary to take responsibility for the work of
                  REI's Auditors as it relates to the Resources Auditors' report
                  on Resources' financial statements, all within sufficient time
                  to enable Resources to meet its timetable for the printing,
                  filing and public dissemination of Resources' annual and
                  quarterly financial statements.

                           (v) Resources may not change its accounting
                  principles or practices if a change in such accounting
                  principle or practice would be required to be disclosed in
                  Resources' financial statements as filed with the SEC or
                  otherwise publicly disclosed therein without the prior written
                  consent of REI, except for changes which are required by GAAP
                  and as to which there is no discretion on the part of
                  Resources, as concurred in by Resources Auditors prior to its
                  implementation. Resources shall give REI as much prior notice
                  as reasonably practical of any proposed determination of, or
                  any significant changes in, its accounting estimates or,
                  subject as aforesaid, accounting principles from those in
                  effect on the Separation Date. Resources will consult with REI
                  and, if requested by REI, Resources will consult with REI's
                  Auditors with respect thereto. REI shall give Resources as
                  much prior notice as reasonably practical of any proposed
                  determination of, or any significant changes in, its
                  accounting estimates or accounting principles from those in
                  effect on the Separation Date.

                           (vi) Nothing in Sections 10.3 and 10.4 shall require
                  Resources to violate any agreement with any third parties
                  regarding the confidentiality of confidential and proprietary
                  information relating to that third party or its business;
                  provided, however, that in the event that Resources is
                  required under Sections 10.3 and 10.4 to disclose any such
                  information, Resources shall use all commercially reasonable
                  efforts to seek to obtain such third party's consent to the
                  disclosure of such information. Similarly, nothing in Sections
                  10.3 and 10.4 shall require REI to violate any agreement with
                  any third parties regarding the confidentiality of
                  confidential and proprietary information relating to that
                  third party or its business; provided, however, that in the
                  event that REI is required under Sections 10.3 and 10.4 to
                  disclose any such information, REI shall use all commercially
                  reasonable efforts to seek to obtain such third party's
                  consent to the disclosure of such information.

                  (b) For so long as REI beneficially owns shares representing
20% or more of the voting power of the outstanding Resources Common Stock (i)
Resources will furnish REI

                                       39
<PAGE>   45

within nine (9) business days after the end of each quarter and eleven (11)
business days after the end of each fiscal year, the unaudited balance sheet,
income statement and statement of cash flows of Resources and its Subsidiaries
as at the end of such period, (ii) Resources shall furnish to REI such financial
information or documents in the possession of Resources and any of its
Subsidiaries as REI may reasonably request, and (iii) Resources shall furnish to
REI on a monthly basis such management and other periodic reports related to
financial information in the form and substance consistent with the practice of
Resources as of the date of this Agreement. For so long as REI beneficially owns
shares representing 50% or more of the voting power of all of the outstanding
Resources Common Stock, Resources will furnish REI the consolidated balance
sheet, consolidated income statement and consolidated statement of cash flows,
if any, of Resources and its Subsidiaries as at the end of each such quarterly
and annual period in the form and substance consistent with the practice of
Resources as of the date of this Agreement.

         10.5 AUDIT RIGHTS. To the extent any member of the REI group provides
goods or services to any member of the Resources Group or any member of the
Resources Group provides goods or services to a member of the REI Group under
this Agreement or under any Ancillary Agreement, the company providing such
goods or services (the "Providing Company") shall maintain complete and accurate
books and records relating to costs and charges made to the company receiving
such goods and services (the "Receiving Company"). Books and accounts shall be
maintained in accordance with generally accepted accounting principles,
consistently applied, and to the extent such books and records relate to
regulated business activities, shall conform to any applicable regulatory code
of accounts which the Receiving Company is required to comply with, to the
extent such conformity is reasonably feasible. If conformity to a regulatory
code of accounts is infeasible, the Providing Company shall maintain its books
and records related to the provision of goods and services in such a manner that
the Receiving Company may readily reconcile such books and records to the
applicable code of accounts. Annually, the Receiving Company shall be entitled
to audit the Providing Company's books and records related to the goods and
services provided, using its own personnel or personnel from its independent
auditing firm. Discrepancies identified as a result of any audit shall be
promptly reconciled between the parties in accordance with any provisions of the
Ancillary Agreement or, if no such provision is applicable, in accordance with
the dispute resolution provisions of this Agreement. Any charge which is not
questioned by the Receiving Company within the calendar year after the charge
was rendered shall be deemed incontestable.

         10.6 PRESERVATION OF LEGAL PRIVILEGES. REI and Resources recognize that
the members of their respective groups possess and will possess information and
advice that has been previously developed but is legally protected from
disclosure under legal privileges, such as the attorney-client privilege or work
product exemption and other concepts of legal protection ("Privilege"). Each
party recognizes that they shall be jointly entitled to the Privilege with
respect to such privileged information and that each shall be entitled to
maintain and use for its own benefit all such information and advice, but both
parties shall ensure that such information is maintained so as to protect the
Privileges with respect to the other party's interest. To that end neither party
will knowingly waive or compromise any Privilege associated with such
information and advice without the consent of the other party. In the event that
privileged information is required to be disclosed to any arbitrator or mediator
in connection with a dispute between the parties, such disclosure shall not be
deemed a waiver of Privilege with respect to

                                       40
<PAGE>   46

such information, and any party receiving it in connection with a proceeding
shall be informed of its nature and shall be required to safeguard and protect
it.

         10.7 PAYMENT OF EXPENSES. Resources shall pay all underwriting fees,
discounts and commissions and other direct costs incurred in connection with the
IPO. Except as otherwise provided in this Agreement, the Ancillary Agreements or
any other agreement between the parties relating to the Separation, the IPO or
the Distribution, all other out-of-pocket costs and expenses of the parties
hereto in connection with the preparation of this Agreement and the Ancillary
Agreements, the Separation, the IPO and the Distribution shall be paid by REI.
Notwithstanding the foregoing, Resources shall pay any internal fees, costs and
expenses incurred by Resources in connection with the Separation, the IPO and
the Distribution.

         10.8 GOVERNMENTAL APPROVALS. The parties acknowledge that certain of
the transactions contemplated by this Agreement and the Ancillary Agreements are
subject to certain conditions established by applicable government regulations,
orders, and approvals ("Existing Authority"). The parties intend to implement
this Agreement, the Ancillary Agreements and the transactions contemplated
thereby consistent with and to the extent permitted by Existing Authority and to
cooperate toward obtaining and maintaining in effect such Governmental Approvals
as may be required in order to implement this Agreement and each of the
Ancillary Agreements as fully as possible in accordance with their respective
terms. To the extent that any of the transactions contemplated by this Agreement
or any Ancillary Agreement require any Governmental Approvals, the parties will
use their reasonable commercial efforts to obtain any such Governmental
Approvals.

         10.9 REGULATORY PROCEEDINGS. It is recognized and understood that high
levels of cooperation and assistance will be required between members of the REI
Group and the Resources Group in connection with Regulatory Proceedings
necessary to implement the Separation and the Business Separation Plan approved
by the PUCT and all matters relating to the Genco Option. During the period from
the Separation Date until an order issued by the PUCT in connection with the
stranded cost determination regarding the Genco Assets becomes final and
nonappealable, the parties agree as follows:

                  (a) Upon reasonable request, members of the REI Group and of
the Resources Group will provide personnel, information and other assistance to
members of the other group in order to prepare, file and prosecute to completion
Regulatory Proceedings which are either (i) required to be filed under the
Utilities Code or under the Business Separation Plan or (ii) deemed by the
requesting party to be desirable to implement or preserve some aspect of the
Separation contemplated herein.

                  (b) Assistance provided may, without limitation, relate to
information that has been transferred to or retained by the assisting party in
the separation or which the assisting party is uniquely qualified to provide in
connection with Regulatory Proceedings that relate to the Separation and its
implementation under the Utilities Code. Assistance may take the form of
developing, filing and giving testimony and reports to the PUCT or other
regulatory authority.

                  (c) The appropriate members of the REI Group or the Resources
Group shall timely file with the PUCT or other regulatory authority or court and
shall prosecute to

                                       41
<PAGE>   47

completion all Regulatory Proceedings required to implement the Business
Separation Plan approved by the PUCT, the Genco Option and the other provisions
of this Agreement, such as, without limitation, filings to terminate the "Price
To Beat" obligation, if appropriate, the determination of any "clawback" related
to retail customers served by Reliant Energy Retail Services, and the
determination of stranded costs related to the Genco Assets.

                  (d) A member of the REI Group shall make all regulatory
filings contemplated above in this Section 10.9 except where a member of the
Resources Group is required by the Utilities Code to file separately or join in
such filings. A member of the REI Group will be responsible for the direction
and prosecution of all Regulatory Proceedings in which REI Group filings are
made, except as follows: A member of the Resources Group will be responsible for
filing on behalf of and in the name of the REI Group, and shall have sole
responsibility and control of the direction and prosecution of (i) any filing
pursuant to Utilities Code Section 39.202(j) and (ii) that portion of any filing
pursuant to Utilities Code Section 39.262(e) which pertains to the
reconciliation of the Price to Beat and market prices and the determination of
any credits to REI under that subsection. With respect to the filings specified
in the immediately preceding sentence, the Resources Group shall be entitled to
act for and be subrogated to the interests of the REI Group. A member of the
Resources Group will be responsible for filing in its own name and shall have
sole responsibility and control of proceedings to establish, revise or adjust
the Price to Beat.

                  (e) Except as provided below, the party supplying assistance
shall be reimbursed for costs incurred in providing assistance. For time
expended by its personnel, the assisting party shall be reimbursed for actual
salary costs, plus payroll burdens and overhead allocations in accordance with
its standard procedures for reimbursing other members of its group. Services
provided for information technology or other internal services shall be charged
in the same manner they would be charged among the members of the providing
company's Group, and out of pocket costs paid to third parties shall be
reimbursed at actual cost.

                  (f) The party requesting assistance shall endeavor to minimize
the impacts of such assistance on the other business needs of the assisting
party.

                  (g) Until the issuance of a Final Order determining the
stranded costs with respect to the Genco Assets (the "Stranded Cost Order"), no
member of the REI Group or the Resources Group will, directly or indirectly,
without express written permission, assert a position which is adverse to the
position of a member of the other in a Regulatory Proceeding before the PUCT,
the Texas Legislature or any other regulatory authority having jurisdiction over
a member of such Group, with respect to amendment or other revision to Senate
Bill 7 or the Utilities Code.

                  (h) Until the issuance of the Stranded Cost Order, no member
of the Resources Group will, directly or indirectly, without the express written
permission of REI, assert a position which is adverse to the position of a
member of the REI Group in Regulatory Proceedings before the PUCT or any other
regulatory authority having jurisdiction over a member of the REI Group with
respect to the following matters: (i) stranded cost quantification or recovery
or (ii) the proper level or components of T&D Utility rates, provided, however,
that positions taken by a member of the Resources Group relating solely to the
allocation of costs or the use of a rate design consistent with Price to Beat
rate designs will not be considered adverse

                                       42
<PAGE>   48

positions even if such positions differ from those asserted by members of the
REI Group. REI will not unreasonably withhold permission for a member of the
Resources Group to take positions which may be indirectly adverse to its own
position. In any T&D Utility rate case that proposes rates to be effective prior
to the issuance of the Stranded Cost Order, any direct case presented by the REI
Group shall be based upon a T&D Utility rate design that is substantially
similar to either the Price to Beat rate design or the rate design approved by
the PUCT in PUCT Docket No. 22355.

         10.10 CONTINUANCE OF REI CREDIT SUPPORT; BORROWINGS. Notwithstanding
any other provision of this Agreement or the provisions of any Ancillary
Agreement to the contrary, the parties hereby agree that REI and each Subsidiary
of REI shall maintain in full force and effect each guarantee, letter of credit,
keepwell or support agreement or other credit support document, instrument or
other similar arrangement issued for the benefit of any Person in the Resources
Group by or on behalf of REI or a Subsidiary of REI (the "Credit Support
Arrangements") which is outstanding as of the Separation Date, until the earlier
of (a) such time as such Credit Support Arrangement terminates in accordance
with its terms or is otherwise released at the request of Resources or (b) the
Distribution Date; provided, that Resources shall use commercially reasonable
efforts, at the request of REI, to attempt to release or replace any Credit
Support Arrangement for which such replacement or release is reasonably
available. All such obligations shall be deemed Resources Liabilities. For so
long as REI or any Subsidiary of REI remains liable with respect to any such
Credit Support Arrangement, (1) Resources shall pay, or cause the Person in the
Resources Group for whose benefit the Credit Support Arrangement is provided to
pay, the underlying obligation as and when the same shall become due and
payable, to the end that neither REI nor such Subsidiary of REI shall be
required to make any payment under or by reason of its obligation under such
Credit Support Arrangement and (2) REI or such Subsidiary shall retain all
rights of reimbursement and subrogation it may have, whether arising by law, by
contract or otherwise, with respect to such Credit Support Arrangement and such
rights shall be enforceable against Resources as well as the Subsidiary of
Resources for whose benefit the Credit Support Arrangement was made. Members of
the REI Group may advance funds to or borrow funds from members of the Resources
Group from time to time at market-based rates; provided, however, that except as
provided in the Genco Option Agreement, no member of the REI Group or the
Resources Group shall have any obligation to do so.

To the extent covenants and agreements contained in any loan or credit agreement
or other financing document in effect on the date of this Agreement to which any
member of the REI Group is a party requires, or requires such party to cause,
any member of the Resources Group to take or refrain from taking any action, or
provides for a default or event of default if any member of the Resources Group
takes or refrains from taking any action, such member of the Resources Group
shall at all times prior to the Distribution Date, take or refrain from taking
any such action as would result in a breach or violation of, or a default under,
such agreement.

         10.11 CERTAIN NON-COMPETITION PROVISIONS; FREEDOM OF ACTION. In order
to preserve the separation of its Texas businesses as contemplated in the
Business Separation Plan as approved by the PUCT and to protect the goodwill
associated with the separate businesses, for a period of three years after the
Choice Date the parties agree that they will conduct their respective businesses
as follows:

                                       43
<PAGE>   49

                  (a) Neither REI, Regco nor any Affiliate or successor in
interest of REI or Regco will sell electricity at retail or provide data, voice
or video transmission services as a commercial activity for profit to retail
customers within the State of Texas, and

                  (b) Neither REI, Regco nor any Affiliate or successor in
interest of REI or Regco will acquire or operate any electric generating
facilities within the State of Texas other than the Genco Assets;

provided, however, neither REI nor Resources shall be restricted from providing
natural gas and other non-electric energy commodities, and REI and its
affiliates shall not be restricted from providing fuel cells, microturbines and
similar distributed generating devices having an individual unit capacity less
than 10 MW, including the installation, operation and maintenance associated
with those devices. Nor shall REI and its Affiliates be precluded from providing
energy services of the type and character currently being provided so long as it
does not provide sales of electricity to customers as a Retail Electric
Provider.

         10.12 CLAWBACK PAYMENT. Resources will pay to REI the lesser of (i) the
amount required to be credited to REI by its affiliated retail electric provider
pursuant to Section 39.262(e) of the Utilities Code promptly following the
determination that such a payment is owed and the amount thereof and (ii) $150
multiplied by the number of residential or small commercial customers served by
the affiliated transmission and distribution utility that are buying electricity
from the affiliated retail electric provider at the price to beat on the second
anniversary of the beginning of competition, minus the number of new customers
obtained outside the service area.

         10.13 NUCLEAR DECOMMISSIONING TRUST AND INVESTMENT. Upon transfer of
the Genco Assets to Genco LP, all rights and obligations associated with REI's
interest in the South Texas Project Electric Generating Station shall become the
rights and obligations of Genco LP, including, without limitation, the interest
of beneficiary under that certain Trust Agreement, originally dated as of July
2, 1990, as amended and restated to date, between Houston Lighting & Power
Company and Mellon Bank, N.A., as Trustee. That Trust Agreement, commonly
referred to as the "STP Decommissioning Trust," provides for the funding of
REI's share of the costs of decontamination and decommissioning of STP. As owner
of STP, Genco shall maintain the STP Decommissioning Trust in accordance with
NRC requirements and shall order disbursements of funds as provided in the STP
Decommissioning Trust and NRC regulations. REI shall continue to collect through
rates, or other authorized charges to customers, amounts designated for funding
the STP Decommissioning Trust, and shall promptly pay all such amounts that it
collects to Genco. Genco shall deposit and maintain all such amounts with the
Trustee under the STP Decommissioning Trust.

         Under the STP Decommissioning Trust, REI has appointed an Investment
Advisory Committee to provide guidelines for the Trustee in the investment of
the trust funds. Genco shall maintain that Investment Advisory Committee as a
four-member committee, and following the Restructuring, Genco and REI shall each
appoint two representatives to the Investment Advisory Committee.

                                       44
<PAGE>   50

            Upon decommissioning of STP, in the event that funds from the STP
Decommissioning Trust should prove inadequate to fund Genco's obligations under
the terms of its NRC license and NRC regulations, REI shall collect through
rates, or other authorized charges to customers, as contemplated by Section
39.205 of the Utilities Code, all additional amounts required to fund Genco's
obligations related to the decommissioning of STP and pay all amounts so
collected to Genco, and shall indemnify Genco from and against any obligations
related to such decommissioning not otherwise satisfied through such collections
and pay over the amount of any such shortfall to Genco upon request. Following
the completion of decommissioning, if surplus funds remain in the STP
Decommissioning Trust, such excess shall be refunded to REI.

         10.14 AUCTIONS OF CAPACITY. Prior to the Option Expiration Date, Genco
LP (and Genco, as applicable) shall auction all its capacity to purchasers other
than Regco or an Affiliate of Regco on the following terms:

                  (a) 15% REQUIREMENT: Fifteen percent (15%) of its capacity
shall be auctioned in accordance with rules prescribed by the PUCT so long as
the PUCT rules require an affiliated Power Generation Company to auction
capacity. Resources shall not be entitled to participate in or reserve for
itself any portion of such capacity that is offered pursuant to PUCT
requirements.

                  (b) REMAINING CAPACITY AUCTION: After deducting capacity
required to satisfy operational requirements associated with the capacity
auctioned pursuant to PUCT rules, including without limitation the capacity
auction and Price to Beat rules and the obligation under the Agreement for
Spinning Reserve Service with Central Power and Light Company dated December 30,
1992, the remaining capacity and related ancillary services shall be auctioned
to purchasers other than Regco. Prior to each such auction, Genco LP (and Genco,
as applicable) shall determine the types of products to be auctioned, taking
into consideration anticipated market demand and the Auction Principles included
in Schedule 10.14(b). Terms and conditions for the remaining capacity auction
shall be established by Genco LP (and Genco, as applicable), and reasonable
notice of the products and terms for the auction will be given to Resources but
no less than ten business days prior to the scheduled auction date.

                  (c) ENTITLEMENT AND OBLIGATIONS OF RESOURCES: Resources shall
be entitled to purchase at the prices established in each auction fifty percent
(50%) (but not less than such percentage) of the capacity auctioned. To exercise
its entitlement, Resources will notify Genco LP (and Genco, as applicable)
whether it elects to purchase fifty percent (50%) of each product auctioned, and
Genco LP (and Genco, as applicable) shall exclude such capacity from the
auction. Resources shall give such notification no later than three business
days prior to the date of the auction. Any portion of the capacity that
Resources does not reserve through such notification shall be auctioned along
with the balance of the capacity being auctioned. Upon determination of auction
prices for the products auctioned, Resources shall be obligated to purchase the
capacity it elected to reserve from the auction process at the prices set during
the auction for that product. If energy and ancillary services are auctioned
separately by Genco LP (and Genco, as applicable), Resources shall be entitled
to participate in fifty percent (50%) of the offered capacity of each. In
addition to its reservation of capacity, and whether or not it has reserved
capacity in the auction, Resources shall be entitled to participate in each
auction of the remaining capacity.

                                       45
<PAGE>   51

         If Resources exercises the Genco Option, then after the Option Exercise
Date and until the Option Closing Date occurs or the Option terminates pursuant
to the Genco Option Agreement, Genco shall conduct no auctions of capacity other
than those required pursuant to PUCT rules without consulting with Resources and
obtaining its reasonable concurrence, not to be unreasonably withheld.

                  (d) COMPLIANCE WITH PUCT RULES. In the event the rules of the
PUCT relating to Price to Beat do not allow for the fuel factor to be adjusted
based on the auction of capacity as contemplated in this Section 10.14 or in the
event the PUCT, by rule or order, otherwise indicates that the auction of
capacity as contemplated in this Section 10.14 would be inconsistent with its
requirements, Genco LP (or Genco, as applicable) shall, in consultation with
Resources, modify the auction procedures set forth herein or, if an auction
would not be acceptable, Resources and Genco LP (or Genco, as applicable) will
use their best efforts to reach agreement on a power purchase agreement which
would satisfy PUCT requirements and preserve, as nearly as possible, Resources'
entitlement to obtain 50 percent of Genco's available capacity at market prices.

                  (e) RECONCILIATION PAYMENT OBLIGATIONS. Genco or its parent
company shall reconcile any difference between the price of power obtained
through capacity auctions required by PUCT rules with the PUCT's ECOM model, as
required by PUCT rules, and Genco or its parent company shall pay to REI, or REI
shall pay to Genco or its parent company as appropriate, the difference between
such amounts during the period, to the extent and in the manner required by
rules of the PUCT.

         10.15 CONFIDENTIALITY.

                  (a) REI and Resources shall hold and shall cause the members
of the REI Group and the Resources Group, respectively, to hold, and shall each
cause their respective officers, employees, agents, consultants and advisors to
hold, in strict confidence and not to disclose or release without the prior
written consent of the other party, any and all Confidential Information (as
defined herein); provided, that the parties may disclose, or may permit
disclosure of, Confidential Information (i) to their respective auditors,
attorneys, financial advisors, bankers and other appropriate consultants and
advisors who have a need to know such information and are informed of their
obligation to hold such information confidential to the same extent as is
applicable to the parties hereto and in respect of whose failure to comply with
such obligations, REI or Resources, as the case may be, will be responsible or
(ii) to the extent any member of the REI Group or the Resources Group is
compelled to disclose any such Confidential Information by judicial or
administrative process or, in the opinion of legal counsel, by other
requirements of law. Notwithstanding the foregoing, in the event that any demand
or request for disclosure of Confidential Information is made pursuant to clause
(ii) above, REI or Resources, as the case may be, shall promptly notify the
other of the existence of such request or demand and shall provide the other a
reasonable opportunity to seek an appropriate protective order or other remedy,
which both parties will cooperate in seeking to obtain. In the event that such
appropriate protective order or other remedy is not obtained, the party whose
Confidential Information is required to be disclosed shall or shall cause the
other party to furnish, or cause to be furnished, only that portion of the
Confidential Information that is legally required to be disclosed. As used in
this Section 10.15, "Confidential Information" shall mean all proprietary,

                                       46
<PAGE>   52

technical or operational information, data or material of one party which, prior
to or following the IPO Closing Date, has been disclosed by REI or members of
the REI Group, on the one hand, or Resources or members of the Resources Group,
on the other hand, in written, oral (including by recording), electronic, or
visual form to, or otherwise has come into the possession of, the other,
including pursuant to the access provisions of Section 10.3 hereof or any other
provision of this Agreement (except to the extent that such Information can be
shown to have been (a) in the public domain through no fault of such party (or,
in the case of REI, any other member of the REI Group or, in the case of
Resources, any other member of the Resources Group) or (b) later lawfully
acquired from other sources by the party (or, in the case of REI, such member of
the REI Group or, in the case of Resources, such member of the Resources Group)
to which it was furnished; provided, however, in the case of (b) that such
sources did not provide such Information in breach of any confidentiality
obligations).

                  (b) Notwithstanding anything to the contrary set forth herein,
(i) REI and the other members of the REI Group, on the one hand, and Resources
and the other members of the Resources Group, on the other hand, shall be deemed
to have satisfied their obligations hereunder with respect to Confidential
Information if they exercise the same degree of care (but no less than a
reasonable degree of care) as they take to preserve confidentiality for their
own similar Information and (ii) confidentiality obligations provided for in any
agreement between REI or any other member of the REI Group, or Resources or any
other members of the Resources Group, on the one hand, and any employee of REI
or any other member of the REI Group, or Resources or any other members of the
Resources Group, on the other hand, shall remain in full force and effect.
Confidential Information of REI or any other member of the REI Group, on the one
hand, or Resources or any other member of the Resources Group, on the other
hand, in the possession of and used by the other as of the IPO Closing Date may
continue to be used by such Person in possession of the Confidential Information
in and only in the operation of the REI Business or the Resources Business, as
the case may be, and may be used only so long as the Confidential Information is
maintained in confidence and not disclosed in violation of Section 10.15(a).
Such continued right to use may not be transferred to any third party unless the
third party purchases all or substantially all of the business and assets in
which the relevant Confidential Information is used or employed in one
transaction or in a series or related transactions. In the event that such right
to use is transferred in accordance with the preceding sentence, the
transferring party shall not disclose the source of the relevant Confidential
Information.

         10.16 1000 MAIN LEASE. As soon as reasonably practicable, following the
IPO, REI will transfer and assign to Resources the Lease Agreement dated as of
February 26, 2001 between Main/Lamar Partnership, L.P. and REI (the "1000 Main
Lease") and Resources will assume the obligations of REI thereunder. Such
assignment shall be made pursuant to the provisions of Section 8.1.1 of the 1000
Main Lease. Resources will concurrently deliver to the landlord under such 1000
Main Lease a confirmation of assignment and assumption pursuant to Section 8.1.1
of the 1000 Main Lease and will take such action as REI may reasonably request
to establish the satisfaction of the Release Conditions referred to therein.

                                       47
<PAGE>   53

                                   ARTICLE XI

                                  MISCELLANEOUS

         11.1 LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT SPECIFICALLY
PROVIDED IN ANY ANCILLARY AGREEMENT IN NO EVENT SHALL ANY MEMBER OF THE REI
GROUP OR THE RESOURCES GROUP OR THEIR RESPECTIVE DIRECTORS, OFFICERS AND
EMPLOYEES BE LIABLE TO ANY OTHER MEMBER OF THE REI GROUP OR THE RESOURCES GROUP
FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST
PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE
FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS
FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT.

         11.2 ENTIRE AGREEMENT. This Agreement, the other Ancillary Agreements
and the Exhibits and Schedules referenced or attached hereto and thereto,
constitutes the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof.

         11.3 GOVERNING LAW. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of Texas as to all matters
regardless of the laws that might otherwise govern under the principles of
conflicts of laws applicable thereto.

         11.4 TERMINATION. This Agreement and all Ancillary Agreements may be
terminated at any time prior to the IPO Closing Date by and in the sole
discretion of REI without the approval of Resources. This Agreement may be
terminated at any time after the IPO Closing Date by mutual consent of REI and
Resources. In the event of termination pursuant to this Section, neither party
shall have any liability of any kind to the other party.

         11.5 NOTICES. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent or (iv) if
sent by facsimile or other generally accepted means of electronic transmission,
on the date confirmation of transmission is received (provided that a copy of
any notice delivered pursuant to this clause (iv) shall also be sent pursuant to
clause (ii) or (iii)), addressed to the attention of the addressee's General
Counsel at the address of its principal executive office or to such other
address or facsimile number for a party as it shall have specified by like
notice.

                                       48
<PAGE>   54

         11.6 COUNTERPARTS. This Agreement, including the Schedules and Exhibits
hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.

         11.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
not be assigned by any party hereto.

         11.8 SEVERABILITY. If any term or other provision of this Agreement or
the Schedules or Exhibits attached hereto is determined by a nonappealable
decision by a court, administrative agency or arbitrator to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to either
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.

         11.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement or the Schedules or Exhibits attached hereto are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

         11.10 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
this Agreement.

         11.11 AUTHORITY. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement and the Ancillary Agreements, (b) the
execution, delivery and performance of this Agreement and the Ancillary
Agreements by it have been duly authorized by all necessary corporate or other
actions, (c) it has duly and validly executed and delivered this Agreement and
the Ancillary Agreements to be executed and delivered on or prior to the
Separation Date, and (d) this Agreement and such Ancillary Agreements are legal,
valid and binding obligations, enforceable against it in accordance with their
respective terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.

         11.12 INTERPRETATION. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning

                                       49
<PAGE>   55

assigned to such term in this Agreement. When a reference is made in this
Agreement to an Article or a Section, Exhibit or Schedule, such reference shall
be to an Article or Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated.

         11.13 CONFLICTING AGREEMENTS. In the event of conflict between this
Agreement and any Ancillary Agreement or other agreement executed in connection
herewith, the provisions of such other agreement shall prevail.

                                       50
<PAGE>   56

WHEREFORE, the parties have signed this Master Separation Agreement effective as
of the date first set forth above.

                                           RELIANT ENERGY, INCORPORATED

                                           By:
                                               -----------------------------
                                               Name:
                                               Title:

                                           RELIANT RESOURCES, INC.

                                           By:
                                               -----------------------------
                                               Name:
                                               Title:

                                       51

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00024-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00024-of-00352.parquet"}]]