Document:

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                                                                     EXHIBIT 4.7

                                                                  EXECUTION COPY

                             RELIANT RESOURCES, INC.

              5.00% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2010

                          REGISTRATION RIGHTS AGREEMENT

                                                           June 24, 2003

Deutsche Bank Securities Inc.
60 Wall Street
New York, New York  10005,

Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004,

Banc of America Securities LLC
9 West 57th Street
New York, New York  10019,

collectively, as Representatives of the several
Purchasers named in Schedule I of the Purchase Agreement

Ladies and Gentlemen:

     Reliant Resources, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the Purchasers (as defined herein) upon the terms set forth
in the Purchase Agreement (as defined herein) its 5.00% Convertible Senior
Subordinated Notes due 2010 (the "Securities"). As an inducement to the
Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the obligations of the Purchasers thereunder, the Company agrees
with the Purchasers for the benefit of Holders (as defined herein) from time to
time of the Registrable Securities (as defined herein) as follows:

         1. Definitions.

         (a) Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Purchase Agreement. As used in this Agreement,
the following defined terms shall have the following meanings:

        "Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such specified person. For

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purposes of this definition, control of a person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

         "Closing Date" means the First Time of Delivery as defined in the
Purchase Agreement.

         "Commission" means the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Exchange
Act or the Securities Act, whichever is the relevant statute for the particular
purpose.

         "Common Stock" means the Company's common stock, par value $0.001 per
share.

         "DTC" means The Depository Trust Company.

         "Effective Failure" has the meaning assigned thereto in Section 7(b)
hereof.

         "Effectiveness Period" has the meaning assigned thereto in Section
2(b)(i) hereof.

         "Effective Time" means the time at which the Commission declares the
Shelf Registration Statement effective or at which the Shelf Registration
Statement otherwise becomes effective.

         "Electing Holder" has the meaning assigned thereto in Section 3(a)(iii)
hereof.

         "Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.

         "Holder" means any person that is the record owner of Registrable
Securities (and includes any person that has a beneficial interest in any
Registrable Security in book-entry form).

         "Indenture" means the Indenture, dated as of June 24, 2003, between the
Company and Wilmington Trust Company, as Trustee, as amended and supplemented
from time to time in accordance with its terms.

         "Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering,
if any, conducted pursuant to Section 6 hereof.

         "NASD Rules" means the Rules of the National Association of Securities
Dealers, Inc., as amended from time to time.

         "Notice and Questionnaire" means a Notice of Registration Statement and
Selling Securityholder Questionnaire substantially in the form of Appendix A
hereto.

         The term "person" means an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.

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         "Prospectus" means the prospectus (including, without limitation, any
preliminary prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act)
included in the Shelf Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by the Shelf Registration Statement and by
all other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after the
date of such prospectus by the Company under the Exchange Act and incorporated
by reference therein.

         "Purchase Agreement" means the purchase agreement, dated as of June 18,
2003, between the Purchasers and the Company relating to the Securities.

         "Purchasers" means the Purchasers named in Schedule I to the Purchase
Agreement.

         "Registrable Securities" means all or any portion of the Securities
issued from time to time under the Indenture in registered form and the shares
of Common Stock issuable upon conversion, repurchase or redemption of such
Securities; provided, however, that a security ceases to be a Registrable
Security when it is no longer a Restricted Security.

         "Registration Default" has the meaning assigned thereto in Section 7(a)
hereof.

         "Restricted Security" means any Security or share of Common Stock
issuable upon conversion thereof except any such Security or share of Common
Stock that (i) has been effectively registered under the Securities Act and sold
in a manner contemplated by the Shelf Registration Statement, (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k) of
such Rule 144 (or any successor provision thereto) or (iii) has otherwise been
transferred and a new Security or share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf of the
Company in accordance with Section 3.5 of the Indenture.

         "Rules and Regulations" means the published rules and regulations of
the Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time.

         "Securities Act" means the United States Securities Act of 1933, as
amended.

         "Shelf Registration" means a registration effected pursuant to Section
2 hereof.

         "Shelf Registration Statement" means a registration statement filed
under the Securities Act providing for the registration of, and the sale on a
continuous or delayed basis by the Holders of, all of the Registrable Securities
pursuant to Rule 415 under the Securities Act and/or any similar rule that may
be adopted by the Commission, filed by the Company pursuant to the provisions of
Section 2 of this Agreement, including the Prospectus contained therein, any
amendments and supplements to such registration statement, including
post-effective amendments, and all exhibits and all material incorporated by
reference in such registration statement.

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         "Special Interest" has the meaning assigned thereto in Section 7(a)
hereof.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, or any
successor thereto, and the rules, regulations and forms promulgated thereunder,
as the same shall be amended from time to time.

         The term "underwriter" means any underwriter of Registrable Securities
in connection with an offering thereof under a Shelf Registration Statement.

         (b) Wherever there is a reference in this Agreement to a percentage of
the "principal amount" of Registrable Securities or to a percentage of
Registrable Securities, Common Stock shall be treated as representing the
principal amount of Securities that was surrendered for conversion or exchange
in order to receive such number of shares of Common Stock.

         2. Shelf Registration.

         (a) The Company shall, no later than 90 calendar days following the
Closing Date, file with the Commission a Shelf Registration Statement relating
to the offer and sale of the Registrable Securities by the Holders from time to
time in accordance with the methods of distribution elected by such Holders and
set forth in such Shelf Registration Statement and, thereafter, shall use all
commercially reasonable efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act no later than 180 calendar days
following the Closing Date; provided, further, however, that no Holder shall be
entitled to be named as a selling securityholder in the Shelf Registration
Statement or to use the Prospectus forming a part thereof for resales of
Registrable Securities unless such Holder is an Electing Holder.

         (b) The Company shall use all commercially reasonable efforts:

               (i) to keep the Shelf Registration Statement continuously
          effective under the Securities Act in order to permit the Prospectus
          forming a part thereof to be usable by Holders until the earliest of
          (1) the sale of all Registrable Securities registered under the Shelf
          Registration Statement; (2) the expiration of the period referred to
          in Rule 144(k) of the Securities with respect to all Registrable
          Securities held by Persons that are not Affiliates of the Company; and
          (3) two years from the Closing Date (such period being referred to
          herein as the "Effectiveness Period");

               (ii) after the Effective Time of the Shelf Registration
          Statement, promptly upon the request of any Holder of Registrable
          Securities that is not then an Electing Holder, to take any action
          reasonably necessary to enable such Holder to use the Prospectus
          forming a part thereof for resales of Registrable Securities,
          including, without limitation, any action necessary to identify such
          Holder as a selling securityholder in the Shelf Registration
          Statement; provided, however, that nothing in this subparagraph shall
          relieve such Holder of the obligation to return a completed and signed
          Notice and Questionnaire to the Company in accordance with Section
          3(a)(ii) hereof; and

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               (iii) if at any time the Securities, pursuant to Article XII of
          the Indenture, are convertible into securities other than Common
          Stock, to cause, or to cause any successor under the Indenture to
          cause, such securities to be included in the Shelf Registration
          Statement no later than the date on which the Securities may then be
          convertible into such securities.

The Company shall be deemed not to have used all commercially reasonable efforts
to keep the Shelf Registration Statement effective during the requisite period
if the Company voluntarily takes any action that would result in Holders of
Registrable Securities covered thereby not being able to offer and sell any of
such Registrable Securities during that period, unless such action is (A)
required by applicable law and the Company thereafter promptly complies with the
requirements of paragraph 3(j) below or (B) permitted pursuant to Section 2(c)
below.

         (c) The Company may suspend the use of the Prospectus for a period not
to exceed 45 days in any 90-day period or an aggregate of 90 days in any 365-day
period if the Board of Directors of the Company shall have determined in good
faith that because of valid business reasons (not including avoidance of the
Company's obligations hereunder), including the acquisition or divestiture of
assets, pending corporate developments, public filing with the Commission and
other events, it is in the best interests of the Company to suspend such use,
and prior to suspending such use the Company provides the Holders with written
notice of such suspension, which notice need not specify the nature of the event
giving rise to such suspension.

         3. Registration Procedures. In connection with the Shelf Registration
Statement, the following provisions shall apply:

         (a)(i) Not less than 30 calendar days prior to the Effective Time of
the Shelf Registration Statement, the Company shall mail the Notice and
Questionnaire to the Holders of Registrable Securities. No Holder shall be
entitled to be named as a selling securityholder in the Shelf Registration
Statement as of the Effective Time, and no Holder shall be entitled to use the
Prospectus forming a part thereof for resales of Registrable Securities at any
time, unless such Holder has returned a completed and signed Notice and
Questionnaire to the Company by the deadline for response set forth therein;
provided, however, Holders of Registrable Securities shall have at least 20
calendar days from the date on which the Notice and Questionnaire is first
mailed to such Holders to return a completed and signed Notice and Questionnaire
to the Company. Notwithstanding the foregoing, (x) upon the request of any
Holder of Registrable Securities that did not return a Notice and Questionnaire
on a timely basis or did not receive a Notice and Questionnaire because it was a
subsequent transferee of Registrable Securities after the Company mailed the
Notice and Questionnaire, the Company shall distribute a Notice and
Questionnaire to such Holders at the address set forth in the request and (y)
upon receipt of a properly completed Notice and Questionnaire from such Holder,
the Company shall use its reasonable efforts to name such Holder as a selling
securityholder in the Shelf Registration Statement by means of a pre-effective
amendment or, if permitted by the Commission, by means of a Prospectus
supplement to the Shelf Registration Statement; provided, however, that the
Company shall have no obligation to pay Special Interest to such Holder for its
failure to file a pre-effective amendment or Prospectus supplement and;
provided, further, that the Company will have no obligation to (1) add Holders
to the Shelf Registration Statement more frequently

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that one time per every 30 calendar days and (2) add a Holder to the Shelf
Registration Statement if a post-effective amendment would be necessary to name
such Holder as a selling securityholder.

               (ii) After the Effective Time of the Shelf Registration
          Statement, the Company shall, upon the request of any Holder of
          Registrable Securities that is not then an Electing Holder, promptly
          send a Notice and Questionnaire to such Holder. The Company shall not
          be required to take any action to name such Holder as a selling
          securityholder in the Shelf Registration Statement or to enable such
          Holder to use the Prospectus forming a part thereof for resales of
          Registrable Securities until such Holder has returned a completed and
          signed Notice and Questionnaire to the Company.

               (iii) The term "Electing Holder" shall mean any Holder of
          Registrable Securities that has returned a completed and signed Notice
          and Questionnaire to the Company in accordance with Section 3(a)(i) or
          3(a)(ii) hereof.

         (b) The Company shall furnish to each Electing Holder, prior to the
Effective Time, a copy of the Shelf Registration Statement initially filed with
the Commission, and shall furnish to such Holders, prior to the filing thereof
with the Commission, copies of each amendment thereto and each amendment or
supplement, if any, to the Prospectus included therein, and shall use all
commercially reasonable efforts to reflect in each such document, at the
Effective Time or when so filed with the Commission, as the case may be, such
comments as such Holders and their respective counsel reasonably may propose.

         (c) The Company shall promptly take such action as may be necessary so
that (i) each of the Shelf Registration Statement and any amendment thereto and
the Prospectus forming a part thereof and any amendment or supplement thereto
(and each report or other document incorporated therein by reference in each
case) complies in all material respects with the Securities Act, the Exchange
Act and the Rules and Regulations, (ii) each of the Shelf Registration Statement
and any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) each of the Prospectus forming a part of the Shelf Registration Statement,
and any amendment or supplement to such Prospectus, does not at any time during
the Effectiveness Period include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

         (d) The Company shall promptly advise each Electing Holder, and shall
confirm such advice in writing if so requested by any such Electing Holder:

               (i) when a Shelf Registration Statement and any amendment thereto
          has been filed with the Commission and when a Shelf Registration
          Statement or any post-effective amendment thereto has become
          effective, in each case making a public announcement thereof by
          release made to Reuters Economic Services and Bloomberg Business News;

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               (ii) of any request by the Commission for amendments or
          supplements to the Shelf Registration Statement or the Prospectus
          included therein or for additional information;

               (iii) of the issuance by the Commission of any stop order
          suspending the effectiveness of the Shelf Registration Statement or
          the initiation of any proceedings for such purpose;

               (iv) of the receipt by the Company of any notification with
          respect to the suspension of the qualification of the securities
          included in the Shelf Registration Statement for sale in any
          jurisdiction or the initiation of any proceeding for such purpose; and

               (v) of the occurrence of any event or the existence of any state
          of facts that requires the making of any changes in the Shelf
          Registration Statement or the Prospectus included therein so that, as
          of such date, such Shelf Registration Statement and Prospectus do not
          contain an untrue statement of a material fact and do not omit to
          state a material fact required to be stated therein or necessary to
          make the statements therein (in the case of the Prospectus, in light
          of the circumstances under which they were made) not misleading (which
          advice shall be accompanied by an instruction to such Holders to
          suspend the use of the Prospectus until the requisite changes have
          been made).

         (e) The Company shall all commercially reasonable efforts to prevent
the issuance, and if issued to obtain the withdrawal at the earliest possible
time, of any order suspending the effectiveness of the Shelf Registration
Statement.

         (f) The Company shall furnish to each Electing Holder who so requests
in writing, without charge, at least one copy of the Shelf Registration
Statement and all post-effective amendments thereto, including financial
statements and schedules, and, if such Electing Holder so requests in writing,
all reports, other documents and exhibits that are filed with or incorporated by
reference in the Shelf Registration Statement.

         (g) The Company shall, during the Effectiveness Period, deliver to each
Electing Holder, without charge, as many copies of the Prospectus (including
each preliminary Prospectus) included in the Shelf Registration Statement and
any amendment or supplement thereto as such Electing Holder may reasonably
request; and the Company consents (except during the periods specified in
Section 2(c) above or during the continuance of any event or the existence of
any state of facts described in Section 3(d)(v) above) to the use of the
Prospectus and any amendment or supplement thereto by each of the Electing
Holders in connection with the offering and sale of the Registrable Securities
covered by the Prospectus and any amendment or supplement thereto during the
Effectiveness Period.

         (h) Prior to any offering of Registrable Securities pursuant to the
Shelf Registration Statement, the Company shall (i) register or qualify or
cooperate with the Electing Holders and their respective counsel in connection
with the registration or qualification of such Registrable

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Securities for offer and sale under the securities or "blue sky" laws of such
jurisdictions within the United States as any Electing Holder may reasonably
request, (ii) keep such registrations or qualifications in effect and comply
with such laws so as to permit the continuance of offers and sales in such
jurisdictions for so long as may be necessary to enable any Electing Holder or
underwriter, if any, to complete its distribution of Registrable Securities
pursuant to the Shelf Registration Statement, and (iii) take any and all other
actions necessary or advisable to enable the disposition in such jurisdictions
of such Registrable Securities; provided, however, that in no event shall the
Company be obligated to (A) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required to so
qualify but for this Section 3(h), (B) file any general consent to service of
process in any jurisdiction where it is not as of the date hereof so subject or
(C) subject itself to taxation in any jurisdiction.

         (i) Unless any Registrable Securities shall be in book-entry only form,
the Company shall cooperate with the Electing Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to the Shelf Registration Statement, which certificates, if so
required by any securities exchange upon which any Registrable Securities are
listed, shall be penned, lithographed or engraved, or produced by any
combination of such methods, on steel engraved borders, and which certificates
shall be free of any restrictive legends and in such permitted denominations and
registered in such names as Electing Holders may request in connection with the
sale of Registrable Securities pursuant to the Shelf Registration Statement.

         (j) Upon the occurrence of any event or the existence of any state of
facts contemplated by paragraph 3(d)(v) above, the Company shall promptly
prepare a post-effective amendment to any Shelf Registration Statement or an
amendment or supplement to the related Prospectus or file any other required
document so that, as thereafter delivered to purchasers of the Registrable
Securities included therein, the Prospectus will not include an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. If the Company notifies the Electing Holders of the
occurrence of any event or the existence of any state of facts contemplated by
paragraph 3(d)(v) above, the Electing Holder shall suspend the use of the
Prospectus until the requisite changes to the Prospectus have been made.

         (k) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall provide a CUSIP number for the Registrable
Securities that are debt securities.

         (l) The Company shall use its best efforts to comply with all
applicable Rules and Regulations, and to make generally available to its
securityholders as soon as practicable, but in any event not later than eighteen
months after (i) the effective date (as defined in Rule 158(c) under the
Securities Act) of the Shelf Registration Statement, (ii) the effective date of
each post-effective amendment to the Shelf Registration Statement, and (iii) the
date of each filing by the Company with the Commission of an Annual Report on
Form 10-K that is incorporated by reference in the Shelf Registration Statement,
an earnings statement of the Company and its subsidiaries complying with Section
11(a) of the Securities Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158).

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         (m) Not later than the Effective Time of the Shelf Registration
Statement, the Company shall cause the Indenture to be qualified under the Trust
Indenture Act; in connection with such qualification, the Company shall
cooperate with the Trustee under the Indenture and the Holders (as defined in
the Indenture) to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the Trust
Indenture Act; and the Company shall execute, and shall use all reasonable
efforts to cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely manner.
In the event that any such amendment or modification referred to in this Section
3(m) involves the appointment of a new trustee under the Indenture, the Company
shall appoint a new trustee thereunder pursuant to the applicable provisions of
the Indenture.

         (n) In the event of an underwritten offering conducted pursuant to
Section 6 hereof, the Company shall, if requested, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the Shelf
Registration Statement such information as the Managing Underwriters reasonably
agree should be included therein and to which the Company does not reasonably
object and shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after it is notified of the
matters to be included or incorporated in such Prospectus supplement or
post-effective amendment.

         (o) The Company shall enter into such customary agreements (including
an underwriting agreement in customary form in the event of an underwritten
offering conducted pursuant to Section 6 hereof) and take all other appropriate
action in order to expedite and facilitate the registration and disposition of
the Registrable Securities, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions
and procedures substantially identical to those set forth in Section 5 hereof
with respect to all parties to be indemnified pursuant to Section 5 hereof.

         (p) The Company shall:

               (i)(A) make reasonably available for inspection by the Electing
          Holders, any underwriter participating in any disposition pursuant to
          the Shelf Registration Statement, and any attorney, accountant or
          other agent retained by such Electing Holders or any such underwriter
          all relevant financial and other records, pertinent corporate
          documents and properties of the Company and its subsidiaries, and (B)
          cause the Company's officers, directors and employees to supply all
          information reasonably requested by such Electing Holders or any such
          underwriter, attorney, accountant or agent in connection with the
          Shelf Registration Statement, in each case, as is customary for
          similar due diligence examinations; provided, however, that all
          records, information and documents that are designated in writing by
          the Company, in good faith, as confidential shall be kept confidential
          by such Electing Holders and any such underwriter, attorney,
          accountant or agent, unless such disclosure is made in connection with
          a court proceeding or required by law, or such records, information or
          documents become available to the public generally or through a third
          party without an accompanying obligation of confidentiality; and
          provided further that, if the foregoing inspection and information
          gathering would otherwise disrupt the Company's conduct of its
          business, such inspection and

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          information gathering shall, to the greatest extent possible, be
          coordinated on behalf of the Electing Holders and the other parties
          entitled thereto by one counsel designated by and on behalf of the
          Electing Holders and other parties;

               (ii) in connection with any underwritten offering conducted
          pursuant to Section 6 hereof, make such representations and warranties
          to the Electing Holders participating in such underwritten offering
          and to the Managing Underwriters, in form, substance and scope as are
          customarily made by the Company to underwriters in primary
          underwritten offerings of equity and convertible debt securities and
          covering matters including, but not limited to, those set forth in the
          Purchase Agreement;

               (iii) in connection with any underwritten offering conducted
          pursuant to Section 6 hereof, use its best efforts to obtain opinions
          of counsel to the Company (which counsel and opinions (in form, scope
          and substance) shall be reasonably satisfactory to the Managing
          Underwriters) addressed to each Electing Holder participating in such
          underwritten offering and the underwriters, covering such matters as
          are customarily covered in opinions requested in primary underwritten
          offerings of equity and convertible debt securities and such other
          matters as may be reasonably requested by such Electing Holders and
          underwriters (it being agreed that the matters to be covered by such
          opinions shall include, without limitation, as of the date of the
          opinion and as of the Effective Time of the Shelf Registration
          Statement or most recent post-effective amendment thereto, as the case
          may be, the absence from the Shelf Registration Statement and the
          Prospectus, including the documents incorporated by reference therein,
          of an untrue statement of a material fact or the omission of a
          material fact required to be stated therein or necessary to make the
          statements therein not misleading;

               (iv) in connection with any underwritten offering conducted
          pursuant to Section 6 hereof, use its best efforts to obtain "cold
          comfort" letters and updates thereof from the independent public
          accountants of the Company (and, if necessary, from the independent
          public accountants of any subsidiary of the Company or of any business
          acquired by the Company for which financial statements and financial
          data are, or are required to be, included in the Shelf Registration
          Statement), addressed to each Electing Holder participating in such
          underwritten offering (if such Electing Holder has provided such
          letter, representations or documentation, if any, required for such
          cold comfort letter to be so addressed) and the underwriters, in
          customary form and covering matters of the type customarily covered in
          "cold comfort" letters in connection with primary underwritten
          offerings;

               (v) in connection with any underwritten offering conducted
          pursuant to Section 6 hereof, deliver such documents and certificates
          as may be reasonably requested by any Electing Holders participating
          in such underwritten offering and the Managing Underwriters, if any,
          including, without limitation, certificates to evidence compliance
          with Section 3(j) hereof and with any conditions contained in the
          underwriting agreement or other agreements entered into by the
          Company.

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         (q) The Company will use all commercially reasonable efforts to cause
the Common Stock issuable upon conversion of the Securities to be listed on the
New York Stock Exchange or other stock exchange or trading system on which the
Common Stock primarily trades on or prior to the Effective Time of the Shelf
Registration Statement hereunder.

         (r) In the event that any broker-dealer registered under the Exchange
Act shall be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD Rules (or
any successor provision thereto)) of the Company or has a "conflict of interest"
(as defined in Rule 2720(b)(7) of the NASD Rules (or any successor provision
thereto)) and such broker-dealer shall underwrite, participate as a member of an
underwriting syndicate or selling group or assist in the distribution of any
Registrable Securities covered by the Shelf Registration Statement, whether as a
Holder of such Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "qualified independent
underwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor
provision thereto)) to participate in the preparation of the registration
statement relating to such Registrable Securities, to exercise usual standards
of due diligence in respect thereto and to recommend the public offering price
of such Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 5 hereof, and (C) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the requirements
of the NASD Rules.

         (s) The Company shall use its best efforts to take all other steps
necessary to effect the registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement contemplated hereby.

         4. Registration Expenses. Except as otherwise provided in Section 3,
the Company shall bear all fees and expenses incurred in connection with the
performance of its obligations under Sections 2, 3 and 6 hereof and shall bear
or reimburse the Electing Holders for the reasonable fees and disbursements of a
single counsel selected by a plurality of all Electing Holders who own an
aggregate of not less than 25% of the Registrable Securities covered by the
Shelf Registration Statement to act as counsel therefore in connection
therewith. Each Electing Holder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Electing Holder's Registrable Securities pursuant to the Shelf Registration
Statement.

         5. Indemnification and Contribution.

         (a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, the Company shall indemnify
and hold harmless each Electing Holder and each underwriter, selling agent or
other securities professional, if any, which facilitates the disposition of
Registrable Securities, and each of their respective officers and directors and
each person who controls such Electing Holder, underwriter, selling agent or
other securities professional within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act (each such person being sometimes referred
to as an "Indemnified Person") against any losses, claims, damages or
liabilities, joint or several, to which such Indemnified

                                       11

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Person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Shelf Registration Statement under which such
Registrable Securities are to be registered under the Securities Act, or any
Prospectus contained therein or furnished by the Company to any Indemnified
Person, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and the Company hereby agrees to reimburse such Indemnified Person for any legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable to any such Indemnified Person in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Shelf Registration Statement or
Prospectus, or amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by such Indemnified Person
expressly for use therein.

         (b) Indemnification by the Electing Holders and any Agents and
Underwriters. Each Electing Holder agrees, as a consequence of the inclusion of
any of such Electing Holder's Registrable Securities in such Shelf Registration
Statement, and each underwriter, selling agent or other securities professional,
if any, which facilitates the disposition of Registrable Securities shall agree,
as a consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors, officers who sign any Shelf Registration Statement and each person,
if any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in such Shelf Registration Statement or Prospectus, or any amendment
or supplement, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Electing
Holder, underwriter, selling agent or other securities professional expressly
for use therein, and (ii) reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.

         (c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under this Section 5, notify such
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under the indemnification
provisions of or contemplated by subsection (a) or (b) above. In case any such
action shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof,

                                       12

<PAGE>

such indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with a single counsel (in addition to
local counsel) satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party under this Section 5 for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act, by
or on behalf of any indemnified party.

         (d) Contribution. If the indemnification provided for in this Section 5
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 5(d) were determined by
pro rata allocation (even if the Electing Holders or any underwriters, selling
agents or other securities professionals or all of them were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 5(d).
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Electing Holders and any underwriters,
selling agents or other securities professionals in this Section 5(d) to
contribute shall be several in proportion to the percentage of principal amount
of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.

                                       13

<PAGE>

         (e) Notwithstanding any other provision of this Section 5, in no event
will any (i) Electing Holder be required to undertake liability to any person
under this Section 5 for any amounts in excess of the dollar amount of the
proceeds to be received by such Holder from the sale of such Holder's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Shelf Registration Statement under which
such Registrable Securities are to be registered under the Securities Act and
(ii) underwriter, selling agent or other securities professional be required to
undertake liability to any person hereunder for any amounts in excess of the
discount, commission or other compensation payable to such underwriter, selling
agent or other securities professional with respect to the Registrable
Securities underwritten by it and distributed to the public.

         (f) The obligations of the Company under this Section 5 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 5 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 5 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.

         6. Underwritten Offering. Any Holder of Registrable Securities who
desires to do so may sell Registrable Securities (in whole or in part) in an
underwritten offering; provided that (i) the Electing Holders of at least
33-1/3% in aggregate principal amount of the Registrable Securities then covered
by the Shelf Registration Statement shall request such an offering and (ii) at
least such aggregate principal amount of such Registrable Securities shall be
included in such offering; and provided further that the Company shall not be
obligated to cooperate with more than one underwritten offering during the
Effectiveness Period. Upon receipt of such a request, the Company shall provide
all Holders of Registrable Securities written notice of the request, which
notice shall inform such Holders that they have the opportunity to participate
in the offering. In any such underwritten offering, the investment banker or
bankers and manager or managers that will administer the offering will be
selected by, and the underwriting arrangements with respect thereto (including
the size of the offering) will be approved by, the holders of a majority of the
Registrable Securities to be included in such offering; provided, however, that
such investment bankers and managers and underwriting arrangements must be
reasonably satisfactory to the Company. No Holder may participate in any
underwritten offering contemplated hereby unless (a) such Holder agrees to sell
such Holder's Registrable Securities to be included in the underwritten offering
in accordance with any approved underwriting arrangements, (b) such Holder
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such approved underwriting arrangements, and (c) if
such Holder is not then an Electing Holder, such Holder returns a completed and
signed Notice and Questionnaire to the Company in accordance with Section
3(a)(ii) hereof within a reasonable amount of time before such underwritten
offering. The Holders participating in any underwritten offering shall be
responsible for any underwriting discounts and commissions and fees and, subject
to Section 4 hereof, expenses of their own counsel. The Company shall pay all
expenses customarily borne by issuers in an underwritten offering, including but
not limited to filing fees, the fees and disbursements of its counsel and
independent public accountants and any printing expenses incurred in connection
with such underwritten offering. Notwithstanding the foregoing or the provisions
of Section 3(n) hereof, upon receipt of a request from the Managing

                                       14

<PAGE>

Underwriter or a representative of holders of a majority of the Registrable
Securities to be included in an underwritten offering to prepare and file an
amendment or supplement to the Shelf Registration Statement and Prospectus in
connection with an underwritten offering, the Company may delay the filing of
any such amendment or supplement for up to 90 days if the Board of Directors of
the Company shall have determined in good faith that the Company has a bona fide
business reason for such delay.

         7. Special Interest.

         (a) Notwithstanding any postponement of effectiveness permitted by
Section 2(a) hereof, if (i) on or prior to the 90th day following the Closing
Date, a Shelf Registration Statement has not been filed with the Commission or
(ii) on or prior to the 180th day following the Closing Date, such Shelf
Registration Statement is not declared effective by the Commission (each, a
"Registration Default"), the Company shall be required to pay special interest
("Special Interest"), from and including the day following such Registration
Default until such Shelf Registration Statement is either so filed or so filed
and subsequently declared effective, as applicable, at a rate per annum equal to
an additional one-quarter of one percent (0.25%) of the principal amount of
Registrable Securities, to and including the 90th day following such
Registration Default and one-half of one percent (0.50%) thereof from and after
the 91st day following such Registration Default.

         (b) In the event that (i) the Shelf Registration Statement ceases to be
effective, (ii) the Company suspends the use of the Prospectus pursuant to
Section 2(c) or 3(j) hereof, (iii) the Holders are not authorized to use the
Prospectus pursuant to Section 3(g) hereto or (iv) the Holders are otherwise
prevented or restricted by the Company from effecting sales pursuant to the
Shelf Registration Statement (an "Effective Failure") for more than 45 days,
whether or not consecutive, in any 90-day period, or for more than 90 days,
whether or not consecutive, during any 12-month period, then the Company shall
pay Special Interest to Electing Holders at a rate per annum equal to an
additional one-half of one percent (0.50%) of the principal amount of
Registrable Securities from the 46th day of the applicable 90-day period or the
91st day of the applicable 12-month period, as the case may be, that any such
Effective Failure has existed until the earlier of (1) the time the Holders of
Registrable Securities are again able to make sales under the Shelf Registration
Statement or (2) the expiration of the Effectiveness Period.

         (c) Any amounts to be paid as Special Interest pursuant to paragraphs
(a) or (b) of this Section 7 shall be paid in cash semi-annually in arrears,
with the first semi-annual payment due on the first Interest Payment Date (as
defined in the Indenture), as applicable, following the date of such
Registration Default or Effective Failure, as applicable. Such Special Interest
will accrue (1) in respect of the Securities at the rates set forth in
paragraphs (a) or (b) of this Section 7, as applicable, on the principal amount
of the Securities and (2) in respect of the Common Stock issued upon conversion
of the Securities, at the rates set forth in paragraphs (a) or (b) of this
Section 7, as applicable, applied to the Conversion Price (as defined in the
Indenture) at that time.

         (d) Except as provided in Section 8(b) hereof, the Special Interest as
set forth in this Section 7 shall be the exclusive monetary remedy available to
the Holders of Registrable Securities for such Registration Default or Effective
Failure. In no event shall the Company be

                                       15

<PAGE>

required to pay Special Interest in excess of the applicable maximum amount of
one-half of one percent (0.50%) set forth above, regardless of whether one or
multiple Registration Defaults or Effective Failures exist.

         8. Miscellaneous.

         (a) Other Registration Rights. The Company may grant registration
rights that would permit any person that is a third party the right to
piggy-back on any Shelf Registration Statement, provided that if the Managing
Underwriter of any underwritten offering conducted pursuant to Section 6 hereof
notifies the Company and the Electing Holders that the total amount of
securities which the Electing Holders and the holders of such piggy-back rights
intend to include in any Shelf Registration Statement is so large as to
materially threaten the success of such offering (including the price at which
such securities can be sold), then the amount, number or kind of securities to
be offered for the account of holders of such piggy-back rights will be reduced
to the extent necessary to reduce the total amount of securities to be included
in such offering to the amount, number and kind recommended by the Managing
Underwriter prior to any reduction in the amount of Registrable Securities to be
included in such Shelf Registration Statement.

         (b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Company fails to perform any of its
obligations hereunder and that the Purchasers and the Holders from time to time
may be irreparably harmed by any such failure, and accordingly agree that the
Purchasers and such Holders, in addition to any other remedy to which they may
be entitled at law or in equity and without limiting the remedies available to
the Electing Holders under Section 7 hereof, shall have the right to pursue
specific performance of the obligations of the Company under this Registration
Rights Agreement in accordance with the terms and conditions of this
Registration Rights Agreement, in any court of the United States or any State
thereof having jurisdiction.

         (c) Amendments and Waivers. This Agreement, including this Section
8(c), may be amended, and waivers or consents to departures from the provisions
hereof may be given, only by a written instrument duly executed by the Company
and the holders of a majority in aggregate principal amount of Registrable
Securities then outstanding. Each Holder of Registrable Securities outstanding
at the time of any such amendment, waiver or consent or thereafter shall be
bound by any amendment, waiver or consent effected pursuant to this Section
8(c), whether or not any notice, writing or marking indicating such amendment,
waiver or consent appears on the Registrable Securities or is delivered to such
Holder.

         (d) Notices. All notices and other communications provided for or
permitted hereunder shall be given as provided in the Indenture.

         (e) Parties in Interest. The parties to this Agreement intend that all
Holders of Registrable Securities shall be entitled to receive the benefits of
this Agreement and that any Electing Holder shall be bound by the terms and
provisions of this Agreement by reason of such election with respect to the
Registrable Securities which are included in a Shelf Registration Statement. All
the terms and provisions of this Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the respective successors and assigns
of the parties

                                       16

<PAGE>

hereto and any Holder from time to time of the Registrable Securities to the
aforesaid extent. In the event that any transferee of any Holder of Registrable
Securities shall acquire Registrable Securities, in any manner, whether by gift,
bequest, purchase, operation of law or otherwise, such transferee shall, without
any further writing or action of any kind, be entitled to receive the benefits
of and, if an Electing Holder, be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement to the
aforesaid extent.

         (f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         (g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

         (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

         (i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

         (j) Survival. The respective indemnities, agreements, representations,
warranties and other provisions set forth in this Agreement or made pursuant
hereto shall remain in full force and effect, regardless of any investigation
(or any statement as to the results thereof) made by or on behalf of any
Electing Holder, any director, officer or partner of such Holder, any agent or
underwriter, any director, officer or partner of such agent or underwriter, or
any controlling person of any of the foregoing, and shall survive the transfer
and registration of the Registrable Securities of such Holder.

         (k) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the expiration of the Effectiveness Period,
except for any liabilities or obligations under Sections 5 and 6 hereof and the
obligations to make payments of and provide for Special Interest under Section 7
hereof to the extent such Special Interest accrues prior to the end of the
Effectiveness Period, each of which shall remain in effect in accordance with
its terms.

                                       17

<PAGE>

         Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.

                                         Very truly yours,

                                         RELIANT RESOURCES, INC.

                                         By: /s/ WILLIAM S. WALLER, JR.
                                            ------------------------------------
                                            Name:  William S. Waller, Jr.
                                            Title: Vice President and Treasurer

                                       18

<PAGE>

Accepted as of the date hereof:

DEUTSCHE BANK SECURITIES INC., on behalf itself and as Representative of the
several Purchasers named in Schedule I to the Purchase Agreement

By: /s/ PAUL MURDOCK
   -------------------------
Name:  Paul Murdock
Title: Vice President

By:  /s/ F.J. Kinney
   -------------------------
Name:  F.J. Kinney
Title: Management Director

GOLDMAN, SACHS & CO., on behalf itself and as Representative of the several
Purchasers named in Schedule I to the Purchase Agreement

By: /s/ GOLDMAN, SACHS & CO.
   -------------------------
     (Goldman, Sachs & Co.)

BANC OF AMERICA SECURITIES LLC, on behalf itself and as Representative of the
several Purchasers named in Schedule I to the Purchase Agreement

By: /s/ ROB SANTANGELO
   -------------------------
Name:  Rob Santangelo
Title: Managing Director

                                       19

<PAGE>

                                                                      APPENDIX A

                             RELIANT RESOURCES, INC.

                         INSTRUCTION TO DTC PARTICIPANTS

                                (Date of Mailing)

                     URGENT - IMMEDIATE ATTENTION REQUESTED

                          DEADLINE FOR RESPONSE: [DATE]

         The Depository Trust Company ("DTC") has identified you as a DTC
Participant through whom beneficial interests in the Reliant Resources, Inc.
(the "Company") 5.00% Convertible Senior Subordinated Notes due 2010 (the
"Securities") are held.

         The Company is in the process of registering the Securities under the
Securities Act of 1933 for resale by the beneficial owners thereof. In order to
have their Securities included in the registration statement, beneficial owners
must complete and return the enclosed Notice of Registration Statement and
Selling Securityholder Questionnaire.

         It is important that beneficial owners of the Securities receive a copy
of the enclosed materials as soon as possible as their rights to have the
Securities included in the registration statement depend upon their returning
the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy
of the enclosed documents to each beneficial owner that holds interests in the
Securities through you. If you require more copies of the enclosed materials or
have any questions pertaining to this matter, please contact Reliant Resources,
Inc., General Counsel's Office, 1111 Louisiana, Houston, Texas 77002, Tel: (713)
497-7465.

                                       20

<PAGE>

                             RELIANT RESOURCES, INC.

                        Notice of Registration Statement
                                       and
                      Selling Securityholder Questionnaire

                                     [DATE]

         Reliant Resources, Inc. (the "Company") has filed with the United
States Securities and Exchange Commission (the "Commission") a registration
statement on Form S-3(the "Shelf Registration Statement") for the registration
and resale under Rule 415 of the United States Securities Act of 1933, as
amended (the "Securities Act"), of the Company's 5.00% Convertible Senior
Subordinated Notes due 2010 (the "Securities") and the shares of common stock,
par value $.001 per share (the "Common Stock"), issuable upon conversion
thereof, in accordance with the Registration Rights Agreement, dated as of June
24, 2003 (the "Registration Rights Agreement"), between the Company and the
purchasers named therein. A copy of the Registration Rights Agreement is
attached hereto. All capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Registration Rights Agreement.

         In order to have Registrable Securities included in the Shelf
Registration Statement (or a supplement or amendment thereto), this Notice of
Registration Statement and Selling Securityholder Questionnaire ("Notice and
Questionnaire") must be completed, executed and delivered to the Company at the
address set forth herein for receipt ON OR BEFORE [INSERT DATE THAT IS 20 DAYS
FROM THE DATE OF THE NOTICE AND QUESTIONNAIRE]. Beneficial owners of Registrable
Securities who do not complete, execute and return this Notice and Questionnaire
by such date (i) will not be named as selling securityholders in the Shelf
Registration Statement and (ii) may not use the Prospectus forming a part
thereof for resales of Registrable Securities.

         Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related Prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Shelf Registration
Statement and related Prospectus.

                                       21

<PAGE>

         The term "Registrable Securities" is defined in the Registration Rights
Agreement to mean all or any portion of the Securities issued from time to time
under the Indenture in registered form and the shares of Common Stock issuable
upon conversion of such Securities; provided, however, that a security ceases to
be a Registrable Security when it is no longer a Restricted Security.

         The term "Restricted Security" is defined in the Registration Rights
Agreement to mean any Security or share of Common Stock issuable upon conversion
thereof except any such Security or share of Common Stock which (i) has been
effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been transferred in
compliance with Rule 144 under the Securities Act (or any successor provision
thereto) or is transferable pursuant to paragraph (k) of such Rule 144 (or any
successor provision thereto), or (iii) has otherwise been transferred and a new
Security or share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company in accordance
with Section ___ of the Indenture.

                                    ELECTION

         The undersigned holder (the "Selling Securityholder") of Registrable
Securities hereby elects to include in the Shelf Registration Statement the
Registrable Securities beneficially owned by it and listed below in Item (3).
The undersigned, by signing and returning this Notice and Questionnaire, agrees
to be bound with respect to such Registrable Securities by the terms and
conditions of this Notice and Questionnaire and the Registration Rights
Agreement, including, without limitation, Section 5 of the Registration Rights
Agreement, as if the undersigned Selling Securityholder were an original party
thereto.

         Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the Selling Securityholder will be required to deliver
to the Company and the Trustee the Notice of Transfer (completed and signed) set
forth in Exhibit 1 to this Notice and Questionnaire.

         The Selling Securityholder hereby provides the following information to
the Company and represents and warrants that such information is accurate and
complete:

                                       22

<PAGE>

                                  QUESTIONNAIRE

(1)(a) Full Legal Name of Selling Securityholder:

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

(b)  Full Legal Name of Registered Holder (if not the same as in (a) above) of
     Registrable Securities Listed in Item (3) Below:

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

(c)  Full Legal Name of DTC Participant (if applicable and if not the same as
     (b) above) Through Which Registrable Securities Listed in Item (3) Below
     are Held:

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

(2)  Address for Notices to Selling Securityholder:

                           -------------------------------
                           -------------------------------
                           -------------------------------
         Telephone:
                           -------------------------------
         Fax:
                           -------------------------------
         Contact Person:
                           -------------------------------

(3)  Beneficial Ownership of Securities:

     Except as set forth below in this Item (3), the undersigned Selling
     Securityholder does not beneficially own any Securities or shares of Common
     Stock issued upon conversion, repurchase or redemption of any Securities.

     (a)  Principal amount of Registrable Securities (as defined in the
          Registration Rights Agreement) beneficially owned:
                                                            --------------------

          CUSIP No(s). of such Registrable Securities:
                                                      --------------------------

          Number of shares of Common Stock (if any) issued upon conversion,
          repurchase or redemption of Registrable Securities:
                                                             -------------------

     (b)  Principal amount of Securities other than Registrable Securities
          beneficially owned:
                             ---------------------------------------------------
          CUSIP No(s). of such other Securities:
                                                --------------------------------

          Number of shares of Common Stock (if any) issued upon conversion of
          such other Securities:
                                ------------------------------------------------

     (c)  Principal amount of Registrable Securities which the undersigned
          wishes to be included in the Shelf Registration Statement:

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

          CUSIP No(s). of such Registrable Securities to be included in the
          Shelf Registration Statement:
                                       ----------------------------------------

          Number of shares of Common Stock (if any) issued upon conversion of
          Registrable Securities which are to be included in the Shelf
          Registration Statement:
                                 -----------------------------------------------

                                       23

<PAGE>

     (4)  Beneficial Ownership of Other Securities of the Company:

          Except as set forth below in this Item (4), the undersigned Selling
          Securityholder is not the beneficial or registered owner of any shares
          of Common Stock or any other securities of the Company, other than the
          Securities and shares of Common Stock listed above in Item (3).

          State any exceptions here:

     (5)  Relationships with the Company:

          Except as set forth below, neither the Selling Securityholder nor any
          of its affiliates, officers, directors or principal equity holders (5%
          or more) has held any position or office or has had any other material
          relationship with the Company (or its predecessors or affiliates)
          during the past three years.

          State any exceptions here:

     (6)  Plan of Distribution:

          Except as set forth below, the undersigned Selling Securityholder
          intends to distribute the Registrable Securities listed above in Item
          (3) only as follows (if at all): Such Registrable Securities may be
          sold from time to time directly by the undersigned Selling
          Securityholder or, alternatively, through underwriters, broker-dealers
          or agents. Such Registrable Securities may be sold in one or more
          transactions at fixed prices, at prevailing market prices at the time
          of sale, at varying prices determined at the time of sale, or at
          negotiated prices. Such sales may be effected in transactions (which
          may involve crosses or block transactions) (i) on any national
          securities exchange or quotation service on which the Registrable
          Securities may be listed or quoted at the time of sale, (ii) in the
          over-the-counter market, (iii) in transactions otherwise than on such
          exchanges or services or in the over-the-counter market, or (iv)
          through the writing of options. In connection with sales of the
          Registrable Securities or otherwise, the Selling Securityholder may
          enter into hedging transactions with broker-dealers, which may in turn
          engage in short sales of the Registrable Securities in the course of
          hedging the positions they assume. The Selling Securityholder may also
          sell Registrable Securities short and deliver Registrable Securities
          to close out such short positions, or loan or pledge Registrable
          Securities to broker-dealers that in turn may sell such securities.

          State any exceptions here:

         Note: In no event may such method(s) of distribution take the form of
an underwritten offering of the Registrable Securities without the prior
agreement of the Company.

                                       24

<PAGE>

         By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will comply, with the
prospectus delivery and other provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder, particularly Regulation M.

         In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above after the date on
which such information is provided to the Company, the Selling Securityholder
agrees to notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Registration Rights
Agreement.

         By signing below, the Selling Securityholder consents to the disclosure
of the information contained herein in its answers to Items (1) through (6)
above and the inclusion of such information in the Shelf Registration Statement
and related Prospectus. The Selling Securityholder understands that such
information will be relied upon by the Company in connection with the
preparation of the Shelf Registration Statement and related Prospectus.

         In accordance with the Selling Securityholder's obligation under
Section 3(a) of the Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Registration Rights Agreement
shall be made in writing, by hand-delivery, first-class mail, or air courier
guaranteeing overnight delivery as follows:

          (i) To the Company:

                                       Reliant Resources, Inc.
                                       1111 Louisiana
                                       Houston, Texas  77002
                                       Attn: Michael Jines

          (ii) With a copy to:

                                       Skadden, Arps, Slate, Meagher & Flom LLP
                                       Four Times Square
                                       New York, New York 10036
                                       Attn: Richard Aftanas, Esq.

         Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this Notice and
Questionnaire, and the representations and warranties contained herein, shall be
binding on, shall inure to the benefit of and shall be enforceable by the
respective successors, heirs, personal representatives, and assigns of the
Company and the Selling Securityholder (with respect to the Registrable
Securities beneficially owned by such Selling Securityholder and listed in Item
(3) above). This Agreement shall be governed in all respects by the laws of the
State of New York.

                                       25

<PAGE>

         IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either in
person or by its duly authorized agent.

Dated:
      ---------------------

      -------------------------------------------------------------------------
      Selling Securityholder
      (Print/type full legal name of beneficial owner of Registrable Securities)

      By:
         ----------------------------------------------------------------------

      Name:
      Title:

PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY AT:

                             Reliant Resources, Inc.
                             1111 Louisiana
                             Houston, Texas  77002
                             Attn: Michael Jines

                             With a copy to:

                             Skadden, Arps, Slate, Meagher & Flom LLP
                             Four Times Square
                             New York, New York 10036
                             Attn: Richard Aftanas, Esq.

                                       26
<PAGE>

                                                                       EXHIBIT 1
                                                                   TO APPENDIX A

              NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT

Reliant Resources, Inc.
1111 Louisiana
Houston, Texas  77002
Attention:  Legal Department

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention:  Corporate Trust Administration

          Re: Reliant Resources, Inc. (the "Company")
              5.00% Convertible Senior Subordinated Notes due 2010 (the "Notes")

Dear Sirs:

         Please be advised that _____________________ has transferred
$___________ aggregate principal amount of the above-referenced Notes or shares
of the Company's common stock, issued upon conversion, repurchase or redemption
of Notes, pursuant to an effective Registration Statement on Form S-3 (File No.
333-____) filed by the Company.

         We hereby certify that the prospectus delivery requirements, if any, of
the Securities Act of 1933, as amended, have been satisfied with respect to the
transfer described above and that the above-named beneficial owner of the Notes
or common stock is named as a selling securityholder in the Prospectus dated
[DATE], or in amendments or supplements thereto, and that the aggregate
principal amount of the Notes or number of shares of common stock transferred
are [A PORTION OF] the Notes or shares of common stock listed in such Prospectus
as amended or supplemented opposite such owner's name.

Dated:

                                                          Very truly yours,

                                                          ----------------------
                                                          (Name)

                                                      By:
                                                          ----------------------
                                                          (Authorized Signature)

                                       27exv10w1

 

Exhibit 10.1

HELIX HEARING CARE OF AMERICA CORP.

AND

FORGET & SAUVÉ, AUDIOPROTHESISTES, S.E.N.C.

AND

6068065 CANADA INC.

ASSET PURCHASE AND SALE AGREEMENT

DATED AS OF JULY 15, 2003

OGILVY RENAULT

Barristers and Solicitors

 

 

ASSET PURCHASE AND SALE AGREEMENT

THIS AGREEMENT dated as of the 15th day of July, 2003

	 	 	 
	AMONG:	 	
FORGET & SAUVÉ, AUDIOPROTHÉSISTES, S.E.N.C.,
doing business as “Le Groupe Forget,
Audioprothésistes”, a partnership existing
under the Civil Code of Québec, having its
principal place of business at 189 Hymus Blvd,
Suite 307, Pointe-Claire, Québec, Canada, H9R
1E9, hereinafter acting and represented by
Steve Forget, its Partner;
	 	 	 
	 	 	
(“GF”)
	 	 	 
	AND:	 	
6068065 CANADA INC., a Canadian corporation
incorporated pursuant to the laws of Canada,
having its head office at 1183 Tecumseh,
Dollard-des-Ormeaux, Québec, Canada, H9B 2Z4,
hereinafter acting and represented by Steve
Forget, its President;
	 	 	 
	 	 	
(“Canada Inc.”)
	 	 	 
	 	 	
(hereinafter collectively referred to as
the “Purchasers”)
	 	 	 
	AND:	 	
HELIX HEARING CARE OF AMERICA CORP., a Canadian corporation incorporated
pursuant to the laws of Canada, having its registered office at 7100 Jean
Talon East, Suite 610, Montreal, Québec, H1M 3S3, hereinafter acting and
represented by Stephen J. Hansbrough, its Chief Executive Officer;
	 	 	 
	 	 	
(the “Vendor”)

WITNESSES THAT

WHEREAS:

	(a)	 	the Vendor through Les Services d’Approvisionnement Hearing Care of
America SAHCA Inc. (“SAHCA”), Les Services de gestion Hearing Care of
America SGHCA Inc. (“SGHCA”) and Les Services de location Hearing Care of
America SLHCA Inc. (“SLHCA”), carries on the business of managing and
supplying a network of hearing

 

 

- 2 -

	 	 	care centres in the Province of Québec that provide a full range of
audiological products and services for the hearing impaired (the
“Business”);
	 
	(b)	 	the Vendor is the owner of the Equipment (as hereinafter defined) and is
desirous of disposing of all its interest in the Equipment;
	 
	(c)	 	the Vendor is the owner of all of the issued and outstanding shares of
SAHCA, SGHCA and SLHCA and is desirous of disposing of all of its interest
in these companies and in the Business;
	 
	(d)	 	the Purchasers are familiar with the Business and GF has had a business
relationship with same for several years;
	 
	(e)	 	GF is a general partnership formed pursuant to the Civil Code of Québec
and Canada Inc. is a corporation incorporated pursuant to the Canada
Business Corporations Act. Both GF and Canada Inc. are controlled (as
such term is defined in the Canada Business Corporations Act, mutatis
mutandis) by Steve Forget;
	 
	(f)	 	the Vendor wishes to sell, assign and transfer to Canada Inc. the shares
of the Purchased Subsidiaries (as hereinafter defined); and
	 
	(g)	 	the Vendor wishes to sell, assign and transfer to GF the Equipment
pertaining to the Business and the Intellectual Property (as hereinafter
defined) and GF wishes to purchase such property and Intellectual
Property.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set out and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties covenant and agree as follows:

ARTICLE 1

DEFINITIONS AND PRINCIPLES OF INTERPRETATION

Section 1.1 Definitions

For the purposes of this Agreement and the Ancillary Documents and any notice,
consent or other communication required or permitted to be given pursuant
hereto or thereto, the following terms shall have the following meanings
ascribed to them respectively, unless the subject matter or context otherwise
requires:

“Affiliate” or “Affiliates” of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person; for the purposes of this definition, “control”
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” have meanings correlative to the foregoing;

 

 

- 3 -

“Agreement” means this agreement entitled “Asset Purchase and Sale Agreement”
and all agreements, schedules and exhibits attached hereto;

“Ancillary Documents” means all agreements and instruments entered into and
delivered pursuant to this Agreement, including the Security Agreements, the
Non-Competition Agreement, the Termination Agreement, the Secured Promissory
Note, the final form of all such Ancillary Documents to be settled as
contemplated in Section 9.2(c);

“Benefit Plans” means all retirement, pension, supplemental pension, savings,
retirement savings, bonus, profit sharing, stock purchase, phantom stock, stock
appreciation, deferred compensation, severance or termination pay, change of
control, insurance, medical, hospital, dental, vision care, drug, sick leave,
short term or long term disability, salary continuation, unemployment benefits,
vacation, incentive, compensation or other employee benefit, plan, program,
arrangement, policy or practice that is maintained or otherwise contributed to,
or required to be contributed to, by or on behalf of the Vendor for the benefit
of its present or former employees, directors or officers;

“Books and Records” means all books and records of the Purchased Subsidiaries
(including the relevant minute books) as at the Effective Time relating to and
used or held for use by the Purchased Subsidiaries (as hereinafter defined)
with respect to the Business, copies of which have been made available to the
Purchasers, but excluding all contracts, instruments, deeds and other
agreements in respect of indebtedness for borrowed money of the Vendor, all
minute books, constating documents, corporate records, all tax returns (and
supporting documentation) of the Vendor and documents pertaining to the Ontario
operations of the Vendor;

“Business” has the meaning ascribed thereto in the preamble;

“Business Day” means a day that is not a Saturday, Sunday or statutory holiday
in Québec;

“Claims” means all claims, demands, debts, damages, losses, deficiencies,
liabilities (accrued, actual, contingent or otherwise), penalties, fines,
causes of action, actions, proceedings, judgments, orders or awards (judicial,
quasi-judicial, administrative, quasi-administrative or arbitral), settlement
payments, assessments, reassessments, and all costs and expenses relating
thereto (including reasonable legal fees and disbursements on a solicitor and
own client basis);

“Closing” means the completion of the purchase and sale of the Purchased Assets
and Business pursuant to this Agreement;

“Closing Date” means July 15, 2003 or such subsequent date jointly determined
by the Vendor and the Purchasers;

“Closing Time” means 2:00 p.m. EST on the Closing Date or such other time on
the Closing Date as Closing occurs with the concurrence of the Parties;

“Consent” means the consent, approval, order, qualification or waiver of,
registration (other than registration with respect to interest in immovable and
real property) or filing with, application or notice to, or other action
whatsoever of, any Person, including any Governmental Authority, which is
required in order for the right, activity or property (immovable and real or
movable and

 

 

- 4 -

personal, tangible or intangible) referred to in the context in which such
defined term is used, to be sold, assigned, transferred, conveyed, obtained,
exercised, owned, leased, possessed or used, as applicable;

“Effective Time” means 12:01 a.m. EST on May 31, 2003;

“Employees” means, as at the Effective Time, all of the employees of the Vendor
employed in the Business, other than the Terminated Employees;

“Encumbrances” means all liens, prior claims, mortgages, charges, pledges,
security interests, hypothecations, easements, rights-of-way, encroachments,
covenants, conditions, rights of re-entry, leases, licences, assignments,
options or any other encumbrance or title defect whatsoever, and all ownership
or title retention, conditional sale, leasing and sale and leaseback agreements
and all other agreements that in substance secure payment or performance of an
obligation, regardless of form, whether or not registered or registrable and
whether or not consensual or arising at law (statutory or otherwise), including
rights of creditors under bankruptcy or insolvency legislation;

“Equipment” means all right, title and interest of the Vendor in, under or to
the equipment, machinery, tools, computer systems (hardware and software),
furnishings, accessories and office supplies owned by the Vendor as at the
Effective Time and all assignable warranties of any Person covering all or any
part thereof, listed in Schedule 1.1(d);

“ETA” means the Excise Tax Act (Canada);

“Governmental Authority” means any domestic, foreign, international, federal or
provincial government or state and each ministry, department, commission,
board, bureau or other agency of, or municipality, regional district or other
local governing body established by, any such government or state, or other
political subdivision thereof, and includes any Person exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, any such government or state and, in each case, having jurisdiction in the
relevant circumstances;

“GST” means the goods and services tax pursuant to ETA;

“Income Taxes” means all Taxes imposed on or measured by, in whole or in part,
income and all federal, provincial, local or foreign franchise tax imposed in
lieu of a tax on or measured by income including in each case all instalments
in respect thereof and all interest, penalties and fines thereon and additions
thereto;

“Indemnified Party” has the meaning ascribed thereto in Section 8.3;

“Indemnifying Party” has the meaning ascribed thereto in Section 8.3;

“Intellectual Property” means the intellectual property listed in Schedule
2.1(c) hereto and all goodwill associated with the foregoing, including any
right that is or may be granted or recognized under any Canadian or foreign
legislation with respect to any of the above;

“ITA” means the Income Tax Act (Canada);

 

 

- 5 -

“Laws” means all laws, statutes, codes, regulations, ordinances, decrees,
rules, by-laws, permits, directives, policies, standards, guidelines and lawful
requirements of any Governmental Authority, and all judicial, quasi-judicial,
administrative, quasi-administrative and arbitral judgments, orders (including
injunctions) decisions or awards of any Governmental Authority, including
general principles of common law, civil law and equity, in each case having the
force of law and binding on the Person, property (immovable and real or movable
and personal, tangible or intangible) or activity referred to in the context in
which such defined term is used;

“Material Consents” means those of the Consents that are listed in Schedule
1.1(l);

“Non-Competition Agreement” means the non-competition agreement substantially
in the form attached as Schedule 1.1(o) among the Vendor and each of the
Purchasers and Steve Forget;

“Offer” has the meaning ascribed thereto in Section 10.1;

“Parties” means the Purchasers and the Vendor collectively, and “Party” means
either the Purchasers or the Vendor as the context indicates;

“Permitted Encumbrances” means: (i) the Encumbrances listed in Schedule 1.1(m)
(ii) Encumbrances which, both individually and in the aggregate, are of a minor
nature, do not affect the value and do not materially impair the use of those
of the Purchased Assets (as hereinafter defined) which are so affected for the
purpose of carrying on the Business.

“Person” means an individual, partnership, joint venture, firm, society,
association, unincorporated organization, corporation, body corporate, limited
liability company, bank, trust, Governmental Authority or any trustee,
executor, administrator or other legal representative, in each case whether
acting for itself, as agent or in any other capacity;

“PST” means the Québec provincial sales tax pursuant to the QSTA;

“Purchased Assets” means the Equipment, the Shares and the Intellectual
Property;

“Purchased Subsidiaries” means Les Services d’Approvisionnement Hearing Care of
America (SAHCA) Inc., Les Services de Gestion Hearing Care of America (SGHCA)
Inc. and Les Services de Location Hearing Care of America (SLHCA) Inc.;

“Purchasers” has the meaning ascribed thereto in the preamble;

“Purchasers’ Counsel” means Joli-Coeur, Lacasse, Geoffrion, Jetté, St-Pierre,
Avocats.

“Purchase Price” has the meaning ascribed thereto in Section 2.2(a);

“QSTA” means the Québec Sales Tax Act;

“Secured Promissory Note” has the meaning ascribed thereto in paragraph
2.3(a)(3);

“Security Agreements” means the deeds of hypothec under the laws of Québec and
other security documentation to be granted at Closing by each of GF and SAHCA
in favour of the

 

 

- 6 -

Vendor to guarantee the Purchasers’ obligations under this Agreement, in form
and substance to be satisfactory to Vendor acting in a commercially reasonable
manner;

“Shares” means all the issued and outstanding shares of the Purchased
Subsidiaries;

“Subsidiary” of any Person means any corporation more than 50% of the voting
rights attaching to the shares of the capital of which, having general voting
power under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the time
shares of any other class or classes shall have or might have voting power by
reason of the happening of any contingency, is owned or controlled directly or
indirectly by such Person or by any other Subsidiary of such Person;

“Taxes” means all taxes, assessments, reassessments, charges, levies and all
other imposts whatsoever, together with all installments in respect thereof and
all interest, penalties and fines thereon or additions thereto, including gross
or net income, alternative or add-on minimum tax, excise, environmental,
property, sales, gross receipts, gains, transfer, occupation, privilege,
employment (including contributions in respect of social security, unemployment
and federal and provincial pension plans), employer health, use, value added,
goods and services, capital, net worth or surplus and franchise taxes and
customs duties, imposed, levied or assessed by any Governmental Authority or
taxing authority including any federal, provincial, local or foreign government
or taxing authority;

“Terminated Employees” shall have the meaning ascribed thereto in Section 5.1;

“Vendor” has the meaning ascribed thereto in the preamble;

“Vendor’s Counsel” means Ogilvy Renault;

“Vendor’s Ontario Operations” has the meaning ascribed thereto in Section 10.1;

Section 1.2 Interpretation

In this Agreement:

	(a)	 	the words “hereof”, “herein” and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular part
of this Agreement;
	 
	(b)	 	references to “this Agreement” shall be deemed to be references to this
Asset Purchase and Sale Agreement;
	 
	(c)	 	nothing set out in the Schedules is intended, or shall be deemed, to
establish a standard or definition of materiality or of material adverse
effect;
	 
	(d)	 	the Article and Section headings are not to be considered part of this
Agreement, are included solely for convenience of reference and do not
define, limit or enlarge the construction or interpretation hereof;

 

 

- 7 -

	(e)	 	unless otherwise expressly provided, all references to Articles, Sections
or other subdivisions or Schedules are references to Articles, Sections,
other subdivisions and Schedules of or to this Agreement;
	 
	(f)	 	references to any act or statute or section thereof shall be deemed to be
references to such act or statute or section (and shall also be deemed to
include and be a reference to the regulations made pursuant thereto), in
each case as amended, re-enacted, substituted for or replaced from time to
time;
	 
	(g)	 	references to “written” and “in writing” includes written communications
transmitted by facsimile (fax);
	 
	(h)	 	the word “include(s)” means “include(s), without limitation”, and the
word “including” means “including, but not limited to”, and the words
“such as” means “such as, without limitation”;
	 
	(i)	 	the expression “arm’s length” has the meaning ascribed thereto in the
ITA;
	 
	(j)	 	words, including defined terms, importing the singular number include the
plural and vice versa and words importing gender include all genders;
	 
	(k)	 	references to a Party shall include its successors and permitted assigns;
and
	 
	(l)	 	references to currency, and use of the dollar sign ($), are deemed to
mean lawful money of Canada and all amounts to be calculated or paid
pursuant to this Agreement are to be calculated in lawful money of Canada
and unless otherwise specified in this Agreement are to be paid by
certified cheque or bank draft drawn on a Canadian chartered bank payable
at par, in immediately available funds, in Montréal, Québec.

Section 1.3 Knowledge

All references herein to “the
best knowledge of”, “ the knowledge of” or
expressions to similar effect, shall mean the knowledge of the executive
officers of the Party referred to in the context in which such expression is
used or the knowledge which such Party and executive officers would have had if
they had conducted a diligent inquiry into the relevant subject-matter.

Section 1.4 Computation of Time Periods

In this Agreement, with respect to the computation of periods of time from a
specified date to a later specified date, unless otherwise expressly stated,
the word “from” means “from but
excluding” and the words “to” and “until” each
means “to and including”, and the word “month” means a period commencing on one
day in a calendar month and ending on the day in the next succeeding calendar
month the date of which corresponds numerically to the date of such first day;
provided that if there is no such numerically corresponding date in the next
succeeding calendar month such period shall end on the last day of such next
succeeding calendar month.

 

 

- 8 -

Section 1.5 Performance on Business Day

Whenever any payment shall be stated to be due or action shall be stated to be
performed on a day which is not a Business Day, such payment shall be made or
action performed on the next succeeding Business Day.

Section 1.6 Schedules

 The following schedules are attached to this Agreement:

	 	 	 
	1.1(d)	 	
List of Equipment
	 	 	 
	1.1(l)	 	
Material Consents
	 	 	 
	1.1(m)	 	
Permitted Encumbrances
	 	 	 
	1.1(o)	 	
Non-Competition Agreement (form of agreement)
	 	 	 
	2.1(c)	 	
Intellectual Property
	 	 	 
	2.2(b)	 	
Allocation of Purchase Price
	 	 	 
	5.1	 	
Terminated Employees

ARTICLE 2

PURCHASE AND SALE AND PURCHASE PRICE

Section 2.1 Purchase and Sale

	(a)	 	The Vendor hereby agrees to sell, assign, transfer and convey to Canada
Inc. at the Closing, but with effect as of the Effective Time, with good
and marketable title, free and clear of all Encumbrances, other than
Permitted Encumbrances, and Canada Inc. hereby agrees to purchase from the
Vendor at the Closing, but with effect as of the Effective Time, all
right, title and interest in, to and under the Shares.
	 
	(b)	 	The Vendor hereby agrees to sell, assign, transfer and convey to GF at
the Closing, but with effect as of the Effective Time, with good and
marketable title, free and clear of all Encumbrances, other than Permitted
Encumbrances, and GF hereby agrees to purchase from the Vendor at the
Closing, but with effect as of the Effective Time, all right, title and
interest in, to and under the Equipment and the Intellectual Property.
	 
	(c)	 	The Vendor hereby agrees to assign and transfer to GF at the Closing,
provided that the Vendor has obtained, if necessary, the consent of any
third party, all its rights, title and interest in and to the Integra
Accounting software.
	 
	(d)	 	The Vendor hereby grants to GF the right to use, in the Province of
Québec and only to the extent that it has been used by the GF since July
11, 2002, the “Ear and Wave” design for an initial period of 20 years,
subject to reasonable usage by GF consistent with prior usage by the
Vendor or by others as permitted by the Vendor.

 

 

- 9 -

	(e)	 	The Vendor hereby grants to GF the right to use, in the Province of
Québec, the “Helix” trademark and the related logo in connection with the
disposition in the ordinary course of business of the existing inventory
of products bearing such trademark, subject to reasonable usage by GF
consistent with prior usage by the Vendor or by others as permitted by the
Vendor.

Section 2.2 Purchase Price and Additional Consideration

	(a)	 	The Purchasers, jointly and severally, agree to pay $2,343,288 to the
Vendor (the “Purchase Price”), subject to the adjustments set forth in
Section 2.4 hereof.
	 
	(b)	 	The Purchase Price shall be allocated by the Parties to the Purchased
Assets as or in the manner set out in Schedule 2.2(b).
	 
	(c)	 	GF shall pay to the Vendor on the Closing Date an amount of $379,661.58
representing the portion of the accounts payable of SAHCA to Siemens
Hearing Instruments, Inc. , as of the Effective Date, previously paid by
the Vendor on June 30, 2003.

Section 2.3 Payment of Purchase Price

	(a)	 	The Purchase Price shall be payable as follows:

	 	(1)	 	An amount of $960,000 shall be paid to the Vendor by the
Purchasers at the Closing Time by way of certified cheques or wire
transfers of immediately available funds by each of GF and Canada
Inc.
	 
	 	(2)	 	The remainder of the Purchase Price shall be paid by the
Purchasers in the manner specified in (1) above as follows:

	 	 	 
	 	(i)	
$300,000 on the date that is 30 days after the Closing Date,
subject to the adjustments set forth in Section 2.4 hereof;
	 	 	 
	 	(ii)	
$400,000 on the date that is 60 days after the Closing Date;
	 	 	 
	 	(iii)	
$400,000 on the date that is 90 days after the Closing Date;
	 	 	 
	 	(iv)	
$145,000 on the date that is 120 days after the Closing Date; and
	 	 	 
	 	(v)	
$138,288 on the date that is 150 days after the
Closing Date, subject to the adjustments set forth in Section
2.4 hereof.

	 	(3)	 	On the Closing Date, the Purchasers shall execute a Secured
Promissory Note, in an amount of $1,383,288.00 in favour of the
Vendor as evidence of the indebtedness pursuant to paragraph
2.3(a)(2) above.
	 
	 	(4)	 	As security for the payment of the Purchase Price, the
Purchasers shall execute the Security Agreements in favour of the
Vendor.

 

 

- 10 -

	 	(5)	 	The Purchasers shall not be entitled to set-off the amount of
any Claims hereunder against any other amounts payable by the
Purchasers to the Vendor whether hereunder or otherwise.

Section 2.4 Adjustments to Purchase Price

	(a)	 	The Purchase Price shall be increased to include the joint and several
obligation of the Purchasers to reimburse, for the period of time between
the Effective Time and the Closing Date, the following to the Vendor: (i)
all costs and expenses related to the continuing employment of the
Vendor’s director of operations for the Business and her assistant; and
(ii) fifty per cent (50%) of any and all costs and expenses incurred in
the ordinary course of business and consistent with past practices related
to the continuing operation of the Vendor’s corporate office located at
7100, Jean-Talon East, Suite 610, Montreal, Québec excluding all costs and
expenses related to Vendor’s in-house legal counsel; and
	 
	(b)	 	the adjustments to the Purchase Price pursuant to this Section 2.4 shall
be payable as follows: (i) as much as reasonably possible, all adjustments
shall be paid on the Closing Date; (ii) 30 days following the Closing Date
a second payment shall be made in connection with any adjustment not paid
on the Closing Date; and (iii) the balance of the adjustments shall be
paid 150 days following the Closing Date.

Section 2.5 GST and PST Elections

The Purchasers and the Vendor shall, with respect to the transfer of the
Purchased Assets to the Purchasers pursuant hereto, make a joint election
pursuant to Subsection 167(1) of the ETA and Section 75 of the QSTA, in the
prescribed forms containing the prescribed information and within the time
period specified for the purposes of the prescribed forms, in order to effect
such transfer of the Purchased Assets without payment of any GST and PST by the
Purchasers. The Vendor shall prepare and execute the prescribed forms and
deliver same at or before the Closing Time for execution by the Purchasers, and
the Purchasers shall file such forms within the prescribed time periods.

Section 2.6 Consent to Assignments

	(a)	 	The Vendor shall exercise all commercially reasonable efforts, and the
Purchasers shall assist using commercially reasonable efforts, for the
purpose of obtaining all Consents necessary for the assignment or transfer
by the Vendor to GF, or for the issue or re-issue to GF, of any Purchased
Asset which is intangible property or of any warranty pertaining to any
Purchased Asset (collectively, the “Rights”), and
	 
	(b)	 	If the Vendor is unable to obtain any of the Consents (other than the
Material Consents) required for the assignment, transfer, issue or
re-issue of any Right before the Closing Time, the Vendor shall, at the
request of the Purchasers and to the extent permitted by the applicable
Laws, hold, enforce, use, carry-out and comply with such Right, and all
benefits derived therefrom, against such Person as agent, and for the
exclusive benefit, of the Purchasers until such Consent is obtained, and
the Vendor shall continue, after the

 

 

- 11 -

	 	 	Closing Time, to exercise their
commercially reasonable efforts to
obtain and cooperate with the
Purchasers for the purpose of
obtaining such Consents.

Section 2.7 Liabilities

The Vendor shall not be liable, directly or indirectly, for any liability,
obligation, agreement, contract, debt, charge, claim, judgment or other fee or
expense in connection with the operation of the Business following the Closing
Time. The foregoing shall not be construed as limiting the obligations of the
Vendor set forth in Article 8 below.

Section 2.8 Transfer Expenses

The Purchasers shall be solely liable for and shall pay all related fees,
expenses, legal and professional fees and other charges and payments to
competent authorities with respect to the transfer of the Intellectual Property
from the Vendor to GF and other Purchased Assets to Purchasers.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of the Vendor

In order to induce the Purchasers to enter into and to consummate the
transactions contemplated hereby, the Vendor represents and warrants to the
Purchasers, as at the date of execution of this Agreement the following:

	(a)	 	Corporate Status
	 
	 	 	The Vendor is:

	 	(1)	 	a corporation duly incorporated, organized and validly
existing under the federal laws of Canada,
	 
	 	(2)	 	duly registered as an extra provincial corporation in which
it owns the Purchased Assets or operates the Business operated by
it, except where failure to so register does not have a material
adverse effect on the consummation of the transaction contemplated
hereby,
	 
	 	(3)	 	in good standing with respect to the filing of annual reports
with the Director under the Canada Business Corporations Act and all
filings required to be made pursuant to or under the Loi sur la
publicité légale des entreprises individuelles, des sociétés et des
personnes morales (Québec).

 

 

- 12 -

	(b)	 	Corporate Power and Capacity
	 
	 	 	The Vendor has the corporate power and corporate capacity

	 	(1)	 	to own the Purchased Assets owned by it,
	 
	 	(2)	 	to enter into and deliver this Agreement and the Ancillary
Documents to which it is a party, and to perform its obligations
hereunder and thereunder.

	(c)	 	Residency
	 
	 	 	The Vendor is not and shall not be on the Closing Date, a non-resident of
Canada for the purposes of the ITA or the Taxation Act (Québec).
	 
	(d)	 	Solvency
	 
	 	 	The Vendor is not insolvent nor has it committed an act of bankruptcy,
proposed a compromise or arrangement to its creditors generally, had any
petition in bankruptcy filed against it, made a voluntary assignment in
bankruptcy or taken any proceeding to be declared bankrupt, to liquidate
its assets or to be dissolved.
	 
	(e)	 	Enforceability
	 
	 	 	This Agreement and the Ancillary Documents constitute legal, valid and
binding obligations of the Vendor, and are enforceable against the Vendor
in accordance with their terms, except to the extent that

	 	(1)	 	the availability of equitable remedies is subject to the
discretion of applicable judicial authority,
	 
	 	(2)	 	enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other laws relating to
the rights of creditors generally, and
	 
	 	(3)	 	the availability generally of remedies due to the application
of legal and equitable principles.

	(f)	 	Consents
	 
	 	 	Except as disclosed in Schedule 1.1(l), no Consent, is required in order
for the Vendor to,

	 	(1)	 	incur its obligations pursuant to this Agreement and the
Ancillary Documents,
	 
	 	(2)	 	enter into and deliver this Agreement and the Ancillary
Documents, and
	 
	 	(3)	 	perform and observe the provisions of this Agreement and the
Ancillary Documents.

 

 

- 13 -

	(g)	 	Conduct of Business
	 
	 	 	Except as disclosed in Schedule 3.1(h), the Vendor has not, since October
20, 2002, directly or indirectly,

	 	(i)	 	conducted the Business other than in the ordinary
course and since said date the Vendor has not entered into any
transaction other than in the ordinary course of the Business
as previously conducted, and to the Vendor’s knowledge there
has been no material adverse effect on the Business,
	 
	 	(ii)	 	except for the management and supply of hearing
care centres in the Province of Ontario, carried on any
business other than the Business.

	(h)	 	Purchased Assets
	 
	 	 	The Equipment are, to the best of the Vendor’s knowledge, in good
operating condition and repair (having regard to the age and use
thereof), except for normal wear and tear, as shall permit their use and
the operation of the Business after the Effective Time in the same manner
as previously and presently conducted.
	 
	(i)	 	Title to Purchased Assets
	 
	 	 	The Vendor is the legal and beneficial owner of the Purchased Assets with
good and marketable title, free and clear of all Encumbrances, except the
Permitted Encumbrances.
	 
	(j)	 	Rights to Purchased Assets
	 
	 	 	No Person has any right, agreement or option, present or future,
contingent or absolute, or any right capable of becoming an agreement or
option, for the purchase of any of the Purchased Assets, except for Les
Laboratoires Orthopédiques Nouvelle Génération Division Distribution Inc.
pursuant to a Sub-Lease Agreement entered into on May 23, 2003, a copy of
which has been provided to the Purchasers.
	 
	(k)	 	Preservation of Rights
	 
	 	 	Since October 20, 2002, the Vendor has

	 	(1)	 	taken all reasonable action required to maintain and preserve
its right, title and interest in the Purchased Assets, and
	 
	 	(2)	 	not taken any action which has or may result in an
Encumbrance on, or an increase in the fees or taxes payable in
respect of, any of the Purchased Assets, other than the Permitted
Encumbrances with regard to the Purchased Assets.

 

 

- 14 -

	(l)	 	Intellectual Property

	 	(1)	 	All Intellectual Property is owned by the Vendor free and
clear of any Encumbrances other than Permitted Encumbrances, and the
Vendor has not assigned, licensed, encumbered or otherwise granted
any of its rights to use such Intellectual Property to any Person
other than pursuant to Software License Agreements for the Audio
Software Québec software dated June 13, 2002 in favour of Richard
Doucet and Martin Cousineau and 9116-3832 Québec Inc.

	(m)	 	Books and Records
	 
	 	 	The Books and Records of the Purchased Subsidiaries include all such
books and records as are reasonably necessary for the conduct of the
Business of the Purchased Subsidiaries. Since July 11, 2002, the Books
and Records of the Purchased Subsidiaries have been maintained in
accordance with sound business practices and present fairly, in all
material respects, the matters referred to therein including all material
financial transactions relating to the Business of the Purchased
Subsidiaries.
	 
	(n)	 	Financial Records
	 
	 	 	Since July 11, 2002, all material transactions affecting the Purchased
Assets have been properly recorded or filed in the corporate and other
record books of the Vendor as applicable.
	 
	(o)	 	Claims Against the Vendor
	 
	 	 	To the best of the Vendor’s knowledge, since October 20, 2002 there are
no:

	 	(i)	 	Claims outstanding or pending or threatened before any
tribunal (judicial, quasi-judicial, administrative,
quasi-administrative or arbitral) or before or by any Governmental
Authority against or concerning the Vendor that may result in a
material adverse effect, or
	 
	 	(ii)	 	facts or circumstances in existence that could be expected to
give rise to such a claim, demand, investigation, cause of action,
action, proceeding, judgment, order or award.

	(p)	 	No Violation
	 
	 	 	The execution and delivery of this Agreement and the Ancillary Documents
by the Vendor and the consummation of the transactions provided for
herein or therein shall not result in the breach or violation of any, or
constitute a default under or an event that, with the giving of notice or
lapse of time or both, would constitute an event of default under, or
conflict with or cause acceleration of, any obligation of the Vendor
under

	 	(1)	 	any contract, consent or approval to which the Vendor is a
party or by which the Vendor is bound or any consent or approval
from which the Vendor derives benefit,

 

 

- 15 -

	 	(2)	 	any provision of the constating documents and, where
applicable, by-laws or resolutions of the board of directors (or any
committee thereof) or shareholders of the Vendor,
	 
	 	(3)	 	any judgment, decree, order or award of any court,
Governmental Authority or arbitrator having jurisdiction over the
Vendor, or
	 
	 	(4)	 	any applicable Law.

	(q)	 	GST and PST Registrant
	 
	 	 	The Vendor is a GST and PST registrant pursuant to the ETA and the QSTA,
respectively and its GST and PST registration numbers are as follows:

	 	 	 
	 	GST Registration No.	PST Registration No.
	 

	 	141759308	
1019937701

Section 3.2 Representations and Warranties of Purchasers

In order to induce the Vendor to enter into and to consummate the transactions
contemplated hereby, each of the Purchasers represents and warrants to the
Vendor as follows:

	(a)	 	Purchasers Status
	 
	 	 	Canada Inc. is

	 	(1)	 	a corporation duly incorporated, organized and validly
existing under the federal laws of Canada;
	 
	 	(2)	 	in good standing with respect to the filing of annual reports
with the Director under the Canada Business Corporations Act and all
filings required to be made pursuant to or under the Loi sur la
publicité légale des entreprises individuelles, des sociétés et des
personnes morales (Québec).

	(b)	 	GF is:

	 	(1)	 	a general partnership duly registered organized and validly
existing under the laws of Québec;
	 
	 	(2)	 	in good standing with respect to all filings required to be
made pursuant to or under the Loi sur la publicité légale des
entreprises individuelles, des sociétés et des personnes morales
(Québec).

	(c)	 	Corporate Power and Capacity of Purchasers
	 
	 	 	Each of the Purchasers has the corporate power and capacity to enter into
and deliver this Agreement and the Ancillary Documents and to perform its
obligations hereunder and thereunder.

 

 

- 16 -

	(d)	 	Solvency of Purchasers
	 
	 	 	Each of the Purchasers is not insolvent nor has it committed an act of
bankruptcy, proposed a compromise or arrangement to its creditors
generally, made a voluntary assignment in bankruptcy, taken any
proceeding to be declared bankrupt, liquidate its assets or be dissolved
or had, to the best of each of the Purchasers’ knowledge, any petition in
bankruptcy filed against it.
	 
	(e)	 	Enforceability
	 
	 	 	This Agreement and the Ancillary Documents constitute the legal, valid
and binding obligations of each of the Purchasers and are enforceable
against each of the Purchasers in accordance with their terms, except to
the extent that

	 	(1)	 	the availability of equitable remedies is subject to the
discretion of applicable judicial authority,
	 
	 	(2)	 	enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws
relating to the rights of creditors generally, and
	 
	 	(3)	 	the availability generally of remedies due to the application
of legal and equitable principles.

	(f)	 	Consents
	 
	 	 	No Consent is required in order for each of the Purchasers to

	 	(1)	 	incur its obligations pursuant to this Agreement and the
Ancillary Documents,
	 
	 	(2)	 	enter into and deliver this Agreement and the Ancillary
Documents, and
	 
	 	(3)	 	perform and observe the provisions of this Agreement and the
Ancillary Documents.

	(g)	 	No Violation
	 
	 	 	The execution and delivery of this Agreement and the Ancillary Documents
by each of the Purchasers and the consummation of the transactions
provided for herein or therein shall not result in the breach or
violation of any, or constitute a default under or an event that, with
the giving of notice or lapse of time or both, would constitute an event
of default under, or conflict with or cause acceleration of, any
obligation of each of the Purchasers under

	 	(1)	 	any contract, consent or approval to which any of the
Purchasers is a party or by which any of the Purchasers is bound or
any consent or approval from which any of the Purchasers derives
benefit,

 

 

- 17 -

	 	(2)	 	any provision of the constating documents and, where
applicable, by-laws or resolutions of the board of directors (or any
committee thereof) or shareholders of any of the Purchasers,

	 	(3)	 	any judgment, decree, order or award of any court,
Governmental Authority or arbitrator having jurisdiction over any of
the Purchasers, or

	 	(4)	 	any applicable Law.

	(h)	 	GST PST Registrant
	 
	 	 	Each of the Purchasers is a GST and PST registrant pursuant to the ETA
and the QSTA, respectively and its GST and PST registration numbers are
as follows:
	 
	 	 	GF:

	 	 	 	 	 
	GST Registration No.	 	PST Registration No.
	
	 	

	11186-5556	 	 	
1012303269	 

	 	 	6068065 Canada Inc.:

	 	 	 	 	 
	GST Registration No.	 	PST Registration No.
	
	 	

	898315502RT	 	 	
1204114753	 

	(i)	 	Financing
	 
	 	 	The Purchasers have obtained the necessary financing, from reputable
financial or other institutions that are acceptable to the Vendor acting
reasonably, and are in possession of immediately available funds to
fulfil their obligations under this Agreement and have provided evidence
of same to the Vendor.

ARTICLE 4

COVENANTS

Section 4.1 General Covenants of the Vendor

The Vendor covenants and agrees with the Purchasers that at the Closing Time,
it shall:

	(a)	 	duly execute and deliver or cause or arrange to have duly executed and
delivered, at or before the time required for delivery, all agreements,
instruments and certificates to be delivered by it pursuant to this
Agreement and the Ancillary Documents;
	 
	(b)	 	have obtained all required Material Consents to the sale, assignment,
transfer and conveyance to and purchase by the Purchasers of the Purchased
Assets;

 

 

- 18 -

	(c)	 	have obtained the discharge and release of all Encumbrances on the
Purchased Assets other than the Permitted Encumbrances;
	 
	(d)	 	have obtained the approval of Siemens Hearing Instruments, Inc. to this
transaction provided that the Purchasers or any of their Subsidiaries
enters into a supply agreement with Siemens Canada Limited and commits to
purchase from Siemens Canada Limited, an amount of products acceptable to
Siemens Hearing Instruments, Inc.;
	 
	(e)	 	have kept the respective books of account for the Purchased Assets and
the Purchased Subsidiaries to reflect all material financial transactions
in respect of the Purchased Assets and the Purchased Subsidiaries to which
the Vendor is a party in accordance with past practices;
	 
	(f)	 	have maintained and preserved the Vendor’s interest in the Purchased
Assets in good standing, except for dispositions and consumption in the
ordinary course of, and in a manner consistent with the practices for, the
Business applied during the previous periods;
	 
	(g)	 	have conducted the Business only in the ordinary course of, and in a
manner consistent with the practices for, the Business applied during the
previous periods; and
	 
	(h)	 	have terminated the management agreements between GF and each of SAHCA,
SLHCA, and SGHCA.

Section 4.2 General Covenants of Purchasers

Each of the Purchasers covenants and agrees with the Vendor that at the Closing
Time, it shall:

	(a)	 	have entered into a supply agreement with Siemens Canada Limited whereby
the Purchasers or any of their Subsidiaries shall commit to purchase from
Siemens Canada Limited, an amount of products acceptable to Siemens
Hearing Instruments, Inc.;
	 
	(b)	 	duly execute and deliver or cause or arrange to have duly executed and
delivered, at or before the time required for delivery, all agreements,
instruments and certificates to be delivered by it pursuant to this
Agreement and the Ancillary Documents;
	 
	(c)	 	advise the Vendor of the occurrence of any circumstance which materially
adversely affects, or with the giving of notice or lapse of time or
otherwise, could reasonably be anticipated to materially adversely affect,
the ability of the Purchasers to complete the transactions contemplated
hereby;
	 
	(d)	 	take all necessary steps and proceedings as may be considered appropriate
by the Vendor’s Counsel in order that the Purchased Assets be duly and
regularly sold, assigned, transferred and conveyed to the Purchasers as of
the Effective Time;
	 
	(e)	 	not have entered into any transaction which could have an adverse impact
on the consummation of the transactions contemplated hereunder; and

 

 

- 19 -

	(f)	 	have agreed to the termination of the management agreements between GF
and each of SAHCA, SLHCA and SGHCA.

ARTICLE 5

EMPLOYEE MATTERS

Section 5.1 Employment Liabilities; Termination of Employment by the Vendor

All liabilities to employees or former employees of the Vendor or any other
Person relating to the employment of, or services rendered by any of such
employees up to the Closing Date, shall remain and be the sole and complete
responsibility of the Vendor.

Prior to the Closing Date, the Vendor shall terminate the employment of the
individuals the name of which is listed in Schedule 5.1 (the “Terminated
Employees”) and shall assume any and all liabilities to any of the Terminated
Employees accrued on or before the termination of employment thereof or as a
result thereof.

Section 5.2 Employment by Purchasers

At the Closing, the Purchasers shall assume all the obligations in relation to
the Employees and provided for by the Civil Code of Québec in the provisions
appended to this Agreement, as well as the obligations provided for by the
Labour Standards Act (Québec) and any other statute in force in the Province of
Québec.

Moreover, the Purchasers shall indemnify and hold the Vendor free of all
liability arising from any legal proceeding or remedy instituted by a
Terminated Employee.

ARTICLE 6

CONDITIONS PRECEDENT

Section 6.1 Conditions for the Benefit of Purchasers

The obligations of the Purchasers to be performed pursuant to this Agreement
and the Ancillary Documents at the Closing Time are subject to the fulfilment,
on or before the Closing Time, of each of the following conditions:

	(a)	 	Representations and Warranties Remain Correct
	 
	 	 	Each of the representations and warranties of the Vendor contained in
this Agreement and the Ancillary Documents shall be true and correct, in
all material respects, on and as at the Closing Date;
	 
	(b)	 	Performance of Obligations
	 
	 	 	The Vendor shall have performed or complied in all material respects with
all their agreements, covenants, obligations and conditions herein agreed
to be performed or

 

 

- 20 -

	 	 	complied with or caused to be performed or complied with by the Vendor on
or prior to the Closing Time;
	 
	(c)	 	No Material Adverse Effect
	 
	 	 	No state of facts or circumstances shall exist as at the Closing Time
which has resulted or could reasonably be expected to result in a
material adverse effect on the Purchased Assets;
	 
	(d)	 	Material Consents and Releases
	 
	 	 	The Vendor shall have obtained all the Material Consents and all
discharges and releases contemplated in Section 4.1(b) hereof;
	 
	(e)	 	Transfer Instruments
	 
	 	 	The Vendor shall have entered into such deeds of transfer, bills of sale,
assignments and other documents as are reasonably required by the

Purchasers for the transfer of the Purchased Assets to the Purchasers;
	 
	(f)	 	Tax Elections
	 
	 	 	The Vendor and the Purchasers shall have entered into the tax elections
pursuant to Section 2.5;
	 
	(g)	 	No Actions or Proceedings
	 
	 	 	No action or proceeding at law or in equity shall be pending or
threatened by any Person to enjoin or prohibit the purchase and sale of
the Purchased Assets contemplated hereby or the right of the Purchasers
to own the Purchased Assets;
	 
	(h)	 	Corporate and Other Proceedings
	 
	 	 	All corporate and other proceedings of the Vendor, in connection with the
transactions contemplated hereby, including the approval of such
transactions by the Board of Directors of the Vendor, and all documents
evidencing same or incidental thereto, shall have been duly authorized
and executed, shall be in form and substance reasonably satisfactory to
the Purchasers, and the Purchasers shall have received all such
proceedings and documents, or duly certified copies thereof, as may be
reasonably requested;
	 
	(i)	 	Opinion of the Vendor’s Counsel
	 
	 	 	The Purchasers shall have received from the Vendor’s Counsel; a
favourable opinion addressed to the Purchasers, dated the Closing Date,
with respect to

	 	(1)	 	the corporate or other legal status and capacity of the
Vendor;

 

 

- 21 -

	 	(2)	 	corporate or other legal authorization by the Vendor; for the
execution and delivery of this Agreement and the Ancillary Documents
and the performance of all of their respective obligations hereunder
and thereunder,
	 
	 	(3)	 	this Agreement and all Ancillary Documents constituting
legal, valid and binding obligations of the Vendor and other parties
thereto other than the Purchasers, enforceable against such Vendor,
as applicable in accordance with their respective terms, subject to
customary exceptions, and
	 
	 	(4)	 	such other matters incident to the transactions contemplated
hereby as the Purchasers may reasonably require, and the Vendor’s
Counsel may, as to facts material to said opinion which are not
independently established by it, rely on certificates of public
officials or of officers of the Vendor.

	 	 	The conditions contained in this Section 6.1, other than those in Section
(f), are for the exclusive benefit of the Purchasers and may be waived by
the Purchasers in writing in whole or in part at or before the Closing
Time.

Section 6.2 Conditions for the Benefit of the Vendor

The obligations of the Vendor to be performed pursuant to this Agreement and
the Ancillary Documents at the Closing Time are subject to the fulfilment, on
or before the Closing Time, of each of the following conditions:

	(a)	 	Representations and Warranties Remain Correct
	 
	 	 	Each of the representations and warranties of each of the Purchasers
contained in this Agreement and the Ancillary Documents shall be true and
correct, in all material respects, on and as at the Closing Date;
	 
	(b)	 	Performance of Obligations
	 
	 	 	Each of the Purchasers shall have performed or complied in all material
respects with all their agreements, covenants, obligations and conditions
herein agreed to be performed or complied with or caused to be performed
or complied with by each of the Purchasers on or prior to the Closing
Time;
	 
	(c)	 	Non-Competition Agreement
	 
	 	 	Each of the Purchasers shall have entered into the Non-Competition
Agreement with the Vendor and the Purchasers shall cause Steve Forget to
enter into a Non-Competition Agreement with the Vendor;
	 
	(d)	 	Tax Elections
	 
	 	 	Each of the Purchasers and the Vendor shall have entered into the tax
elections pursuant to Section 2.5;

 

 

- 22 -

	(e)	 	No Actions or Proceedings
	 
	 	 	No action or proceeding at law or in equity shall be pending or
threatened by any Person to enjoin or prohibit the purchase and sale of
the Purchased Assets contemplated hereby;
	 
	(f)	 	Corporate and Other Proceedings
	 
	 	 	All corporate and other proceedings of each of the Purchasers in
connection with the transactions contemplated hereby, including the
approval of such transactions by the Board of Directors of Canada Inc.,
and all documents evidencing same or incidental thereto, shall have been
duly authorized and executed, shall be in form and substance reasonably
satisfactory to the Vendor, and the Vendor shall have received all such
proceedings and documents, or duly certified copies thereof, as may be
reasonably requested;
	 
	(g)	 	Opinion of Purchasers’ Counsel
	 
	 	 	The Vendor shall have received from the Purchasers’ Counsel a favourable
opinion addressed to the Vendor, dated at the Closing Date, with respect
to:

	 	(1)	 	the corporate status and capacity of each of the Purchasers,
	 
	 	(2)	 	corporate authorization by each of the Purchasers for the
execution and delivery of this Agreement and the Ancillary Documents
and the performance of all of their respective obligations hereunder
and thereunder,
	 
	 	(3)	 	this Agreement and the Ancillary Documents constituting
legal, valid and binding obligations of each of the Purchasers,
enforceable against each of the Purchasers in accordance with their
respective terms, subject to customary exceptions, and
	 
	 	(4)	 	such other matters incident to the transactions contemplated
hereby as the Vendor may reasonably require, and the Purchasers’
Counsel may, as to facts material to said opinion which are not
independently established by it, rely on certificates of public
officials or of officers of each of the Purchasers.

The conditions contained in this Section 6.2, other than those in Sections (c),
(d) and (e) are for the exclusive benefit of the Vendor and may be waived by
the Vendor in writing in whole or in part at or before the Closing Time.

ARTICLE 7

SURVIVAL AND RELIANCE ON REPRESENTATIONS AND WARRANTIES

Section 7.1 Survival Notwithstanding Investigation

Notwithstanding any investigation conducted before or after the Closing Date
and notwithstanding any actual or implied knowledge or notice of any fact or
circumstance which any Person may have as a result of such investigation or
otherwise, the Parties shall be entitled to

 

 

- 23 -

rely upon the representations and warranties contained in this Agreement and
the Ancillary Documents delivered pursuant hereto and the obligations of the
Parties with respect thereto shall survive the Closing Date and shall continue
in full force and effect as provided in Section 7.2.

Section 7.2 Survival of Liability for Representations and Warranties

	(a)	 	All the representations and warranties of the Vendor contained in this
Agreement shall survive the Closing Date and shall continue in full force
and effect as follows:

	 	(1)	 	where a Claim for the breach of a representation or warranty
is based on or relates to:

	 
	 	(i)	 	title to the Purchased Assets pursuant to the
provisions hereof, or
	 
	 	(ii)	 	intentional misrepresentation or fraud by the
Vendor,
	 

	 	 	 	until the expiry of the relevant limitation or prescription period
under applicable Law;
	 
	 	(2)	 	where a Claim for the breach of a representation or warranty
is based on or relates to any other matter, for a period of 150
days,

	 	 	except to the extent that during such period the Purchasers shall have
given notice to the Vendor of a Claim in respect of any such
representation or warranty, in which case such representation or warranty
with respect to such Claim (or any additional or supplemental Claim with
respect to the subject matter of the initial Claim) shall continue in
full force and effect until the final determination thereof.
	 
	(b)	 	All the representations and warranties of each of the Purchasers
contained in this Agreement and the Ancillary Documents shall survive the
Closing Date and shall continue in full force and effect for a period of
150 days, except to the extent that during such period the Vendor shall
have given notice to the Purchaser of a Claim in respect of any such
representation or warranty, in which case such representation or warranty
with respect to such Claim (or any additional or supplemental Claim with
respect to the subject matter of the initial Claim) shall continue in full
force and effect until the final determination thereof.

ARTICLE 8

INDEMNITY

Section 8.1 Indemnification by the Vendor

The Vendor shall be liable to the Purchasers and shall defend, indemnify and
hold harmless the Purchasers and their shareholders, directors and officers
against any and all Claims incurred after the Closing by the Purchasers
resulting from, relating to or in any way connected with:

 

 

- 24 -

	(a)	 	the breach or non-fulfilment of any representation, warranty, agreement,
covenant or any other obligation of the Vendor contained in this Agreement
and the Ancillary Documents delivered to the Purchasers pursuant hereto;
or
	 
	(b)	 	the conduct of the Business from October 20, 2002 up to the Effective
Time.

Section 8.2 Indemnification by Each of Purchasers

The Purchasers shall, on a joint and several basis, be liable to the Vendor and
shall defend, indemnify and hold harmless the Vendor and its shareholders,
directors and officers against any and all Claims incurred after the Closing by
it resulting from, relating to or in any way connected with:

	(a)	 	the breach or non-fulfillment of any representation, warranty, agreement,
covenant or any other obligation of each of the Purchasers contained in
this Agreement and the Ancillary Documents delivered to the Vendor
pursuant hereto;
	 
	(b)	 	any agreement, covenant, obligation or liability of the Purchased
Subsidiaries; or
	 
	(c)	 	the conduct of the Business after the Effective Time.

Section 8.3 Notice of Claim

A Party shall, when it has knowledge of facts or circumstances which give rise
to a Claim under this Agreement or the Ancillary Documents against another
Party, promptly notify the other Parties of such facts or circumstances in
writing.

Following receipt from the other party (the “Indemnified Party”) of written
notice of a Claim for indemnification, the Party who is in receipt of such
notice (the “Indemnifying Party”) shall have 30 days to make such investigation
of the Claim as the Indemnifying Party considers necessary or desirable for the
purpose of such investigation. The Indemnified Party shall make available to
the Indemnifying Party, the information relied upon by the Indemnified Party to
substantiate the Claim. If the Indemnified Party and the Indemnifying Party
agree at or prior to the expiration of such 30 day period (or any mutually
agreed upon extension thereof) to the validity and amount of the Claim, the
Indemnifying Party shall immediately pay to the Indemnified Party, the full
agreed upon amount of the Claim. If the Indemnified Party and the Indemnifying
Party fail to reach a mutually acceptable agreement with respect to a Claim
within the time period mentioned above, such Claim shall be referred to the
President or the Chief Executive Officer of each of the Indemnified Party and
the Indemnifying Party who shall then each appoint a representative to conduct,
during a further ten (10) day period (or any mutually agreed upon extension
thereof), good faith negotiations and agree on a complete and final settlement
of such Claim.

Section 8.4 Restrictions on Claims

Neither the Purchasers nor the Vendor shall be liable for a Claim with respect
to the breach of any of their respective representations or warranties pursuant
to Section 3.1 or Section 3.2, as applicable, unless the Indemnified Party has
commenced proceedings for enforcement of such

 

 

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Claim within the applicable survival of liability period pursuant to Section
7.2(a) or Section 7.2(b), as applicable.

Section 8.5 GST and PST on Indemnity

If any indemnity payment determined under this Article 8 is deemed to include
GST or PST or similar taxes, the Indemnitor shall pay the Indemnifying Party,
in addition to the amount of such indemnity payment, an amount equal to the
amount of such indemnity payment multiplied by the applicable rate of GST, PST
or similar taxes at the time of the payment of such indemnity payment.

Section 8.6 Limit on Indemnity

Notwithstanding anything contained herein, the liability of the Vendor pursuant
to any indemnification obligations hereunder shall in no event exceed in the
aggregate of the Purchase Price.

ARTICLE 9

CLOSING

Section 9.1 Time and Place of Closing

The Closing will take place at the offices of the Vendor’s Counsel, Ogilvy
Renault, at Suite 1100, 1981 McGill College Avenue, Montréal, Québec, at the
Closing Time, or at such other place as the Parties agree in writing.

Section 9.2 Closing of Purchase and Sale

The completion of the purchase and sale of the Purchased Assets pursuant to
this Agreement shall take place at the Closing Time, as follows:

	(a)	 	At the Closing, the Vendor shall deliver or cause to be delivered to the
Purchasers:

	 	(1)	 	instruments of transfer for and documents of title to the
Purchased Assets, registered in the name of the Purchasers;
	 
	 	(2)	 	instruments of transfer for and documents of title to the
Intellectual Property; and
	 
	 	(3)	 	all such other agreements, instruments, certificates,
consents, opinions and other documents herein required to be
delivered by the Vendor at or prior to the Closing Time and not
theretofore received by the Purchasers.

	(b)	 	The Purchasers shall deliver or cause to be delivered:

	 	(1)	 	to the Vendor, the Purchase Price herein required to be paid
by the Purchasers pursuant to Section 2.3;

 

 

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	 	(2)	 	to the Vendor, all such other agreements, certificates,
consents, opinions and other documents herein required to be
delivered by the Purchasers at or prior to the Closing Time and not
theretofore received by the Vendor.

	(c)	 	It is agreed that at the Closing each of the Vendor and the Purchasers
must be satisfied with the final form of each of the Ancillary Documents
and that each Schedule hereto is accurate and complete, each acting in a
commercially reasonable manner.

ARTICLE 10

RIGHT OF FIRST REFUSAL AND OF FIRST OFFER

Section 10.1 Right of First Refusal

The Vendor hereby grants to Canada Inc. a right of first refusal as set forth
herein for the purchase of all the Vendor operations conducted in Ontario,
Canada (the “Vendor’s Ontario Operations”). In the event that the Vendor
receives a bona fide offer from an unaffiliated third party to purchase all or
part of the Vendor’s Ontario Operations, which the Vendor’s Board of Directors
is inclined to accept (the “Offer”), the Vendor will give Canada Inc. notice of
such Offer, which notice shall include the terms and conditions of such Offer.
Canada Inc. shall then have the right to purchase all (but not less than all)
of the Vendor’s Ontario Operations which are the subject of the Offer on the
same terms and conditions as are contained in the Offer. Canada Inc.’s right
hereunder must be exercised in writing within fifteen (15) days following
receipt of the notice from the Vendor of the Offer. Canada Inc. must include
in his written exercise his irrevocable commitment to make such purchase and
the source of the funding for such purchase. The written exercise must be
accompanied by a written irrevocable funding commitment by the funding source,
which must be a bank, financial institution or other reputable source. In the
event Canada Inc. provides such timely notice to the Vendor, the Vendor agrees
that it will make the sale contemplated by the Offer to Canada Inc. on the
terms and conditions contained in the Offer. In the event Canada Inc. does not
exercise its right hereunder, or affirmatively declines to make the purchase on
the terms of the Offer, or fails to consummate the purchase on the terms of the
Offer within 30 days following receipt of the notice from the Vendor of the
Offer, then the Vendor may proceed with such proposed transaction on the terms
and conditions contained in the Offer. This right of first refusal shall
expire on the date that is eighteen (18) months following the Closing Date.
This right of first refusal shall not apply to any merger or consolidation of
the Vendor with an unaffiliated third party or any sale of all or substantially
all of the assets of the Vendor and its Affiliates to an unaffiliated third
party.

Section 10.2 Right of First Offer

The Vendor agrees that it will seriously consider any bona fide offer that
Canada Inc. might make to the Vendor to purchase all or part of the Vendor’s
Ontario Operations. To discharge this obligation, the Vendor shall cause any
such bona fide offer that Canada Inc. makes to management to the Vendor for
such purchase to be presented by management to the Board of Directors of Hear
USA, Inc. for its consideration.

 

 

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ARTICLE 11

MISCELLANEOUS

Section 11.1 Entire Agreement

This Agreement together with the Schedules referred to and attached hereto and
the Ancillary Documents contains the entire agreement among the Parties on the
subject matter hereof and supersedes and replaces all understandings,
communications, representations and agreements including the Term Sheet dated
April 2, 2003.

Section 11.2 Waiver

The failure by any Party, at any time or for any period of time, to require
performance by the other Parties or any of them, as applicable, of any of the
latter’s obligations under this Agreement or any Ancillary Document shall not
affect the former’s right thereafter to require such performance. The waiver
by any Party, at any time or for any period of time, of any breach by the other
Parties or any of them, as applicable, of any term or condition of this
Agreement or any Ancillary Document shall not be deemed or construed a waiver
of any such other breach thereafter.

Section 11.3 Amendments

This Agreement or any Ancillary Document shall not be modified or amended
except by agreement in writing signed by duly authorized representatives of all
the Parties.

Section 11.4 Cumulative Remedies

The rights and remedies of the Parties provided in this Agreement and the
Ancillary Documents are cumulative and no exercise or enforcement by the
Parties of any right or remedy under this Agreement or the Ancillary Documents
shall preclude the exercise or enforcement by the Parties of any other right or
remedy under this Agreement, the Ancillary Documents or otherwise available to
the Parties at law or in equity.

Section 11.5 Expenses Payable by Each Party

Each Party shall be responsible for all costs and expenses incurred in
connection with the negotiation and execution and delivery of this Agreement
and the Ancillary Documents and the completion of the transactions contemplated
hereby and thereby including all legal, accounting or other professional
advisory fees, all finder’s, agent’s or broker’s fees and expenses, if any, and
all costs or expenses relating to due diligence and investigations.

Section 11.6 Non Disclosure; Announcements

No report or press release in connection with this Agreement or the
transactions contemplated hereby or by the Ancillary Documents will be
released, made or issued to any third party without the prior written consent
of the Parties except for any information which is required to be disclosed by
applicable Laws, or must be disclosed to obtain the Consents or otherwise
satisfy the conditions precedent to Closing for the transfer of the Purchased
Assets. The Parties shall

 

 

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prepare a joint public announcement and press release to announce the purchase
and sale of the Purchased Assets, which shall be made and issued only after the
Closing unless otherwise required by law.

Section 11.7 Reasonable Efforts

Each Party shall use all commercially reasonable efforts to satisfy the
conditions contained in Article 6 to the extent that it is in such Party’s
power to do so.

Section 11.8 Termination

If the Parties consent in writing to terminate this Agreement, this Agreement
and the Ancillary Documents shall terminate and shall be of no force
or effect.

Section 11.9 Notices

Every notice or communication required or permitted to be given under this
Agreement and the Ancillary Documents shall be in writing and sent by
registered mail (return receipt requested) or by facsimile (fax) to such Party
at the following address or such other address as such Party notifies to the
other in the same manner.

	 	 	If to the Purchasers:
	 
	 	 	189 Hymus, Suite 307

Pointe-Claire, Québec H9R 1E9

Facsimile: (514) 630-3391

Attention: Steve Forget
	 
	 	 	If to the Vendor:
	 
	 	 	1250 Northpoint Parkway

West Palm Beach, Florida

33407
	 
	 	 	Facsimile: (561) 478-9603

Attention: Chief Financial Officer
	 
	 	 	Any such notice or communication shall be deemed to have been received
on the fifth Business Day following its sending by registered mail or
on the first Business Day following its sending by facsimile (fax).

Section 11.10 Successors and Assigns

This Agreement and the Ancillary Documents shall be binding upon, and enure to
the benefit of, the Parties and their respective successors, legal
representatives and permitted assigns. Neither this Agreement nor any of the
Ancillary Documents may be assigned by the Purchasers to any other Person
without the Vendor’s prior written consent, such consent not to be unreasonably
withheld.

 

 

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Section 11.11 Further Assurances

The Parties shall do with reasonable diligence all such things and provide all
such reasonable assurances as may be required to consummate the transactions
provided for under this Agreement and the Ancillary Documents, and each Party
shall provide such further documents required by the other Parties or any of
them, as applicable, as may be reasonably necessary or desirable to effect the
purpose of this Agreement and the Ancillary Documents and carry out their
respective provisions. Each Party shall promptly remit to the appropriate Party
any monies received by it and payable to such other Party.

Section 11.12 No Third Party Beneficiary

Nothing contained in this Agreement or the Ancillary Documents is intended, or
should be interpreted as having been intended, to create any right or assume
any obligation in favour of, or grant any waiver or release from any obligation
to, or otherwise constitute a stipulation in favour of any Person, other than
the Parties pursuant to the provisions hereof.

Section 11.13 Governing Law

This Agreement shall be governed by, and construed in accordance with, the laws
in force in the Province of Québec.

Section 11.14 Severability

Except for any provision or covenant contained herein which is fundamental to
the subject matter of this Agreement or of any Ancillary Documents, the
invalidity or unenforceability of any provision contained herein or therein
shall not affect the validity or enforceability of any other provision
contained herein or therein and any such invalid or unenforceable provision
shall be deemed to be severable.

Section 11.15 Time

Time is of the essence in the performance of each obligation under this
Agreement and the Ancillary Documents.

Section 11.16 Counterparts

This Agreement may be executed by the Parties in several counterparts
(including by facsimile (fax)), each of which when so executed and delivered
shall be an original, but all such counterparts shall constitute one and the
same document.

Section 11.17 Language

The parties hereto have specifically requested that this Agreement and any
other documents ancillary thereto be drafted in the English language. Les
parties aux présentes ont spécifiquement requis que les dispositions de la
présente et les documents qui y sont accessoires soient rédigés dans la langue
anglaise.

 

 

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IN WITNESS WHEREOF this Agreement has been executed by the Parties as of the
date first hereinbefore mentioned.

	 	 	 	 	 
	 	 	HELIX HEARING CARE OF AMERICA 
CORP.
	 	 	 	 	 
	 	 	Per:	 	/s/  Stephen J. Hansbrough
	 	 	 	 	

	 	 	 	 	Name: Stephen J. Hansbrough
	 	 	 	 	Title: Chief Executive Officer
	 	 	 	 	 
	 	 	FORGET & SAUVÉ, AUDIOPROTHÉSISTES,
 S.E.N.C.
	 	 	 	 	 
	 	 	Per:	 	/s/ Steve Forget
	 	 	 	 	

	 	 	 	 	Name: Steve Forget
	 	 	 	 	Title: Partner
	 	 	 	 	 
	 	 	Per:	 	/s/ Magella Sauvé
	 	 	 	 	

	 	 	 	 	Name: Magella Sauvé
	 	 	 	 	Title: Partner
	 	 	 	 	 
	 	 	6068065 CANADA INC.
	 	 	 	 	 
	 	 	Per:	 	/s/ Steve Forget
	 	 	 	 	

	 	 	 	 	Name: Steve Forget
	 	 	 	 	Title: President

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