EXHIBIT 4.3
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AMENDED AND RESTATED DECLARATION OF TRUST
OF
REI TRUST I
_______________________________________
DATED AS OF FEBRUARY 26, 1999
_______________________________________
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TABLE OF CONTENTS/1/
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ARTICLE 1
DEFINITIONS
Section 1.01. Definitions.............................. 2
Affiliate........................................... 2
Book Entry Interest................................. 3
Business Day........................................ 3
Business Trust Act.................................. 3
Certificate......................................... 3
Certificate of Trust................................ 3
Clearing Agency..................................... 3
Clearing Agency Participant......................... 3
Closing Date........................................ 3
Code................................................ 3
Commission.......................................... 4
Common Securities................................... 4
Common Security Certificate......................... 4
Covered Person...................................... 4
Creditor............................................ 4
Debenture Trustee................................... 4
Debentures.......................................... 4
Definitive Preferred Security Certificates.......... 4
Delaware Trustee.................................... 4
Depositary Agreement................................ 4
Distribution........................................ 4
DTC................................................. 4
Event of Default.................................... 4
Exchange............................................ 4
Exchange Act........................................ 5
Fiscal Year......................................... 5
Global Certificate.................................. 5
Holder.............................................. 5
Holder Direct Action................................ 5
Indemnified Person.................................. 5
Indenture........................................... 5
Indenture Event of Default.......................... 5
Investment Company.................................. 5
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*This Table of Contents does not constitute part of the Amended and Restated
Declaration of Trust and should not have any bearing upon the interpretation of
any of its terms or provisions.
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Investment Company Act.............................. 5
Legal Action........................................ 5
Liquidation Distribution............................ 5
List of Holders..................................... 5
Majority in liquidation amount of the Securities.... 5
NASD................................................ 6
Nasdaq.............................................. 6
1933 Act Registration Statement..................... 6
1934 Act Registration Statement..................... 6
Officers' Certificate............................... 6
Opinion of Counsel.................................. 6
Original Declaration................................ 7
Paying Agent........................................ 7
Payment Amount...................................... 7
Person.............................................. 7
Preferred Securities Guarantee...................... 7
Preferred Securities................................ 7
Preferred Security Beneficial Owner................. 7
Preferred Security Certificate...................... 7
Property Trustee.................................... 7
Property Account.................................... 7
Quorum.............................................. 7
Regular Trustee..................................... 7
Related Party....................................... 8
Reliant Energy...................................... 8
Sponsor............................................. 8
Resignation Request................................. 8
Responsible Officer................................. 8
Rule 3a-7........................................... 8
Securities.......................................... 8
Securities Act...................................... 8
Special Event....................................... 8
Successor Delaware Trustee.......................... 8
Successor Entity.................................... 8
Successor Property Trustee.......................... 8
Successor Securities................................ 8
Super Majority...................................... 8
Supplemental Indenture.............................. 9
10% in liquidation amount of the Securities......... 9
Treasury Regulations................................ 9
Trust............................................... 9
Trustee............................................. 9
Trustees............................................ 9
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Trust Indenture Act................................................. 9
Underwriting Agreement.............................................. 9
ARTICLE 2
TRUST INDENTURE ACT
Section 2.01. Trust Indenture Act; Application......................... 10
Section 2.02. Lists of Holders of Preferred Securities................. 10
Section 2.03. Reports by the Property Trustee.......................... 11
Section 2.04. Periodic Reports to the Property Trustee................. 11
Section 2.05. Evidence of Compliance with Conditions Precedent......... 11
Section 2.06. Events of Default; Waiver................................ 11
Section 2.07. Disclosure of Information................................ 13
ARTICLE 3
ORGANIZATION
Section 3.01. Name..................................................... 15
Section 3.02. Office................................................... 15
Section 3.03. Issuance of the Securities............................... 15
Section 3.04. Purchase of Debentures................................... 15
Section 3.05. Purpose.................................................. 16
Section 3.06. Authority................................................ 16
Section 3.07. Title to Property of the Trust........................... 17
Section 3.08. Powers and Duties of the Regular Trustees................ 17
Section 3.09. Prohibition of Actions by the Trust and the Trustees..... 19
Section 3.10. Powers and Duties of the Property Trustee................ 21
Section 3.11. Delaware Trustee......................................... 24
Section 3.12. Certain Rights and Duties of the Property Trustee........ 24
Section 3.13. Registration Statement and Related Matters............... 28
Section 3.14. Filing of Amendments to Certificate of Trust............. 30
Section 3.15. Execution of Documents by the Regular Trustees........... 30
Section 3.16. Trustees Not Responsible for Recitals or Issuance of
Securities............................................... 30
Section 3.17. Duration of the Trust.................................... 30
Section 3.18. Mergers.................................................. 30
Section 3.19. Property Trustee May File Proofs of Claim................ 32
ARTICLE 4
SPONSOR
Section 4.01. Purchase of Common Securities by the Sponsor............. 33
Section 4.02. Expenses................................................. 34
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ARTICLE 5
TRUSTEES
Section 5.01. Number of Trustees; Qualifications.................... 34
Section 5.02. Appointment, Removal and Resignation
of the Trustees....................................... 37
Section 5.03. Vacancies among the Trustees.......................... 38
Section 5.04. Effect of Vacancies................................... 38
Section 5.05. Meetings.............................................. 39
Section 5.06. Delegation of Power................................... 39
Section 5.07. Merger, Conversion, Consolidation or
Succession to Business................................ 39
ARTICLE 6
DISTRIBUTIONS
Section 6.01. Distributions......................................... 40
ARTICLE 7
ISSUANCE OF THE SECURITIES
Section 7.01. General Provisions Regarding the Securities........... 40
ARTICLE 8
DISSOLUTION OF THE TRUST
Section 8.01. Dissolution of the Trust.............................. 42
ARTICLE 9
TRANSFER OF INTERESTS
Section 9.01. Transfer of Securities................................ 43
Section 9.02. Transfer of Certificates.............................. 43
Section 9.03. Deemed Security Holders............................... 44
Section 9.04. Book Entry Interests.................................. 44
Section 9.05. Notices to Holders of Certificates.................... 45
Section 9.06. Appointment of Successor Clearing Agency.............. 45
Section 9.07. Definitive Preferred Securities
Certificates.......................................... 45
Section 9.08. Mutilated, Destroyed, Lost or Stolen Certificates..... 46
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ARTICLE 10
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 10.01. Exculpation......................................... 46
Section 10.02. Indemnification..................................... 47
Section 10.03. Outside Business.................................... 47
ARTICLE 11
ACCOUNTING
Section 11.01. Fiscal Year......................................... 48
Section 11.02. Certain Accounting Matters.......................... 48
Section 11.03. Banking............................................. 49
Section 11.04. Withholding......................................... 49
ARTICLE 12
AMENDMENTS AND MEETINGS
Section 12.01. Amendments.......................................... 50
Section 12.02. Meetings of the Holders of Securities;
Action by Written Consent........................... 51
ARTICLE 13
REPRESENTATIONS OF THE PROPERTY TRUSTEE AND
THE DELAWARE TRUSTEE
Section 13.01. Representations and Warranties of the
Property Trustee.................................... 53
Section 13.02. Representations and Warranties of the
Delaware Trustee.................................... 54
ARTICLE 14
MISCELLANEOUS
Section 14.01. Notices............................................. 54
Section 14.02. Undertaking for Costs............................... 56
Section 14.03. Governing Law....................................... 56
Section 14.04. Headings............................................ 56
Section 14.05. Partial Enforceability.............................. 56
Section 14.06. Counterparts........................................ 57
Section 14.07. Intention of the Parties............................ 57
Section 14.08. Successors and Assigns.............................. 57
Section 14.09. No Recourse......................................... 57
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SIGNATURES
EXHIBIT A-1: CERTIFICATE OF TRUST
EXHIBIT A-2: CERTIFICATE OF AMENDMENT OF CERTIFICATE OF TRUST
EXHIBIT B: TERMS OF THE PREFERRED SECURITIES
EXHIBIT C: TERMS OF THE COMMON SECURITIES
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AMENDED AND RESTATED DECLARATION OF TRUST
OF
REI TRUST I
AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration") dated and
effective as of February 26, 1999 by Linda Geiger, an individual, Paul A.
Castanon, an individual, and William T. Massar, an individual, as Regular
Trustees (the "Regular Trustees"), The Bank of New York, a New York banking
corporation, as Property Trustee (the "Property Trustee") and The Bank of New
York (Delaware), a Delaware banking corporation, as Delaware Trustee (the
"Delaware Trustee") (together with all other Persons from time to time duly
appointed and serving as trustees in accordance with the provisions of this
Declaration, the "Trustees"), Houston Industries Incorporated, d/b/a Reliant
Energy, Incorporated, a Texas corporation, as trust sponsor ("Reliant Energy" or
the "Sponsor"), and by the holders, from time to time, of undivided beneficial
interests in the assets of the Trust to be issued pursuant to this Declaration.
WHEREAS, the Sponsor and certain of the Trustees entered into a Declaration
of Trust dated as of January 8, 1999 (as amended by an Amendment of the
Declaration of Trust, dated as of February 15, 1999, the "Original Declaration")
in order to establish REI Trust I, a statutory business trust (the "Trust"),
under the Business Trust Act (as hereinafter defined);
WHEREAS, the Certificate of Trust (the "Certificate of Trust") of the Trust
was filed with the office of the Secretary of State of the State of Delaware on
January 11, 1999;
WHEREAS, the Certificate of Amendment of Certificate of Trust of the Trust,
whereby the name of the Trust was changed from "HI Trust I" to "REI Trust I,"
was filed with the office of the Secretary of State of the State of Delaware on
February 16, 1999; and
WHEREAS, the Trustees and the Sponsor desire to continue the Trust pursuant
to the Business Trust Act for the purpose of, as described more fully in
Sections 303 and 304 hereof, (i) issuing and selling Preferred Securities (as
hereinafter defined) representing preferred undivided beneficial interests in
the assets of the Trust for cash and investing the proceeds thereof in
Debentures (as hereinafter defined) of Reliant Energy issued under the Indenture
(as hereinafter defined) to be held as assets of the Trust and (ii) issuing and
selling Common Securities (as hereinafter defined) representing common undivided
beneficial interests in the assets of the Trust to Reliant Energy in exchange
for cash and investing the proceeds thereof in additional Debentures issued
under the Indenture to be held as assets of the Trust;
NOW, THEREFORE, it being the intention of the parties hereto that the Trust
constitute a business trust under the Business Trust Act, that the Original
Declaration be amended and restated in its entirety as provided herein and that
this Declaration constitute the governing instrument of such business trust, the
Trustees declare that all Debentures referred to in clauses (i) and (ii) of the
previous paragraph purchased by the Trust will be held for the benefit of the
Holders (as hereinafter defined) from time to time, of the Certificates (as
hereinafter defined) representing undivided beneficial interests in the assets
of the Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE 1
DEFINITIONS
Section 1.0. Definitions.
(a) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.01;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to this
Amended and Restated Declaration of Trust (including Exhibits A-1, A-2, B and C
hereto (the "Exhibits")) as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles, Sections and Exhibits
are to Articles and Sections of and Exhibits to this Declaration unless
otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires; and
(f) a reference to the singular includes the plural and vice versa.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through
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the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Book Entry Interest" means a beneficial interest in a Global Certificate
registered in the name of a Clearing Agency or a nominee thereof, ownership and
transfers of which shall be maintained and made through book entries by such
Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in the Borough of Manhattan, The City and State of
New York or Houston, Texas are authorized or required by law or executive order
to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code (S) 3801 et seq., as it may be amended from time to time, or any
successor legislation.
"Certificate" means a Common Security Certificate or a Preferred Security
Certificate.
"Certificate of Trust" has the meaning set forth in the second WHEREAS
clause above.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depository for the
Preferred Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency
effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means the "Time of Delivery" as specified in the Underwriting
Agreement, which date is also the date of execution and delivery of this
Declaration.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation. A reference to a specific section (Sec.) of
the Code refers not only to such specific section but also to any corresponding
provision of any Federal tax statute enacted after the date of this Declaration,
as such specific section or corresponding provision is in effect on the date of
application of the provisions of this Declaration containing such reference.
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"Commission" means the Securities and Exchange Commission.
"Common Securities" has the meaning specified in Section 7.01(b).
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder, partner,
member, representative, employee or agent of the Trust or of any of its
Affiliates, (ii) any officer, director, shareholder, employee, representative or
agent of Reliant Energy or of any of its Affiliates and (iii) the Holders from
time to time of the Securities.
"Creditor" has the meaning specified in Section 4.02(c).
"Debenture Trustee" means The Bank of New York, a New York banking
corporation, as trustee under the Indenture until a successor is appointed
thereunder and thereafter means such successor trustee.
"Debentures" means the series of junior subordinated debentures issued by
Reliant Energy under the Indenture to the Property Trustee and entitled the
"7.20% Junior Subordinated Debentures due 2048".
"Definitive Preferred Security Certificates" has the meaning set forth in
Section 9.04.
"Delaware Trustee" has the meaning set forth in Section 5.01(a)(3).
"Depositary Agreement" means the agreement among the Trust, the Property
Trustee and DTC dated as of the Closing Date, as the same may be amended or
supplemented from time to time.
"Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.01.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Securities means that an Indenture
Event of Default has occurred and is continuing with respect to the Debentures.
"Exchange" has the meaning specified in Section 3.13.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Fiscal Year" has the meaning specified in Section 11.01.
"Global Certificate" has the meaning set forth in Section 9.04.
"Holder" means a Person in whose name a Certificate representing a Security
is registered, such Person being a beneficial owner within the meaning of the
Business Trust Act.
"Holder Direct Action" has the meaning specified in Section 3.10(e).
"Indemnified Person" means any Trustee, any Affiliate of any Trustee, any
Paying Agent, any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Trustee or Paying Agent, or any
employee or agent of the Trust or of any of its Affiliates.
"Indenture" means the Junior Subordinated Indenture dated as of February 15,
1999 between Reliant Energy and the Debenture Trustee as supplemented by
Supplemental Indenture No. 1 thereto dated as of February 15, 1999, pursuant to
which the Debentures are to be issued.
"Indenture Event of Default" means that an event or condition defined as an
"Event of Default" with respect to the Debentures under Section 6.01(a) of the
Indenture has occurred and is continuing.
"Investment Company" means an "investment company" as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Legal Action" has the meaning specified in Section 3.08(g).
"Liquidation Distribution" has the meaning set forth in Exhibits B and C
hereto establishing the terms of the Securities.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in liquidation amount of the Securities" means, except as
otherwise required by the Trust Indenture Act and except as provided in the
penultimate paragraph of section 5 of Exhibit B hereto, Holder(s) of outstanding
Securities voting together as a single class or, as the context may require,
Holder(s) of outstanding Preferred Securities or Common Securities voting
5
separately as a class, who are the record owners of a relevant class of
Securities whose liquidation amount (including the stated amount that would be
paid on redemption, liquidation or otherwise, plus accumulated and unpaid
Distributions to the date upon which the voting percentages are determined)
represents more than 50% of the liquidation amount of all outstanding Securities
of such class.
"NASD" has the meaning specified in Section 3.13.
"Nasdaq" has the meaning specified in Section 3.13.
"1933 Act Registration Statement" has the meaning specified in Section 3.13.
"1934 Act Registration Statement" has the meaning specified in Section 3.13.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the Chief Executive Officer, the President or a Vice President, and by
the Treasurer, an Associate Treasurer, an Assistant Treasurer, the Comptroller,
the Secretary or an Assistant Secretary of the Sponsor, and delivered to the
appropriate Trustee. One of the officers signing an Officers' Certificate given
pursuant to Section 2.04 shall be the principal executive, financial or
accounting officer of the Sponsor. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration shall include:
(a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Trust, the Property Trustee or the Sponsor, which may be an employee of
the Sponsor but not an employee of the Trust or the Property Trustee, and who
shall be reasonably acceptable to the Property Trustee. Any Opinion of
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Counsel pertaining to Federal income tax matters may rely on published rulings
of the Internal Revenue Service.
"Original Declaration" has the meaning set forth in the first WHEREAS clause
above.
"Paying Agent" has the meaning specified in Section 3.10(i).
"Payment Amount" has the meaning specified in Section 6.01.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, government or any agency
or political subdivision thereof, or any other entity of whatever nature.
"Preferred Securities Guarantee" means the Guarantee Agreement, dated as of
February 26, 1999 of Reliant Energy and The Bank of New York, a New York banking
corporation as initial guarantee trustee thereunder, in respect of the Preferred
Securities.
"Preferred Securities" has the meaning specified in Section 7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive certificate in fully
registered form representing a Preferred Security substantially in the form of
Annex I to Exhibit B.
"Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 5.01(c) and having the duties set forth for the Property
Trustee herein.
"Property Account" has the meaning specified in Section 3.10(c)(i).
"Quorum" means a majority of the Regular Trustees or, if there are only two
Regular Trustees, both such Regular Trustees.
"Regular Trustee" means any Trustee other than the Property Trustee and the
Delaware Trustee.
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"Related Party" means any direct or indirect wholly owned subsidiary of
Reliant Energy or any other Person which owns, directly or indirectly, 100% of
the outstanding voting securities of Reliant Energy.
"Reliant Energy" or " Sponsor" means Houston Industries Incorporated, d/b/a
Reliant Energy, Incorporated, a Texas corporation, or any successor entity
resulting from any merger, consolidation, amalgamation or other business
combination, in its capacity as sponsor of the Trust.
"Resignation Request" has the meaning specified in Section 5.02(d).
"Responsible Officer" means, when used with respect to the Property Trustee,
any officer within the corporate trust department of the Property Trustee,
including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Property Trustee
who customarily performs functions similar to those performed by the Persons who
at the time shall be such officers, respectively, or to whom any corporate trust
matter is referred because of such Person's knowledge of and familiarity with
the particular subject and who shall have direct responsibility for the
administration of this Declaration.
"Rule 3a-7" means Rule 3a-7 under the Investment Company Act or any
successor rule thereunder.
"Securities" means the Common Securities and the Preferred Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"Special Event" has the meaning set forth in the terms of the Securities as
set forth in section 4 of Exhibits B and C hereto.
"Successor Delaware Trustee" has the meaning specified in Section
5.02(b)(ii).
"Successor Entity" has the meaning specified in Section 3.18(b)(i).
"Successor Property Trustee" has the meaning specified in Section
5.02(b)(i).
"Successor Securities" has the meaning specified in Section 3.18(b)(i)(B).
"Super Majority" has the meaning specified in Section 2.06(a)(ii).
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"Supplemental Indenture" means Supplemental Indenture No. 1 dated as of
February 15, 1999 between Reliant Energy and the Debenture Trustee, pursuant to
which the Debentures are to be issued.
"10% in liquidation amount of the Securities" means, except as otherwise
required by the Trust Indenture Act and except as provided in the penultimate
paragraph of section 5 of Exhibit B hereto, Holder(s) of outstanding Securities
voting together as a single class or, as the context may require, Holder(s) of
outstanding Preferred Securities or Common Securities, voting separately as a
class, who are the record owners of a relevant class of Securities whose
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accumulated and unpaid Distributions
to the date upon which the voting percentages are determined) represents 10% or
more of the liquidation amount of all outstanding Securities of such class.
"Treasury Regulations" means the income tax regulations, including temporary
and proposed regulations, promulgated under the Code by the United States
Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trust" has the meaning set forth in the first WHEREAS clause above.
"Trustee" or " Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from
time to time, or any successor legislation.
"Underwriting Agreement" means the Underwriting Agreement dated February 23,
1999 among the Trust, the Sponsor and the underwriters named in Schedule I
thereto.
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ARTICLE 2
TRUST INDENTURE ACT
Section 2.01. Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the extent
applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by (S)(S) 310 to 317, inclusive,
of the Trust Indenture Act, such imposed duties shall control;
(c) the Property Trustee, to the extent permitted by applicable law and/or
the rules and regulations of the Commission, shall be the only Trustee which is
a trustee for the purposes of the Trust Indenture Act; and
(d) the application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
Section 2.02. Lists of Holders of Preferred Securities.
(a) Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide the Property Trustee unless the Property Trustee is registrar for
the Securities, (i) on each regular record date for payment of Distributions, a
list, in such form as the Property Trustee may reasonably require, of the names
and addresses of the Holders ("List of Holders") as of such record date,
provided that neither the Sponsor nor the Regular Trustees on behalf of the
Trust shall be obligated to provide such List of Holders at any time that the
List of Holders does not differ from the most recent List of Holders given to
the Property Trustee by the Sponsor and the Regular Trustees on behalf of the
Trust, and (ii) at any other time, within 30 days of receipt by the Trust of a
written request for a List of Holders as of a date no more than 15 days before
such List of Holders is given to the Property Trustee. The Property Trustee
shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity) provided that the
Property Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Property Trustee shall comply with its obligations under (S)(S)
310(b), 311 and 312(b) of the Trust Indenture Act.
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Section 2.03. Reports by the Property Trustee.
Within 60 days after January 15 of each year, commencing January 15, 2000,
the Property Trustee shall provide to the Holders of the Securities such reports
as are required by (S) 313 of the Trust Indenture Act, if any, in the form, in
the manner and at the times provided by (S) 313 of the Trust Indenture Act. The
Property Trustee shall also comply with the requirements of (S) 313(d) of the
Trust Indenture Act. A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Property Trustee with the Company, with
each stock exchange or quotation system upon which any Preferred Securities are
listed or traded (if so listed or traded) and also with the Commission. The
Company agrees to notify the Property Trustee when any Preferred Securities
become listed on any stock exchange or quotation system and of any delisting
thereof.
Section 2.04. Periodic Reports to the Property Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee, the Commission and the Holders of the
Securities, as applicable, such documents, reports and information as required
by (S) 314(a)(1)-(3) (if any) of the Trust Indenture Act and the compliance
certificates required by (S) 314(a)(4) and (c) of the Trust Indenture Act, any
such certificates to be provided in the form, in the manner and at the times
required by (S) 314(a)(4) and (c) of the Trust Indenture Act (provided that any
certificate to be provided pursuant to (S) 314(a)(4) of the Trust Indenture Act
shall be provided within 120 days of the end of each Fiscal Year). Delivery of
such reports, information and documents to the Property Trustee is for
informational purposes only and the Property Trustee's receipt of such shall not
constitute constructive notice of any information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Property Trustee is entitled to rely exclusively on Officers' Certificates).
Section 2.05. Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Property Trustee such evidence of compliance with any conditions
precedent provided for in this Declaration which relate to any of the matters
set forth in (S) 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to (S) 314(c) may be given in the
form of an Officers' Certificate.
Section 2.06. Events of Default; Waiver.
(a) The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its
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consequences, provided that, if the underlying Event of Default under the
Indenture:
(i) is not waivable under the Indenture, the Event of Default under
this Declaration shall also not be waivable; or
(ii) requires the consent or vote of the holders of greater than a
majority in aggregate principal amount of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default under
this Declaration may only be waived by the vote of the Holders of at least
the proportion in aggregate liquidation amount of the Preferred Securities
that the relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding.
The foregoing provisions of this Section 2.06(a) shall be in lieu of (S)
316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote or
consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except where the Holders of
the Common Securities are deemed to have waived such Event of Default under
this Declaration as provided above in Section 2.06(a) or below in this
Section 2.06(b), the Event of Default under this Declaration shall also not
be waivable; or
(ii) requires the consent or vote of a Super Majority to be waived,
except where the Holders of the Common Securities are deemed to have waived
such Event of Default under this Declaration as provided above in Section
2.06(a) or below in this Section 2.06(b), the Event of Default under this
Declaration may only be waived by the vote of the Holders of at
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least the proportion in aggregate liquidation amount of the Common Securities
that the relevant Super Majority represents of the aggregate principal amount
of the Debentures outstanding;
provided, further, that the Holders of Common Securities will be deemed to
have waived any such Event of Default and all Events of Defaults with respect to
the Common Securities and their consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated, and until such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.06(b) shall be in lieu of (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. In the event that any
Event of Default with respect to the Preferred Securities is waived by the
Holders of Preferred Securities as provided in this Declaration, the Holders of
Common Securities agree that such waiver shall also constitute the waiver of
such Event of Default with respect to the Common Securities for all purposes
under this Declaration without any further act, vote or consent of the Holders
of the Common Securities. Subject to the foregoing provisions of this Section
2.06(b), upon waiver, any such default shall cease to exist and any Event of
Default with respect to the Common Securities arising therefrom shall be deemed
to have been cured for every purpose of this Declaration, but no such waiver
shall extend to any subsequent or other default or Event of Default with respect
to the Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the Indenture by the Property
Trustee, at the direction of the Holders of Preferred Securities, constitutes a
waiver of the corresponding Event of Default under this Declaration. The
foregoing provisions of this Section 2.06(c) shall be in lieu of (S)
316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act.
Section 2.07. Disclosure of Information.
The disclosure of information as to the names and addresses of the Holders
of the Securities in accordance with (S) 312 of the Trust Indenture Act,
regardless of the source from which such information was derived, shall not be
deemed to be a violation of any existing law, or any law hereafter enacted which
does not specifically refer to (S) 312 of the Trust Indenture Act, nor shall the
Property
13
Trustee be held accountable by reason of mailing any material pursuant to a
request made under (S) 312(b) of the Trust Indenture Act.
14
ARTICLE 3
ORGANIZATION
Section 3.01. Name.
The Trust continued by this Declaration is named "REI Trust I" as such name
may be modified from time to time by the Regular Trustees following written
notice to the Holders of the Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Regular Trustees.
Section 3.02. Office.
The address of the principal office of the Trust is c/o Reliant Energy,
Incorporated, 1111 Louisiana, Houston, Texas 77002. Upon ten days' written
notice to the Holders, the Regular Trustees may change the location of the
Trust's principal office.
Section 3.03. Issuance of the Securities.
On February 23, 1999 the Sponsor, on behalf of the Trust and pursuant to
the Original Declaration, executed and delivered the Underwriting Agreement. On
the Closing Date and contemporaneously with the execution and delivery of this
Declaration, the Regular Trustees, on behalf of the Trust, shall execute and
deliver (i) one or more Global Certificates, registered in the name of the
nominee of the initial Clearing Agency as specified in Section 9.04 for the
benefit of the underwriters named in the Underwriting Agreement, in an aggregate
amount of 15,000,000 Preferred Securities having an aggregate liquidation amount
of $375,000,000, against receipt of the aggregate purchase price of such
Preferred Securities of $375,000,000, and (ii) to the Sponsor, one or more
Common Securities Certificates, registered in the name of the Sponsor, in an
aggregate amount of 463,920 Common Securities having an aggregate liquidation
amount of $11,598,000, against receipt of the aggregate purchase price of such
Common Securities of $11,598,000.
Section 3.04. Purchase of Debentures.
On the Closing Date and contemporaneously with the execution and delivery
of this Declaration, the Regular Trustees, on behalf of the Trust, shall
purchase from the Sponsor with the proceeds received by the Trust from the sale
of the Securities on such date pursuant to Section 3.03, at a purchase price of
100% of the principal amount thereof, Debentures, registered in the name of the
Property Trustee and having an aggregate principal amount equal to $386,598,000,
and, in satisfaction of the purchase price for such Debentures, the
15
Property Trustee, on behalf of the Trust, shall deliver or cause to be delivered
to the Sponsor the sum of $386,598.000.
Section 3.05. Purpose.
The exclusive purposes and functions of the Trust are: (a)(i) to issue and
sell Preferred Securities for cash and use the proceeds of such sales to acquire
from Reliant Energy Debentures issued under the Indenture having an aggregate
principal amount equal to the aggregate liquidation amount of the Preferred
Securities so issued and sold; (ii) to enter into such agreements and
arrangements as may be necessary in connection with the sale of Preferred
Securities to the initial purchasers thereof (including the Underwriting
Agreement) and to take all action, and exercise such discretion, as may be
necessary or desirable in connection therewith and to file such registration
statements or make such other filings under the Securities Act, the Exchange Act
or state securities or "Blue Sky" laws as may be necessary or desirable in
connection therewith and the issuance of the Preferred Securities; and (iii) to
issue and sell Common Securities to Reliant Energy for cash and use the proceeds
of such sale to purchase as trust assets an equal aggregate principal amount of
Debentures issued under the Indenture; and (b) except as otherwise limited
herein, to engage in only those other activities necessary, convenient or
incidental thereto, including such other activities specifically authorized in
this Declaration. The Trust shall not borrow money, issue debt or reinvest
proceeds derived from investments, mortgage or pledge any of its assets or at
any time while the Securities are outstanding, otherwise undertake (or permit to
be undertaken) any activity that would result in or cause the Trust not to be
classified for United States Federal income tax purposes as a grantor trust.
Section 3.06. Authority.
Subject to the limitations provided in this Declaration and to the specific
duties of the Property Trustee, the Regular Trustees shall have exclusive and
complete authority to carry out the purposes of the Trust. An action taken by
the Regular Trustees in accordance with their powers shall constitute the act of
and serve to bind the Trust and an action taken by the Property Trustee on
behalf of the Trust in accordance with its powers shall constitute the act of
and serve to bind the Trust. In dealing with the Trustees acting on behalf of
the Trust, no Person shall be required to inquire into the authority of the
Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely
conclusively on the power and authority of the Trustees as set forth in this
Declaration.
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Section 3.07. Title to Property of the Trust.
Except as provided in Section 3.10 with respect to the Debentures and the
Property Account or unless otherwise provided in this Declaration, legal title
to all assets of the Trust shall be vested in the Trust. The Holders shall not
have legal title to any part of the assets of the Trust, but shall have
undivided beneficial interests in the assets of the Trust.
Section 3.08. Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive power, authority and duty to
cause the Trust, and shall cause the Trust, to engage in the following
activities:
(a) to issue Preferred Securities and Common Securities, in each case in
accordance with this Declaration; provided, however, that the Trust may issue no
more than one series of Preferred Securities and no more than one series of
Common Securities, and, provided further, that there shall be no interests in
the Trust other than the Securities and the issuance of Securities shall be
limited to a one-time, simultaneous issuance of both Preferred Securities and
Common Securities on the Closing Date;
(b) in connection with the issuance of the Preferred Securities, at the
direction of the Sponsor, to effect or cause to be effected the filings, and to
execute or cause to be executed, the documents, set forth in Section 3.13 and to
execute, deliver and perform on behalf of the Trust the Depositary Agreement;
(c) to acquire as trust assets Debentures with the proceeds of the sale of
the Preferred Securities and the Common Securities; provided, however, that the
Regular Trustees shall cause legal title to all of the Debentures to be vested
in, and the Debentures to be held of record in the name of, the Property Trustee
for the benefit of the Holders of the Preferred Securities and the Common
Securities;
(d) if and to the extent that the Sponsor on behalf of the Trust has not
already done so, to cause the Trust to enter into the Underwriting Agreement and
such other agreements and arrangements as may be necessary or desirable in
connection with the sale of the Preferred Securities to the initial purchasers
thereof and the consummation thereof, and to take all action, and exercise all
discretion, as may be necessary or desirable in connection with the consummation
thereof;
(e) to give the Sponsor and the Property Trustee prompt written notice of
the occurrence of a Special Event;
(f) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for the purposes
of
17
(S) 316(c) of the Trust Indenture Act and with respect to Distributions, voting
rights, redemptions, and exchanges, and to issue relevant notices to Holders of
the Preferred Securities and Common Securities as to such actions and applicable
record dates;
(g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.10(e), the Property Trustee has
the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors and
consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;
(j) to give the certificate to the Property Trustee required by (S)
314(a)(4) of the Trust Indenture Act, which certificate may be executed by any
Regular Trustee;
(k) to incur expenses which are necessary or incidental to carrying out
any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar and transfer
agent for the Securities, the Regular Trustees hereby initially appointing the
Property Trustee for such purposes;
(m) to take all actions and perform such duties as may be required of the
Regular Trustee pursuant to the terms of the Securities set forth in Exhibits B
and C hereto;
(n) to take all actions which may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Securities or
to enable the Trust to effect the purposes for which the Trust has been created;
(o) to take all actions, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the purposes of the Trust and the
activities of the Trust as set out in this Section 3.08, including, but not
limited to:
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(i) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) causing the Trust to be classified for United States Federal
income tax purposes as a grantor trust; and
(iii) cooperating with the Sponsor to ensure that the Debentures will
be treated as indebtedness of the Sponsor for United States Federal income
tax purposes;
(p) to take all actions necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the Trust
to be duly prepared and filed by the Regular Trustees, on behalf of the Trust,
and to comply with any requirements imposed by any taxing authority on holders
of instruments treated as indebtedness for United States Federal income tax
purposes;
(q) subject to the requirements of Rule 3a-7 (if the Trust is excluded
from the definition of an Investment Company solely by reason of Rule 3a-7) and
(S) 317(b) of the Trust Indenture Act, to appoint one or more Paying Agents in
addition to the Property Trustee; and
(r) to execute all documents or instruments, perform all duties and powers
and do all things for and on behalf of the Trust in all matters necessary or
incidental to the foregoing.
The Regular Trustees must exercise the powers set forth in this Section
3.08 in a manner which is consistent with the purposes and functions of the
Trust set out in Section 3.05, and the Regular Trustees shall not take any
action which is inconsistent with the purposes and functions of the Trust set
forth in Section 3.05.
Subject to this Section 3.08, the Regular Trustees shall have none of the
powers or any of the authority of the Property Trustee set forth in Section
3.10.
The Regular Trustees shall take all actions on behalf of the Trust that are
not specifically required by this Declaration to be taken by any other Trustee.
Any expenses incurred by the Regular Trustees pursuant to this Section 3.08
shall be reimbursed by the Sponsor.
Section 3.09. Prohibition of Actions by the Trust and the Trustees.
The Trust shall not, and the Trustees (including the Property Trustee)
shall cause the Trust not to, engage in any activity other than in connection
with the purposes of the Trust or other than as required or authorized by this
Declaration.
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In particular, the Trust shall not and the Trustees (including the Property
Trustee) shall not cause the Trust to:
(a) invest any proceeds received by the Trust from holding the Debentures
but shall promptly distribute from the Property Account all such proceeds to
Holders of Securities pursuant to the terms of this Declaration and of the
Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans, other than loans represented by the Debentures;
(e) possess any power or otherwise act in such a way as to vary the Trust
assets or the terms of the Securities in any way whatsoever, except as otherwise
expressly provided herein;
(f) issue any securities or other evidences of beneficial ownership of, or
beneficial interests in, the Trust other than the Securities;
(g) incur any indebtedness for borrowed money;
(h) (i) direct the time, method and place of conducting any proceeding for
any remedy available to the Debenture Trustee or exercising any trust or power
conferred upon the Debenture Trustee with respect to the Debentures, (ii) waive
any past default that is waivable under Section 6.06 of the Indenture, or (iii)
exercise any right to rescind or annul a declaration of acceleration of the
maturity of the principal of the Debentures, without, in each case, obtaining
the prior approval of the Holders of a Majority in liquidation amount of all
outstanding Securities;
(i) revoke any action previously authorized or approved by a vote of the
Holders of Preferred Securities except by subsequent vote of such Holders;
(j) consent to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required, unless in the case of
this clause (j) the Property Trustee shall have received an Opinion of Counsel
experienced in such matters to the effect that such amendment, modification or
termination will not cause more than an insubstantial risk that for United
States Federal income tax purposes the Trust will not be classified as a grantor
trust;
(k) take or consent to any action that would result in the placement of a
lien, pledge, charge, mortgage or other encumbrance on any of the Trust
property;
20
(l) vary the investment (within the meaning of Treasury Regulation Section
301.7701-4(c)) of the Trust or of the Holders of Securities; or
(m) after the date hereof, enter into any contract or agreement (other
than any depositary agreement or any agreement with any securities exchange or
automated quotation system) that does not expressly provide that the Holders of
Preferred Securities, in their capacities as such, have limited liability (in
accordance with the provisions of the Business Trust Act) for the liabilities
and obligations of the Trust, which express provision shall be in substantially
the following form, "The Holders of the Preferred Securities, in their
capacities as such, shall not be personally liable for any liabilities or
obligations of the Trust arising out of this Agreement, and the parties hereto
hereby agree that the Holders of the Preferred Securities, in their capacities
as such, shall be entitled to the same limitation of personal liability extended
to stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware."
Section 3.10. Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be owned by and held of record
in the name of the Property Trustee in trust for the benefit of the Holders of
the Securities. The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Article 5. Such vesting and
cessation of title shall be effective whether or not conveyancing documents with
regard to the Debentures have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and interest
in the Debentures to the Regular Trustees or, if the Property Trustee does not
also act as the Delaware Trustee, the Delaware Trustee.
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing bank
account (the "Property Account") in the name of and under the exclusive control
of the Property Trustee on behalf of the Holders of the Securities and on the
receipt of payments of funds made in respect of the Debentures held by the
Property Trustee, deposit such funds into the Property Account and, without any
further acts of the Property Trustee or the Regular Trustees, promptly make
payments to the Holders of the Preferred Securities and Common Securities from
the Property Account in accordance with Section 6.01. Funds in the Property
Account shall be held uninvested, and without liability for interest thereon,
until disbursed in accordance with this Declaration. The Property Account shall
be an account which is maintained with a banking institution whose long term
unsecured indebtedness is rated by a "nationally recognized statistical rating
21
organization", as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act, at least investment grade;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the redemption of the Preferred Securities and
the Common Securities to the extent the Debentures are redeemed or mature;
(iii) upon notice of distribution issued by the Regular Trustees in
accordance with the terms of the Preferred Securities and the Common
Securities, engage in such ministerial activities as shall be necessary or
appropriate to effect promptly pursuant to terms of the Securities the
distribution of Debentures to Holders of Securities upon the election of the
Holder of Common Securities to distribute the Debentures to Holders of
Securities and dissolve the Trust; and
(iv) have the legal power to exercise all of the rights, powers and
privileges of a holder of the Debentures under the Indenture and, if an Event
of Default occurs and is continuing, the Property Trustee, subject to Section
3.10(e), shall for the benefit of the Holders of the Securities, enforce its
rights as holder of the Debentures under the Indenture, subject to the rights
of the Holders of the Preferred Securities pursuant to the terms of this
Declaration, the Business Trust Act and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform such duties as
may be specifically required of the Property Trustee pursuant to the terms of
the Securities set forth in Exhibits B and C hereto.
(e) If an Event of Default has occurred and is continuing, then the
Holders of a Majority in liquidation amount of the Preferred Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Property Trustee or to direct the exercise of
any trust or power conferred upon the Property Trustee under this Declaration,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Debentures. If the Property Trustee fails to
enforce its rights under the Debentures, a Holder of Preferred Securities, to
the extent permitted by applicable law, may, after a period of 30 days has
elapsed since such Holder's written request to the Property Trustee to enforce
such rights, institute a legal proceeding directly against the Sponsor to
enforce the Property Trustee's rights under the Debentures without first
instituting any legal proceeding against the Property Trustee or any other
Person; provided further, that, if an Event of Default has occurred and is
continuing and such event is attributed to the failure of the Sponsor to pay
interest or principal on the Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption
22
date), then a Holder of Preferred Securities may directly institute a proceeding
for enforcement of payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such Holder (a "Holder Direct Action") on or
after the respective due date specified in the Debentures. In connection with
such Holder Direct Action, the Sponsor will be subrogated to the rights of such
Holder of Preferred Securities to the extent of any payment made by the Sponsor
to such Holders of Preferred Securities in such Holder Direct Action. Except as
provided in the preceding sentences, the Holders of Preferred Securities will
not be able to exercise directly any other remedy available to the Holders of
the Debentures.
(f) All moneys deposited in the Property Account and all Debentures held
by the Property Trustee for the benefit of the Holders of the Securities will
not be subject to any right, charge, security interest, lien or claim of any
kind in favor of, or for the benefit of the Property Trustee or its agents or
their creditors.
(g) The Property Trustee shall, within 90 days after the occurrence of a
default with respect to the Securities actually known to a Responsible Officer
of the Property Trustee, transmit by mail, first class postage prepaid, to the
holders of the Securities, as their names and addresses appear upon the
register, notice of such defaults with respect to the Securities known to the
Property Trustee, unless such defaults shall have been cured before the giving
of such notice (the term "defaults" for the purposes of this Section 3.10(g)
being hereby defined to be an Indenture Event of Default, not including any
periods of grace provided for in the Indenture and irrespective of the giving of
any notice provided therein); provided, that, except in the case of default in
the payment of the principal of (or premium, if any) or interest on any of the
Debentures, the Property Trustee shall be protected in withholding such notice
if and so long as the board of directors, the executive committee or a trust
committee of directors and/or Responsible Officers, of the Property Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders of the Securities. The Property Trustee shall not be deemed to have
knowledge of any default, except (i) a default in the payment of principal,
premium or interest on the Debentures or (ii) any default as to which the
Property Trustee shall have received written notice or a Responsible Officer
charged with the administration of this Declaration shall have obtained written
notice.
(h) The Property Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and the proceeds thereof
distributed to the Holders of Securities pursuant to the terms of the
Securities; or
(ii) a Successor Property Trustee has been appointed and accepted that
appointment in accordance with Article 5.
23
(i) The Property Trustee shall act as paying agent in respect of the
Common Securities and, if the Preferred Securities are not in book entry only
form, the Preferred Securities and, subject to Section 3.08(q), may authorize
one or more Persons (each, a "Paying Agent") to pay Distributions, redemption
payments or liquidation payments on behalf of the Trust with respect to the
Preferred Securities. Any such Paying Agent shall comply with (S) 317(b) of the
Trust Indenture Act. Any Paying Agent may be removed by the Property Trustee,
after consultation with the Regular Trustees, at any time and a successor Paying
Agent or additional Paying Agents may be appointed at any time by the Property
Trustee, subject to Section 3.08(q).
(j) The Property Trustee shall give prompt written notice to the Holders
of the Securities of any notice received by it from Reliant Energy of its
election to defer payments of interest on the Debentures by extending the
interest payment period with respect thereto.
(k) Subject to this Section 3.10, the Property Trustee shall have none of
the powers or the authority of the Regular Trustees set forth in Section 3.08.
(l) The Property Trustee shall exercise the powers, duties and rights set
forth in this Section 3.10 and Section 3.12 in a manner which is consistent with
the purposes and functions of the Trust set out in Section 3.05, and the
Property Trustee shall not take any action which is inconsistent with the
purposes and functions of the Trust set forth in Section 3.05.
Section 3.11. Delaware Trustee.
Notwithstanding any other provision of this Declaration other than Section
5.01(a)(3), the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Trustees described in this Declaration. Except as set forth in Section
5.01(a)(3), the Delaware Trustee shall be a Trustee for the sole and limited
purpose of fulfilling the requirements of (S) 3807(a) of the Business Trust Act.
No implied covenants or obligations shall be read into this Declaration against
the Delaware Trustee.
Section 3.12. Certain Rights and Duties of the Property Trustee.
(a) The Property Trustee, before the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration, and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.06), the Property Trustee
shall exercise
24
such of the rights and powers vested in it by this Declaration, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration, and
the Property Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Declaration, and no implied covenants or obligations shall be read
into this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Property
Trustee and conforming to the requirements of this Declaration;
provided, however, that in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the Property Trustee, the Property Trustee shall be under
a duty to examine the same to determine whether or not they conform to
the requirements of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent
in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in liquidation
amount of the Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee
hereunder or under the Indenture, or exercising any trust or power
conferred upon the Property Trustee under this Declaration; and
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
25
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or adequate indemnity against
such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.12(a) and (b):
(i) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Property
Trustee (unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part and, if the Trust is excluded from the
definition of Investment Company solely by means of Rule 3a-7, subject to
the requirements of Rule 3a-7, request and rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Sponsor or the Regular Trustees;
(ii) the Property Trustee (A) may consult with counsel (which may be
counsel to the Sponsor or any of its Affiliates and may include any of its
employees) selected by it in good faith and with due care and the advice or
opinion of such counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon
and in accordance with such advice and opinion and (B) shall have the right
at any time to seek instructions concerning the administration of this
Declaration from any court of competent jurisdiction;
(iii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Property Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
by it in good faith and with due care;
(iv) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of any Holder, unless such Holder shall have offered to the
Property Trustee security and indemnity satisfactory to the Property
Trustee against the costs, expenses (including attorneys' fees and
expenses) and liabilities that might be incurred by it in complying with
such request or direction; provided that nothing contained in this clause
(iv) shall relieve the Property Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured or waived) to
exercise such of the rights and powers vested in it by this Declaration,
and to use the same degree of care and skill in this exercise, as a prudent
26
person would exercise or use under the circumstances in the conduct of his
or her own affairs; and
(v) any action taken by the Property Trustee or its agents hereunder
shall bind the Holders of the Securities, and the signature of the Property
Trustee or its agents alone shall be sufficient and effective to perform
any such action; and no third party shall be required to inquire as to the
authority of the Property Trustee to so act, or as to its compliance with
any of the terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's taking such
action.
(d) The recitals contained herein shall be taken as the statements of the
Sponsor, and the Property Trustee assumes no responsibility for the correctness
of the same. The Property Trustee makes no representations as to the validity or
sufficiency of this Declaration.
(e) The Property Trustee, in its individual or any other capacity, may
become the owner or pledgee of Preferred Securities and may otherwise deal with
the Sponsor with the same rights it would have if it were not the Property
Trustee.
(f) All moneys received by the Property Trustee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, but need not be segregated from other funds except to the extent
required by law. The Property Trustee shall be under no liability for interest
on any moneys received by it hereunder except such as it may agree in writing to
pay thereon.
(g) (i) The Sponsor covenants and agrees to pay to the Property Trustee
from time to time, and the Property Trustee shall be entitled to, such
compensation as the Sponsor and the Property Trustee shall from time to time
agree in writing (which shall not be limited by any provision of law in regard
to the compensation of a Property Trustee of an express trust) for all services
rendered by it in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Property
Trustee, and the Sponsor will pay or reimburse the Property Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Property Trustee in accordance with any of the provisions of this
Indenture (including the reasonable compensation and the reasonable expenses and
disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Sponsor also covenants to indemnify each of the
Property Trustee or any predecessor Property Trustee and their officers, agents,
directors and employees for, and to hold them harmless against, any and all
loss, liability,
27
damage, claim or expense including taxes (other than taxes based upon, measured
by or determined by the income of the Property Trustee) incurred without
negligence or bad faith on the part of the Property Trustee and arising out of
or in connection with the acceptance or administration of this trust, including
the reasonable costs and expenses of defending itself against any claim (whether
asserted by the Sponsor, any Holder or any other Person) of liability in the
premises. The provisions of this subpart (g) of this Section 3.12 shall survive
the termination of this Declaration and resignation or removal of the Property
Trustee.
(ii) The obligations of the Sponsor under this subpart (g) of this
Section 3.12 to compensate and indemnify the Property Trustee and to pay or
reimburse the Property Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Securities upon all property and
funds held or collected by the Property Trustee as such, except funds held in
trust for the benefit of the Holders of particular Securities.
(h) Except as otherwise provided in this Section 3.12, whenever in the
administration of the provisions of this Declaration the Property Trustee shall
deem it necessary or desirable that a matter be proved or established prior to
taking or suffering or omitting to take any action hereunder, such matter
(unless other evidence in respect thereof be herein specifically prescribed)
may, in the absence of negligence or bad faith on the part of the Property
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Property Trustee and such certificate, in the
absence of negligence or bad faith on the part of the Property Trustee, shall be
full warrant to the Property Trustee for any action taken, suffered or omitted
to be taken by it under the provisions of this Declaration upon the faith
thereof.
(i) Whether or not expressly stated, every provision of this Declaration
pertaining to the Property Trustee shall be subject to this Section 3.12.
Section 3.13. Registration Statement and Related Matters.
In accordance with the Original Declaration, Reliant Energy, as the sponsor
of the Trust, was authorized (i) to file with the Commission and execute, in
each case on behalf of the Trust, (a) the Registration Statement on Form S-3
(Registration Nos. 333-70665, 333-70665-01 and 333-70665-02) (the "1933 Act
Registration Statement") including any pre-effective or post-effective
amendments thereto, relating to the registration under the Securities Act of the
Preferred Securities and (b) if Reliant Energy shall deem it desirable, a
Registration Statement on Form 8-A or other appropriate form (the "1934 Act
Registration Statement") (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Preferred Securities
under
28
Section 12 of the Exchange Act; (ii) if Reliant Energy shall deem it desirable,
to prepare and file with the New York Stock Exchange or one or more national
securities exchange(s) (each, an "Exchange") or the National Association of
Securities Dealers, Inc. (the "NASD") and execute on behalf of the Trust a
listing application or applications and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on any such Exchange or
the NASD's Nasdaq National Market ("Nasdaq"); (iii) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and all other papers
and documents as Reliant Energy, on behalf of the Trust, may deem necessary or
desirable to register the Preferred Securities under the securities or "Blue
Sky" laws of such jurisdictions as Reliant Energy on behalf of the Trust, may
deem necessary or desirable; and (iv) to negotiate the terms and execute on
behalf of the Trust the Underwriting Agreement. In the event that any filing
referred to in clauses (i)-(iii) above is required by the rules and regulations
of the Commission, any Exchange, Nasdaq, the NASD or state securities or blue
sky laws, to be executed on behalf of the Trust by the Trustees, the Regular
Trustees, in their capacities as Trustees of the Trust, and Reliant Energy are
hereby authorized and directed to join in any such filing and to execute on
behalf of the Trust any and all of the foregoing. In connection with all of the
foregoing, Reliant Energy and each Trustee, solely in its capacity as Trustee of
the Trust, have constituted and appointed, and hereby confirm the appointment
of, Hugh Rice Kelly, R. Steve Letbetter and Stephen W. Naeve and each of them,
as his, her or its, as the case may be, true and lawful attorneys-in-fact, and
agents, with full power of substitution and resubstitution, for Reliant Energy
or such Trustee or in Reliant Energy' or such Trustee's name, place and stead,
in any and all capacities, to sign any and all amendments (including post-
effective amendments) to the 1933 Act Registration Statement and the 1934 Act
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as Reliant Energy or such Trustee might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
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Section 3.14. Filing of Amendments to Certificate of Trust.
The Certificate of Trust as filed with the Secretary of State of the State
of Delaware on January 11, 1999 is attached hereto as Exhibit A-1. The
Certificate of Amendment of Certificate of Trust as filed with the Secretary of
State of the State of Delaware on February 16, 1999 is attached hereto as
Exhibit A-2. On or after the date of execution of this Declaration, the
Trustees shall cause the filing with the Secretary of State of the State of
Delaware of such amendments, if any, to the Certificate of Trust as the Trustees
shall deem necessary or desirable.
Section 3.15. Execution of Documents by the Regular Trustees.
Except as otherwise required by the Business Trust Act with respect to the
Certificate of Trust or otherwise and except as provided in Sections 7.01(c) and
9.08, any Regular Trustee, or if there is only one, such Regular Trustee is
authorized to execute and deliver on behalf of the Trust any documents which the
Regular Trustees have the power and authority to execute or deliver pursuant to
this Declaration.
Section 3.16. Trustees Not Responsible for Recitals or Issuance of
Securities.
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as
to the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
Section 3.17. Duration of the Trust.
The Trust, absent dissolution pursuant to the provisions of Article 8
hereof, shall continue without dissolution until December 31, 2053.
Section 3.18. Mergers.
(a) The Trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, except as described in
Section 3.18(b) and (c) of this Declaration.
(b) The Trust may, at the request of the Sponsor, with the consent of the
Regular Trustees or, if there are more than two, a majority of the Regular
Trustees and without the consent of the Holders, the Delaware Trustee or the
Property Trustee, merge with or into, convert into, consolidate, amalgamate, or
be replaced
30
by, or convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, a trust organized as such under the laws of any
State; provided that:
(i) such successor entity (the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the
Securities and this Declaration; or
(B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor Securities")
so long as the Successor Securities rank the same as the Securities rank
with respect to Distributions and payments upon liquidation, redemption and
otherwise;
(ii) the Sponsor expressly appoints a trustee of the Successor Entity that
possesses the same powers and duties as the Property Trustee as the holder of
the Debentures;
(iii) the Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or with another organization in which the Preferred Securities are then
listed or quoted, if any;
(iv) if the Preferred Securities (including any Successor Securities) are
rated by any nationally recognized statistical rating organization prior to such
transaction, such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Preferred Securities (including
any Successor Securities), or if the Debentures are so rated, the Debentures, to
be downgraded by any nationally recognized statistical rating organization;
(v) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders (including the holders of any Successor
Securities) in any material respect (other than with respect to any dilution of
such Holders' interests in the new entity);
(vi) such Successor Entity has purposes substantially identical to those
of the Trust;
(vii) prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Sponsor has received an Opinion
of Counsel experienced in such matters that:
31
(A) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of any
Successor Securities) in any material respect (other than with respect to
any dilution of the Holders' interest in the new entity);
(B) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor the
Successor Entity will be required to register as an Investment Company
under the Investment Company Act; and
(C) following such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Trust (or the Successor
Entity) will continue to be classified as a grantor trust for United States
Federal income tax purposes;
(viii) the Sponsor or any permitted successor or assignee owns all of the
common securities of such Successor Entity and guarantees the obligations of
such Successor Entity under the Successor Securities at least to the extent
provided by the Preferred Securities Guarantee; and
(ix) there shall have been furnished to the Property Trustee an Officers'
Certificate and an Opinion of Counsel, each to the effect that all conditions
precedent in this Declaration to such transaction have been satisfied.
(c) Notwithstanding Section 3.18(b), the Trust shall not, except with the
consent of Holders of 100% in liquidation amount of the Securities, consolidate,
amalgamate, merge with or into, convert into, or be replaced by, or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to, any other Person or permit any other Person to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger, conversion, replacement, conveyance, transfer or lease
would cause the Trust or the Successor Entity not to be classified as a grantor
trust for United States Federal income tax purposes or would cause the Holders
of the Securities not to be treated as owning an undivided interest in the
Debentures.
Section 3.19. Property Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
similar judicial proceeding relative to the Trust or any other obligor upon the
Securities or the property of the Trust or of such other obligor or their
creditors, the Property Trustee (irrespective of whether any Distributions on
the Securities shall then be
32
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Property Trustee shall have made any demand on the
Trust for the payment of any past due Distributions) shall be entitled and
empowered, to the fullest extent permitted by law, by intervention in such
proceeding or otherwise:
(a) to file and prove a claim for the whole amount of any Distributions
owing and unpaid in respect of the Securities (or, if the Securities are
original issue discount Securities, such portion of the liquidation amount as
may be specified in the terms of such Securities) and to file such other papers
or documents as may be necessary or advisable in order to have the claims of the
Property Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Property Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Property Trustee and, in the event the
Property Trustee shall consent to the making of such payments directly to the
Holders to pay to the Property Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Property Trustee, its
agents and counsel, and any other amounts due the Property Trustee.
Nothing herein contained shall be deemed to authorize the Property Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or compensation affecting the
Securities or the rights of any Holder thereof to authorize the Property Trustee
to vote in respect of the claim of any Holder in any such proceeding.
ARTICLE 4
SPONSOR
Section 4.01. Purchase of Common Securities by the Sponsor.
On the Closing Date, the Sponsor will purchase all of the Common Securities
issued by the Trust at the same time as the Preferred Securities to be issued on
such date are issued, such purchase to be in an amount equal to or greater than
3% of the total capital of the Trust.
33
Section 4.02. Expenses.
(a) In connection with the purchase of the Debentures by the Trust, the
Sponsor, in its capacity as Sponsor and not as a Holder, shall be responsible
for and shall pay for all debts and obligations (other than with respect to the
Securities) and all costs and expenses of the Trust (including, but not limited
to, costs and expenses relating to the organization of the Trust, the issuance
of the Preferred Securities to initial purchasers thereof, the fees and expenses
(including reasonable counsel fees and expenses) of the Trustees (including any
amounts payable under Article 10), the costs and expenses relating to the
operation of the Trust, including, without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the disposition of Trust assets).
(b) In connection with the purchase of the Debentures by the Trust, the
Sponsor, in its capacity as Sponsor and not as a Holder, shall pay any and all
taxes (other than United States withholding taxes attributable to the Trust or
its assets) and all liabilities, costs and expenses with respect to such taxes
of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor's obligations under this Section 4.02 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor.
(d) The Sponsor shall be subrogated to all (if any) rights of the Trust in
respect of any amounts paid to any Creditor by the Sponsor under this Section
4.02.
ARTICLE 5
TRUSTEES
Section 5.01. Number of Trustees; Qualifications.
(a) The number of Trustees initially shall be five (5). At any time (i)
before the issuance of the Securities, the Sponsor may, by written instrument,
34
increase or decrease the number of, and appoint, remove and replace, the
Trustees, and (ii) after the issuance of the Securities the number of Trustees
may be increased or decreased solely by, and Trustees may be appointed, removed
or replaced solely by, vote of Holders of Common Securities representing a
Majority in liquidation amount of the Common Securities voting as a class;
provided that in any case:
(1) the number of Trustees shall be at least five (5) unless the
Trustee that acts as the Property Trustee also acts as the Delaware
Trustee, in which case the number of Trustees shall be at least four (4);
(2) at least a majority of the Trustees shall at all times be
officers, directors or employees of Reliant Energy;
(3) if required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be either a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware and otherwise is permitted to
act as a Trustee hereunder under the laws of the State of Delaware, except
that if the Property Trustee has its principal place of business in the
State of Delaware and otherwise is permitted to act as a Trustee hereunder
under the laws of the State of Delaware, then the Property Trustee shall
also be the Delaware Trustee and Section 3.11 shall have no application;
and
(4) there shall at all times be a Property Trustee hereunder which
shall satisfy the requirements of Section 5.01(c).
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
(b) The initial Regular Trustees shall be:
Linda Geiger, Paul Castanon and William T. Massar
c/o Reliant Energy, Incorporated
1111 Louisiana
Houston, Texas 77002
(c) There shall at all times be one Trustee which shall act as the Property
Trustee. In order to act as the Property Trustee hereunder, such Trustee shall:
35
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation or national banking association organized and
doing business under the laws of the United States of America or any State
or Territory thereof or of the District of Columbia, or a corporation,
national banking association or Person permitted by the Commission to act
as an institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least $50,000,000, and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority. If such
corporation or national banking association publishes reports of condition
at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes
of this Section 5.01(c)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published; and
(iii) if the Trust is excluded from the definition of an Investment
Company solely by reason of Rule 3a-7 and to the extent Rule 3a-7 requires
a trustee having certain qualifications to hold title to the "eligible
assets" (as defined in Rule 3a-7) of the Trust, the Property Trustee shall
possess those qualifications.
If at any time the Property Trustee shall cease to satisfy the requirements
of clauses (i)-(iii) above, the Property Trustee shall immediately resign in the
manner and with the effect set out in Section 5.02(d). If the Property Trustee
has or shall acquire any "conflicting interest" within the meaning of (S) 310(b)
of the Trust Indenture Act, the Property Trustee and the Holders of the Common
Securities (as if such Holders were the obligor referred to in (S) 310(b) of the
Trust Indenture Act) shall in all respects comply with the provisions of (S)
310(b) of the Trust Indenture Act. The Preferred Securities Guarantee and the
Indenture shall be deemed to be specifically described in this Declaration for
the purposes of clause (i) of the first proviso contained in (S) 310(b) of the
Trust Indenture Act.
The initial Trustee which shall serve as the Property Trustee is The Bank
of New York, a New York banking corporation, whose address is as set forth in
Section 14.01(b).
(d) The initial Trustee which shall serve as the Delaware Trustee is The
Bank of New York (Delaware), a Delaware banking corporation, whose address is as
set forth in Section 14.01(c).
(e) Any action taken by the Holders of Common Securities pursuant to this
Article 5 shall be taken at a meeting of the Holders of Common Securities
convened for such purpose or by written consent as provided in Section 12.02.
36
(f) No amendment may be made to this Section 5.01 which would change any
rights with respect to the number, existence or appointment and removal of
Trustees, except with the consent of each Holder of Common Securities.
Section 5.02. Appointment, Removal and Resignation of the Trustees.
(a) Subject to Section 5.02(b), Trustees may be appointed or removed
without cause at any time:
(i) until the issuance of the Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of the Securities by vote of the Holders of a
Majority in liquidation amount of the Common Securities voting as a class.
(b) (i) The Trustee that acts as the Property Trustee shall not be removed
in accordance with Section 5.02(a) until a successor Trustee possessing the
qualifications to act as the Property Trustee under Section 5.01(c) (a
"Successor Property Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Property
Trustee and delivered to the Regular Trustees, the Sponsor and the Property
Trustee being removed; and
(ii) the Trustee that acts as the Delaware Trustee shall not be
removed in accordance with Section 5.02(a) until a successor Trustee
possessing the qualifications to act as the Delaware Trustee under Section
5.01(a)(3) (a "Successor Delaware Trustee") has been appointed and has
accepted such appointment by written instrument executed by such Successor
Delaware Trustee and delivered to the Regular Trustees, the Sponsor and the
Delaware Trustee being removed.
(c) A Trustee appointed to office shall hold such office until his
successor shall have been appointed or until his death, removal or resignation.
(d) Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "Resignation Request") in writing
signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) no such resignation of the Trustee that acts as the Property
Trustee shall be effective until:
37
(A) a Successor Property Trustee has been appointed and has
accepted such appointment by instrument executed by such Successor
Property Trustee and delivered to the Regular Trustees, the Sponsor
and the resigning Property Trustee; or
(B) if the Trust is excluded from the definition of an Investment
Company solely by reason of Rule 3a-7, until the assets of the Trust
have been completely liquidated and the proceeds thereof distributed
to the Holders of the Securities; and
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees, the
Sponsor and the resigning Delaware Trustee.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section 5.02
within 60 days after delivery of a notice of removal or a Resignation Request,
the Property Trustee or Delaware Trustee being removed or resigning as the case
may be may petition, at the expense of the Sponsor, any court of competent
jurisdiction for appointment of a Successor Property Trustee or Successor
Delaware Trustee, as the case may be. Such court may thereupon after
prescribing such notice, if any, as it may deem proper and prescribe, appoint a
Successor Property Trustee or Successor Delaware Trustee, as the case may be.
Section 5.03. Vacancies among the Trustees.
If a Trustee ceases to hold office for any reason and the number of Trustees is
not reduced pursuant to Section 5.01 or if the number of Trustees is increased
pursuant to Section 5.01, a vacancy shall occur. A resolution certifying the
existence of such vacancy by a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with the requirements of this
Article 5.
Section 5.04. Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee, or
any one of them, shall not operate to dissolve, terminate or annul the Trust.
Whenever a vacancy in the number of Regular Trustees shall occur until such
vacancy is filled as provided in this Article 5, the Regular Trustees in office,
regardless of their number, shall have all the powers granted to the Regular
Trustees and shall discharge all the duties imposed upon the Regular Trustees by
this Declaration.
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Section 5.05. Meetings.
Meetings of the Regular Trustees shall be held from time to time upon the call
of any Regular Trustee. Regular meetings of the Regular Trustees may be held at
a time and place fixed by resolution of the Regular Trustees. Notice of any in-
person meeting of the Regular Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than 48 hours before such meeting. Notice of any telephonic
meeting of the Regular Trustees or any committee thereof shall be hand delivered
or otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before such meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Unless otherwise provided in this Declaration, any action
of the Regular Trustees may be taken at a meeting by vote of a majority of the
Regular Trustees present (whether in person or by telephone) and eligible to
vote with respect to such matter, provided that a Quorum is present, or without
a meeting by the unanimous written consent of the Regular Trustees.
Section 5.06. Delegation of Power.
(a) Any Regular Trustee may, by power of attorney consistent with applicable
law, delegate to any other natural person over the age of 21 his or her power
for the purpose of executing any registration statement or amendment thereto or
other document or schedule filed with the Commission or making any other
governmental filing (including, without limitation, the filings referred to in
Section 3.13).
(b) The Regular Trustees shall have power to delegate from time to time to
such of their number or to officers of the Trust the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Regular Trustees or otherwise as the Regular Trustees may deem expedient,
to the extent such delegation is not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.
Section 5.07. Merger, Conversion, Consolidation or Succession to Business.
Any Person into which the Property Trustee or the Delaware Trustee or any
Regular Trustee that is not a natural person, as the case may be, may be merged
or converted or with which it may be consolidated, or any Person resulting from
any merger, conversion or consolidation to which the Property Trustee or the
Delaware Trustee or the Regular Trustees, as the case may be, shall be a party,
or
39
any Person succeeding to all or substantially all of the corporate trust
business of the Property Trustee or the Delaware Trustee or the Regular Trustee,
as the case may be, shall be the successor of the Property Trustee or the
Delaware Trustee or the Regular Trustees, as the case may be, hereunder,
provided that such Person shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE 6
DISTRIBUTIONS
Section 6.01. Distributions.
Holders shall receive periodic distributions, redemption payments and
liquidation distributions in accordance with the applicable terms of the
relevant Holder's Securities as set forth in Exhibits B and C hereto
("Distributions"). If and to the extent that Reliant Energy makes a payment of
interest (including Additional Interest and/or Compounded Interest (as defined
in the Indenture)), premium and/or principal on the Debentures held by the
Property Trustee (the amount of any such payment being a "Payment Amount"), the
Property Trustee shall and is directed, to the extent funds are available for
that purpose, to promptly make a Distribution of the Payment Amount to Holders
in accordance with the terms of the Securities as set forth in Exhibits B and C
hereto. The record dates and payment dates for Distributions shall be the same
as the record dates and payment dates for the Debentures held by the Property
Trustee.
ARTICLE 7
ISSUANCE OF THE SECURITIES
Section 7.01. General Provisions Regarding the Securities.
(a) The Regular Trustees shall issue on behalf of the Trust Securities in
fully registered form representing undivided beneficial interests in the assets
of the Trust in accordance with Section 7.01(b) and for the consideration
specified in Section 3.03.
(b) The Regular Trustees shall issue on behalf of the Trust one class of
preferred securities representing preferred undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Exhibit B (the
"Preferred Securities") hereto, which terms are incorporated by reference in,
and made a part of, this Declaration as if specifically set forth herein, and
one class of common
40
securities representing common undivided beneficial interests in the assets of
the Trust having such terms as are set forth in Exhibit C (the "Common
Securities") hereto, which terms are incorporated by reference in, and made a
part of, this Declaration as if specifically set forth herein. The Trust shall
have no securities or other interests in the assets of the Trust other than the
Preferred Securities and the Common Securities.
(c) The Certificates shall be signed on behalf of the Trust by the Regular
Trustees (or if there are more than two Regular Trustees by any two of the
Regular Trustees). Such signatures may be the manual or facsimile signatures of
the present or any future Regular Trustee. Typographical and other minor errors
or defects in any such reproduction of any such signature shall not affect the
validity of any Certificate. In case any Regular Trustee who shall have signed
any of the Certificates shall cease to be such Regular Trustee before the
Certificate so signed shall be delivered by the Trust, such Certificate
nevertheless may be delivered as though the person who signed such Certificate
had not ceased to be such Regular Trustee; and any Certificate may be signed on
behalf of the Trust by such persons as, at the actual date of the execution of
such Certificate, shall be the Regular Trustees, although at the date of the
execution and delivery of this Declaration any such person was not a Regular
Trustee. Certificates shall be typewritten, printed, lithographed or engraved
or may be produced in any other manner as is reasonably acceptable to the
Regular Trustees, as evidenced by their execution thereof, and may have such
letters, numbers or other marks of identification or designation and such
legends or endorsements as the Regular Trustees may deem appropriate, or as may
be required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or automated
quotation system on which Securities may be listed or traded, or with any rule
or regulation of the Clearing Agency, or to conform to usage. Pending the
preparation of definitive Certificates, the Regular Trustees on behalf of the
Trust may execute temporary Certificates (printed, lithographed or typewritten),
in substantially the form of the definitive Certificates in lieu of which they
are issued, but with such omissions, insertions and variations as may be
appropriate for temporary Certificates, all as may be determined by the Regular
Trustees. Each temporary Certificate shall be executed by the Regular Trustees
(or, if there are more than two Regular Trustees, by any two of the Regular
Trustees) on behalf of the Trust upon the same conditions and in substantially
the same manner, and with like effect, as definitive Certificates. Without
unnecessary delay, the Regular Trustees on behalf of the Trust will execute and
furnish definitive Certificates and thereupon any or all temporary Certificates
may be surrendered to the transfer agent and registrar in exchange therefor
(without charge to the Holders). Each Preferred Security Certificate whether in
temporary or definitive form shall be countersigned, upon receipt of a written
order of the Trust signed by one Regular Trustee, by the manual signature of an
authorized signatory of the Person acting as registrar and transfer agent for
the Preferred Securities, which shall initially be the Property Trustee.
41
(d) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(e) Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and non-
assessable.
(f) Every Person, by virtue of having become a Holder or a Preferred Security
Beneficial Owner in accordance with the terms of this Declaration, shall be
deemed to have expressly assented and agreed to the terms of, and shall be bound
by this Declaration.
(g) Upon issuance of the Securities as provided in this Declaration, the
Regular Trustees on behalf of the Trust shall return to Reliant Energy the $10
constituting initial trust assets as set forth in the Original Declaration.
ARTICLE 8
DISSOLUTION OF THE TRUST
Section 8.01. Dissolution of the Trust.
The Trust shall dissolve:
(i) when all of the Securities shall have been called for redemption and
the amounts necessary for redemption thereof shall have been paid to the
Holders of the Securities in accordance with the terms of the Securities; or
(ii) when all of the Debentures shall have been distributed to the Holders
of the Securities in exchange for all of the Securities in accordance with the
terms of the Securities;
(iii) upon the expiration of the term of the Trust as set forth in Section
3.17; or
(iv) upon a decree of judicial dissolution.
Upon dissolution and the completion of the winding up of the affairs of the
Trust, the Trust and this Declaration shall terminate when a certificate of
cancellation is filed by the Trustees with the Secretary of State of the State
of Delaware. The
42
Trustees shall so file such a certificate as soon as practicable after the
occurrence of an event referred to in this Section 8.01.
The provisions of Sections 3.12 and 4.02 and Article 10 shall survive the
termination of the Trust and this Declaration.
ARTICLE 9
TRANSFER OF INTERESTS
Section 9.01. Transfer of Securities.
(a) Securities may only be transferred, in whole or in part, in accordance
with the terms and conditions set forth in this Declaration and in the terms of
the Securities. To the fullest extent permitted by law, any transfer or
purported transfer of any Security not made in accordance with this Declaration
shall be null and void.
(b) Subject to this Article 9, Preferred Securities shall be freely
transferable.
(c) The Holder of the Common Securities may not transfer the Common
Securities except (a) in connection with transactions permitted under Section
10.01 of the Indenture, or (b) to the Sponsor or an Affiliate thereof in
compliance with applicable law (including the Securities Act and applicable
state securities and blue sky laws). To the fullest extent permitted by law,
any attempted transfer of the Common Securities other than as set forth in the
immediately preceding sentence shall be void.
Section 9.02. Transfer of Certificates.
The Regular Trustees shall provide for the registration of Certificates and of
transfers of Certificates, which will be effected without charge but only upon
payment (with such indemnity as the Regular Trustees may require) in respect of
any tax or other government charges which may be imposed in relation to it. Upon
surrender for registration of transfer of any Certificate, the Regular Trustees
shall cause one or more new Certificates to be issued in the name of the
designated transferee or transferees. Every Certificate surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Regular Trustees duly executed by the
Holder or such Holder's attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer shall be canceled by the Regular
Trustees. A transferee of a Certificate shall be entitled to the rights and
subject to the obligations of a Holder hereunder
43
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by this
Declaration.
Section 9.03. Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trustees shall have
actual or other notice thereof.
Section 9.04. Book Entry Interests.
Unless otherwise specified in the terms of the Preferred Securities, the
Preferred Security Certificates, on original issuance, will be issued in the
form of one or more, fully registered, global Preferred Security Certificates
(each a "Global Certificate"), to be delivered to DTC, the initial Clearing
Agency, by, or on behalf of, the Trust. Such Global Certificates shall
initially be registered on the books and records of the Trust in the name of
Cede & Co., the nominee of DTC, and no Preferred Security Beneficial Owner will
receive a definitive Preferred Security Certificate representing such Preferred
Security Beneficial Owner's interests in such Global Certificates, except as
provided in Section 9.07. Unless and until definitive, fully registered
Preferred Security Certificates (the "Definitive Preferred Security
Certificates") have been issued to the Preferred Security Beneficial Owners
pursuant to Section 9.07:
(i) the provisions of this Section 9.04 shall be in full force and effect;
(ii) the Trust and the Trustees shall be entitled to deal with the Clearing
Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Certificates and receiving approvals, votes or
consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the Global Certificates and, except as set forth herein in Section
9.07 or in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) with respect to the Property
Trustee, shall have no obligation to the Preferred Security Beneficial Owners;
(iii) to the extent that the provisions of this Section 9.04 conflict with
any other provisions of this Declaration, the provisions of this Section 9.04
shall control; and
44
(iv) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security Beneficial
Owners and the Clearing Agency and/or the Clearing Agency Participants. DTC
will make book entry transfers among the Clearing Agency Participants and
receive and transmit payments of Distributions on the Global Certificates to
such Clearing Agency Participants, provided, that solely for the purposes of
determining whether the Holders of the requisite amount of Preferred
Securities have voted on any matter provided for in this Declaration, so long
as definitive Preferred Security Certificates have not been issued (pursuant
to Section 9.07 hereof), the Trustees may conclusively rely on, and shall be
protected in relying on, any written instrument (including a proxy) delivered
to the Trustees by the Clearing Agency setting forth the Preferred Security
Beneficial Owners' votes or assigning the right to vote on any matter to any
other Persons either in whole or in part.
Section 9.05. Notices to Holders of Certificates.
Whenever a notice or other communication to the Holders is required to be
given under this Declaration, unless and until Definitive Preferred Security
Certificates shall have been issued pursuant to Section 9.07, the relevant
Trustees shall give all such notices and communications, specified herein to be
given to Holders of Preferred Securities, to the Clearing Agency and, with
respect to any Preferred Security Certificate registered in the name of a
Clearing Agency or the nominee of a Clearing Agency, the Trustees shall, except
in Rule 3a-7 (if the Trust is excluded from the definition of an Investment
Company solely by reason of Rule 3a-7) with respect to the Property Trustee,
have no notice obligations to the Preferred Security Beneficial Owners.
Section 9.06. Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities, the Regular Trustees may,
in their sole discretion, appoint a successor Clearing Agency with respect to
the Preferred Securities.
Section 9.07. Definitive Preferred Securities Certificates.
If (i) a Clearing Agency elects to discontinue its services as securities
depository with respect to the Preferred Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 9.06 or (ii) the Regular Trustees elect after consultation with the
Sponsor to terminate the book entry system through the Clearing Agency with
respect to
45
the Preferred Securities, then (x) Definitive Preferred Security Certificates
shall be prepared by the Regular Trustees on behalf of the Trust with respect to
such Preferred Securities and (y) upon surrender of the Global Certificates by
the Clearing Agency, accompanied by registration instructions, the Regular
Trustees shall cause Definitive Preferred Security Certificates to be delivered
to Preferred Security Beneficial Owners in accordance with the instructions of
the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any
delay in delivery of such instructions and each of them may conclusively rely
on, and shall be protected in relying on, such instructions.
Section 9.08. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and (b)
there shall be delivered to the Regular Trustees such security or indemnity as
may be required by them to keep each of them and the Trust harmless, then in the
absence of notice that such Certificate shall have been acquired by a bona fide
purchaser, the Regular Trustees (or if there are more than two Regular Trustees
by any two of the Regular Trustees) on behalf of the Trust shall execute and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like denomination. In connection with
the issuance of any new Certificate under this Section 9.08, the Regular
Trustees may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Certificate issued pursuant to this section shall constitute conclusive evidence
of an ownership interest in the relevant Securities, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
ARTICLE 10
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 10.01. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or, in the
case of the
46
Property Trustee, negligence) or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
(c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders of
Securities, in their capacities as Holders, shall be entitled to the same
limitation of liability that is extended to stockholders of private corporations
for profit organized under the General Corporation Law of the State of Delaware.
Section 10.02. Indemnification.
(a) To the fullest extent permitted by applicable law, the Sponsor shall
indemnify and hold harmless each Indemnified Person from and against any loss,
liability, expense, damage or claim incurred by such Indemnified Person by
reason of any act or omission performed or omitted by such Indemnified Person in
good faith on behalf of the Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Declaration, except that no Indemnified Person shall
be entitled to be indemnified in respect of any loss, liability, expense, damage
or claim incurred by such Indemnified Person by reason of gross negligence (or,
in the case of the Property Trustee, negligence) or willful misconduct with
respect to such acts or omissions.
(b) The provisions of this Section 10.02 shall survive the termination of this
Declaration or the resignation or removal of any Trustee.
Section 10.03. Outside Business.
The Sponsor and any Trustee (in the case of the Property Trustee, subject to
Section 5.01(c)) may engage in or possess an interest in other business ventures
of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. Neither the Sponsor nor any Trustee shall
be obligated to present any
47
particular investment or other opportunity to the Trust even if such opportunity
is of a character that, if presented to the Trust, could be taken by the Trust,
and the Sponsor or any Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor or may act as depository for, trustee or agent for, or
act on any committee or body of holders of, securities or other obligations of
the Sponsor or any of its Affiliates.
ARTICLE 11
ACCOUNTING
Section 11.01. Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or
such other year as is required by the Code.
Section 11.02. Certain Accounting Matters.
(a) At all times during the existence of the Trust, the Regular Trustees shall
keep, or cause to be kept, full books of account, records and supporting
documents, which shall reflect in reasonable detail each transaction of the
Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual method of accounting for
United States Federal income tax purposes.
(b) If required by applicable law, the Regular Trustees shall, as soon as
available after the end of each Fiscal Year of the Trust, cause to be prepared
and mailed to each Holder of Securities unaudited financial statements of the
Trust for such Fiscal Year, prepared in accordance with generally accepted
accounting principles; provided that if the Trust is required to comply with the
periodic reporting requirements of Section 13(a) or 15(d) of the Exchange Act,
such financial statements for such Fiscal Year shall be examined and reported on
by a firm of independent certified public accountants selected by the Regular
Trustees (which firm may be the firm used by the Sponsor).
(c) The Regular Trustees shall cause to be duly prepared and mailed to each
Holder of Securities any annual United States Federal income tax information
statement required by the Code, containing such information with regard to the
Securities held by each Holder as is required by the Code and the
48
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Regular Trustees shall endeavor to deliver
all such statements within 30 days after the end of each Fiscal Year of the
Trust.
(d) The Regular Trustees shall cause to be duly prepared and filed with the
appropriate taxing authority an annual United States Federal income tax return,
on such form as is required by the Code, and any other annual income tax returns
required to be filed by the Regular Trustees on behalf of the Trust with any
state or local taxing authority.
Section 11.03. Banking.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Account and no other funds from the Trust shall be deposited in the
Property Account. The sole signatories for such accounts shall be designated by
the Regular Trustees; provided, however, that the Property Trustee shall
designate the sole signatories for the Property Account.
Section 11.01. Withholding.
The Trust and the Trustees shall comply with all withholding requirements
under United States Federal, State and local law. The Regular Trustees shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Regular Trustees to assist them in determining the extent of, and in
fulfilling, the Trust's withholding obligations. The Trust shall file required
forms with applicable jurisdictions and, unless an exemption from withholding is
properly established by a Holder, shall remit amounts withheld with respect to
the Holder to applicable jurisdictions. To the extent that the Trust is
required to withhold and pay over any amounts to any authority with respect to
Distributions or allocations to any Holder, the amount withheld shall be deemed
to be a Distribution in the amount of the withholding to the Holder. In the
event of any claimed overwithholding, Holders shall be limited to an action
against the applicable
49
jurisdiction. If the amount to be withheld was not withheld from a Distribution,
the Trust may reduce subsequent Distributions by the amount of such withholding.
ARTICLE 12
AMENDMENTS AND MEETINGS
Section 12.01. Amendments.
(a) Except as otherwise provided in this Declaration or by any applicable
terms of the Securities, this Declaration may be amended by, and only by, a
written instrument executed by a majority of the Regular Trustees; provided,
however, that (i) no amendment or modification to this Declaration shall be
made, and any such purported amendment shall be void and ineffective: (A) unless
the Regular Trustees shall have first received: (x) an Officers' Certificate
that such amendment is permitted by, and conforms to, the terms of this
Declaration; and (y) an Opinion of Counsel that such amendment is permitted by,
and conforms to, the terms of this Declaration and that all conditions
precedent, if any, in this Declaration to the execution and delivery of such
amendment have been satisfied; and (B) to the extent the result of such
amendment would be to: (x) cause the Trust to fail to continue to be classified
for purposes of United States Federal income taxation as a grantor trust; (y)
reduce or otherwise adversely affect the rights or powers of the Property
Trustee in contravention of the Trust Indenture Act; or (z) cause the Trust to
be deemed to be an Investment Company required to be registered under the
Investment Company Act; (ii) at such time after the Trust has issued any
Securities which remain outstanding, any amendment which would adversely affect
the rights, privileges or preferences of any Holder of Securities may be
effected only with such additional requirements as may be set forth in the terms
of such Securities; (iii) Section 4.02, Section 9.01(c) and this Section 12.01
shall not be amended without the consent of all of the Holders of the
Securities; (iv) no amendment which adversely affects the rights, powers and
privileges of the Property Trustee or the Delaware Trustee shall be made without
the consent of the Property Trustee or the Delaware Trustee, respectively; (v)
Article 4 shall not be amended without the consent of the Sponsor; and (vi) the
rights of the Holders of Common Securities under Article 5 to increase or
decrease the number of, and to appoint, replace or remove, Trustees shall not be
amended without the consent of each Holder of Common Securities.
(b) Notwithstanding Section 12.02(a), this Declaration may be amended without
the consent of the Holders of the Securities to (i) cure any ambiguity, (ii)
correct or supplement any provision in this Declaration that may be defective or
inconsistent with any other provision of this Declaration, (iii) add to the
50
covenants, restrictions or obligations of the Sponsor, (iv) conform to any
changes in Rule 3a-7 (if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7) or any change in
interpretation or application of Rule 3a-7 (if the Trust is excluded from the
definition of an Investment Company solely by reason of Rule 3a-7) by the
Commission, (v) make any other provisions with respect to matters or questions
arising under this Declaration which shall not be inconsistent with the other
provisions of this Declaration, (vi) modify, eliminate or add to any provisions
of this Declaration to such extent as shall be necessary to ensure that the
Trust will be classified for United States federal income tax purposes as a
grantor trust at all times that any Securities are outstanding or to ensure that
the Trust will not be required to register as an Investment Company under the
Investment Company Act, and (vii) pursuant to Section 5.02, evidence the
acceptance of the appointment of a successor Trustee or fill a vacancy created
by an increase in the number of Regular Trustees, which amendment does not
adversely affect in any material respect the rights, preferences or privileges
of the Holders.
Section 12.02. Meetings of the Holders of Securities; Action by Written
Consent.
(a) Meetings of the Holders of Preferred Securities and/or Common Securities
may be called at any time by the Regular Trustees (or as provided in the terms
of the Securities) to consider and act on any matter on which the Holders of
such class of Securities are entitled to act under the terms of this
Declaration, the terms of the Securities or the rules of any stock exchange or
automated quotation system on which the Preferred Securities are then listed,
traded or quoted. The Regular Trustees shall call a meeting of the Holders of
Preferred Securities or Common Securities, if directed to do so by Holders of at
least 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Regular Trustees one or more notices in
writing stating that the signing Holders of Securities wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Securities calling a meeting shall specify in writing
the Certificates held by the Holders of Securities exercising the right to call
a meeting and only those specified Certificates shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Securities,
the following provision shall apply to meetings of the Holders of Securities:
(i) Notice of any such meeting shall be given by mail to all the Holders
of Securities having a right to vote thereat not less than seven (7) days nor
more than sixty (60) days prior to the date of such meeting. Whenever a vote,
consent or approval of the Holders of Securities is
51
permitted or required under this Declaration or the rules of any stock
exchange or automated quotation system on which the Preferred Securities are
then listed, traded or quoted, such vote, consent or approval may be given at
a meeting of the Holders of Securities. Any action that may be taken at a
meeting of the Holders of Securities may be taken without a meeting and
without prior notice if a consent in writing setting forth the action so
taken is signed by Holders of Securities owning not less than the minimum
aggregate liquidation amount of Securities that would be necessary to
authorize or take such action at a meeting at which all Holders of Securities
having a right to vote thereon were present and voting. Prompt notice of the
taking of action without a meeting shall be given to the Holders of
Securities entitled to vote who have not consented in writing. The Regular
Trustees may specify that any written ballot submitted to the Holders of
Securities for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Regular Trustees.
(ii) Each Holder of a Security may authorize any Person to act for it by
proxy on all matters in which a Holder of a Security is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. No proxy shall be valid after the expiration of
11 months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Holder of the Security
executing it. Except as otherwise provided herein or in the terms of the
Securities, all matters relating to the giving, voting or validity of proxies
shall be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the Trust
were a Delaware corporation and the Holders of the Securities were
stockholders of a Delaware corporation.
(iii) Each meeting of the Holders of the Securities shall be conducted by
the Regular Trustees or by such other Person that the Regular Trustees may
designate.
(iv) Unless otherwise provided in the Business Trust Act, this Declaration
or the rules of any stock exchange or automated quotation system on which the
Preferred Securities are then listed, traded or quoted, the Regular Trustees,
in their sole discretion, shall establish all other provisions relating to
meetings of Holders of Securities, including notice of the time, place or
purpose of any meeting at which any matter is to be voted on by any Holders
of Securities, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements, voting in
person or by proxy or any other matter with respect to the exercise of any
such right to vote.
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ARTICLE 13
REPRESENTATIONS OF THE PROPERTY TRUSTEE AND THE DELAWARE TRUSTEE
Section 13.01. Representations and Warranties of the Property Trustee.
The Trustee which acts as the initial Property Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Property Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Property Trustee's acceptance of its appointment as
the Property Trustee that:
(i) The Property Trustee is a national banking association or a banking
corporation with trust powers, duly organized, validly existing and in good
standing under the laws of the United States or the laws of the state of its
incorporation, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Property Trustee of this
Declaration have been duly authorized by all necessary corporate action on the
part of the Property Trustee. This Declaration has been duly executed and
delivered by the Property Trustee, and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law).
(iii) The execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee.
(iv) No consent, approval or authorization of, or registration with or notice
to, any banking authority which supervises or regulates the Property Trustee is
required for the execution, delivery or performance by the Property Trustee of
this Declaration.
(v) The Property Trustee satisfies the qualifications set forth in Section
5.01(c).
53
Section 13.02. Representations and Warranties of the Delaware Trustee.
The Trustee which acts as the initial Delaware Trustee represents and warrants
to the Trust and the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee represents and warrants to the Trust and the Sponsor at the
time of the Successor Delaware Trustee's acceptance of its appointment as the
Delaware Trustee, that:
(i) The Delaware Trustee is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with corporate
power and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Delaware Trustee of this
Declaration have been duly authorized by all necessary corporate action on the
part of the Delaware Trustee. This Declaration has been duly executed and
delivered by the Delaware Trustee and constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in
equity or at law).
(iii) No consent, approval or authorization of, or registration with or
notice to, any banking authority which supervises or regulates the Delaware
Trustee, if any, is required for the execution, delivery or performance by the
Delaware Trustee of this Declaration.
(iv) The Delaware Trustee is a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware and is a Person that satisfies for
the Trust (S) 3807(a) of the Business Trust Act.
ARTICLE 14
MISCELLANEOUS
Section 14.01. Notices.
All notices provided for in this Declaration shall be in writing, duly signed
by the party giving such notice, and shall be delivered, telecopied or mailed by
first class mail, as follows:
54
(a) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Regular Trustees
on behalf of the Trust may give notice of to the Holders of the Securities):
REI Trust I
c/o Reliant Energy, Incorporated
1111 Louisiana
Houston, Texas 77002
Attention: Treasurer
Telecopy: (713) 207-3301
(b) if given to the Property Trustee, at the mailing address of the Property
Trustee set forth below (or such other address as the Property Trustee may give
notice of to the Holders of the Securities):
101 Barclay Street
Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopy: (212) 815-5915
(c) if given to the Delaware Trustee, at the mailing address of the Delaware
Trustee set forth below (or such other address as the Delaware Trustee may give
notice of to the Holders of the Securities):
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(d) if given to the Holder of the Common Securities, at the mailing address of
the Sponsor set forth below (or such other address as the Holder of the Common
Securities may give notice of to the Trust):
Reliant Energy, Incorporated
1111 Louisiana
Houston, Texas 77002
Attention: Treasurer
Telecopy: (713) 207-3301
(e) if given to any other Holder, at the address set forth on the books and
records of the Trust.
A copy of any notice to the Property Trustee or the Delaware Trustee shall
also be sent to the Trust. All notices shall be deemed to have been given, when
55
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
Section 14.02. Undertaking for Costs.
All parties to this Declaration agree, and each Holder of any Securities by
his or her acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the enforcement of any right or
remedy under this Declaration, or in any suit against the Property Trustee for
any action taken or omitted by it as Property Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in such suit, having
due regard to the merits and good faith of the claims or defenses made by such
party litigant; but the provisions of this Section 14.02 shall not apply to any
suit instituted by the Property Trustee, to any suit instituted by any Holder of
Preferred Securities, or group of Holders of Preferred Securities, holding more
than 10% in aggregate liquidation amount of the outstanding Preferred
Securities, or to any suit instituted by any Holder of Preferred Securities for
the enforcement of the payment of the principal of (or premium, if any) or
interest on the Debentures, on or after the respective due dates expressed in
such Debentures.
Section 14.03. Governing Law.
This Declaration, the Securities and the rights of the parties hereunder shall
be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
Section 14.04. Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
Section 14.05. Partial Enforceability.
If any provision of this Declaration, or the application of such provision to
any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to Persons or circumstances
other than those to which it is held invalid, shall not be affected thereby.
56
Section 14.06. Counterparts.
This Declaration may contain more than one counterpart of the signature pages
and this Declaration may be executed by the affixing of the signature of the
Sponsor and each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
Section 14.07. Intention of the Parties.
It is the intention of the parties hereto that the Trust not be classified for
United States Federal income tax purposes as an association taxable as a
corporation or partnership but that the Trust be treated as a grantor trust for
United States federal income tax purposes. The provisions of this Declaration
shall be interpreted to further this intention of the parties.
Section 14.08. Successors and Assigns.
Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included, and
all covenants and agreements in this Declaration by the Sponsor and the Trustees
shall bind and inure to the benefit of their respective successors and assigns,
whether so expressed.
Section 14.09. No Recourse.
The Trust's obligations hereunder are intended to be the obligations of the
Trust and no recourse for the payment of Distributions, or for any claim upon
the Securities or otherwise in respect thereof, shall be had against any Holder
of Securities or any Affiliate of a Holder of Securities, solely by reason of
such Person's being a Holder of Securities or an Affiliate of a Holder of
Securities, it being understood that the Holder of Securities, solely by reason
of being a Holder of Securities, has limited liability (in accordance with the
provisions of the Business Trust Act) for the liabilities and obligations of the
Trust. Nothing contained in this Section 14.09 shall be construed to limit the
exercise or enforcement, in accordance with the terms of this Declaration, the
Preferred Securities Guarantee and the Indenture, of the rights and remedies
against the Trust or the Sponsor.
57
IN WITNESS WHEREOF, the undersigned has caused these presents to be executed
as of the day and year first above written.
HOUSTON INDUSTRIES INCORPORATED, d/b/a
RELIANT ENERGY, INCORPORATED
as Sponsor
By: /s/ Marc Kilbride
---------------------------------
Name: Marc Kilbride
Title: Treasurer
/s/ Linda Geiger
------------------------------------
Linda Geiger,
as Regular Trustee
/s/ Paul A. Castanon
------------------------------------
Paul A. Castanon,
as Regular Trustee
/s/ William T. Massar
------------------------------------
William T. Massar,
as Regular Trustee
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Remo J. Reale
---------------------------------
Name: Remo J. Reale
Title: Assistant Vice President
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Walter N. Gitlin
---------------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
58
EXHIBIT A-1
CERTIFICATE OF TRUST
OF
HI TRUST I
THIS CERTIFICATE OF TRUST of HI Trust I (the "Trust"), dated as of January 8,
1999, is being duly executed and filed by the undersigned, as trustees, with the
Secretary of State of the State of Delaware to form a business trust under the
Delaware Business Trust Act (12 Del. Code (S) 3801 et seq.).
1. Name. The name of the business trust being formed hereby is HI Trust I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are The Bank
of New York (Delaware), a Delaware banking corporation, White Clay Center, Route
273, Newark, Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective at the time
of its filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned, being all of the trustees of the Trust at
the time of filing this Certificate of Trust, have executed this Certificate of
Trust as of the date first above written.
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Walter N. Gitlin
-----------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Remo J. Reale
------------------
Name: Remo J. Reale
Title: Assistant Vice President
WILLIAM T. MASSAR
as Regular Trustee
By: /s/ William T. Massar
----------------------
EXHIBIT A-2
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF TRUST
OF
HI TRUST I
THIS CERTIFICATE OF AMENDMENT OF CERTIFICATE OF TRUST of HI Trust I (the
"Trust") is being duly executed and filed on behalf of the Trust by the
undersigned, as trustee, to amend the Certificate of Trust of the Trust, which
was filed with the Secretary of State of the State of Delaware on January 11,
1999, under the Delaware Business Trust Act (12 Del. Code (S) 3801 et seq.) (the
"Act").
1. Name. The name of the Trust is HI Trust I.
2. Amendment of Certificate of Trust. The Certificate of Trust of the Trust
is hereby amended by changing the name of the Trust to REI Trust I.
3. Effective Date. This Certificate of Amendment shall be effective upon
filing with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Trust in accordance with Section 3811(a)(2) of the Act.
WILLIAM T. MASSAR,
not in his individual capacity, but solely as trustee
/s/ William T. Massar
---------------------
William T. Massar
EXHIBIT B
TERMS OF
PREFERRED SECURITIES
Pursuant to Section 7.01(b) of the Amended and Restated Declaration of Trust
of REI Trust I dated as of February 26, 1999 (as amended from time to time, the
"Declaration"), the designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities are set forth below
(each capitalized term used but not defined herein having the meaning set forth
in the Declaration):
1. DESIGNATION AND NUMBER. Fifteen million (15,000,000) Preferred
Securities of the Trust with an aggregate liquidation amount at any time
outstanding with respect to the assets of the Trust of Three Hundred Seventy-
Five Million Dollars ($375,000,000) and each with a liquidation amount with
respect to the assets of the Trust of $25 per Preferred Security, are hereby
designated as "7.20% Trust Originated Preferred Securities, Series C". The
Preferred Security Certificates evidencing the Preferred Securities shall be
substantially in the form attached hereto as Annex I, with such changes and
additions thereto or deletions therefrom as may be required by ordinary usage,
custom or practice or to conform to the rules of any stock exchange or automated
quotation system on which the Preferred Securities are then listed, traded or
quoted. In connection with the issuance and sale of the Preferred Securities
and the Common Securities, the Trust will purchase as trust assets Debentures of
Reliant Energy having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities and the Common Securities so
issued, and bearing interest at an annual rate equal to the annual Distribution
rate on the Preferred Securities and the Common Securities and having payment
and redemption provisions which correspond to the payment and redemption
provisions of the Preferred Securities and the Common Securities.
2. DISTRIBUTIONS. (a) Distributions payable on each Preferred Security will
be fixed at a rate per annum of 7.20% (the "Coupon Rate") of the stated
liquidation amount of $25 per Preferred Security, such rate being the rate of
interest payable on the Debentures to be held by the Property Trustee.
Distributions in arrears for more than one calendar quarter will accumulate
additional distributions thereon at the Coupon Rate per annum (to the extent
permitted by applicable law), compounded quarterly. The term "Distributions" as
used herein means such periodic cash distributions and any such additional
distributions payable unless otherwise stated. A Distribution will be made by
the Property Trustee only to the extent that interest payments are made in
respect of the Debentures held by the Property Trustee and to the extent the
Trust has funds
B-1
on hand legally available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
(b) Distributions on the Preferred Securities will accumulate from February
26, 1999 and will be payable quarterly in arrears, on March 31, June 30,
September 30 and December 31 of each year, commencing on June 30, 1999, except
as otherwise described below, but only if and to the extent that interest
payments are made in respect of the Debentures held by the Property Trustee.
So long as Reliant Energy shall not be in default in the payment of interest
on the Debentures, Reliant Energy has the right under the Indenture for the
Debentures to defer payments of interest on the Debentures by extending the
interest payment period at any time and from time to time on the Debentures
for a period not exceeding 20 consecutive quarterly interest periods (each, an
"Extension Period"), during which Extension Period no interest shall be due
and payable on the Debentures. As a consequence of such deferral,
Distributions shall also be deferred. Despite such deferral, Distributions
will continue to accumulate with additional distributions thereon (to the
extent permitted by applicable law but not at a rate greater than the rate at
which interest is then accruing on the Debentures) at the Coupon Rate
compounded quarterly during any such Extension Period; provided that no
Extension Period shall extend beyond the stated maturity of the Debentures.
Prior to the termination of any such Extension Period, Reliant Energy may
further extend such Extension Period; provided that such Extension Period
together with all such previous and further extensions thereof may not exceed
20 consecutive quarterly interest periods. Upon the termination of any
Extension Period and the payment of all amounts then due, Reliant Energy may
commence a new Extension Period, subject to the above requirements. On the
Distribution payment date at the end of an Extension Period, payments of
accumulated Distributions will be payable to Holders of Preferred Securities
as they appear on the books and records of the Trust (regardless of who the
Holders may have been on other dates during the Extension Period) on the
record date for such Distribution payment date.
(c) Distributions on the Preferred Securities will be payable promptly by
the Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and records
of the Trust on the relevant record dates. While the Preferred Securities
remain in book-entry only form, the relevant record dates shall be one
business day prior to the relevant Distribution date, and
B-2
if the Preferred Securities are no longer in book-entry only form, the
relevant record dates will be the fifteenth (15th) day of the month prior to
the relevant Distribution date, which record and payment dates correspond to
the record and interest payment dates on the Debentures. Distributions payable
on any Preferred Securities that are not punctually paid on any Distribution
payment date as a result of Reliant Energy' having failed to make the
corresponding interest payment on the Debentures will forthwith cease to be
payable to the person in whose name such Preferred Security is registered on
the relevant record date, and such defaulted Distribution will instead be
payable to the person in whose name such Preferred Security is registered on
the special record date established by the Regular Trustees, which record date
shall correspond to the special record date or other specified date determined
in accordance with the Indenture; provided, however, that Distributions shall
not be considered payable on any Distribution payment date falling within an
Extension Period unless Reliant Energy has elected to make a full or partial
payment of interest accrued on the Debentures on such Distribution payment
date. Subject to any applicable laws and regulations and the provisions of the
Declaration, each payment in respect of the Preferred Securities will be made
as described in section 8 hereof. If any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on the
date such payment was originally payable. Notwithstanding anything herein to
the contrary, the record dates and payment dates for Distributions shall be
the same as the record dates and payment dates for the Debentures.
(d) All Distributions paid with respect to the Preferred Securities and the
Common Securities will be paid Pro Rata (as defined below) to the Holders
thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for under the Declaration, such money or
property shall be distributed Pro Rata among the Holders of the Preferred
Securities and the Common Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. (a) In the event of any
voluntary or involuntary dissolution of the Trust, the Holders of the Preferred
Securities and the Common Securities will be entitled to receive Pro Rata solely
B-3
out of the assets of the Trust legally available for distribution to Holders of
Preferred Securities and Common Securities after satisfaction of liabilities to
the creditors of the Trust, an amount equal to the aggregate of the stated
liquidation amount of $25 per Preferred Security and Common Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, and after satisfaction of liabilities to the creditors of the
Trust, Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Preferred Securities and the Common Securities and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on, such Preferred Securities and the Common Securities,
shall be distributed Pro Rata to the Holders of the Preferred Securities and the
Common Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets on hand legally available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid, subject to the next paragraph, on a Pro Rata basis.
Holders of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution Pro Rata with Holders of Preferred
Securities, except that if an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to such Liquidation Distribution.
(b) The Holder of the Common Securities shall have the right to direct the
Property Trustee in writing at any time to dissolve the Trust and to distribute
Debentures to Holders in exchange for Securities (which direction is optional
and wholly within the discretion of the Holder of the Common Securities). Upon
the receipt of any such written direction, the Property Trustee shall promptly
(i) distribute Debentures in an aggregate principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities and the Common
Securities held by each Holder, which Debentures bear accrued and unpaid
interest in an amount equal to the accumulated and unpaid Distributions on the
Preferred Securities and the Common Securities of such Holder, in exchange for
the Preferred Securities and Common Securities of such Holder and (ii) dissolve
the Trust.
(c) On the date fixed for any distribution of Debentures, upon dissolution of
the Trust, (i) the Preferred Securities will no longer be deemed to be
outstanding and may be canceled by the Regular Trustees, and (ii) Certificates
representing Preferred Securities will be deemed to represent beneficial
interests in the Debentures having an aggregate principal amount equal to the
stated liquidation amount of, and bearing accrued and unpaid interest equal to
B-4
accumulated and unpaid Distributions on, such Preferred Securities until such
Certificates are presented to Reliant Energy or its agent for transfer or
reissuance.
(d) If Debentures are distributed to Holders of the Preferred Securities,
Reliant Energy, pursuant to the terms of the Indenture, will use its best
efforts to have the Debentures listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities were listed immediately prior to the
distribution of the Debentures.
4. REDEMPTION OF DEBENTURES. The Preferred Securities may be redeemed only
if Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities and the Common Securities are
repaid or redeemed as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part, whether at
maturity, upon redemption at any time or from time to time on or after
February 26, 2004, the proceeds of such repayment will be promptly applied to
redeem Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures
so repaid or redeemed, upon not less than 30 nor more than 60 days' notice, at
a redemption price of $25 per Preferred Security and Common Security plus an
amount equal to accumulated and unpaid Distributions thereon to, but
excluding, the date of redemption, payable in cash (the "Redemption Price").
The date of any such repayment or redemption of Preferred Securities and
Common Securities shall be established to coincide with the repayment or
redemption date of the Debentures.
(b) If fewer than all the outstanding Preferred Securities and Common
Securities are to be so redeemed, the Preferred Securities and the Common
Securities will be redeemed Pro Rata and the Preferred Securities will be
redeemed as described in section 4(f)(ii) below. If a partial redemption would
result in the delisting of the Preferred Securities by any national securities
exchange or other organization on which the Preferred Securities are then
listed or traded, Reliant Energy pursuant to the Indenture will redeem
Debentures only in whole and, as a result, the Trust may redeem the Preferred
Securities only in whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each, a "Special Event") shall occur and be
continuing, Reliant Energy shall have the right at any time, upon not less
than 30 nor more than 60 days' notice, to redeem the Debentures in whole or in
part for cash at the Redemption Price within 90 days following the occurrence
of such Special Event, and promptly following such redemption, Preferred
Securities and Common Securities with an
B-5
aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so redeemed will be redeemed by the Trust at the Redemption Price
on a Pro Rata basis. The Common Securities will be redeemed Pro Rata with the
Preferred Securities, except that if an Event of Default has occurred and is
continuing, the Preferred Securities will have a priority over the Common
Securities with respect to payment of the Redemption Price.
"Tax Event" means that the Sponsor and the Regular Trustees shall have
received an Opinion of Counsel experienced in such matters to the effect that on
or after February 23, 1999 as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), (c) any interpretation or pronouncement by any
legislative body, court, governmental agency or regulatory authority that
provides for a position with respect to such laws or regulations that differs
from the theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after February 23, 1999, there is more than an insubstantial risk that (i)
the Trust is, or will be within 90 days of the date thereof, subject to United
States federal income tax with respect to income accrued or received on the
Debentures, (ii) the Trust is, or will be within 90 days of the date thereof,
subject to more than a de minimis amount of taxes, duties or other governmental
charges or (iii) interest payable by Reliant Energy to the Trust on the
Debentures is not, or within 90 days of the date thereof will not be, deductible
by Reliant Energy for United States Federal income tax purposes.
"Investment Company Event" means that the Sponsor and the Regular Trustees
shall have received an Opinion of Counsel experienced in practice under the
Investment Company Act that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (a
"Change in Investment Company Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
Investment Company Act Law becomes effective on or after February 23, 1999.
(d) The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accumulated and unpaid Distributions have
B-6
been paid on all Preferred Securities for all quarterly Distribution periods
terminating on or prior to the date of redemption.
(e) [Intentionally omitted.]
(f) (i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for, the Preferred Securities and the Common Securities (a
"Redemption/Distribution Notice") will be given by the Regular Trustees on
behalf of the Trust by mail to each Holder of Preferred Securities and Common
Securities to be redeemed or exchanged not less than 30 nor more than 60 days
prior to the date fixed for redemption or exchange thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this section 4(f)(i), a Redemption/Distribution
Notice shall be deemed to be given on the day such notice is first mailed by
first-class mail, postage prepaid, to Holders of Preferred Securities and
Common Securities. Each Redemption/Distribution Notice shall be addressed to
the Holders of Preferred Securities and Common Securities at the address of
each such Holder appearing in the books and records of the Trust. No defect in
the Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Preferred Securities
are to be redeemed, the Preferred Securities to be redeemed will be redeemed
Pro Rata from each Holder of Preferred Securities, it being understood that,
in respect of Preferred Securities registered in the name of and held of
record by DTC (or successor Clearing Agency) or any other nominee, the
Preferred Securities will be redeemed from, and the distribution of the
proceeds of such redemption will be made to, DTC (or successor Clearing
Agency).
(iii) Subject to section 8 hereof, if the Trust gives a
Redemption/Distribution Notice in respect of a redemption of Preferred
Securities as provided in this section 4 then (A) while the Preferred
Securities are in book-entry only form, with respect to the Preferred
Securities, by 12:00 noon, New York City time, on the redemption date,
provided that Reliant Energy has paid the Property Trustee, in immediately
available funds, a sufficient amount of cash in connection with the related
redemption or maturity of the Debentures, the Property Trustee will deposit
irrevocably with DTC (or successor Clearing Agency) funds sufficient to pay
the applicable Redemption Price with respect to the Preferred Securities and
will give DTC (or successor Clearing
B-7
Agency) irrevocable instructions and authority to pay the Redemption Price
to the Holders of the Preferred Securities and (B) if the Preferred
Securities are issued in definitive form, with respect to the Preferred
Securities and provided that Reliant Energy has paid the Property Trustee,
in immediately available funds, a sufficient amount of cash in connection
with the related redemption or maturity of the Debentures, the Property
Trustee will pay the relevant Redemption Price to the Holders of such
Preferred Securities by check mailed to the address of the relevant Holder
appearing on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on
the redemption date, Distributions will cease to accumulate on the Preferred
Securities called for redemption, such Preferred Securities will no longer
be deemed to be outstanding and all rights of Holders of such Preferred
Securities so called for redemption will cease, except the right of the
Holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price. Neither the Trustees nor the
Trust shall be required to register or cause to be registered the transfer
of any Preferred Securities which have been so called for redemption. If any
date fixed for redemption of Preferred Securities is not a Business Day,
then payment of the Redemption Price payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business
Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of Preferred Securities is improperly withheld
or refused and not paid either by the Property Trustee or by Reliant Energy
pursuant to the Preferred Securities Guarantee, Distributions on such
Preferred Securities will continue to accumulate, from the original
redemption date to the date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular Trustees
on behalf of the Trust to DTC or its nominee (or any successor Clearing
Agency or its nominee) if the Global Certificates have been issued or, if
Definitive Preferred Security Certificates have been issued, to the Holders
of the Preferred Securities.
B-8
(v) Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), Reliant Energy or any of
its Affiliates may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
5. VOTING RIGHTS. (a) Except as provided under section 5(b) below and as
otherwise required by law and the Declaration, the Holders of the Preferred
Securities will have no voting rights.
(b) If any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration, other than as described in
Section 12.01(b) of the Declaration or section 3 of Exhibit B, or otherwise,
or (ii) the dissolution, winding-up or termination of the Trust, other than as
described in Section 8.01 of the Declaration, then the Holders of outstanding
Securities will be entitled to vote on such amendment or proposal as a single
class and such amendment or proposal shall not be effective except with the
approval of the Holders of Securities of at least a Majority in liquidation
amount of the Securities, voting together as a single class; provided,
however, that (A) if any amendment or proposal referred to in clause (i) above
would adversely affect only the Preferred Securities or the Common Securities,
then only the affected class of Securities will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a Majority in liquidation amount of such
class of Securities and (B) amendments to the Declaration shall be subject to
such further requirements as are set forth in Sections 12.01 and 12.02 of the
Declaration.
In the event the consent of the Property Trustee, as the holder of the
Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the written direction of the Holders of the Securities
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a Majority in liquidation amount of the Securities voting
together as a single class; provided, however, that where such amendment,
modification or termination of the Indenture requires the consent or vote of (1)
holders of Debentures representing a specified percentage greater than a
majority in principal amount of the Debentures or (2) each holder of Debentures,
the Property Trustee may only vote with respect to that amendment, modification
or termination as directed by, in the case of clause (1) above, the vote of
Holders of Securities representing such specified percentage of the aggregate
liquidation amount of the
B-9
Securities, or, in the case of clause (2) above, each Holder of Securities; and
provided, further, that the Property Trustee shall be under no obligation to
take any action in accordance with the directions of the Holders of Securities
unless the Property Trustee shall have received, at the expense of the Sponsor,
an Opinion of Counsel experienced in such matters to the effect that the Trust
will not be classified for United States Federal income tax purposes as other
than a grantor trust on account of such action.
So long as any Debentures are held by the Property Trustee, the Trustees shall
not (i) direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee of the Indenture (the "Debenture Trustee"), or
exercising any trust or power conferred on the Debenture Trustee with respect to
the Debentures, (ii) waive any past default that is waivable under Section 6.06
of the Indenture or (iii) exercise any right to rescind or annul a declaration
of acceleration of the maturity of the principal of the Debentures, without, in
each case, obtaining the prior approval of the Holders of a Majority in
liquidation amount of all outstanding Preferred Securities and Common
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of the Preferred Securities except by
subsequent vote of such Holders. The Property Trustee shall notify each Holder
of Preferred Securities of any notice of default with respect to the Debentures.
If an Event of Default has occurred and is continuing, then the Holders of a
Majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee to exercise the remedies available to it as
a holder of the Debentures. If the Property Trustee fails to enforce its rights
under the Debentures, a Holder of Preferred Securities, to the extent permitted
by applicable law, may, after a period of 30 days has elapsed since such
Holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding directly against the Sponsor to enforce the
Property Trustee's rights under the Debentures without first instituting any
legal proceeding against the Property Trustee or any other Person; provided
further, that, if an Event of Default has occurred and is continuing and such
event is attributed to the failure of the Sponsor to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of
Preferred Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such Holder (a "Holder Direct Action") on or after the respective
due date specified in the Debentures. In connection with such Holder Direct
Action, the Sponsor will be subrogated to the rights of such Holder of Preferred
Securities to the extent of any payment made by the Sponsor to such Holders of
Preferred
B-10
Securities in such Holder Direct Action. Except as provided in the preceding
sentences, the Holders of Preferred Securities will not be able to exercise
directly any other remedy available to the Holders of the Debentures.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of the Holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Securities.
Any required approval or direction of Holders of Preferred Securities may be
given at a separate meeting of Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of Securities or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
Holders of Preferred Securities are entitled to vote to be mailed to each Holder
of record of Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
and (iii) instructions for the delivery of proxies.
No vote or consent of the Holders of Preferred Securities will be required for
the Trust to redeem and cancel Preferred Securities or to distribute the
Debentures in accordance with the Declaration.
Notwithstanding that Holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities at such time that are owned by Reliant Energy or by any Affiliate of
Reliant Energy shall not be entitled to vote or consent and shall, for purposes
of such vote or consent, be treated as if they were not outstanding.
Holders of the Preferred Securities have no rights to increase or decrease the
number of Trustees or to appoint, remove or replace a Trustee, which voting
rights are vested exclusively in the Holders of the Common Securities.
6. PRO RATA TREATMENT. A reference in these terms of the Preferred
Securities to any payment, Distribution or treatment as being "Pro Rata" shall
mean pro rata to each Holder of Securities according to the aggregate
liquidation amount of the Securities held by the relevant Holder in relation to
the aggregate liquidation amount of all Securities outstanding unless, in
relation to a payment, an Event of Default has occurred and is continuing, in
which case any funds available to make such payment shall be paid first to each
Holder of the Preferred Securities pro rata according to the aggregate
liquidation amount of Preferred Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Preferred Securities outstanding, and
only after satisfaction of all amounts owed to the Holders of the Preferred
Securities, to each Holder of Common Securities pro rata according to the
aggregate liquidation amount of Common
B-11
Securities held by the relevant Holder relative to the aggregate liquidation
amount of all Common Securities outstanding.
7. RANKING. The Preferred Securities rank pari passu and payment thereon
will be made Pro Rata with the Common Securities, except that when an Event of
Default occurs and is continuing, the rights of Holders of Preferred Securities
to payment in respect of Distributions and payments upon liquidation, redemption
or otherwise rank in priority to the rights of Holders of the Common Securities.
8. TRANSFER, EXCHANGE, METHOD OF PAYMENTS. Payment of Distributions and
payments on redemption of the Preferred Securities will be payable, the transfer
of the Preferred Securities will be registrable, and Preferred Securities will
be exchangeable for Preferred Securities of other denominations of a like
aggregate liquidation amount, at the principal corporate trust office of the
Property Trustee in The City of New York; provided that payment of Distributions
may be made at the option of the Regular Trustees on behalf of the Trust by
check mailed to the address of the persons entitled thereto and that the payment
on redemption of any Preferred Security will be made only upon surrender of such
Preferred Security to the Property Trustee.
9. ACCEPTANCE OF INDENTURE AND PREFERRED SECURITIES GUARANTEE. Each Holder
of Preferred Securities, by the acceptance thereof, agrees to the provisions of
(i) the Preferred Securities Guarantee, including the subordination provisions
therein, and (ii) the Indenture and the Debentures, including the subordination
provisions of the Indenture.
10. NO PREEMPTIVE RIGHTS. The Holders of Preferred Securities shall have no
preemptive or similar rights to subscribe to any additional Preferred Securities
or Common Securities.
11. MISCELLANEOUS. These terms shall constitute a part of the Declaration.
The Trust will provide a copy of the Declaration and the Indenture to a Holder
of Preferred Securities without charge on written request to the Trust at its
principal place of business.
B-12
Annex I
FORM OF PREFERRED SECURITY CERTIFICATE
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - THIS
PREFERRED SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE DECLARATION
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST
COMPANY ("DTC") OR A NOMINEE OF DTC. THIS PREFERRED SECURITY IS EXCHANGEABLE
FOR PREFERRED SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN DTC OR
ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND
NO TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED
SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR
ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO REI TRUST
I OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
Certificate Number Number of Preferred Securities:
--------------------------
___________
Aggregate Liquidation Amount: $
--------------------------
CUSIP NO.
------------
Certificate Evidencing Preferred Securities
of
REI Trust I
7.20% Trust Originated Preferred Securities, Series C
(liquidation amount $25 per Preferred Security)
B-13
REI Trust I, a statutory business trust created under the laws of the State of
Delaware (the "Trust"), hereby certifies that _________ (the "Holder") is the
registered owner of _____ (______) preferred securities of the Trust
representing preferred undivided beneficial interests in the assets of the Trust
and designated the 7.20% Trust Originated Preferred Securities, Series C
(liquidation amount $25 per Preferred Security) (the "Preferred Securities").
The Preferred Securities are transferable on the books and records of the Trust,
in person or by a duly authorized attorney, upon surrender of this Certificate
duly endorsed and in proper form for transfer. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Securities are set forth in, and this Certificate and the Preferred
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Declaration of Trust of
the Trust dated as of February 26, 1999, as the same may be amended from time to
time (the "Declaration") including the designation of the terms of Preferred
Securities as set forth in Exhibit B thereto. The Preferred Securities and the
Common Securities issued by the Trust pursuant to the Declaration represent
undivided beneficial interests in the assets of the Trust, including the
Debentures (as defined in the Declaration) issued by Houston Industries
Incorporated, d/b/a Reliant Energy, Incorporated, a Texas corporation ("Reliant
Energy"), to the Trust pursuant to the Indenture referred to in the Declaration.
The Holder is entitled to the benefits of the Guarantee Agreement of Reliant
Energy dated as of February 26, 1999, as the same may be amended from time to
time (the "Guarantee") to the extent provided therein. The Trust will furnish a
copy of the Declaration, the Guarantee and the Indenture to the Holder without
charge upon written request to the Trust at its principal place of business or
registered office.
The Holder of this Certificate, by accepting this Certificate, is deemed to
have (i) agreed to the terms of the Indenture and the Debentures, including that
the Debentures are subordinate and junior in right of payment to all Senior Debt
(as defined in the Indenture) as and to the extent provided in the Indenture,
and (ii) agreed to the terms of the Guarantee, including that the Guarantee is
subordinate and junior in right of payment to all other liabilities of Reliant
Energy, including the Debentures, except those made pari passu or subordinate by
their terms, and senior to all capital stock (other than the most senior
preferred stock issued, from time to time, if any, by Reliant Energy, which
preferred stock will rank pari passu with the Guarantee) now or hereafter issued
by Reliant Energy and to any guarantee now or hereafter entered into by Reliant
Energy in respect of any of its capital stock (other than the most senior
preferred stock issued, from time to time, if any, by Reliant Energy).
Upon receipt of this Certificate, the Holder is bound by the Declaration and
is entitled to the benefits thereunder.
B-14
IN WITNESS WHEREOF, Trustees of the Trust have executed this Certificate.
REI TRUST I
By:_________________________, as Regular Trustee
Name:
Title: Regular Trustee
By:_________________________, as Regular Trustee
Name:
Title: Regular Trustee
Dated:
Countersigned and Registered:
Transfer Agent and Registrar
By:___________________________
Authorized Signatory
B-15
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be fixed at a rate per
annum of 7.20% (the "Coupon Rate") of the stated liquidation amount of $25 per
Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for
more than one calendar quarter will accumulate additional distributions thereon
at the Coupon Rate per annum (to the extent permitted by applicable law),
compounded quarterly. The term "Distributions" as used herein means such
periodic cash distributions and any such additional distributions payable unless
otherwise stated. A Distribution is payable only to the extent that payments are
made in respect of the Debentures held by the Property Trustee and to the extent
the Trust has funds on hand legally available therefor. The amount of
Distributions payable for any period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of twelve 30-day months, and
for any period shorter than a full quarterly Distribution period for which
Distributions are computed, Distributions will be computed on the basis of the
actual number of days elapsed per 90-day quarter.
Distributions on the Preferred Securities will accumulate from February 26,
1999, and will be payable quarterly in arrears, on March 31, June 30, September
30 and December 31 of each year, commencing on June 30, 1999, but only if and to
the extent that interest payments are made in respect of the Debentures held by
the Property Trustee. So long as Reliant Energy shall not be in default in the
payment of interest on the Debentures, Reliant Energy has the right under the
Indenture for the Debentures to defer payments of interest on the Debentures by
extending the interest payment period at any time and from time to time on the
Debentures for a period not exceeding 20 consecutive quarterly interest periods
(each an "Extension Period"), during which Extension Period no interest shall be
due and payable on the Debentures. As a consequence of such deferral,
Distributions shall also be deferred. Despite such deferral, Distributions will
continue to accumulate with additional distributions thereon (to the extent
permitted by applicable law but not at a rate greater than the rate at which
interest is then accruing on the Debentures) at the Coupon Rate compounded
quarterly during any such Extension Period; provided that no Extension Period
shall extend beyond the stated maturity of the Debentures. Prior to the
termination of any such Extension Period, Reliant Energy may further extend such
Extension Period; provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20 consecutive quarterly
interest periods. Upon the termination of any Extension Period and the payment
of all amounts then due, Reliant Energy may commence a new Extension Period,
subject to the above requirements. On the Distribution payment date at the end
of the Extension Period, payments of accumulated Distributions will be payable
to Holders of Preferred Securities as they appear on the books and records of
the Trust
B-16
(regardless of who the Holders may have been on other dates during the
Extension Period) on the record date for such Distribution payment date.
The Preferred Securities shall be redeemable as provided in the Declaration.
B-17
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Insert assignee's social security or tax identification number)
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
____________________________________________________________
____________________________________________________________
____________________________________________________________
agent to transfer this Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
B-18
Date: _________________________
Signature: ____________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THIS PREFERRED SECURITY CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
B-19
EXHIBIT C
TERMS OF
COMMON SECURITIES
Pursuant to Section 7.01(b) of the Amended and Restated Declaration of Trust
of REI Trust I dated as of February 26, 1999 (as amended from time to time, the
"Declaration"), the designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Common Securities are set forth below
(each capitalized term used but not defined herein having the meaning set forth
in the Declaration):
1. DESIGNATION AND NUMBER. Four hundred, sixty-three thousand, nine hundred
twenty (463,920) Common Securities of the Trust with an aggregate liquidation
amount at any time outstanding with respect to the assets of the Trust of Eleven
Million, Five Hundred Ninety-Eight Thousand Dollars ($11,598,000), and each with
a liquidation amount with respect to the assets of the Trust of $25 per Common
Security, are hereby designated as "7.20% Trust Originated Common Securities,
Series C". The Common Security Certificates evidencing the Common Securities
shall be substantially in the form attached hereto as Annex I, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice. In connection with the issuance and sale of the
Preferred Securities and the Common Securities, the Trust will purchase as trust
assets Debentures of Reliant Energy having an aggregate principal amount equal
to the aggregate liquidation amount of the Preferred Securities and the Common
Securities so issued, and bearing interest at an annual rate equal to the annual
Distribution rate on the Preferred Securities and the Common Securities and
having payment and redemption provisions which correspond to the payment and
redemption provisions of the Preferred Securities and the Common Securities.
2. DISTRIBUTIONS. (a) Distributions payable on each Common Security will be
fixed at a rate per annum of 7.20% (the "Coupon Rate") of the stated liquidation
amount of $25 per Common Security, such rate being the rate of interest payable
on the Debentures to be held by the Property Trustee. Distributions in arrears
for more than one calendar quarter will accumulate additional distributions
thereon at the Coupon Rate per annum (to the extent permitted by applicable
law), compounded quarterly. The term "Distributions" as used herein means such
periodic cash distributions and any such additional distributions payable unless
otherwise stated. A Distribution will be made by the Property Trustee only to
the extent that interest payments are made in respect of the Debentures held by
the Property Trustee and to the extent the Trust has funds on hand legally
available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year of twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
(b) Distributions on the Common Securities will accumulate from February 26,
1999 and will be payable quarterly in arrears, on March 31, June 30, September
30 and December 31 of each year, commencing on June 30, 1999, except as
otherwise described below, but only if and to the extent that interest
payments are made in respect of the Debentures held by the Property Trustee.
So long as Reliant Energy shall not be in default in the payment of interest
on the Debentures, Reliant Energy has the right under the Indenture for the
Debentures to defer payments of interest on the Debentures by extending the
interest payment period at any time and from time to time on the Debentures
for a period not exceeding 20 consecutive quarterly interest periods (each, an
"Extension Period"), during which Extension Period no interest shall be due
and payable on the Debentures. As a consequence of such deferral,
Distributions shall also be deferred. Despite such deferral, Distributions
will continue to accumulate with additional distributions thereon (to the
extent permitted by applicable law but not at a rate greater than the rate at
which interest is then accruing on the Debentures) at the Coupon Rate
compounded quarterly during any such Extension Period; provided that no
Extension Period shall extend beyond the stated maturity of the Debentures.
Prior to the termination of any such Extension Period, Reliant Energy may
further extend such Extension Period; provided that such Extension Period
together with all such previous and further extensions thereof may not exceed
20 consecutive quarterly interest periods. Upon the termination of any
Extension Period and the payment of all amounts then due, Reliant Energy may
commence a new Extension Period, subject to the above requirements. On the
Distribution payment date at the end of the Extension Period, payments of
accumulated Distributions will be payable to Holders of Common Securities as
they appear on the books and records of the Trust (regardless of who the
Holders may have been on other dates during the Extension Period) on the
record date for such Distribution payment date.
(c) Distributions on the Common Securities will be payable promptly by the
Property Trustee (or other Paying Agent) upon receipt of immediately available
funds to the Holders thereof as they appear on the books and records of the
Trust on the relevant record dates. While the Preferred Securities remain in
book-entry only form, the relevant record dates for the Common Securities
shall be one business day prior to the relevant Distribution date, and if the
Preferred Securities are no longer in
C-2
book-entry only form, the relevant record dates for the Common Securities will
be the fifteenth (15th) day of the month prior to the relevant Distribution
date, which record and payment dates correspond to the record and interest
payment dates on the Debentures. Distributions payable on any Common
Securities that are not punctually paid on any Distribution payment date as a
result of Reliant Energy' having failed to make the corresponding interest
payment on the Debentures will forthwith cease to be payable to the person in
whose name such Common Security is registered on the relevant record date, and
such defaulted Distribution will instead be payable to the person in whose
name such Common Security is registered on the special record date established
by the Regular Trustees, which record date shall correspond to the special
record date or other specified date determined in accordance with the
Indenture; provided, however, that Distributions shall not be considered
payable on any Distribution payment date falling within an Extension Period
unless Reliant Energy has elected to make a full or partial payment of
interest accrued on the Debentures on such Distribution payment date. Subject
to any applicable laws and regulations and the provisions of the Declaration,
each payment in respect of the Common Securities will be made as described in
section 8 hereof. If any date on which Distributions are payable on the Common
Securities is not a Business Day, then payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date such payment was
originally payable. Notwithstanding anything herein to the contrary, the
record dates and payment dates for Distributions shall be the same as the
record dates and payment dates for the Debentures.
(d) All Distributions paid with respect to the Common Securities and the
Preferred Securities will be paid Pro Rata (as defined below) to the Holders
thereof entitled thereto. If an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to Distributions.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for under the Declaration, such money or
property shall be distributed Pro Rata among the Holders of the Preferred
Securities and the Common Securities.
3. LIQUIDATION DISTRIBUTION UPON DISSOLUTION. (a) In the event of any
voluntary or involuntary dissolution of the Trust, the Holders of the Preferred
Securities and the Common Securities will be entitled to receive Pro Rata solely
C-3
out of the assets of the Trust legally available for distribution to Holders of
Preferred Securities and Common Securities after satisfaction of liabilities to
the creditors of the Trust, an amount equal to the aggregate of the stated
liquidation amount of $25 per Preferred Security and Common Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution"), unless, in connection with such
dissolution, and after satisfaction of liabilities to the creditors of the
Trust, Debentures in an aggregate principal amount equal to the aggregate stated
liquidation amount of such Preferred Securities and the Common Securities and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on, such Preferred Securities and the Common Securities,
shall be distributed Pro Rata to the Holders of the Preferred Securities and the
Common Securities in exchange for such Securities.
If, upon any such dissolution, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets on hand legally available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and the Common Securities
shall be paid, subject to the next paragraph, on a Pro Rata basis.
Holders of Common Securities will be entitled to receive Liquidation
Distributions upon any such dissolution Pro Rata with Holders of Preferred
Securities, except that if an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to such Liquidation Distribution.
(b) The Holder of the Common Securities shall have the right to direct the
Property Trustee in writing at any time to dissolve the Trust and to
distribute Debentures to Holders in exchange for Securities (which direction
is optional and wholly within the discretion of the Holder of the Common
Securities). Upon the receipt of any such written direction, the Property
Trustee shall promptly (i) distribute Debentures in an aggregate principal
amount equal to the aggregate stated liquidation amount of the Preferred
Securities and the Common Securities held by each Holder, which Debentures
bear accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on the Preferred Securities and the Common Securities of
such Holder, in exchange for the Preferred Securities and Common Securities of
such Holder and (ii) dissolve the Trust.
(c) On the date fixed for any distribution of Debentures, upon dissolution
of the Trust, (i) the Common Securities will no longer be deemed to be
outstanding and may be canceled by the Regular Trustees, and (ii) Certificates
representing Common Securities will be deemed to represent beneficial
interests in the Debentures having an aggregate principal amount equal to the
stated liquidation amount of, and bearing accrued and unpaid interest equal to
C-4
accumulated and unpaid Distributions on, such Common Securities until such
Certificates are presented to Reliant Energy or its agent for transfer or
reissuance.
4. REDEMPTION OF DEBENTURES. The Common Securities may be redeemed only if
Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities and the Common Securities are
repaid or redeemed as set forth below:
(a) Upon the repayment of the Debentures, in whole or in part, whether at
maturity, upon redemption at any time or from time to time on or after
February 26, 2004, the proceeds of such repayment will be promptly applied to
redeem Pro Rata Preferred Securities and Common Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Debentures
so repaid or redeemed, upon not less than 30 nor more than 60 days' notice, at
a redemption price of $25 per Preferred Security and Common Security plus an
amount equal to accumulated and unpaid Distributions thereon to, but
excluding, the date of redemption, payable in cash (the "Redemption Price").
The date of any such repayment or redemption of Preferred Securities and
Common Securities shall be established to coincide with the repayment or
redemption date of the Debentures.
(b) If fewer than all the outstanding Preferred Securities and Common
Securities are to be so redeemed, the Preferred Securities and the Common
Securities will be redeemed Pro Rata and the Common Securities will be
redeemed as described in section 4(e)(ii) below. If a partial redemption would
result in the delisting of the Preferred Securities by any national securities
exchange or other organization on which the Preferred Securities are then
listed or traded, Reliant Energy pursuant to the Indenture will redeem
Debentures only in whole and, as a result, the Trust may redeem the Common
Securities only in whole.
(c) If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each, a "Special Event") shall occur and be
continuing, Reliant Energy shall have the right at any time, upon not less
than 30 nor more than 60 days' notice, to redeem the Debentures in whole or in
part for cash at the Redemption Price within 90 days following the occurrence
of such Special Event, and promptly following such redemption, Preferred
Securities and Common Securities with an aggregate liquidation amount equal to
the aggregate principal amount of the Debentures so redeemed will be redeemed
by the Trust at the Redemption Price on a Pro Rata basis. The Common
Securities will be redeemed Pro Rata with the Preferred Securities, except
that if an Event of Default has occurred and is continuing, the Preferred
Securities will have a
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priority over the Common Securities with respect to payment of the Redemption
Price.
"Tax Event" means that the Sponsor and the Regular Trustees shall have
received an Opinion of Counsel experienced in such matters to the effect that on
or after February 23, 1999 as a result of (a) any amendment to, or change
(including any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), (c) any interpretation or pronouncement by any
legislative body, court, governmental agency or regulatory authority that
provides for a position with respect to such laws or regulations that differs
from the theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after February 23, 1999, there is more than an insubstantial risk that (i)
the Trust is, or will be within 90 days of the date thereof, subject to United
States federal income tax with respect to income accrued or received on the
Debentures, (ii) the Trust is, or will be within 90 days of the date thereof,
subject to more than a de minimis amount of taxes, duties or other governmental
charges or (iii) interest payable by Reliant Energy to the Trust on the
Debentures is not, or within 90 days of the date thereof will not be, deductible
by Reliant Energy for United States Federal income tax purposes.
"Investment Company Event" means that the Sponsor and the Regular Trustees
shall have received an Opinion of Counsel experienced in practice under the
Investment Company Act that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (a
"Change in Investment Company Act Law"), there is more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
Investment Company Act Law becomes effective on or after February 23, 1999.
(d) The Trust may not redeem fewer than all the outstanding Common
Securities unless all accumulated and unpaid Distributions have been paid on
all Common Securities for all quarterly Distribution periods terminating on or
prior to the date of redemption.
(e) (i) Notice of any redemption of, or notice of distribution of Debentures
in exchange for, the Preferred Securities and the Common Securities (a
"Redemption/Distribution Notice") will be given by the
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Regular Trustees on behalf of the Trust by mail to each Holder of Preferred
Securities and Common Securities to be redeemed or exchanged not less than 30
nor more than 60 days prior to the date fixed for redemption or exchange
thereof. For purposes of the calculation of the date of redemption or exchange
and the dates on which notices are given pursuant to this section 4(e)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. No defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any Holder shall affect the
validity of the redemption or exchange proceedings with respect to any other
Holder.
(ii) In the event that fewer than all the outstanding Common Securities
are to be redeemed, the Common Securities to be redeemed will be redeemed
Pro Rata from each Holder of Common Securities (subject to adjustment to
eliminate fractional Common Securities).
(iii) If the Trust gives a Redemption/Distribution Notice in respect of a
redemption of Common Securities as provided in this section 4 (which notice
will be irrevocable), then immediately prior to the close of business on the
redemption date, provided that Reliant Energy has paid to the Property
Trustee in immediately available funds a sufficient amount of cash in
connection with the related redemption or maturity of the Debentures,
Distributions will cease to accumulate on the Common Securities called for
redemption, such Common Securities will no longer be deemed to be
outstanding and all rights of Holders of such Common Securities so called
for redemption will cease, except the right of the Holders of such Common
Securities to receive the Redemption Price, but without interest on such
Redemption Price. Neither the Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Common Securities
which have been so called for redemption. If any date fixed for redemption
of Common Securities is not a Business Day, then payment of the Redemption
Price payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date fixed
for redemption. If payment of the Redemption Price in respect of
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Common Securities is improperly withheld or refused and not paid by the
Property Trustee, Distributions on such Common Securities will continue to
accumulate, from the original redemption date to the date of payment, in which
case the actual payment date will be considered the date fixed for redemption
for purposes of calculating the Redemption Price.
(iv) Redemption/Distribution Notices shall be sent by the Regular Trustees
on behalf of the Trust to Holders of the Common Securities.
5. VOTING RIGHTS. (a) Except as provided under section 5(b) below and as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) Holders of Common Securities have the sole right under the Declaration
to increase or decrease the number of Trustees, and to appoint, remove or
replace a Trustee, any such increase, decrease, appointment, removal or
replacement to be approved by Holders of Common Securities representing a
Majority in liquidation amount of the Common Securities.
If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Securities, whether by way of
amendment to the Declaration, other than as described in section 12.01(b) of the
Declaration, or otherwise, or (ii) the dissolution, winding-up or termination of
the Trust, other than as described in Section 8.01 of the Declaration or section
3 of this Exhibit C, then the Holders of outstanding Securities will be entitled
to vote on such amendment or proposal as a single class and such amendment or
proposal shall not be effective except with the approval of the Holders of
Securities of at least a Majority in liquidation amount of the Securities,
voting together as a single class; provided, however, that (A) if any amendment
or proposal referred to in clause (i) above would adversely affect only the
Preferred Securities or the Common Securities, then only the affected class of
Securities will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a Majority in liquidation amount of such class of Securities, (B) the
rights of Holders of Common Securities under Section 5.02 of the Declaration to
increase or decrease the number of, and to appoint, replace or remove, Trustees
shall not be amended without the consent of each Holder of Common Securities,
and (C) amendments to the Declaration shall be subject to such further
requirements as are set forth in Sections 12.01 and 12.02 of the Declaration.
In the event the consent of the Property Trustee, as the holder of the
Debentures, is required under the Indenture with respect to any amendment,
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modification or termination of the Indenture or the Debentures, the Property
Trustee shall request the written direction of the Holders of the Securities
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a Majority in liquidation amount of the Securities voting
together as a single class; provided, however, that where such amendment,
modification or termination of the Indenture requires the consent or vote of (1)
holders of Debentures representing a specified percentage greater than a
majority in principal amount of the Debentures or (2) each holder of Debentures,
the Property Trustee may only vote with respect to that amendment, modification
or termination as directed by, in the case of clause (1) above, the vote of
Holders of Securities representing such specified percentage of the aggregate
liquidation amount of the Securities, or, in the case of clause (2) above, each
Holder of Securities; and provided, further, that the Property Trustee shall be
under no obligation to take any action in accordance with the directions of the
Holders of Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an Opinion of Counsel experienced in such matters to the
effect that the Trust will not be classified for United States Federal income
tax purposes as other than a grantor trust on account of such action.
So long as any Debentures are held by the Property Trustee, the Trustees shall
not (i) direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee of the Indenture (the "Debenture Trustee"), or
exercising any trust or power conferred on such Debenture Trustee with respect
to the Debentures, (ii) waive any past default that is waivable under Section
6.06 of the Indenture or (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Debentures,
without, in each case, obtaining the prior approval of the Holders of a Majority
in liquidation amount of all outstanding Common Securities and Preferred
Securities. The Trustees shall not revoke any action previously authorized or
approved by a vote of the Holders of the Common Securities except by subsequent
vote of such Holders. The Property Trustee shall notify each Holder of Common
Securities of any notice of default with respect to the Debentures.
Notwithstanding any other provision of these terms, each Holder of Common
Securities will be deemed to have waived any Event of Default with respect to
the Common Securities and its consequences until all Events of Default with
respect to the Preferred Securities have been cured, waived by the Holders of
Preferred Securities as provided in the Declaration or otherwise eliminated, and
until all Events of Default with respect to the Preferred Securities have been
so cured, waived by the Holders of Preferred Securities or otherwise eliminated,
the Property Trustee will be deemed to be acting solely on behalf of the Holders
of Preferred Securities and only the Holders of the Preferred Securities will
have the right to direct the Property Trustee in accordance with the terms of
the Declaration or of the Securities. In the event that any Event of Default
with respect to the
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Preferred Securities is waived by the Holders of Preferred Securities as
provided in the Declaration, the Holders of Common Securities agree that such
waiver shall also constitute the waiver of such Event of Default with respect to
the Common Securities for all purposes under the Declaration without any further
act, vote or consent of the Holders of the Common Securities.
A waiver of an Indenture Event of Default by the Property Trustee at the
direction of the Holders of the Preferred Securities will constitute a waiver of
the corresponding Event of Default under the Declaration in respect of the
Securities.
Any required approval or direction of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Securities or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote to be mailed to each Holder of
record of Common Securities. Each such notice will include a statement setting
forth (i) the date of such meeting, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
and (iii) instructions for the delivery of proxies.
No vote or consent of the Holders of Common Securities will be required for
the Trust to redeem and cancel Common Securities or to distribute the Debentures
in accordance with the Declaration.
6. PRO RATA TREATMENT. A reference in these terms of the Common Securities to
any payment, Distribution or treatment as being "Pro Rata" shall mean pro rata
to each Holder of Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate liquidation
amount of Common Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Common Securities outstanding.
7. RANKING. The Common Securities rank pari passu and payment thereon will be
made Pro Rata with the Preferred Securities, except that when an Event of
Default occurs and is continuing, the rights of Holders of Common Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise are subordinate to the rights of Holders of the Preferred Securities.
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8. TRANSFER, EXCHANGE, METHOD OF PAYMENTS. Payment of Distributions and
payments on redemption of the Common Securities will be payable, the transfer of
the Common Securities will be registrable, and Common Securities will be
exchangeable for Common Securities of other denominations of a like aggregate
liquidation amount, at the principal corporate trust office of the Property
Trustee in The City of New York; provided that payment of Distributions may be
made at the option of the Regular Trustees on behalf of the Trust by check
mailed to the address of the persons entitled thereto and that the payment on
redemption of any Common Security will be made only upon surrender of such
Common Security to the Property Trustee. Notwithstanding the foregoing,
transfers of Common Securities are subject to conditions set forth in Section
9.01(c) of the Declaration.
9. ACCEPTANCE OF INDENTURE. Each Holder of Common Securities, by the
acceptance thereof, agrees to the provisions of Indenture and the Debentures,
including the subordination provisions of the Indenture.
10. NO PREEMPTIVE RIGHTS. The Holders of Common Securities shall have no
preemptive or similar rights to subscribe to any additional Common Securities or
Preferred Securities.
11. MISCELLANEOUS. These terms shall constitute a part of the Declaration. The
Trust will provide a copy of the Declaration and the Indenture to a Holder of
Common Securities without charge on written request to the Trust at its
principal place of business.
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Annex I
FORM OF COMMON SECURITY CERTIFICATE
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
________________ ________________
Certificate Evidencing Common Securities
of
REI Trust I
7.20% Trust Originated Common Securities, Series C
(liquidation amount $25 per Common Security)
REI Trust I, a statutory business trust created under the laws of the State of
Delaware (the "Trust"), hereby certifies that ______________ (the "Holder") is
the registered owner of ____________________________ (_________) common
securities of the Trust representing common undivided beneficial interests in
the assets of the Trust and designated the "7.20% Trust Originated Common
Securities, Series C" (liquidation amount $25 per Common Security) (the "Common
Securities"). The Common Securities are transferable on the books and records of
the Trust, in person or by a duly authorized attorney, upon surrender of this
Certificate duly endorsed and in proper form for transfer and satisfaction of
the other conditions set forth in the Declaration (as defined below) including,
without limitation, Section 9.01(c) thereof. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth in, and this Certificate and the Common
Securities represented hereby are issued and shall in all respects be subject to
the terms and provisions of, the Amended and Restated Declaration of Trust of
the Trust dated as of February 26, 1999, as the same may be amended from time to
time (the "Declaration") including the designation of the terms of Common
Securities as set forth in Exhibit C thereto. The Common Securities and the
Preferred Securities issued by the Trust pursuant to the Declaration represent
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undivided beneficial interests in the assets of the Trust, including the
Debentures (as defined in the Declaration) issued by Houston Industries
Incorporated, d/b/a Reliant Energy, Incorporated, a Texas corporation ("Reliant
Energy"), to the Trust pursuant to the Indenture referred to in the Declaration.
The Trust will furnish a copy of the Declaration and the Indenture to the Holder
without charge upon written request to the Trust at its principal place of
business or registered office.
The Holder of this Certificate, by accepting this Certificate, is deemed to
have agreed to the terms of the Indenture and the Debentures, including that the
Debentures are subordinate and junior in right of payment to all Senior Debt (as
defined in the Indenture) as and to the extent provided in the Indenture.
Upon receipt of this Certificate, the Holder is bound by the Declaration and
is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Trustees of the Trust have executed this Certificate
this ___ day of _____________, ____.
REI TRUST I
By________________________, as Regular Trustee
Name:
Title: Regular Trustee
By_________________________, as Regular Trustee
Name:
Title: Regular Trustee
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[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed at a rate per
annum of 7.20% (the "Coupon Rate") of the stated liquidation amount of $25 per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
calendar quarter will accumulate additional distributions thereon at the Coupon
Rate per annum (to the extent permitted by applicable law) compounded quarterly.
The term "Distributions" as used herein means such periodic cash distributions
and any such additional distributions payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Trust has
funds on hand legally available therefor. The amount of Distributions payable
for any period will be computed for any full quarterly Distribution period on
the basis of a 360-day year of twelve 30-day months, and for any period shorter
than a full quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days elapsed
per 90-day quarter.
Distributions on the Common Securities will accumulate from February 26,
1999 and will be payable quarterly in arrears, on March 31, June 30, September
30 and December 31 of each year, commencing on June 30, 1999, but only if and to
the extent that interest payments are made in respect of the Debentures held by
the Property Trustee. So long as Reliant Energy shall not be in default in the
payment of interest on the Debentures, Reliant Energy has the right under the
Indenture for the Debentures to defer payments of interest on the Debentures by
extending the interest payment period at any time and from time to time on the
Debentures for a period not exceeding 20 consecutive quarterly interest periods
(each an "Extension Period"), during which Extension Period no interest shall be
due and payable on the Debentures. As a consequence of such deferral,
Distributions shall also be deferred. Despite such deferral, Distributions will
continue to accumulate with additional distributions thereon (to the extent
permitted by applicable law but not at a rate greater than the rate at which
interest is then accruing on the Debentures) at the Coupon Rate compounded
quarterly during any such Extension Period; provided that no Extension Period
shall extend beyond the stated maturity of the Debentures. Prior to the
termination of any such Extension Period, Reliant Energy may further extend such
Extension Period; provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20 consecutive quarterly
interest periods. Upon the termination of any Extension Period and the payment
of all amounts then due, Reliant Energy may commence a new Extension Period,
subject to the above requirements. On the Distribution payment date at the end
of the Extension Period, payments of accumulated Distributions will be payable
to Holders of Common Securities as they appear on the books and records of the
Trust
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(regardless of who the Holders may have been on other dates during the
Extension Period) on the record date for such Distribution payment date.
The Common Securities shall be redeemable as provided in the Declaration.
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Insert assignee's social security or tax identification number)
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
____________________________________________________________
____________________________________________________________
_____________________________________________________ agent to transfer
this Common Security Certificate on the books of the Trust. The agent may
substitute another to act for him or her.
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Date: ________________________
Signature: _________________________________
(Sign exactly as your name appears on the other side of this Common
Security Certificate)
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