Exhibit 10.1A

 

[Execution Version]

 

 

 

 

 

 

 

 

 

CREDIT SLEEVE AND REIMBURSEMENT AGREEMENT

 

dated as of

 

September 24, 2006

 

among

 

RELIANT ENERGY POWER SUPPLY, LLC,

 

The Other Reliant Retail Obligors referred to herein,

as Reimbursement Guarantors,

 

MERRILL LYNCH COMMODITIES, INC.,

as Sleeve Provider,

 

and

 

MERRILL LYNCH & CO., INC.,

as ML Guarantee Provider,

 

 

as amended and restated as of August 1, 2007, in connection with RESE becoming
an Other
Reliant Retail Obligor

 

 

                                                                                  
TABLE OF CONTENTS

 

This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience of reference only.

 

 

 

 

 

Page

Section 1.

 

Definitions and Accounting Matters.

 

1

1.01.

 

Certain Defined Terms

 

1

1.02.

 

Terms Generally

 

32

1.03.

 

Accounting Terms and Determinations

 

33

 

 

 

 

 

Section 2.

 

Credit Sleeve for Reliant Retail Obligors

 

33

 

 

 

 

 

2.01.

 

Credit Sleeve Generally; Exclusivity

 

33

2.02.

 

Credit Sleeve of OTC Trading and Hedging Activities

 

37

2.03.

 

Credit Sleeve of Exchange Traded Hedging Activities

 

41

2.04.

 

Credit Sleeve of C&I and Governmental Contracts

 

42

2.05.

 

Credit Sleeve of Regulatory Obligations

 

43

2.06.

 

Term

 

43

2.07.

 

Posting Collateral to Increase K

 

43

 

 

 

 

 

Section 3.

 

Payments, Fees and Records

 

43

 

 

 

 

 

3.01.

 

Notice of Payment on ML Guarantee or Collateral Foreclosure

 

43

3.02.

 

Repayment of Draw Reimbursement Obligations

 

44

3.03.

 

Interest

 

44

3.04.

 

Monthly Sleeve Fee

 

46

3.05.

 

Make-whole Payment

 

46

3.06.

 

Structuring Fee

 

46

3.07.

 

Payments Generally

 

46

3.08.

 

Records; Prima Facie Evidence

 

46

 

 

 

 

 

Section 4.

 

Conditions.

 

47

 

 

 

 

 

Section 5.

 

Representations and Warranties

 

47

 

 

 

 

 

5.01.

 

Existence, Qualification and Power; Compliance with Laws

 

47

5.02.

 

Authorization; No Contravention

 

47

5.03.

 

Governmental Authorization; Other Consents

 

48

5.04.

 

Binding Effect

 

48

5.05.

 

Financial Statements; No Material Adverse Effect

 

48

5.06.

 

Litigation

 

49

5.07.

 

No Default

 

49

5.08.

 

Ownership of Property; Liens

 

49

5.09.

 

Environmental Matters

 

50

5.10.

 

Insurance

 

50

5.11.

 

Taxes

 

51

5.12.

 

ERISA Compliance

 

51

 

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5.13.

 

Subsidiaries; Equity Interests

 

52

5.14.

 

Margin Regulations; Investment Company Act; Public Utility Holding Company Act

 

52

5.15.

 

Disclosure

 

52

5.16.

 

Compliance with Laws

 

53

5.17.

 

Intellectual Property; Licenses, Etc.

 

53

5.18.

 

Solvency

 

53

5.19.

 

Perfection, Etc.

 

53

5.20.

 

Employees, Etc.

 

53

5.21.

 

Information Technology Systems

 

54

5.22.

 

Marks

 

54

 

 

 

 

 

Section 6.

 

Affirmative Covenants

 

54

 

 

 

 

 

6.01.

 

Financial Statements

 

54

6.02.

 

Certificates; Other Information

 

55

6.03.

 

Notices

 

56

6.04.

 

Payment of Obligations

 

57

6.05.

 

Preservation of Existence, Etc.

 

57

6.06.

 

Maintenance of Properties

 

57

6.07.

 

Maintenance of Insurance

 

57

6.08.

 

Compliance with Laws

 

57

6.09.

 

Books and Records

 

58

6.10.

 

Inspection Rights

 

58

6.11.

 

Addition and Removal of Transaction Parties; Collateral Matters; Waterfall

 

58

6.12.

 

Further Assurances

 

61

6.13.

 

Risk Management Policy

 

62

6.14.

 

Employees

 

64

6.15.

 

Information Technology Systems

 

64

6.16.

 

Marks

 

64

6.17.

 

Reliant Parent Services Agreement

 

64

 

 

 

 

 

Section 7.

 

Negative Covenants

 

65

 

 

 

 

 

7.01.

 

Liens

 

65

7.02.

 

Investments and Acquisitions

 

65

7.03.

 

Indebtedness

 

65

7.04.

 

Consolidation and Mergers

 

66

7.05.

 

Asset Sales

 

67

7.06.

 

Limitation on Issuances and Sales of Certain Equity Interests

 

68

7.07.

 

Restricted Payments

 

68

7.08.

 

Line of Business

 

68

7.09.

 

Transactions with Affiliates

 

68

7.10.

 

Restrictive Agreements

 

69

7.11.

 

Modification and Enforcement of Transaction Documents

 

70

7.12.

 

Fiscal Year

 

70

7.13.

 

Specified Transaction

 

70

7.14.

 

Services

 

70

7.15.

 

Tax Agreements

 

70

 

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7.16.

 

Posting of Collateral

 

71

7.17.

 

Accepted Products

 

71

 

 

 

 

 

Section 8.

 

Events of Default

 

71

 

 

 

 

 

8.01.

 

Reliant Events of Default

 

71

8.02.

 

Sleeve Provider Events of Default

 

74

 

 

 

 

 

Section 9.

 

Remedies and Termination

 

75

 

 

 

 

 

9.01.

 

Remedies of Sleeve Provider

 

75

9.02.

 

Remedies of REPS

 

76

9.03.

 

Certain Intercreditor Agreements

 

77

9.04.

 

Certain Limitations on Remedies

 

78

 

 

 

 

 

Section 10.

 

Unwind

 

79

 

 

 

 

 

10.01.

 

Permitted Activities during Unwind Period

 

79

 

 

 

 

 

Section 11.

 

Reimbursement Guaranty by Other Reliant Retail Parties

 

80

 

 

 

 

 

11.01.

 

Reimbursement Guaranty of the Obligations

 

80

11.02.

 

Payment by Guarantors

 

80

11.03.

 

Liability of Reimbursement Guarantors Absolute

 

81

11.04.

 

Waivers by Reimbursement Guarantors

 

83

11.05.

 

Reimbursement Guarantors’ Rights of Subrogation, Contribution, etc

 

83

11.06.

 

Subordination of Other Obligations

 

84

11.07.

 

Continuing Reimbursement Guaranty

 

84

11.08.

 

Authority of Reimbursement Guarantors or REPS

 

84

11.09.

 

Financial Condition of REPS

 

84

11.10.

 

Bankruptcy, etc.

 

85

 

 

 

 

 

Section 12.

 

Miscellaneous

 

85

 

 

 

 

 

12.01.

 

Notices

 

85

12.02.

 

Confidentiality; Limitation on Use of Information

 

87

12.03.

 

Reliant Employees

 

88

12.04.

 

Provisions relating to Collateral Trust Agreement and Reimbursement Guarantee

 

89

12.05.

 

Waiver

 

90

12.06.

 

Amendments, Etc.

 

90

12.07.

 

Expenses, Etc.

 

91

12.08.

 

Successors and Assigns

 

91

12.09.

 

Assignments

 

91

12.10.

 

Survival

 

91

12.11.

 

Counterparts

 

92

12.12.

 

Governing Law; Jurisdiction; Etc.

 

92

12.13.

 

Certain Dispute Resolution Procedures

 

93

12.14.

 

Captions

 

93

12.15.

 

Limitation on Interest

 

94

12.16.

 

Integration

 

94

 

iii

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12.17.

 

Amendment and Restatement

 

94

 

iv

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Schedules and Exhibits

 

SCHEDULE 1.01(a)

 

—

 

Risk Management Policy Violations

SCHEDULE 1.01(b)

 

—

 

Calculations Relating to Exchange Traded Contracts

SCHEDULE 1.01(c)

 

—

 

Determination of K and VaR

SCHEDULE 1.01(e)

 

—

 

Trademarks

SCHEDULE 1.01(f)

 

—

 

Credit Limit Approval Guidelines

SCHEDULE 2.01(b)

 

—

 

C&I Customer Wholesale Purchase Provisions

SCHEDULE 2.02(a)

 

—

 

Counterparty Document Negotiation Provisions

SCHEDULE 2.04

 

 

 

C&I Contracts and Governmental Contracts receiving ML Guarantee

SCHEDULE 3.04

 

—

 

Calculation and Settlement of Monthly Sleeve Fee

SCHEDULE 3.05

 

 

 

Calculation of Make-whole Payment

SCHEDULE 3.07(a)

 

 

 

Merrill Account

SCHEDULE 5.13

 

—

 

List of Subsidiaries

SCHEDULE 7.14

 

—

 

List of Retail Services

SCHEDULE 2.13

 

—

 

List of Calculation Agents

 

 

 

 

 

EXHIBIT A1

 

—

 

Form of ML Guarantee for Accepted Counterparties

EXHIBIT A2

 

—

 

Form of ML Guarantee for C&I Customers

EXHIBIT B

 

—

 

List of Accepted Counterparties

EXHIBIT C1

 

—

 

Form of EEI Power Purchase and Hedging Contract

EXHIBIT C2

 

—

 

Form of ISDA Power Purchase and Hedging Contract

EXHIBIT C3

 

—

 

Form of EEI Power Purchase and Hedging Contract for WMBEs in ERCOT

EXHIBIT C4

 

—

 

Form of RECs Purchase Contract for ERCOT

EXHIBIT D1

 

—

 

Form of EEI Collateral Annex

EXHIBIT D2

 

—

 

Form of ISDA Credit Support Annex

EXHIBIT E1

 

—

 

Reliant Energy — Retail Risk Policy

EXHIBIT E2

 

—

 

Hedge Limit Calculations

EXHIBIT F

 

—

 

ERCOT Asset List

EXHIBIT G

 

—

 

Form of Joinder Agreement

EXHIBIT H

 

—

 

Form of Compliance Certificate

EXHIBIT 11

 

—

 

Sleeve Provider’s Employees with Access to Certain Reliant Retail Obligor
Information

EXHIBIT 12

 

—

 

Reliant Retail Obligors’ Employees with Access to Certain Merrill Party
Information

 

v

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CREDIT SLEEVE AND REIMBURSEMENT AGREEMENT dated as of September 24, 2006, as
amended and restated as of August 1, 2007 (this “Agreement”), among RELIANT
ENERGY POWER SUPPLY, LLC, a Delaware limited liability company (“REPS”), the
Other Reliant Retail Obligors listed on the signature pages hereto, MERRILL
LYNCH COMMODITIES, INC., a Delaware corporation, as sleeve provider (the “Sleeve
Provider”), and MERRILL LYNCH & CO., INC., a Delaware corporation, as guarantee
provider (the “ML Guarantee Provider”).

 

The Reliant Retail Obligors have requested that the Sleeve Provider arrange for
the provision of certain guarantees of the ML Guarantee Provider and the posting
of required collateral in connection therewith, in each case, in connection with
the trading and related activities of the Reliant Retail Obligors in the Retail
Energy Business.  The Sleeve Provider is prepared to arrange for such guarantees
and other required posting of collateral upon the terms and conditions hereof,
and, accordingly, the Parties hereto agree as follows:

Section 1.               Definitions and Accounting Matters.

                1.01.        Certain Defined Terms.  As used herein, the
following terms shall have the following respective meanings:

 

“A&R Date” means August 1, 2007.

“Accepted Counterparty” means each Core Accepted Counterparty and Other Accepted
Counterparty.

“Accepted Exchange” means the NYMEX, ICE and, with the prior written consent of
the Sleeve Provider, such consent not to be unreasonably withheld or delayed,
any other public trading exchange commonly used by the natural gas or electric
power industries for commercial transactions in Accepted Products.

“Accepted Product” means, (a) in general, (i) physical and financial power,
power basis, natural gas, natural gas basis and heat rate, (ii) options on the
foregoing, (iii) weather derivatives, ancillary services, capacity, transmission
congestion rights, and renewable energy credits, and (iv) other structured
products related to the hedging of retail electricity, as such other structured
products may be approved by the Sleeve Provider, including in such approval such
related changes to the terms and conditions of this Agreement as the Merrill
Parties deem appropriate (including the addition of related Counterparty
Limitations in respect of such products), but with approval of such other
structured products not to be unreasonably withheld, conditioned or delayed
unless the impact thereof on K or VaR are not measurable using the methodology
employed on Schedule 1.01(c) or, in the case of products traded on an Accepted
Exchange, such products are not capable of being assigned to the Sleeve Provider
in connection with the execution of a related over the counter trade between the
Sleeve Provider and REPS in a manner similar to that as provided in Section
2.03, in the Sleeve Provider’s reasonable discretion, and (b) in respect of each
Accepted Counterparty, each of the foregoing with respect to such Accepted
Counterparty set forth on Exhibit B; provided that (x) all Accepted Products
shall be reasonably related to Approved Markets and (y) all Accepted Products
shall have (i) with respect

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to all transactions other than those in the following proviso, a “tenor” of no
more than 5 years and 6 months, meaning the time between the date of the
execution of the transaction until the final delivery date of such product for
physical transactions or the last day of the final settlement period for
financial transactions, provided that this requirement shall not apply to the
ISDA confirmations under the REES/REPS Power Purchase Agreement relating to
“Upton Wind” and under the RES/REPS Power Purchase Agreement relating to the
Channelview Services Agreement and (ii) with respect to all transactions under
Power and Hedging Contracts, a tenor ending on or before the third anniversary
of the then current expiry date of the Scheduled Term.

“Accepted Retail Product” has the meaning ascribed thereto in Schedule 1.01(c).

“Accepted Trades” means each trade, including purchases and sales, relating to
an Accepted Product with an Accepted Counterparty under a Power and Hedging
Contract; provided that wholesale physical power sales shall be limited to sales
within Approved Markets.

“Acquisition” means any transaction or any series of related transactions by
which a Person (1) acquires any going business or all or substantially all of
the assets of any other Person, or division thereof, whether through purchase of
assets, merger, or otherwise or (2) directly or indirectly acquires 100% of the
Equity Interests of any other Person.

“Adjusted Volume” means, in respect of the volume under a Mirror OTC Contract,
the volume of the related Exchange Traded Contract(s), adjusted in accordance
with Schedule 1.01(b).

“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; provided that a Person will be deemed to be
an Affiliate of RERH Holdings if RERH Holdings has knowledge that such Person
beneficially owns 10% or more of the Voting Stock of RERH Holdings or, so long
as Reliant Parent has a direct or indirect beneficial interest in RERH Holdings,
Reliant Parent; provided, further, that RERH Holdings shall only be deemed to
have knowledge of any Person beneficially owning 10% or more of the Reliant
Parent’s Voting Stock if such Person has filed a statement of beneficial
ownership pursuant to Sections 13(d) or 13(g) of the Exchange Act or has
provided written notice thereof to RERH Holdings.

“Allocable State Taxes” means any state or local taxes other than Applicable
State Taxes.

“Applicable State Taxes” means any state or local taxes (i) that are determined
by reference solely to the income, transactions or attributes of the Reliant
Retail Obligors, and (ii) the sole liability for which is imposed on the Reliant
Retail Obligors.

“Approved ISO” means ERCOT, PJM and such other independent system operators,
regional transmission organizations and control areas as the Parties may from
time to time agree in writing to include as Approved ISOs hereunder.

“Approved Market” means the ERCOT Market, the PJM Market and any other electric
market subject to operation under an Approved ISO.

2

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“Approved Market Regulator” means the FERC and the regulatory agency of each
state in which an Approved Market operates that is responsible for regulating
energy markets in such state, including, with respect to Texas, the PUCT.

“Agreement” has the meaning ascribed thereto in the title paragraph hereto.  The
Agreement is sometimes referred to as the “CSRA”.

“Asset Sale” means the sale, lease, conveyance or other disposition of any
assets.  Notwithstanding the foregoing, none of the following items will be
deemed to be an Asset Sale:

(1)           any single transaction or series of related transactions that (i)
involves assets with gross cash proceeds of $500,000 or less or (ii) involves
assets with gross cash proceeds of greater than $500,000 and less than
$5,000,000 to the extent the aggregate of such transactions since the Execution
Date does not exceed $25,000,000;

(2)           a transfer of assets between or among the Reliant Retail Obligors;

(3)           an issuance of Equity Interests by any Subsidiary of RERH Holdings
to any Reliant Retail Obligor;

(4)           the sale or lease of products or services in the ordinary course
of business, the sale or other disposition of damaged, worn out or obsolete
assets or assets no longer used or useful in RERH Holdings’ or any of its
Subsidiaries’ business and the sale or other disposition of accounts receivable
which are more than sixty (60) days past due for collection;

(5)           the sale or other disposition of cash or Cash Equivalents in the
ordinary course of the Retail Energy Business;

(6)           any Permitted Investment;

(7)           a disposition resulting from any Condemnation; and

(8)           a disposition of assets in connection with a foreclosure, transfer
or deed in lieu of foreclosure or other exercise of remedial action.

“Attributable Debt” means, on any date, (a) in respect of a sale and leaseback
transaction, the present value of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such sale and
leaseback transaction including any period for which such lease has been
extended or may, at the option of the lessor, be extended (such present value to
be calculated using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with GAAP; provided, that if such
sale and leaseback transaction results in a Capital Lease Obligation, the amount
of Indebtedness represented thereby will be determined in accordance with the
definition of “Capital Lease Obligation”) and (b) in respect of any Synthetic
Lease Obligation or financing lease, the amount of the remaining lease payments
under the relevant lease that would as of such date be required to be
capitalized on a balance sheet in accordance with GAAP if such lease were
accounted for as a Capital Lease Obligation.

3

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“Audited Financial Statements” means the audited consolidated balance sheet of
RERH Holdings and its consolidated Subsidiaries for the Fiscal Year ended
December 31, 2006, and the related consolidated statements of income or
operations, stockholders’ equity, comprehensive income (loss) and cash flows for
such Fiscal Year, setting forth in each case in comparative form the figures as
of the end of, and for, the previous Fiscal Year, all in reasonable detail and
prepared in accordance with GAAP.

“Audit Committee” means the Audit Committee of the Board of Directors or any
equivalent committee of the Board of Directors having equivalent
responsibilities to the Audit Committee of the Board of Directors of the Reliant
Parent as of the Execution Date.

“Available Cash Flow” means funds available to any Reliant Retail Obligor
pursuant to Section 6.11(c)(ix).

“Available Commitment” has the meaning ascribed thereto in Section 6.11(c).

 

“Available Contributions” means funds from cash contributions by the Reliant
Parent to RERH Holdings or through RERH Holdings to any Reliant Retail Obligor.

“Available Funds” means any Available Cash Flow or Available Contributions.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as heretofore and
hereafter amended, as codified at 11 U.S.C. Section 101 et seq.

“Bankruptcy Event” means, with respect to any Person, a “Bankruptcy” (as defined
in the 2003 ISDA Credit Derivatives Definitions, published by the International
Swaps and Derivatives Association, Inc., determined as if such Person were a
“Reference Entity”) of such Person.

“Base Rate” means for any day a fluctuating rate per annum equal to the higher
of (a) the Federal Funds Rate in effect for such day plus 1/2 of 1% and (b) the
Prime Rate in effect for such day.  Any change in the Base Rate due to a change
in the Prime Rate or the Federal Funds Rate shall be effective from and
including the effective date of such change in the Prime Rate or the Federal
Funds Rate, respectively.

“Blocked Account Agreement” means collectively, (a) the Blocked Account
Agreement dated as of the Initial Effective Date, among Mellon Bank, N.A., the
Collateral Trustee, and the Reliant Retail Obligors, (b) the Blocked Account
Agreement dated as of the Initial Effective Date, among Wells Fargo Bank NA, the
Collateral Trustee, and RERS, and (c) the Securities Account Control Agreement
dated as of the Initial Effective Date, among Mellon Bank, N.A., the Collateral
Trustee, and RERH. “Board of Directors” means the Board of Directors of the
Reliant Parent or the board of directors, board of members, board of managers or
similar body having equivalent responsibilities to the Board of Directors of the
Reliant Parent as of the Execution Date.

“Business Day” means any day other than a Saturday, Sunday or other day (a) on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, Houston, Texas or New York City, (b) if the context relates to the
NYMEX or ICE, on which the

4

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NYMEX or ICE is authorized to close or in fact is closed, or (c) if the context
relates to ERCOT or PJM, on which ERCOT or PJM is authorized by North American
Electric Reliability Corporation (NERC), or its successor,  to close or in fact
is closed.

“Business Services Mass Customer” means any commercial, industrial or
governmental customer of the Reliant Retail Obligors that is not a C&I Customer.

“C&I Contract” means a contract for the sale of any retail electric products or
services by any Reliant Retail Obligor to a C&I Customer.

“C&I Customer” means any commercial, industrial or governmental customer of the
Reliant Retail Obligors designated by the Reliant Retail Obligors for treatment
as such or as a successor to such designation in the ordinary course of
business.

“Calculation Agent” has the meaning ascribed thereto in Section 12.13.

“Capital Lease Obligation” means, as applied to any Person, at the time any
determination is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be capitalized on a balance sheet
of such Person in accordance with GAAP in the reasonable judgment of such
Person, and the stated maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be prepaid by the lessee without payment of a penalty.

“Capital Outlay Date” has the meaning ascribed thereto in Section 3.01.

“Capital Stock” means:

(a)           in the case of a corporation, corporate stock;

(b)           in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;

(c)           in the case of a partnership or limited liability company,
partnership interests (whether general or limited) or membership interests; and

(d)           any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person, but excluding from all of the foregoing any debt
securities convertible into Capital Stock, whether or not such debt securities
include any right of participation with Capital Stock.

“Cash Collateral” means, with respect to any Collateral Account, Collateral
consisting of the balance of Dollars credited to such Collateral Account.

5

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“Cash Equivalents” means:

(a)           Dollars;

(b)           securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality of the United
States government (provided that the full faith and credit of the United States
is pledged in support of those securities) having maturities of not more than
one year from the date of acquisition;

(c)           deposit accounts with any other bank that has a long-term debt
rating at the time of investment of A+ or better by S&P and A1 or better by
Moody’s (an “Approved Bank”);

(d)           time deposits, certificates of deposit, acceptances or prime
commercial paper issued by an Approved Bank at the time acquired or issued (as
applicable and whichever is latest), in each case, having a maturity of not more
than one year from the date of acquisition;

(e)           repurchase obligations for underlying securities of the types
described in clause (b) entered into with an Approved Bank at the time acquired,
issued or entered into (as applicable and whichever is latest), in each case,
having a maturity of not more than one year from the date of acquisition and
secured by securities of the type described in clause (b), the market value of
which (including accrued interest) is not less than the amount of the applicable
repurchase agreement;

(f)            commercial paper with a rating at the time of investment of A-1
by S&P and P-1 by Moody’s and, in each case, maturing within one year after the
date of acquisition; and

(g)           money market funds which invest primarily in Cash Equivalents of
the kinds described in clauses (a) through (f) of this definition.

“Channelview PPA Confirmation” means the Confirmation dated as of December 1,
2006, under the RES/REPS Power Purchase Agreement pursuant to which REPS
purchases from RES power associated with the Channelview power plant with a
delivery period expiring on December 31, 2006.

“Channelview Services Agreement” means the Channelview Services Agreement dated
as of July 1, 2006, among REPS, RES, RERS and RESC.

“Chief Executive Officer” means the Chief Executive Officer of the Reliant
Parent or the individual with equivalent responsibilities to the Chief Executive
Officer as of the Execution Date.

“Chief Financial Officer” means the Chief Financial Officer of the Reliant
Parent or the individual with equivalent responsibilities to the Chief Financial
Officer as of the Execution Date.

6

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“Chief Risk Officer” means the Chief Risk Officer of the Reliant Parent or the
individual with equivalent responsibilities to the Chief Risk Officer as of the
Execution Date.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” has the meaning ascribed thereto in the Collateral Trust Agreement.

“Collateral Accounts” means the deposit, securities, and investment accounts
subject to the Blocked Account Agreement.

“Collateral Foreclosure” means any setoff, application or foreclosure taken by
an applicable secured party with respect to any Merrill Collateral.

“Collateral Thresholds” means the collateral thresholds for applicable
counterparties determined in accordance with the credit risk policy set forth on
Schedule 1.01(f), such Schedule to be updated from time at the option of REPS
with the approval of the Sleeve Provider, not to be unreasonably withheld or
delayed.

“Collateral Trust Agreement” means the Collateral Trust Agreement dated as of
the Initial Effective Date, among each Reliant Retail Obligor and the Collateral
Trustee under which the Merrill Parties are Secured Counterparties as therein
defined.

“Collateral Trustee” means the Collateral Trustee under the Collateral Trust
Agreement, including any successors from time to time acting as such thereunder.

“Commitment” means (i) the commitment of the Working Capital Facility Provider
to make Loans to REPS under, and in accordance with, the Working Capital
Facility and (ii) the commitments of Replacement Working Capital Providers to
make Loans to any of the Reliant Retail Obligors under, and in accordance with,
Replacement Working Capital Facilities.

“Compliance Certificate” means a compliance certificate in substantially the
form of Exhibit H.

“Compliance Information” means, with respect to any Compliance Party, the
information customarily requested from similarly situated trading counterparties
by the Sleeve Provider or the ML Guarantee Provider in the ordinary course of
their respective businesses (i) to comply with applicable Laws (including the
USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October
26, 2001))) and (ii) to comply with other internal compliance requirements, in
each case to the extent the same are of general application to, and established
by the Sleeve Provider or the ML Guarantee Provider in the ordinary course of
their respective businesses for, similarly situated trading counterparties.

“Compliance Party” means any Accepted Counterparty, C&I Customer, Governmental
Customer, Governmental Authority or any other Person entitled to benefit from
(i) an ML Guarantee, or (ii) the posting of cash collateral by, or any agreement
to post or provide cash collateral by, the Sleeve Provider.

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“Compliance Requirements” means, with respect to any Compliance Party, the
receipt by the Sleeve Provider or the ML Guarantee Provider, as applicable, from
such Compliance Party of applicable Compliance Information that satisfies the
compliance requirements generally established by the Sleeve Provider or the ML
Guarantee Provider for similarly situated trading counterparties in the ordinary
course of their respective businesses.

“Computation Failure Event of Default” has the meaning ascribed thereto in
Schedule 1.01(c).

“Computation Period” means, as of the last day of each month, (i) occurring on
or prior to the last day of the eleventh month after the Initial Effective Date,
the period commencing on the Initial Effective Date and ending on such last day
and (ii) occurring from and after the last day of the eleventh month after the
Initial Effective Date, the last twelve full calendar months ending on such last
day.

“Condemnation” shall mean any condemnation or other taking, or temporary or
permanent requisition of, any property, any interest therein or right
appurtenant thereto, or any change of grade affecting any property, in each case
as the result of the exercise of any right of condemnation or eminent domain.  A
sale or other transfer to a Governmental Authority in lieu of, or in
anticipation of, condemnation shall be deemed to be a Condemnation.

“Contractual Obligation” means, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.

“Controller” means the Controller of the Reliant Parent or the individual with
equivalent responsibilities to the Controller as of the Execution Date.

“Contribution Agreement” means the Contribution Agreement dated as of the
Initial Effective Date between Reliant Parent and RERH Holdings.

“Control” means, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; and the terms “controlling,” “controlled by” and “under
common control with” have correlative meanings.

“Core Accepted Counterparty” means each “Core Accepted Counterparty” listed in
Exhibit B, as such Exhibit may be updated from time to time in accordance with
Section 2.02.

“Counterparty” means a Person that at any time sells, delivers, purchases and/or
receives, or is or can be required to sell, deliver, purchase and/or receive,
Accepted Products to or from any Reliant Retail Obligor.

“Counterparty Document” means, with respect to each Accepted Counterparty, the
Power and Hedging Contract, Credit Support Agreement and ML Guarantee and any
related certificates, documents and agreements, as applicable, relating to such
Accepted Counterparty.

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“Counterparty Limitations” means, in respect of an Accepted Counterparty and an
Accepted Product, each of the limits set forth on Exhibit B.

“Counterparty CDS Fee” has the meaning ascribed thereto in Section 2.02(b).

“CPT” means the prevailing time in Houston, Texas.

“Credit Rating” means, at any time with respect to any Accepted Counterparty:

(a)           if Moody’s or S&P has issued a credit rating for long-term senior
unsecured, and non-credit enhanced, Dollar-denominated debt of such Accepted
Counterparty, such credit rating, or, if such credit rating is not available,
the issuer rating of such Accepted Counterparty, issued by each of Moody’s and
S&P, as applicable, as in effect at such time in respect of the Accepted
Counterparty (in the event of a split rating the lower rating shall apply);

(b)           if (i) clause (a) above does not apply at such time, (ii) the
obligations of such Accepted Counterparty are guaranteed by any Person,
(iii) the Sleeve Provider has approved in its reasonable discretion the form of
such guarantee and (iv) Moody’s or S&P has issued a credit rating for long-term
senior unsecured, and non-credit enhanced debt of such guarantor, such credit
rating issued by each of Moody’s and S&P, as applicable, as in effect at such
time in respect of the guarantor (in the event of a split rating the lower
rating shall apply); or

(c)           if neither clause (a) nor clause (b) above shall apply at such
time, the credit rating, if any, for such Accepted Counterparty designated in
writing by the Sleeve Provider and in effect at such time for purposes of this
Agreement (which the Sleeve Provider may designate or withhold in its reasonable
discretion after consultation with, and review of any relevant credit
information provided by, the Reliant Retail Obligors).

“Credit Sleeve Obligations” mean the Obligations of the Reliant Retail Obligors
under this Agreement, including the Reimbursement Obligations and the
Obligations in respect of the payment of all Monthly Sleeve Fees required
hereunder.

“Credit Sleeve Termination Date” means the earliest date on which the Credit
Sleeve Obligations have been terminated and satisfied in full and all
collateral, including all ML Guarantees, posted by the Merrill Parties required
to be returned to the Merrill Parties has been so returned or reimbursement has
been made therefor.

“Credit Support Agreement” means a credit support agreement among an Accepted
Counterparty, REPS and the Sleeve Provider, in substantially the form of
Exhibits D1 or D2, or in such other form as REPS and the Sleeve Provider may
otherwise agree, in accordance with Section 2.02, providing for credit support
with respect to a Power and Hedging Contract.

“Current Draw Reimbursement Obligations” means Draw Reimbursement Obligations
other than any portion thereof that becomes a Deferred Reimbursement Obligation.

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“Data Failure Event of Default” has the meaning ascribed thereto in Schedule
1.01(c).

“Default” means an Event of Default or an event that with notice or lapse of
time or both would, unless cured or waived, become an Event of Default.

“Deferred Cure Reimbursement Obligations” has the meaning ascribed thereto in
Section 12.07(b).

“Deferred Draw Reimbursement Obligations” has the meaning ascribed thereto in
Section 3.02.

“Deferred Reimbursement Obligations” means the Deferred Draw Reimbursement
Obligations and Deferred Cure Reimbursement Obligations.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms
of any security into which it is convertible, or for which it is exchangeable,
in each case, at the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
of the Capital Stock, in whole or in part, on or prior to the date that is 91
days after the Credit Sleeve Termination Date.  Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital Stock have the right to require the Borrower
to repurchase such Capital Stock upon the occurrence of a change of control or
an asset sale shall not constitute Disqualified Stock if the terms of such
Capital Stock provide that the Borrower may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the provisions of Sections 7.06 and 7.07.  The amount of
Disqualified Stock deemed to be outstanding at any time for purposes of this
Agreement shall be equal to the maximum amount that the Borrower and its
Restricted Subsidiaries may become obligated to pay upon the maturity of, or
pursuant to any mandatory redemption provisions of, such Disqualified Stock,
exclusive of accrued dividends.

“Dollars” and “$” means lawful money of the United States of America.

“Downgrade Event” means, with respect to any Person, the Credit Rating of such
Person in effect on the Initial Effective Date or when such Person first becomes
an Accepted Counterparty, as applicable, is downgraded by either of Moody’s or
S&P by two notches or has been downgraded by one notch and put on watch list for
a possible additional downgrade by either of Moody’s or S&P.

“Draw Reimbursement Obligations” has the meaning ascribed thereto in Section
3.02.

“EEI Master Agreement” means the Edison Electric Institute Master Power Purchase
and Sale Agreement, version 2.1 (modified 04/25/00) as in effect from time to
time.

“EFS Transaction” means, in respect of any NYMEX Exchange Traded Contract(s)
held by REPS on the A&R Date, or subsequently entered into by REPS, an exchange

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of such futures for a swap transaction between REPS and the Sleeve Provider
executed on the NYMEX, in accordance with any applicable rules and procedures,
pursuant to which the Sleeve Provider and REPS exchange (a) the number of NYMEX
Exchange Traded Contract(s) held by REPS at the volume weighted average price at
which REPS entered into such Exchange Traded Contract(s) for (b) related Mirror
NYMEX OTC Contracts.

“Energy” means “Energy” as defined in Schedule P to the EEI Master Agreement.

“Environmental Laws” means any and all Federal, state, local, regional and
foreign statutes, laws, rules of common law, constitutional provisions,
regulations, ordinances, rules judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or governmental restrictions relating
to pollution and the protection of the environment or Hazardous Materials,
including, those relating to the use analysis, generation, manufacture, storage,
discharge, emission, release, disposal, transportation treatment, investigation,
removal, or remediation of Hazardous Materials.  Environmental Laws include
those acts commonly referred to as: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980; the Superfund Amendments and
Reauthorization Act; the National Environmental Policy Act; the Hazardous
Materials Transportation Act; the Resource Conservation and Recovery Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic
Substances Control Act, and the Occupational Safety and Health Act, and their
state counterparts.

“EOO Transaction” means, in respect of any NYMEX Exchange Traded Contract(s)
held by REPS on the A&R Date, or subsequently entered into by REPS, an exchange
of such NYMEX options for an over-the-counter option transaction between REPS
and the Sleeve Provider executed on NYMEX, in accordance with any applicable
rules and procedures, pursuant to which the Sleeve Provider and REPS exchange
(a) the number of NYMEX options held by REPS for (b) related Mirror NYMEX OTC
Contracts.

“Equity Interests” means Capital Stock and all warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).

“ERCOT” means the Electric Reliability Council of Texas, or any successor
thereto.

“ERCOT Market” means the electric market to which ERCOT regulation applies.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
which is a member of the controlled group of RERH Holdings or under common
control with RERH Holdings within the meaning of Section 414(b) or (c) of the
Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code) or Section 4001(a)(14) of ERISA.

“ERISA Event” means (a) a reportable event (within the meaning of Section 4043
of ERISA) with respect to a Pension Plan; (b) a withdrawal by RERH Holdings or
any ERISA

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Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA) or a cessation of operations that is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal (within the
meaning of Sections 4203 or 4205 of ERISA) by RERH Holdings or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon RERH Holdings
or any ERISA Affiliate.

“Estimated Obligations” has the meaning ascribed thereto in Section 6.11(c).

 

“Estimation Day” has the meaning ascribed thereto in Section 6.11(c).

 

“Estimation Period” means, for any Estimation Day, the period from such
Estimation Day until the date 30 days after such Estimation Day.

“Event of Default” means a Sleeve Provider Event of Default or a Reliant Event
of Default.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Traded Contract” means each trade of an Accepted Product traded and
cleared on an Accepted Exchange held or obtained by REPS relating to the sale,
purchase, delivery or receipt of any Accepted Product.

“Execution Date” means September 24, 2006.

“Fair Market Value” means the value that would be paid by a willing buyer to a
willing seller in a transaction not involving distress or necessity of either
party, determined in good faith by the chief financial officer of RERH Holdings
or Board of Directors of RERH Holdings or the selling entity (unless otherwise
provided in this Agreement).

“Failure to Pay or Post” means, in respect of any Accepted Counterparty, any
event of default (after any applicable cure period) for failure to make payment
or post collateral (howsoever defined) by such Accepted Counterparty under its
related Power and Hedging Contract with REPS (including, as applicable, its
related Credit Support Agreement).

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided, that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding

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Business Day, the Federal Funds Rate for such day shall be the average rate
(rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to
Bank of America, N.A. on such day on such transactions as determined by the
Sleeve Provider.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System of the United States of America.

“Federal Tax Payable Amount” has the meaning set forth in the Reliant Parent
Services Agreement.

“FERC” means the Federal Energy Regulatory Commission, or any successor thereto.

“Financial Officer” means, with respect to any Reliant Retail Obligor, any of
the chief financial officer, principal accounting officer, treasurer or
controller thereof.

“Fiscal Quarter” means each three month period of a Fiscal Year ending on March
31, June 30, September 30, and December 31.

“Fiscal Year” means any period of twelve consecutive calendar months ending on
December 31; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., the “2006 Fiscal Year”) refer to the Fiscal Year ending on
December 31 of such calendar year.

“GAAP” means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.

“GLO” means the Texas General Land Office.

“GLO Amount” means, at any time, the aggregate outstanding amount owed to GLO in
respect of the outstanding GLO Payments (as such term is defined in the GLO
Contract).

“GLO Contract” means that certain Energy Supply and Services Agreement dated as
of December 12, 2006, between GLO and REPS.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state, county, or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank, independent system operator, transmission organization or other
entity to the extent exercising executive, legislative, judicial, taxing,
monetary, regulatory, supervisory or administrative powers or functions of or
pertaining to government or the regulation of the Retail Energy Business,
including Approved ISOs and Approved Market Regulators in such capacities as
regulators of their applicable markets.

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“Governmental Contract” means a contract for the purchase or sale of any retail
electric products or services between any Reliant Retail Obligor and a
Governmental Customer.

“Governmental Customer” means (a) any agency, authority, instrumentality,
central bank, independent system operator, transmission organization or other
entity owned or controlled by any Governmental Authority or (b) any Person that
is or could be a Governmental Authority; in either case, to the extent acting in
a commercial capacity under a Governmental Contract, including Approved ISOs and
the GLO in such capacities.

“Guarantee” means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including by way of a pledge of assets or through
letters of credit or reimbursement agreements in respect thereof, of all or any
part of any Indebtedness (whether arising by virtue of partnership arrangements,
or by agreements to keep-well, to purchase assets, goods, securities or
services, to take or pay or to maintain financial statement conditions or
otherwise).  The term “Guarantee” as a verb has a corresponding meaning.

“Guaranteed Obligations” has the meaning ascribed thereto in Section 11.01.

“Hazardous Materials” means all explosive, flammable, corrosive or radioactive
substances or wastes and all hazardous, carcinogenic, mutagenic or toxic
substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes, toxic mold and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“ICE” means the Intercontinental Exchange or its successor.

“ICE Block Transaction” means, in respect of any ICE Exchange Traded Contract(s)
held by REPS on the A&R Date, or subsequently entered into by REPS, transactions
between REPS and the Sleeve Provider, pursuant to which the Sleeve Provider and
REPS (a) execute a block trade entered into ICE in accordance with any
applicable rules and procedures, whereby Sleeve Provider takes the same net long
or short position as that initially held by REPS for the number of ICE Exchange
Traded Contract(s) held by REPS at the volume weighted average price at which
REPS entered into such ICE Exchange Traded Contract(s) and (b) enter into
related Mirror ICE OTC Contracts.

“Indebtedness” means, with respect to any specified Person, any indebtedness of
such Person (excluding accrued expenses or trade payables), whether or not
contingent (without duplication):

(a)           in respect of borrowed money;

(b)           evidenced by bonds, notes, debentures or similar instruments or
letters of credit or reimbursement agreements in respect thereof;

(c)           in respect of banker’s acceptances;

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(d)           representing Capital Lease Obligations or Attributable Debt in
respect of sale and leaseback transactions, Synthetic Lease Obligations or
financing leases;

(e)           representing the balance deferred and unpaid of the purchase price
of any property or services due more than six months after such property is
acquired or such services are completed;

(f)            representing any Interest Hedging Obligations; or

(g)           consisting of Disqualified Stock;

whether or not any of the preceding items appear as a liability upon a balance
sheet of the specified Person prepared in accordance with GAAP.  In addition,
the term “Indebtedness” includes all Indebtedness of others secured by a Lien on
any asset of the specified Person (whether or not such Indebtedness is assumed
by the specified Person) and, to the extent not otherwise included, the
Guarantee by the specified Person of any Indebtedness of any other Person.  The
amount of any Indebtedness outstanding as of any date will be:

(i)            the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount;

(ii)           the principal amount of and premium (if any) on the Indebtedness,
in the case of any other Indebtedness;

(iii)          in respect of Indebtedness of other Persons secured by a Lien on
the assets of the specified Person, the lesser of:

(A)          the Fair Market Value of such asset at such date of determination,
and

(B)           the amount of such Indebtedness of such other Persons; and

(iv)          in respect of any Guarantee, an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in
respect of which such Guarantee is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith.

“Indemnity Letter” means that certain letter dated September 20, 2006 from the
Reliant Parent and certain of the Reliant Retail Obligors accepted and agreed to
by MLCI on behalf of the Merrill Parties, relating to the transactions
contemplated hereby.

“Information Technology Systems” means all information technology systems used
in the operation of the Retail Energy Business including hardware, software,
middleware, tools, databases, technical and business information, know-how or
other data or information, related documents, registrations and franchises,
licenses or leases for any of the foregoing and all license rights and all
additions, improvements, enhancements and accessions thereto, and books and
records describing or used in connection with any of the foregoing.

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“Initial Effective Date” means December 1, 2006.

“Intercompany Cash Management Agreement” means the Intercompany Cash Management
Agreement dated as of the Initial Effective Date among RERH Holdings and its
Subsidiaries.

“Interest Hedging Obligations” means, with respect to any specified Person, the
net obligations of such Person under:

(a)           interest rate swap agreements (whether from fixed to floating or
from floating to fixed), interest rate cap agreements and interest rate collar
agreements;

(b)           other agreements or arrangements designed to manage interest rate
risk; and

(c)           other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange rates.

“Investment” means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or similar obligations), advances or capital
contributions (excluding payroll, commission, travel and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.  “Investment”
shall exclude extensions of trade credit or posting of cash collateral by RERH
Holdings and its Subsidiaries in the ordinary course of business.  The
acquisition by RERH Holdings or any Subsidiary of RERH Holdings of a Person that
holds an Investment in a third Person will be deemed to be an Investment by RERH
Holdings or such Subsidiary in such third Person in an amount equal to the Fair
Market Value of the Investments held by the acquired Person in such third
Person.  Except as otherwise provided in this Agreement, the amount of an
Investment shall be its Fair Market Value at the time the Investment is made and
without giving effect to subsequent changes in value.

“Investment Grade Rating” means a Credit Rating equal to or higher than Baa3 (or
the equivalent) by Moody’s and BBB- (or the equivalent) by S&P.

“IP License Agreement” means the IP License Agreement dated as of the Initial
Effective Date between IP Trust and one or more of the Reliant Retail Obligors.

“IP Trust” means the Reliant Energy Trademark Trust, a Delaware statutory trust.

“IP Servicing Agreement” means the IP Servicing Agreement dated as of the
Initial Effective Date between the Reliant Parent and IP Trust.

“IT Service Agreement” means the IT Service Agreement dated as of the Initial
Effective Date between IT Trust and one or more of the Reliant Retail Obligors.

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“IT Trust” means the Reliant Energy IT Trust, a Delaware statutory trust.

“IT Trust Management Agreement” means the IT Trust Management Agreement dated as
of the Initial Effective Date between the Reliant Parent and IT Trust.

 “Joinder Agreement” means a Joinder Agreement in the form of Exhibit G or in
such other form as REPS and the Merrill Parties may agree executed pursuant to
Section 6.11(a)(i) in connection with a Subsidiary of RERH Holdings becoming an
“Other Reliant Retail Obligor” hereunder.

“K” has the meaning ascribed thereto in, and shall be determined in accordance
with, Schedule 1.01(c).

“Laws” means, collectively, all international, foreign, federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of any Governmental Authority.

“Level I Violation”, “Level II Violation” or “Level III Violation” means a
violation relating to the Risk Management Policy described as such in Schedule
1.01(a).

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement and any lease that
constitutes a security interest.

“Loans” means (i) the loans made by the Working Capital Facility Provider to
REPS under, and in accordance with, the Working Capital Facility and (ii) the
loans made by Replacement Working Capital Providers to REPS under, and in
accordance with, any Replacement Working Capital Facilities.

“Loss Exposure” means, with respect to any underlying transaction, the
mark-to-market value of such underlying transaction assuming a two standard
deviation move in the underlying variables, multiplied by the square root of
ten.

“Make-whole Payment” has the meaning ascribed thereto in Schedule 3.05.

“Margin Stock” means “margin stock” within the meaning of Regulations T, U and X
of the Federal Reserve Board.

“Marks” means all trade names, trademarks and service marks, logos, trademark
and service mark registrations owned by the Reliant Parent or any of its
Subsidiaries and applicable to the Reliant Retail Obligors, including those set
forth on Schedule 1.01(e), and all related applications for trademark and
service mark registrations, including all renewals of trademark and service mark
registrations, all rights to recover for all past, present and future

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infringements thereof and all rights to sue therefor, and all rights
corresponding thereto throughout the world.

“Market Information” means market information such as price curves,
volatilities, interest rates and similar information for which quotes are
customarily available from reference market makers.

“Master Netting Agreement” means the Master Netting Agreement to be mutually
agreed among RES, REES, and REPS (and in a form reasonably satisfactory to
Sleeve Provider) relating to the REES/REPS Power Purchase Agreement and the
RES/REPS Power Purchase Agreement.

“Material Adverse Effect” means a material adverse effect upon (a) the business,
operations, property or financial condition of RERH Holdings and its
Subsidiaries taken as a whole; or (b) the validity or enforceability against any
of RERH Holdings or any of its Subsidiaries of any Transaction Document to which
it is a party or the material rights and remedies of the Sleeve Provider
thereunder.

“Merrill Collateral” has the meaning ascribed thereto in Section 3.01.

“Merrill Parties” means the Sleeve Provider and the ML Guarantee Provider

“Mirror ICE OTC Contract” means, in respect of any ICE Exchange Traded
Contract(s), the over-the-counter swap leg of the related ICE Block Transaction
or the swap that corresponds to the ICE cleared swap contract transferred
pursuant to Section 2.03(a) in each case between REPS and the Sleeve Provider
(executed under the MLCI/REPS ISDA), (i) in which REPS takes the same net long
or short position it took in the related ICE Exchange Traded Contract(s); (ii)
that settles on the industry standard settlement date applicable to such
Accepted Product; (iii) that has a price per unit equal to the price of the ICE
Exchange Traded Contract(s) leg of the ICE Block Transaction or the price of the
ICE cleared swap contract transferred pursuant to Section 2.03(a); and (iv) that
has a volume equal to the related Adjusted Volume.

“Mirror NYMEX OTC Contract” means, in respect of any NYMEX Exchange Traded
Contracts, the over-the-counter swap leg of the related EFS Transaction or EOO
Transaction or the swap that corresponds to the ex-pit transfers made pursuant
to Section 2.03(a) in each case between REPS and the Sleeve Provider (executed
under the MLCI/REPS ISDA), (i) in which REPS takes the same net long or short
position it held in the related Exchange Traded Contracts; (ii) that settles on
the industry standard settlement date applicable to such Accepted Product; (iii)
that has a price or strike per unit equal to the price or strike of the futures
or option leg of the EFS Transaction or EOO Transaction or the price or strike
of the future or option transferred pursuant to Section 2.03(a); and (iv) that
has a volume equal to the related Adjusted Volume.

“Mirror OTC Contract” means any Mirror ICE OTC Contract or Mirror NYMEX OTC
Contract.

“ML&Co.” means Merrill Lynch & Co., Inc., a Delaware corporation.

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“MLCI” means Merrill Lynch Commodities, Inc., a Delaware corporation.

“ML Equivalent Credit Rating” means “A” and “A2” by S&P and Moody’s,
respectively, provided that if the Credit Rating for the ML Guarantee Provider
by S&P or Moody’s, respectively, is lower, then the actual S&P or Moody’s Credit
Rating of the ML Guarantee Provider, respectively, shall apply.

“ML Guarantee” means a guarantee by the ML Guarantee Provider (i) in
substantially the form of Exhibit A1 with respect to Accepted Counterparties or
Exhibit A2 with respect to C&I Customers, (ii) in substantially the form of
Exhibit A2 with respect to Governmental Customers and Governmental Authorities
that do not have requirements with respect to the forms of guarantees received
or in such other form of guarantee as is required by the applicable Governmental
Customer or Governmental Authority and is reasonably acceptable to the Merrill
Parties, and (iii)  in such other form as REPS and the Merrill Parties may
agree.

“ML Guarantee Provider” means ML&Co.

“MLCI/REPS ISDA” means the ISDA 2002 Master Agreement dated the Initial
Effective Date between the Sleeve Provider and REPS.

“Moody’s” shall mean Moody’s Investors Service, Inc. or if such company shall
cease to issue ratings, another nationally recognized rating company selected in
good faith by mutual agreement of the Sleeve Provider and REPS.

“Monthly Payment Date” means, in respect of any month, the date two Business
Days after the Sleeve Provider provides REPS with the invoice in respect of such
month generated and delivered in accordance with the provisions of Schedule
3.04, commencing with the Monthly Payment Date first occurring after the Initial
Effective Date.

“Monthly Sleeve Fee” means the Sleeve Fee or Unwind Sleeve Fee, as applicable,
as defined in Schedule 3.04.

“Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been made, or have been required to be
made, by RERH Holdings or any ERISA Affiliate and that is covered by Title IV of
ERISA.

“MWh” means a megawatt hour of energy.

“MW” means one million watts.

“Non-Guarantor Cutoff Amounts” means, on any date of determination, in respect
of all Subsidiaries of RERH Holdings that are not Reliant Retail Obligors on a
consolidated basis, either (i) $1,000,000 or more of consolidated net income
during the four-fiscal quarter period most recently ended for which financial
statements are available or (ii) assets equal to or exceeding $25,000,000 in
book value at the end of the fiscal quarter most recently ended for which
financial statements are available.

“Notice Date” has the meaning ascribed thereto in Section 3.02.

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“NYMEX” means the New York Mercantile Exchange or its successor.

“Obligations” means any amounts, principal, interest, premium, fees,
indemnifications, reimbursements, expenses, damages and other liabilities
payable under the applicable documentation.

 

“Obligee Guarantor” has the meaning ascribed thereto in Section 11.06.

“Organizational Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

“Other Reliant Retail Obligors” means each of RERH Holdings, RERH, RERS, RERR,
RESE, and any other Wholly Owned Subsidiaries of RERH Holdings that join this
Agreement in accordance with the provisions of this Agreement and, in each case,
their respective successors and assigns.

 

“Other Accepted Counterparty” means each “Other Accepted Counterparty” listed in
Exhibit B, as such Exhibit may be updated from time to time in accordance with
Section 2.02.

“Party” means any Reliant Retail Obligor or any Merrill Party, as applicable.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by RERH Holdings or
any ERISA Affiliate or to which RERH Holdings or any ERISA Affiliate contributes
or has an obligation to contribute or with respect to which RERH Holdings or any
ERISA Affiliate has any direct or contingent liability, or in the case of a
multiple employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.

“Permitted Acquisition” means any Acquisition by any Reliant Retail Obligor made
with Available Funds that satisfies all of the following conditions:  (1) no
Default with respect to a Reliant Event of Default shall have occurred and be
continuing or would result therefrom on the date of the closing of such
Acquisition, (2) the acquired Person is in (or the acquired assets, including
books of commercial and industrial and consumer electricity customers and
related contracts, are useful in) the Retail Energy Business and (3) the assets,
including any Equity Interests, acquired pursuant to such Acquisition shall be
pledged as

 

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additional collateral for the Credit Sleeve Obligations, in each case in
accordance with Section 6.11.

“Permitted Investments” means:

(a)           (1) any Investment by a Reliant Retail Obligor in any other 
Reliant Retail Obligor and (2) Investments by the Reliant Retail Obligors in
Wholly Owned Subsidiaries of RERH Holdings that are not Other Reliant Retail
Obligors, in each case, with Available Funds or in accordance with cash
management principles in the ordinary course of business and, to the extent
applicable, in accordance with Section 6.11(c);

(b)           any Investment by a Reliant Retail Obligor or its Subsidiaries in
a Person made with Available Funds, if as a result of such Investment:

(i)                                     such Person becomes a Wholly Owned
Subsidiary of RERH Holdings; or

(ii)                                  such Person is merged or consolidated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, RERH Holdings or a Wholly Owned Subsidiary of RERH Holdings;

(c)           any Investment in Cash Equivalents, the Collateral Accounts and
under the Intercompany Cash Management Agreement;

(d)           any Investment (other than an Investment in Capital Stock) made as
a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the provisions of Section 7.05;

(e)           any Investments received in compromise or resolution of (A)
Obligations of trade creditors or customers that were incurred in the ordinary
course of business of the Reliant Retail Obligors, including pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of any trade creditor or customer; or (B) litigation, arbitration or other
disputes with Persons who are not Affiliates;

(f)            loans or advances to employees made in the ordinary course of
business up to an aggregate principal amount not to exceed $2,000,000 at any one
time;

(g)           any Investment acquired by any Reliant Retail Obligor on account
of any claim against, or interest in, any other Person (A) acquired in good
faith in connection with or as a result of a bankruptcy, workout, reorganization
or recapitalization of such other Person or (B) as a result of a bona fide
foreclosure by any Reliant Retail Obligor with respect to any claim against any
other Person;

(h)           receivables owing to any Reliant Retail Obligor, if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided that such trade terms may
include such concessionary trade terms as such Reliant Retail Obligor deems
reasonable under the circumstances; and

 

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(i)            other Investments otherwise permitted in accordance with this
Agreement (other than Investments in Capital Stock) made with Available Funds;
provided that the aggregate outstanding amount of Investments under this clause
(i) shall not exceed $25,000,000.

With respect to all of the foregoing Permitted Investments in Subsidiaries of
RERH Holdings that are not Reliant Retail Obligors, such Investments are subject
to Section 6.11(a).

“Permitted Liens” means:

(a)           Liens under the Collateral Trust Agreement or otherwise securing
the Credit Sleeve Obligations and Working Capital Obligations;

(b)           Liens in favor of the Reliant Retail Obligors;

(c)           Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; provided
that any reserve or other appropriate provision as is required in conformity
with GAAP has been made therefore;

(d)           Liens imposed by law, such as carriers’, warehousemen’s,
landlord’s and mechanics’ Liens, in each case, incurred in the ordinary course
of business;

(e)           Liens in the form of survey exceptions, encumbrances, easements or
reservations, including those for licenses, rights-of-way, sewers, electric
lines, telegraph and telephone lines, other utilities, mineral reservations and
rights and leases, zoning restrictions and other restrictions as to the use of
real property or other exceptions to title that were not incurred in connection
with Indebtedness and that do not in the aggregate materially adversely affect
the value of said properties or materially impair their use in the operation of
the business of such Person;

(f)            Liens securing Capital Lease Obligations and purchase money
obligations, in each case permitted to be incurred pursuant to clause (f) of
Section 7.03, covering only the assets acquired with or financed by such
Indebtedness;

(g)           Liens in the form of financing statements (including precautionary
statements) filed in connection with a Capital Lease Obligation, financing lease
or an operating lease, in each case, not prohibited hereunder; provided, that no
such financing statement extends to, covers or refers to as collateral, any
property or assets of RERH or its Subsidiaries, other than the property or
assets which are subject to such Capital Lease Obligation, financing lease or
operating lease;

(h)           Liens arising out of or in connection with any judgment that does
not constitute a Reliant Event of Default or in connection with any litigation
or other legal proceeding as to which an appeal to contest or review is timely
commenced in good faith by appropriate proceedings and as to which adequate
reserves have been established in accordance with GAAP; provided, that any right
to levy, seizure, attachment,

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sequestration, foreclosure or garnishment of any property and assets of a
Reliant Retail Obligor arising out of or in connection with any such Lien has
been and continues to be enjoined or effectively stayed;

(i)            Liens in the form of inchoate statutory Liens arising under
ERISA;

(j)            Liens on cash and short-term investments pledged or deposited as
collateral to a contract counterparty or issuer of surety bonds by RERH Holdings
or any of its Subsidiaries to secure obligations with respect to contracts for
commercial activities in the ordinary course of business;

(k)           Liens granted during the Transition Period or an Unwind Period in
favor of a commercial trading counterparty pursuant to a netting agreement,
which Liens encumber rights under agreements that are subject to such netting
agreement and which Liens are granted by a Subsidiary of RERH Holdings to secure
such Subsidiary’s obligations to such counterparty under such netting agreement;
provided that any such agreements and netting agreements are entered into in the
ordinary course of business; and provided, further, that the Liens are incurred
in the ordinary course of business and when granted do not secure obligations
which are past due;

(l)            Liens arising by virtue of any statutory or common law provision
relating to banker’s liens, rights of set off or similar rights, contractual
rights of setoff or netting arrangements entered into in the ordinary course of
business and similar rights with respect to deposit accounts, commodity accounts
and/or securities accounts;

(m)          Liens arising under Section 9.343 of the Texas Uniform Commercial
Code or similar statutes of states other than Texas;

(n)           pledges and deposits to secure the payment of worker’s
compensation, unemployment insurance, social security benefits or obligations
under similar laws, or to secure the payment or performance of statutory or
public obligations (including environmental, municipal and public utility
commission obligations and requirements), reimbursement or indemnity obligations
arising out of surety, performance, or other similar bonds, and other
obligations of a like nature, in each case incurred in the ordinary course of
business;

(o)           Liens other than under the Collateral Trust Agreement incurred in
the ordinary course of business of RERH Holdings or any Subsidiary of RERH
Holdings securing obligations that do not exceed $10,000,000 in the aggregate at
any one time outstanding;

(p)           Liens in favor of any Replacement Sleeve Provider or Replacement
Working Capital Provider incurred during the Transition Period or Unwind Period
and subject to the Collateral Trust Agreement; and

(q)           Liens on assets of Reliant Energy Retail Services, LLC created in
connection with Delivery Order No. DABT39-97-C-4046 dated September 1997 and

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issued by the Directorate of Contracting, Contract Support Division, Ft. Sill,
Oklahoma (as more completely described in Schedule 7.14).

“Person” means any individual, corporation, firm, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.

“PJM” means the PJM Interconnection, L.L.C., or any successor thereto.

“PJM Market” means the electric market to which PJM regulation applies.

“PJM Retail Business” means the Retail Energy Business conducted by RESE in the
ordinary course of business in the PJM Market area.

“PJM Structuring Fee” has the meaning ascribed thereto in Section 3.06.

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by RERH Holdings or its Subsidiaries or with
respect to which RERH Holdings or its Subsidiaries could have any direct or
contingent liability or, with respect to any such plan that is subject to
Section 412 of the Code, Section 4980B of the Code or Title IV of ERISA, any
ERISA Affiliate.

“Post-Default Rate” means a per annum rate equal to the Base Rate (as in effect
from time to time) plus 3.875%.

“Post-Unwind Start Date Transaction” means an Accepted Trade entered prior to
the Unwind Start Date in accordance with this Agreement under which the final
delivery date, payment date, or settlement date is scheduled to occur after the
Unwind Start Date.

“Power and Hedging Contract” means an over-the-counter master agreement between
REPS and an Accepted Counterparty substantially in the form of Exhibits C1, C2,
C3, or C4 (provided that C4 applies only with respect to REC contracts for a
duration of 12 or less months and for the ERCOT market only) or in such other
form as REPS and the Sleeve Provider may agree in accordance with Section 2.02,
providing for transactions regarding Accepted Products, and including as part
thereof the associated Credit Support Agreement.

“Powerlight Contract” means the Solar Renewable Energy Credit Purchase and Sale
Agreement dated as of April 5, 2007, between Powerlight Corporation, as Seller,
and REPS, as assignee of REES, as Buyer, as in effect on the A&R Date.

“Prime Rate” means a fluctuating rate of interest equal to the rate of interest
most recently announced by the Wall Street Journal as the prime rate for
Dollar-denominated loans.

“Properly Allocable” means with respect to any Allocable State Taxes the
percentage of the total tax (not in excess of 100 percent) which the tax of the
Reliant Retail Obligors if computed on a separate return would bear to the total
amount of the taxes for all members of the group so computed.

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“Projected Financial Statements” mean the projected unaudited consolidated
balance sheet of RERH Holdings and its consolidated Subsidiaries based on a
draft June 30, 2007, balance sheet, and giving effect to the transfer of RESE to
RERH and the other contributions of the assets and liabilities of the Retail
Energy Business contemplated by this Agreement as of the A&R Date as if such
transfer and contributions had been made as of June 30, 2007.

“PUCT” means the Public Utility Commission of Texas, or any successor thereto.

“Qualified Institution” means a major U.S. commercial bank or a foreign bank
with a U.S. branch office with a Credit Rating of at least the ML Equivalent
Credit Rating.

“QSE” or “Qualified Scheduling Entity” means a market participant qualified by
ERCOT in accordance with the ERCOT protocols to submit schedules and settle
payments with ERCOT.

“REES” means Reliant Energy Electric Solutions, LLC, a Delaware limited
liability company.

“REES/REPS Power Purchase Agreement” means the ISDA 2002 Master Agreement dated
July 1, 2006, between REES and REPS, relating to (i) the confirmation thereunder
outstanding on the Initial Effective Date regarding certain third party
agreements other than “Upton Wind,” (ii) the confirmation thereunder outstanding
on the Initial Effective Date regarding the “Upton Wind” agreement, and (iii)
the confirmation thereunder outstanding on the A&R Date to transfer from REES to
REPS approximately 11,000 PJM Class I RECs purchased on July 27, 2007.

“Reimbursement Guarantors” means each of the Other Reliant Retail Obligors and
their respective successors and assigns.

“Reimbursement Guaranty” means the guarantee of the Reimbursement Guarantors to
repay the Guaranteed Obligations in accordance with Section 11.

“Reimbursement Obligations” means the Draw Reimbursement Obligations and the
Deferred Reimbursement Obligations.

“Reliant Event of Default” has the meaning ascribed thereto in Section 8.01.

“Reliant Parent” means Reliant Energy, Inc., a Delaware Corporation.

“Reliant Parent Consent and Agreement” means the Consent and Agreement dated as
of the Initial Effective Date made by the Reliant Parent  for the benefit of the
Collateral Trustee and the Secured Counterparties pertaining to the Reliant
Parent Services Agreement.

“Reliant Parent Lenders” means any one or more financial institutions or groups
of financial institutions providing credit to the Reliant Parent, including
their respective administrative, collateral, and other like agents if
applicable, in each case to the extent designated by REPS as Reliant Parent
Lenders hereunder.

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“Reliant Parent Services Agreement” means the Master Services Agreement dated as
of the Execution Date, among Reliant Parent, RECS and RESE on one hand, and RERH
Holdings and its Subsidiaries, on the other hand.

“Reliant Power Purchase Agreements” means the REES/REPS Power Purchase
Agreement, the RES/REPS Power Purchase Agreement, the REPS/RERS Power Purchase
Agreement, and the REPS/RESE Power Purchase Agreement.

“Reliant Retail Obligors” means REPS and the Other Reliant Retail Obligors.

“Remediation Plan” means a written report outlining the sequence of actions that
the Reliant Retail Obligors will take to address a Level III Violation and seek
to prevent similar Level III Violations from occurring in the future.

“Replacement Sleeve Provider” means a counterparty or counterparties with a
Credit Rating that is at least equal to the ML Equivalent Credit Rating and
providing Accepted Products or credit support for the acquisition thereof to
RERH Holdings or any of its Subsidiaries during the Transition Period or Unwind
Period.

“Replacement Working Capital Facility” means a working capital facility or
similar facility provided by a Replacement Working Capital Provider  (a) entered
into during the Unwind Period after the commitments under the Working Capital
Facility shall have been permanently terminated and the Working Capital
Obligations have been paid in full, (b) having available commitments that,
together with all other Replacement Working Capital Facilities then in effect,
do not exceed $300,000,000 on an aggregate basis, and (c) having terms, taken as
a whole, no less restrictive than the Working Capital Facility on the date of
its termination.

 

“Replacement Working Capital Provider” means a counterparty or counterparties
with a Credit Rating that is at least equal to the ML Equivalent Credit Rating
and providing working capital to RERH Holdings or any of its Subsidiaries under
a Replacement Working Capital Facility.

“RECs” means renewable energy credits.

“RECS” means Reliant Energy Corporate Services, LLC, a Delaware limited
liability company.

“REPS” has the meaning ascribed thereto in the opening paragraph of this
Agreement.

“REPS/RERS Power Purchase Agreement” means the ISDA 2002 Master Agreement dated
July 1, 2006, between REPS and RERS.

“REPS/RESE Power Purchase Agreement” means the ISDA 2002 Master Agreement dated
as of the A&R Date, between REPS and RESE.

“RERH” means Reliant Energy Retail Holdings, LLC, a Delaware limited liability
company.

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“RERH Holdings” means RERH Holdings, LLC, a Delaware limited liability company.

“RERR” means RE Retail Receivables, LLC, a Delaware limited liability company.

“RERS” means Reliant Energy Retail Services, LLC, a Delaware limited liability
company.

“RES” means Reliant Energy Services, Inc., a Delaware corporation.

“RES/REPS Power Purchase Agreement” means the ISDA 2002 Master Agreement dated
July 1, 2006, between RES and REPS.

“RESC” means Reliant Energy Services Channelview, LLC, a Delaware limited
liability company.

“RESE” means Reliant Energy Solutions East, LLC, a Delaware limited liability
company.

“RESE Contribution Agreement” means the Contribution Agreement dated as of the
A&R Date between Reliant Parent and RERH Holdings.

 “Residential Mass Customer” means any residential customer of the Reliant
Retail Obligors.

“Responsible Officer” means the chief executive officer, president, chief
financial officer, treasurer or assistant treasurer of a Party and, in addition
with respect to RERH Holdings, any officer thereof that is also a vice president
or more senior officer of the Reliant Parent (excluding vice presidents in
marketing).  Any document delivered hereunder that is signed by a Responsible
Officer of a Party shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Party
and such Responsible Officer shall be conclusively presumed to have acted on
behalf of such Party.

“Restricted Payment” means any of the following:

(a)           any declaration or payment of any dividend or the making of any
other payment or distribution on account of RERH Holdings’ or any of its
Subsidiaries’ Equity Interests (including any payment in connection with any
merger or consolidation involving RERH Holdings or any of its Subsidiaries) or
to the direct or indirect holders of RERH Holdings’ or any of its Subsidiaries’
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests of RERH Holdings or to RERH Holdings
or any Other Reliant Retail Obligor);

(b)           any purchase, redemption or other acquisition or retirement for
value (including in connection with any merger or consolidation involving RERH
Holdings) of any Equity Interests of RERH Holdings; or

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(c)           any payment on or with respect to, or purchase, redemption,
defeasance or other acquisition or retirement for value of any Indebtedness of
RERH Holdings and its Subsidiaries that is contractually subordinated to the
Credit Sleeve Obligations (excluding any intercompany Indebtedness, intercompany
receivables or intercompany advances between or among any of the Reliant Retail
Obligors).

“Restricted Period” has the meaning ascribed thereto in Section 9.03(a).

“Retail Energy Business” means the business of providing Accepted Retail
Products in retail electricity markets in the United States and any businesses
incidental or related thereto and performing under the Transaction Documents and
any activities incidental or related thereto.

“Retail Organizational Documents” means the Organizational Documents of each of
the Reliant Retail Obligors.

“Risk Limit” means (a) for ERCOT, any of the limits specified in GEP
Conversion,  Gas & Power Hedges, Natural Gas Basis Position or Power Average
Daily Peak Contractual Load, in each case as such terms are defined in Section
VII (ERCOT) of the Risk Management Policy, and (b) for PJM, any of the Hedge
Limits specified in Section VIII (PJM & Illinois Retail Hedge) of the Risk
Management Policy

“Risk Management Event of Default” has the meaning ascribed thereto in Section
6.13.

“Risk Management Policy” means the “Reliant Energy — Retail Risk Policy” set
forth in Exhibit E1, as the same may be updated from time to time in accordance
with Section 6.13.

“S&P” means Standard & Poor’s Ratings Group (presently a division of The
McGraw-Hill Companies, Inc.), together with its successors, or, if such company
shall cease to issue ratings, another nationally recognized rating company
selected in good faith by mutual agreement of the Sleeve Provider and REPS.

“Scheduled Term” means the period from the Execution Date through December 31,
2011; provided that if neither the Sleeve Provider nor REPS objects in writing
prior to the last day of each calendar year (excluding the calendar year ending
December 31, 2006), the referenced expiration date in this clause shall be
automatically extended for an additional calendar year and provided, further,
that the Parties to this Agreement may agree, in their sole discretion, to
extend the referenced expiration date under this clause for greater than one
additional calendar year.

“Scheduling Entity” means a market participant qualified by an Approved ISO or
Approved Market Regulator to submit schedules, settle payments and handle like
matters within an Approved Market, including, with respect to ERCOT, a QSE.

“SEC” means the Securities and Exchange Commission or any Governmental Authority
succeeding to any of its principal functions.

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“Secured Obligations” has the meaning ascribed thereto in the Collateral Trust
Agreement.

“Secured Counterparties” has the meaning ascribed thereto in the Collateral
Trust Agreement.

“Security Agreement” means the Security Agreement dated as of the Initial
Effective Date among the Reliant Retail Obligors, and the Collateral Trustee.

“Security Documents” shall mean (i) the Collateral Trust Agreement, the Security
Agreement, the Reliant Parent Consent and Agreement, the Blocked Account
Agreement, (ii) each other security agreement, pledge agreement, mortgage, deed
of trust, assignment agreement, consent and agreement and other instrument being
executed concurrently therewith or herewith or from time to time hereafter
pursuant to which a Lien has been granted by the Reliant Retail Obligors in
favor of the Collateral Trustee (for the benefit of the Secured Counterparties)
on any of their respective assets to secure any of the Secured Obligations, and
(iii) any intercreditor or like agreements related to any of the foregoing.

“Sleeve Provider” has the meaning ascribed thereto in the title paragraph
hereto.

“Sleeve Provider Event of Default” has the meaning ascribed thereto in Section
8.02.

“Solvent” and “Solvency” mean, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person, (b) such Person is expected to have assets
available of not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured,
(c) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person’s ability to pay such debts and
liabilities as they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capital.  The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability; provided that if the context in which “Solvent” or “Solvency”
is used refers to a Person together with its Subsidiaries, Person as used above
shall be deemed to be a reference to such Person together with its Subsidiaries.

“Specified Transaction” means, with respect to any Person (i) any prepaid
forward sale of energy, oil, gas or minerals by such Person that is intended
primarily as a borrowing of funds, excluding volumetric production payments, and
(ii) any interest rate, currency, commodity or other swap, collar, cap, option
or other derivative that is intended primarily as a borrowing of funds, or any
combination of any of the foregoing, with the amount of the obligations of such
Person thereunder being the net obligations of such Person thereunder.

“State Tax Distribution Amount” means with respect to any Allocable State Taxes,
on any date of determination, the excess of (a) the cumulative amounts, for
periods beginning on or after the Initial Effective Date, of Allocable State
Taxes Properly Allocable to

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the Reliant Retail Obligors as shown on tax returns relating thereto (and
reflecting any adjustments thereto agreed upon with applicable Governmental
Authorities or as determined by courts of competent jurisdiction), over (b)
amounts previously distributed pursuant to Section 6.11(c)(ii) of this
Agreement.

“Stated Maturity” means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness as of the Execution Date, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.

“Structuring Fee” has the meaning ascribed thereto in Section 3.06.

“Sublease “ means the  Sublease Agreement dated as of the Initial Effective Date
between Reliant Energy Corporate Services, LLC, a Delaware limited liability
company, as Sublessor, and RERR, as Sublessee.

“Subordinated Indebtedness” means any Indebtedness of a Person that is
contractually subordinated to the Credit Sleeve Obligations.

“Subordinated Secured Obligations” has the meaning ascribed thereto in the
Collateral Trust Agreement.

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person.

“Synthetic Lease Obligation” means the monetary obligation of a Person under a
so-called synthetic, off-balance sheet or tax retention lease.

“Tax Code” means Title 26 of the United States Code (Internal Revenue),
26 U.S.C. Section 1 et seq.

“Tax Subordination Agreement” means the Tax Subordination Agreement dated as of
the Initial Effective Date made by the Reliant Parent and the Reliant Retail
Obligors for the benefit of the Merrill Parties and the Working Capital Facility
Provider.

“Term” has the meaning ascribed thereto in Section 2.06.

“Transaction Documents” means (i) this Agreement, (ii) the Working Capital
Facility, (iii) the Security Documents, (iv) the Contribution Agreement and the
RESE Contribution Agreement, (v) Retail Organizational Documents, (vi) the
Reliant Parent Services Agreement, (vii) the REES/REPS Power Purchase Agreement,
(viii) the RES/REPS Power Purchase Agreement, (ix) the Master Netting Agreement,
(x) the REPS/RERS Power Purchase Agreement and the REPS/RESE Power Purchase
Agreement, (xi) the Channelview Services

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Agreement, (xii) Mirror OTC Contracts, (xiii) the IP License Agreement, (xiv)
the IP Trust, (xv) the IP Servicing Agreement, (xvi) the IT Service Agreement,
(xvii) the IT Trust, (xviii) the IT Trust Management Agreement, (xix)
[intentionally deleted], (xx) the Indemnity Letter, (xxi) the Tax Subordination
Agreement, (xxii) the Sublease, and (xxiii) any other contract or agreement
(including ISDA Master Agreements, but excluding any Credit Support Agreements)
between any Merrill Party or its Affiliates, on one hand, and any Reliant Retail
Obligor or its Affiliates, on the other hand, relating to the transactions
contemplated hereby.

“Transition Agreement” means the Transition Agreement dated as of the Initial
Effective Date among Reliant Parent, RECS, RESE, the Reliant Retail Obligors,
the IP Trust and the IT Trust, with respect to certain interim employment
matters, intellectual property and information technology matters and other
interim matters related to the ringfencing of the Reliant Retail Obligors (which
Transition Agreement has been terminated as of the A&R Date).

“Transition Period” means the period from the Transition Start Date through the
Unwind Start Date.

“Transition Start Date” means the date three months prior to the last day of the
Scheduled Term.

“Trigger Event” has the meaning ascribed thereto in, and shall be determined in
accordance with, Schedule 1.01(c).

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York and (solely with respect to the perfection or priority of any
Lien in personal property or fixtures or control over Collateral that
constitutes personal property or fixtures) the Uniform Commercial Code as in
effect from time to time in the jurisdiction that governs such perfection,
priority or control, provided that, for purposes of each Security Document in
which the term “UCC” is separately defined, “UCC” has the meaning assigned to
such term in such Security Document.

“Unaudited Financial Statements” means the unaudited consolidated balance sheet
of RERH Holdings and its consolidated Subsidiaries as at the end of the Fiscal
Quarter ended March 31, 2007, and the related unaudited consolidated statements
of income or operations for such Fiscal Quarter and for the portion of RERH’s
Fiscal Year then ended and cash flows for the portion of RERH’s Fiscal Year then
ended, without comparisons to prior periods and subject to normal year-end audit
adjustments and the absence of footnotes.

“Unfunded Pension Liability” means any “accumulated funding deficiency” of a
Pension Plan as determined in accordance with Section 412 of the Code.

“Unwind Conclusion Date” means, with respect to any Unwind Start Date, the
Credit Sleeve Termination Date.

“Unwind Period” means the period from the Unwind Start Date through the Unwind
Conclusion Date.

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“Unwind Start Date” means the earlier of (a) the date immediately following the
last day of the Scheduled Term, (b) the date for the beginning of the Unwind
Period declared by the Sleeve Provider in connection with a Reliant Event of
Default in accordance with Section 9.01(a), (c) the date for the beginning of
the Unwind Period declared by REPS in connection with a Sleeve Provider Event of
Default in accordance with Section 9.02(a)(i), or (d) the date for the beginning
of the Unwind Period declared by REPS in accordance with Section 2.06(b).

“VaR” has the meaning ascribed thereto in, and shall be determined in accordance
with, Schedule 1.01(c).

“Voting Stock” of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

“Wholly Owned Subsidiary” of any specified Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors’ qualifying shares) is owned by such Person or by
one or more other Wholly Owned Subsidiaries of such Person.

“Working Capital Facility” means the Working Capital Facility dated as of the
Execution Date, among Working Capital Facility Provider, as Lender, REPS, as
Borrower, and the Other Reliant Retail Obligors, as Guarantors.

“Working Capital Facility Provider” means Merrill Lynch Capital Corporation, a
Delaware corporation.

“Working Capital Obligations” mean the Obligations of the Reliant Retail
Obligors under the Working Capital Facility.

“Work Plan” means a written report outlining a series of actions that the
Reliant Retail Obligors will take to develop a Remediation Plan.

                1.02.        Terms Generally.  The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined. 
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms.  The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”. 
The word “will” shall be construed to have the same meaning and effect as the
word “shall”.  Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, restated, supplemented or otherwise modified, renewed or
replaced (subject to any restrictions on such amendments, restatements,
supplements or modifications, renewals or replacements set forth therein or
herein), (b) references to any law, constitution, statute, treaty, regulation,
rule or ordinance, including any section or other part thereof (each, for
purposes of this Section 1.02, a “law”) shall refer to that law as amended from
time to time and shall include any successor law, (c) any reference herein to
any Person shall be construed to include such Person’s successors and permitted
assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof and (e) all

 

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references herein to Sections, Exhibits and Schedules shall be construed to
refer to Sections of, and Exhibits and Schedules to, this Agreement.

 

                1.03.        Accounting Terms and Determinations.  Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Sleeve Provider hereunder
shall be prepared in accordance with generally accepted accounting principles as
in effect from time to time, applied on a basis consistent with that used in the
financial statements referred to in Section 5.05.

 

Section 2.               Credit Sleeve for Reliant Retail Obligors

                2.01.        Credit Sleeve Generally;
Exclusivity                 (a)           Commitment of Merrill Parties.  From
and after the A&R Date and during the remainder of the Term, and otherwise
subject to and in accordance with the terms and conditions of this Agreement
(including Sections 2.04 and 2.05), at the request of REPS from time to time,
subject to the proviso below, the Merrill Parties shall:

 

(i)            cause the ML Guarantee Provider to execute and deliver to
Accepted Counterparties and perform under ML Guarantees in respect of REPS’
obligations under Power and Hedging Contracts, including Credit Support
Agreements, and prevent any events of default or termination events relating
solely to the ML Guarantee Provider as a credit support provider under the Power
and Hedging Contracts, including the related Credit Support Agreements;

 

(ii)           cause the Sleeve Provider to execute and deliver to Accepted
Counterparties and REPS and perform under Credit Support Agreements providing
credit support for the obligations under Power and Hedging Contracts, and
prevent any events of default or termination events relating solely to the
Sleeve Provider as a credit support provider under the Credit Support Agreements
related to the Power and Hedging Contracts;

 

(iii)          cause the Sleeve Provider to execute and deliver and perform
under EFS Transactions, EOO Transactions and ICE Block Transactions in
connection with Exchange Traded Contracts entered into by REPS, or held by REPS
on the A&R Date, or subsequently obtained by REPS, in each case, in accordance
with the provisions of Section 2.03;

 

(iv)          cause the ML Guarantee Provider to execute and deliver to C&I
Customers and Governmental Customers and perform under ML Guarantees in
connection with C&I Contracts and Governmental Contracts;

 

(v)           subject to Section 2.05, cause the ML Guarantee Provider to
execute and deliver ML Guarantees to, and cause the Sleeve Provider to provide
or post cash collateral, surety bonds or letters of credit to, Governmental
Authorities for Persons making customer deposits and advance payments and
Persons constituting transmission

 

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and distribution service providers (for this paragraph, collectively the
“regulatory beneficiaries”), for, in all cases, the obligations of the Reliant
Retail Obligors to such regulatory beneficiaries regarding (A) regulatory
requirements with respect to the conduct of the Retail Energy Business in
Approved Markets under or with Governmental Authorities, (B) the obligations of
the Reliant Retail Obligors with respect to customer deposits and advance
payments relating to Approved Markets as required by Governmental Authorities
(including, with respect to the ERCOT Market area, under PUCT Subst. Reg.
25.107, or any successor thereto), provided that the same are for the benefit of
Persons making customer deposits and advance payments and are payable or made at
the direction of the Reliant Retail Obligors, and (C) the obligations of the
Reliant Retail Obligors with respect to transmission and distribution service in
Approved Markets required by Governmental Authorities (including, with respect
to the ERCOT Market area, posting requirements under PUCT Subst. Reg. 25.108, or
any successor thereto); and

 

(vi)          execute and deliver such further certificates, documents and
agreements, and take such further actions, as REPS may reasonably request to
fully implement the intent of the foregoing;

 

Provided, however, that the foregoing commitments of the Merrill Parties are
subject to the following:

 

(1)           the commitments of the Merrill Parties to enter into any ML
Guarantees or Credit Support Agreements, any EFS Transactions, EOO Transactions,
Mirror OTC Contracts or ICE Block Transactions or any agreement to post or
provide cash collateral to Governmental Authorities, are subject to the
satisfaction of the conditions precedent set forth in Section 4; and

 

(2)           following the Unwind Start Date, (A) commitments with respect to
any ML Guarantees and Credit Support Agreements, and EFS Transactions, EOO
Transactions, Mirror OTC Contracts and ICE Block Transactions, other than those
described in clause (B) below shall be limited to transactions outstanding on
the Unwind Start Date and the maintenance and modification of hedges in Accepted
Products where those hedges are in place to support contracts with Residential
Mass Customers, Business Service Mass Customers and C&I Customers existing on
the Unwind Start Date, (B) ninety (90) days after the Unwind Start Date, the
commitments of the Merrill Parties with respect to providing ML Guaranties or
the posting or provision of collateral to Governmental Authorities or with
respect to customer deposits shall be terminated, and (C) to the extent of any
commitments that have terminated, the Merrill Parties shall have the right to
deliver to the applicable Persons notices that such commitments have terminated
and the right to the return of any collateral theretofore posted under such
commitments.

 

The Merrill Parties shall take all actions reasonably requested under this
Section 2.01(a) by REPS reasonably promptly upon receipt of such request unless
another time period is expressly provided for such actions under this Agreement.

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(b)           Exclusivity.

(i)            Subject to Section 2.01(b)(ii), the Reliant Retail Obligors shall
conduct all power, gas and other commodity purchases or sales and all hedging
transactions entered into or performed after the A&R Date either:

(A)          Using Accepted Products under Power and Hedging Contracts and the
Reliant Power Purchase Agreements, as applicable, with Accepted Counterparties
and within each applicable Counterparty Limitation;

(B)           On an Accepted Exchange in accordance with Section 2.03;

(C)           With Governmental Customers, and, in each case, such transactions
shall be solely for the Retail Energy Business;

(D)          Under transactions constituting wholesale purchases from C&I
Customers or from power marketing affiliates of C&I Customers not to exceed 500
MWs at any time; provided that (i) any purchase from a power marketing affiliate
of a C&I Customer will be consummated under a single written contract, the
material provisions of which shall be substantially in accordance with the
Customer Supply Product Feature Additional Product Schedule attached hereto as
Schedule 2.01(b), (ii) (y) payment terms set forth in such written contract will
be structured to reduce payment risk either by netting payment to the power
marketing affiliate on the related C&I Customer invoice or by payment terms to
the power marketing affiliate that require receipt of payment of the C&I
Customer invoice prior to payment to the power marketing affiliate, and (z) such
written contract shall provide that (amongst other things) such C&I Customer and
power marketing affiliate of such C&I Customer shall be jointly and severally
liable for the obligations of each other under the purchase, (iii) such purchase
shall be at MCPE pricing, and (iv) upon execution of such written contract, REPS
shall promptly advise the Sleeve Provider thereof and promptly furnish the
Sleeve Provider with true, correct and complete executed copies thereof,
together with all other documents evidencing, and specific to, such wholesale
purchase;

(E)           Under transactions outstanding on the A&R Date and disclosed in a
certificate, dated the A&R Date, of a Responsible Officer of REPS;

(F)           Acting as a Scheduling Entity for C&I Customers making purchases
from third-parties where the credit risks to the Reliant Retail Obligors with
the applicable C&I Customers with respect to such transactions together with the
credit risks of the direct sales by the Reliant Retail Obligors to such C&I
Customers collectively are within the credit policies of the Reliant Retail
Obligors with respect to such C&I Customers;

(G)           Under transactions constituting purchases and sales among the
Reliant Retail Obligors;

(H)          Under transactions constituting sales of electricity in the
ordinary course of the Retail Energy Business to Residential Mass Customers,
Business Services Mass Customers and C&I Customers using Accepted Retail
Products;

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(I)            Under transactions constituting purchases and sales of RECs under
the Powerlight Contract; or

(J)            Under transactions with third parties (who are not required to be
Accepted Counterparties) where such transactions are made such that (1) payment
for purchases of applicable RECs are made by the Reliant Retail Obligors after
delivery of the RECs to the applicable Reliant Retail Obligor account, (2)
delivery of applicable RECs shall take place within 12 months of the execution
of the applicable transaction, (3) no ML Guarantee is requested to be provided
to the applicable counterparty, and (4) with respect to the applicable
counterparty under such transaction, the sum of (x) the quantity of RECs that
have been contracted for purchase from such counterparty and its affiliates
under previous transactions that have not yet been delivered by such
counterparty and affiliates to the applicable Reliant Retail Obligor account and
(y) the quantity of RECs contracted for purchase from such counterparty and its
affiliates under the subject transaction, does not exceed any of the relevant
limits set forth in the table below:

Type of REC

 

Quantity

ERCOT

 

100,000

PJM Class I

 

40,000

PJM Class II

 

60,000

PJM Solar

 

500

PJM Green E (further described as of

the A & R Date at the following

web link. http://www.green-e.org.)

 

30,000

 

 (ii)          During the Transition Period and the Unwind Period, the Reliant
Retail Obligors shall have the right to conduct power, gas and other commodity
purchases or sales and hedging transactions that would otherwise be restricted
by Section 2.01(b)(i) so long as such transactions (A) are either (1) with
Accepted Counterparties and, taken together with the transactions under this
Agreement, are within applicable Counterparty Limitations and applicable
Collateral Thresholds, or (2) on an Accepted Exchange, (B) do not impose setoff
rights against transactions under Credit Support Agreements, and (C) use
Accepted Products measurable in K and VaR.

(iii)          Until the commitments under the Working Capital Facility have
been terminated, the Working Capital Obligations have been repaid, and the
Unwind Start Date has occurred, the Reliant Retail Obligors the shall not enter
into any agreement with any Person for the provision of working capital
facilities and, thereafter, shall not enter into any agreement for the provision
of working capital facilities other than Replacement Working Capital Facilities.

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2.02.        Credit Sleeve of OTC Trading and Hedging Activities.

(a)           Negotiation and Documentation of Power and Hedging Contracts.  In
connection with the obligations of the Merrill Parties under Section 2.01(a),
REPS and the Sleeve Provider shall negotiate in good faith the terms and
conditions of each Counterparty Document, and document, execute and deliver,
with each Accepted Counterparty in according with the following procedures:

(i)  General.  REPS shall communicate directly with each Accepted Counterparty
and, unless requested by REPS, the Sleeve Provider may not communicate directly
with any Accepted Counterparty in connection with such negotiation.  REPS shall
promptly provide the Sleeve Provider with each draft of or comments to a
Counterparty Document that is distributed or received by REPS.  Modifications
from the form Power and Hedging Contract, Credit Support Agreement and ML
Guarantee attached to this Agreement (as Exhibits C, D and A, respectively)
shall require the consent of the Merrill Parties, not to be unreasonably
withheld or delayed; provided that consent shall be deemed given with respect to
the items provided on Schedule 2.02(a) if not objected to by the Sleeve Provider
within one (1) Business Day of the receipt of the related proposed
modification.  No consent of the Merrill Parties shall be required with respect
to confirmations reflecting Accepted Trades under the Power and Hedging
Contracts; provided that consent of the Merrill Parties shall be required to
execute any confirmation for an Accepted Trade that (i) modifies the underlying
terms of any Power and Hedging Contract, to the same extent consent would have
been required had such modification been proposed at the time such Power and
Hedging Contract was originally executed or (ii) modifies or supplements in any
manner (including any supplement providing for posting of additional collateral
or any independent amount) the terms of any Credit Support Agreement, but in
each case such consent shall not be unreasonably withheld or delayed.

(ii)  Scheduled Term.  On and after the Initial Effective Date, during the
Scheduled Term, REPS shall promptly provide the Sleeve Provider with comments
received from each Accepted Counterparty to each applicable Counterparty
Document and the Sleeve Provider shall make available necessary resources and,
to the extent commercially practicable, respond to comments and drafts within
three Business Days of receipt by the Sleeve Provider.

(iii)  Execution of Counterparty Documents.  Following the completion of the
negotiation of each Counterparty Document with respect to an Accepted
Counterparty (and the agreement by REPS and the Merrill Parties to the terms and
conditions thereof), the Merrill Parties shall as soon as is reasonably
practicable and to the extent applicable, execute and deliver each such
Counterparty Document, but in no event later than three (3) Business Days after
a receipt of a request therefor.  Following the execution thereof by all
applicable parties and as soon as is commercially practicable, REPS shall
provide the Sleeve Provider with a complete, fully executed set of Counterparty
Documents with respect to each Accepted Counterparty.  Following the execution
of a Counterparty Document, any amendment, supplement or other modification
thereto shall be conducted in accordance with the processes set forth in this
Section 2.02(a)(i) through (ii).

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(iv)  Notice and Demands for Collateral Posting.  Following receipt of notice
from any Person, including any Accepted Counterparty or Governmental Customer,
that REPS (or the Sleeve Provider on its behalf) is required to post or return
collateral in connection with any collateral posting obligation that the Sleeve
Provider has undertaken in accordance with this Agreement, REPS shall promptly
(and in no event later than, for collateral to be posted on the same day, 11:00
a.m. CPT on such day of receipt, and for collateral to be posted on the next
day, 2:00 p.m. CPT on such day of receipt) provide such notice to the Sleeve
Provider.  On each day in which REPS is permitted to value exposure or make any
other determination in respect of collateral to be posted by or to the Sleeve
Provider in connection with any posting obligation that the Sleeve Provide has
agreed to undertake in connection with this Agreement, REPS shall make such
valuation or determination in good faith and in a commercially reasonable
manner.  To the extent applicable, following any valuation or determination made
pursuant to the prior sentence, REPS shall make demand to the applicable Person
for the posting of collateral by or the return of collateral to the Sleeve
Provider and to the extent the Sleeve Provider receives such a demand from REPS,
the Sleeve Provider shall, subject to the terms and conditions of this Agreement
and the related Credit Support Agreement, make such posting of Collateral as
demanded, whether or not the Sleeve Provider disputes the valuation,
determination or demand (but subject to the Sleeve Provider’s rights to cause
the adjustment thereof below).  Each valuation, determination and demand of REPS
specified in this clause (v) shall be made by REPS without consultation with the
Sleeve Provider unless such consultation is sought by REPS, except that:

(1) if the Sleeve Provider disputes any such valuation, determination or demand,
prior to any action taken under paragraphs (2) or (3) below, and prior to the
commencement of any further remedial action, REPS shall negotiate with the
Sleeve Provider in good faith for one Business Day to resolve any such dispute
and upon resolution of such dispute, the applicable valuation, determination or
demand shall be adjusted accordingly, with corresponding adjustments to the
subsequent requests to the Persons to whom such valuations, determinations or
demands apply;

(2) if the Sleeve Provider disputes any such valuation based on Market
Information, prior to any action taken under paragraph (3) below, the Market
Information and resulting calculation shall be determined in accordance with
Section 12.13 and upon such determination, the applicable valuation shall be
adjusted accordingly, with corresponding adjustments to the subsequent requests
to the Persons to whom such valuations apply; provided that, until such
determination in accordance with Section 12.13, the valuation determined by REPS
shall apply;

(3) to the extent applicable, if after the application of clauses (1) and (2)
above, the Sleeve Provider in its reasonable discretion determines that (x) more
than $30,000,000 in outstanding value of Merrill Collateral remains at any time
posted or is requested to be posted in excess of the amount that is required to
be posted as determined by REPS (determined, in each case, on aggregate basis
across all Persons to whom the Sleeve Provider has such excess posted or has

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requested posting of Merrill Collateral in an outstanding value of $2,000,000 or
more in connection with this Agreement), or (y) more than $10,000,000 in
outstanding value of Merrill Collateral remains at any time posted or is
requested to be posted to any single Person in excess of the amount that is
required to be posted as determined by REPS, then, in either case, if REPS
disputes such determination, such determination shall be referred by the parties
to the Calculation Agent for resolution, and upon resolution of such dispute the
applicable valuation shall apply and REPS shall use its best efforts to
negotiate with, and to the extent applicable, dispute valuations of, or provide
updated valuations to each such Person holding excess Merrill Collateral that
the Sleeve Provider may direct in accordance with the resolution; provided that
in lieu thereof  REPS may instead authorize the Sleeve Provider to do so; and
provided further that, until resolution of this dispute by the Calculation
Agent, the valuation determined by REPS shall apply; and

(4) to the extent applicable, if after application of clause (1) and (2) above
the Sleeve Provider in its reasonable discretion determines that the outstanding
value of any single Counterparty’s cash collateral posted or requested to be
posted to any Reliant Retail Obligor as determined by REPS is more than
$10,000,000 in deficiency of the amount that is required to be posted as
determined by Sleeve Provider, then, if REPS disputes such determination, such
determination shall be referred by the parties to the Calculation Agent for
resolution, and upon resolution of such dispute the applicable valuation shall
apply and REPS shall use its best efforts to negotiate with, and to the extent
applicable, dispute valuations of, or provide updated valuations to each such
Counterparty that the Sleeve Provider may direct in accordance with the
resolution; provided that in lieu thereof REPS may instead authorize the Sleeve
Provider to do so; and provided further that, until resolution of this dispute
by the Calculation Agent, the valuation determined by REPS shall apply.

(b)           Core Accepted Counterparties and Counterparty Limitations.  Each
counterparty listed on Exhibit B and designated as a Core Accepted Counterparty
shall constitute a Core Accepted Counterparty and the limitations set forth
therein (including those with respect to RECs in Annex A to Exhibit B) shall
constitute such Core Accepted Counterparty’s “Counterparty Limitations” (in
respect of each Accepted Product set forth therein). Following a Failure to Pay
or Post or a Bankruptcy Event in respect of a Core Accepted Counterparty, the
Sleeve Provider shall have the right by written notice to REPS to make
adjustments to the Counterparty Limitations applicable to such Core Accepted
Counterparty, as determined by the Sleeve Provider in its commercially
reasonable discretion.  In addition, at any time, REPS may (i) (a) use Available
Funds to pay to the Sleeve Provider an additional fee (each, a “Counterparty CDS
Fee”), determined by the Sleeve Provider in its commercially reasonable
discretion based on the then-market price for credit default swaps on such Core
Accepted Counterparty, to increase the Counterparty Limitations applicable to
such Core Accepted Counterparty or (b) deliver to the Sleeve Provider a credit
default swap or swaps purchased with Available Funds and written by a Qualified
Institution or Qualified Institutions with such Core Accepted Counterparty as
the “Reference Entity” thereunder, in each case in which the applicable
Counterparty Limitations shall be increased, as determined by the Sleeve
Provider in its

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commercially reasonable discretion, for the term of the related credit default
swap(s) or (ii) use Available Funds to post cash Collateral to the Sleeve
Provider, in an amount determined by the Sleeve Provider in its commercially
reasonable discretion, to increase the Counterparty Limitations applicable to
such Core Accepted Counterparty in which case the applicable Counterparty
Limitations shall be increased, as determined by the Sleeve Provider in its
commercially reasonable discretion, during the period until REPS requests the
return of such posted cash Collateral at which time, so long as the trading
activities under such Power and Hedging Contract are within the Counterparty
Limitations without giving effect to such increase, such posted cash Collateral
shall be promptly returned to REPS and such increase shall no longer be
applicable.  In connection with each adjustment to the Counterparty Limitations
described in this paragraph, the Sleeve Provider shall promptly provide an
updated Exhibit B reflecting such adjustment to REPS.

(c)           Other Accepted Counterparties.  Each counterparty listed on
Exhibit B shall constitute an Other Accepted Counterparty and the limitations
set forth therein (including those in with respect to RECs in Annex A to Exhibit
B) shall constitute such Other Accepted Counterparty’s “Counterparty
Limitations” (in respect of each Accepted Product set forth therein).  Following
a Failure to Pay or Post or other material event of default (howsoever defined),
a Bankruptcy Event or a Downgrade Event in respect of such Other Accepted
Counterparty, the Sleeve Provider shall have the right by written notice to REPS
to adjust the Counterparty Limitations applicable to such Other Accepted
Counterparty, as determined by the Sleeve Provider in its commercially
reasonable discretion.  In addition, at any time, REPS may (i) (a) use Available
Funds to pay to the Sleeve Provider a Counterparty CDS Fee on such Other
Accepted Counterparty to increase the Counterparty Limitations applicable to
such Other Accepted Counterparty or (b) deliver to the Sleeve Provider a credit
default swap or swaps purchased with Available Funds and written by a Qualified
Institution or Qualified Institutions with such Other Accepted Counterparty as
the “Reference Entity” thereunder, and in each case the applicable Counterparty
Limitations shall be increased, as determined by the Sleeve Provider in its
commercially reasonable discretion, for the term of the related credit default
swap(s) or (ii) use Available Funds to post cash Collateral to the Sleeve
Provider, in an amount determined by the Sleeve Provider in its commercially
reasonable discretion, to increase the Counterparty Limitations applicable to
such Other Accepted Counterparty in which case the applicable Counterparty
Limitations shall be increased, as determined by the Sleeve Provider in its
commercially reasonable discretion, during the period until REPS requests the
return of such posted cash Collateral at which time so long as the trading
activities under such Power and Hedging Contract are within the Counterparty
Limitations without giving effect to such increase, such posted cash Collateral
shall be promptly returned to REPS and such increase shall no longer be
applicable.  In connection with each adjustment to the Counterparty Limitations
described in this paragraph, the Sleeve Provider shall promptly provide an
updated Exhibit B reflecting such adjustment to REPS.

(d)           Additional Counterparties.  REPS shall have the right to add
additional Core Accepted Counterparties and Other Accepted Counterparties to
Exhibit B with the approval of the Sleeve Provider, which shall not be
unreasonably withheld or delayed.  When any Accepted Counterparty is added such
Accepted Counterparty shall be added with commercially reasonable Counterparty
Limitations as the Sleeve Provider may reasonably determine;  provided that, at
all times after the Initial Effective Date, the Sleeve Provider shall grant
approvals referred

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to above to the extent necessary such that (i) with respect to the ERCOT Market
area, the Core Accepted Counterparties shall own at least the percentages of the
aggregate generating capacity for the asset classes and zones set forth on
Exhibit F and (ii) at all times there shall be at least 30 Other Accepted
Counterparties; and provided further, that, if the Sleeve Provider shall reject
any additional Accepted Counterparty proposed by REPS and such rejection would
cause a violation of the foregoing requirements, then Sleeve Provider shall
suggest an alternative Accepted Counterparty meeting such requirements.  In
connection with each additional Accepted Counterparty added as described in this
paragraph, the Sleeve Provider shall promptly provide an updated Exhibit B
reflecting such adjustment to REPS.

(e)           Compliance Requirements.  Each Compliance Party shall be subject
to the Compliance Requirements.  The obligation of the Merrill Parties under (i)
Section 2.01(a) with respect to any Compliance Party or (ii) paragraphs (c) and
(d) of this Section 2.02 to (A) designate any Other Accepted Counterparty or (B)
add any additional Accepted Counterparty, shall in each case be subject to the
satisfaction of the Compliance Requirements with respect to such Compliance
Party or such Other Accepted Counterparty or additional Accepted Counterparty,
as the case may be.  To the extent the Sleeve Provider or the ML Guarantee
Provider is not already in possession of applicable Compliance Information
satisfying the applicable Compliance Requirements with respect to any such
Person, REPS hereby permits, and the Merrill Parties hereby agree, that the
Sleeve Provider or the ML Guarantee Provider shall use commercially reasonable
efforts to endeavor to obtain the same from such Person and, in the event the
Sleeve Provider or the ML Guarantee Provider, as the case may be, has not timely
received applicable Compliance Information with respect to such Person, the
Sleeve Provider shall promptly notify REPS of the same by written notice, and
REPS may request the required Compliance Information for such Person and forward
the same to Sleeve Provider upon receipt, provided that REPS shall not be deemed
to have made any representation or warranty, express or implied, with respect to
the accuracy thereof.  The Merrill Parties shall provide to REPS upon request
from time to time a description of the applicable Compliance Information and
Compliance Requirements at such time with respect to any Compliance Party or
generally with respect to any category of Compliance Parties as to which similar
requirements apply.

                                2.03.        Credit Sleeve of Exchange Traded
Hedging Activities.

 

(a)           A&R Date Transactions.  On the A&R Date, and subject to the last
sentence of this paragraph, RES shall (i) transfer on an ex-pit basis to REPS
all of the NYMEX Exchanged Traded Contracts relating to the PJM Retail Business
held by RES as of the Business Day prior to the A&R Date and (ii) transfer to
REPS all of the ICE cleared swap contracts relating to the PJM Retail Business
held by RES as of the Business Day prior to the A&R Date.  On the A&R Date, and
subject to the last sentence of this paragraph, after giving effect to the
foregoing transfer, REPS shall (i) transfer on an ex-pit basis to Sleeve
Provider all of the NYMEX Exchanged Traded Contracts relating to the PJM Retail
Business held by REPS as of the A&R Date and (ii) transfer to the Sleeve
Provider all of the ICE cleared swap contracts relating to the PJM Retail
Business held by REPS as of the A&R Date.  All such NYMEX ex-pit and ICE
position transfers shall be at the original prices and terms thereof.  In
addition, REPS and Sleeve Provider shall enter into related Mirror OTC Contracts
for each such NYMEX ex-pit and ICE position transfer.  With respect to such
NYMEX ex-pit and ICE position transfers, each party shall pay its own broker’s
fees and FCM fees.  The foregoing shall apply only to the

 

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September and forward positions under the applicable NYMEX Exchange Traded
Contracts and ICE cleared swap contracts.

 

(b)           Ongoing Transactions.  On each Business Day, on and after the A&R
Date, REPS and the Sleeve Provider shall execute (i) one EFS Transaction or EOO
Transaction per Accepted Product, for all of the NYMEX Exchanged Traded
Contracts held by REPS as of the mutually agreed upon time on such Business Day,
by the close of the Business Day such NYMEX Exchanged Traded Contracts were
entered into, and (ii) one ICE Block Transaction per Accepted Product, for all
of the ICE cleared swap contracts held by REPS as of the mutually agreed upon
time on such Business Day, by the close of the Business Day such ICE cleared
swap contracts were entered into.  With respect to all EFS Transactions, EOO
Transactions and ICE Block Transactions, each Party shall pay its own broker’s
fees and FCM fees.

 

                                2.04.        Credit Sleeve of C&I and
Governmental Contracts.  On and after the Initial Effective Date, subject to the
terms and conditions of this Agreement, the ML Guarantee Provider shall provide
an ML Guarantee in respect of each of the C&I Contracts and Governmental
Contracts set forth on Schedule 2.04.  The obligations of the Merrill Parties
under Section 2.01(a)(iv) to provide ML Guarantees in respect of additional C&I
Contracts and Governmental Contracts other than those specified on Schedule 2.04
shall be subject to the following restrictions: (i) no more than 30 such ML
Guarantees (in addition to those on Schedule 2.04) shall be issued per 12 month
period and (ii) such additional C&I Contracts and Governmental Contracts shall
be in respect of Accepted Retail Products.  Notwithstanding the foregoing, if
any ML Guarantees in respect of any C&I Contracts and Governmental Contracts set
forth on Schedule 2.04 cannot be arranged for on or before the A&R Date, the ML
Guarantee Provider shall provide such ML Guarantees as soon as commercially
practicable following the A&R Date.

 

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                                2.05.        Credit Sleeve of Regulatory
Obligations.  In connection with the obligation of the Merrill Parties under
Section 2.01(a)(v), REPS shall endeavor with the Merrill Parties to cause the
applicable beneficiaries to accept ML Guarantees instead of the posting or
provision of cash collateral, surety bonds or letters of credit, to accept cash
collateral instead of the posting or provision of surety bonds or letters of
credit and to accept surety bonds instead of posting or provision of letters of
credit, in each case when possible to satisfy the requirements of the Merrill
Parties thereunder; provided that the foregoing shall not imply any waiver of
the obligation to post or provide ML Guarantees, cash collateral, surety bonds
or letters of credit.  In providing any such ML Guarantee, cash collateral,
surety bond or letter of credit, neither the Merrill Parties nor any of their
Affiliates shall be responsible for or otherwise guarantee or assure, any other
regulatory requirements or compliance provisions applicable to the Reliant
Retail Obligors, other than those pertaining to required financial criteria and
the required posting of guarantees, cash collateral, surety bonds or letters of
credit with respect to the applicable regulatory beneficiaries identified in,
and as defined in, Section 2.01(a)(v).  With respect to any such ML Guarantees,
cash collateral, surety bonds and letters of credit contemplated to be delivered
in connection with the A&R Date, to the extent the same cannot be arranged for
on or before the A&R Date, the Merrill Parties shall provide such ML Guarantees,
cash collateral, surety bonds and letters of credit as soon as commercially
practicable following the A&R Date.

 

                                2.06.        Term

 

(a)           The term of this Agreement (the “Term”) shall be the period from
the Execution Date through the Credit Sleeve Termination Date.

 

(b)           REPS shall have the right to declare an Unwind Start Date on the
last day of any month to effect the beginning of the Unwind Period at any time
upon not less than 60 days prior written notice provided by REPS to the Sleeve
Provider.  The declaration of an Unwind Start Date in accordance with this
Section 2.06(b) may result in an obligation of REPS with respect to a Make-whole
Payment under Section 3.05.

 

                                2.07.        Posting Collateral to Increase K. 
At any time REPS shall have the right to use Available Funds to post cash
Collateral to the Sleeve Provider, in an amount determined by REPS, to increase
the value of clause (y) of the definition of “Trigger Event”, in which case such
clause (y) shall be increased by the amount of such posted cash Collateral as
contemplated by clause (y)(2) of the definition of “Trigger Event” until such
time as REPS requests the return of such posted cash Collateral, at which time,
so long as the return of such cash Collateral would not cause a Trigger Event,
such posted cash Collateral shall be promptly returned to REPS and such increase
shall no longer be applicable.

 

                                Section 3.               Payments, Fees and
Records.

 

                                3.01.        Notice of Payment on ML Guarantee
or Collateral Foreclosure.  The Sleeve Provider shall notify REPS, promptly upon
receipt from any beneficiary or recipient of an ML Guarantee or any secured
party to which the Sleeve Provider has provided collateral pursuant to Article 2
(whether a ML Guarantee, posted cash collateral, surety bond, letter of credit
or other collateral, “Merrill Collateral”) of any demand for payment under such
ML Collateral or any Collateral Foreclosure thereon. The Sleeve Provider shall
notify REPS of the

 

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Dollar amount paid by the Merrill Parties as a result of such demand or the
Dollar amount of Merrill Collateral relating to such Collateral Foreclosure, as
applicable, and the date on which payment was made by a Merrill Party in respect
of such demand or the date on which such Collateral Foreclosure occurred, as
applicable (any such date, a “Capital Outlay Date”).

 

                                3.02.        Repayment of Draw Reimbursement
Obligations.  REPS hereby unconditionally and irrevocably promises to pay to the
Sleeve Provider, on behalf of the applicable Merrill Party, the entire
outstanding Dollar amount of each payment on behalf of the Reliant Retail
Obligors by ML&Co. or the Sleeve Provider arising from each demand for payment
under Merrill Collateral or payment on behalf of the Reliant Retail Obligors by
the Sleeve Provider arising from each Collateral Foreclosure of Merrill
Collateral (each, a “Draw Reimbursement Obligation”), notwithstanding the
identity of the beneficiary or recipient of any Merrill Collateral, and without
presentment, demand, protest or other formalities of any kind.  Each such Draw
Reimbursement Obligation shall mature on the Business Day following the date the
Sleeve Provider delivers notice to REPS of the related Capital Outlay Date as
provided in Section 3.01 (the “Notice Date”); provided that, in the event that,
on or prior to the Business Day following the Notice Date, REPS delivers to the
Sleeve Provider in good faith a written notice referred to in Section 8.02(b) or
(c) predicated upon (i) failure to pay under any ML Guarantee after demand by
the beneficiary complying with the terms and conditions of the ML Guarantee or
(ii) the breach of a Merrill Party of its obligations under Section 2.01 or any
Credit Support Agreement, such Draw Reimbursement Obligation shall mature and be
payable on the earliest of (A) the date that the notice to the Sleeve Provider
is withdrawn, (B) the date the underlying failure related to the Draw
Reimbursement Obligation is cured, (C) the date that the remedies under Section
9.02 with respect to such failure have been resolved, mutually concluded, or
finally determined by a court of competent jurisdiction, or (D) the date that
the Working Capital Facility matures (whether on the Maturity Date under, and as
defined in, the Working Capital Facility, by acceleration or otherwise) (any
Reimbursement Obligation subject to the foregoing proviso, a “Deferred Draw
Reimbursement Obligation”).

 

Notwithstanding any payment of a Draw Reimbursement Obligation REPS makes as
required in this Section 3.02, REPS does not by making such payment waive any
rights under Sections 8.02 and 9.02 against a Merrill Party related to the
applicable Draw Reimbursement Obligation, subject to the limitations in Section
9.04.

 

                                3.03.        Interest.

 

(a)           (i) REPS hereby unconditionally promises to pay to the Sleeve
Provider, when due and payable in accordance with Section 3.03(d):

(A)  interest accruing at a rate per annum equal to the Base Rate (as in effect
from time to time) plus 0.45% on the unreimbursed Dollar amount of each Current
Draw Reimbursement Obligation for the period from and including the Business Day
following the related Notice Date to but excluding the date the Dollar amount of
such Current Draw Reimbursement Obligation shall be paid in full; and

(B)  interest accruing at a rate per annum equal to the LIBO Rate (as defined in
the Working Capital Facility and incorporated by reference in accordance with
Section 3.03(a)(ii)) plus 0.45% on the unpaid Dollar amount of each Deferred

 

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Reimbursement Obligation for the period from and including the Business Day
following the related Notice Date to but excluding the date the Dollar amount of
such Deferred Reimbursement Obligation shall be paid in full.

 

(ii)  REPS agrees, for the benefit of the Sleeve Provider, to perform, comply
with and be bound by each of its covenants, agreements and obligations contained
in Sections 2.10, 2.13, and 2.14 of the Working Capital Facility with respect to
Deferred Reimbursement Obligations, as modified and supplemented and in effect
from time to time, or as last in effect in the event the Working Capital
Facility shall be terminated.  Without limiting the generality of the foregoing,
the above-mentioned provisions of Working Capital Facility, together with
related definitions (including the definition of “LIBO Rate” and “Interest
Payment Date”) and ancillary provisions, are hereby incorporated herein by
reference, as if set forth herein in full, mutatis mutandis.

 

(b)           Notwithstanding Section 3.03(a), REPS hereby unconditionally
promises to pay to the Sleeve Provider, when due and payable in accordance with
Section 3.03(d), interest accruing at a rate per annum equal to the Post-Default
Rate (as in effect from time to time) on (i) the Dollar amount of each
Reimbursement Obligation that is not paid in full within one Business Day after
becoming due and (ii) any other overdue amount payable by REPS under any
Transaction Documents with any Merrill Party, in each case for the period from
and including the due date thereof to but excluding the date the same is paid in
full.

(c)           Interest on any amount, including interest on Reimbursement
Obligations, shall be computed on the basis of actual days elapsed (including
the first day but excluding the last day) occurring during the period such
interest accrues and a year of 365 or 366 days, as applicable (if computed by
reference to the Prime Rate) or 360 days (if computed by reference to the
Federal Funds Rate or the LIBO Rate).

 

(d)           (i) Subject to clause (iii) below, accrued interest on each
Current Draw Reimbursement Obligation shall be payable monthly on the last
Business Day of each month and on the date that such Current Draw Reimbursement
Obligation shall be paid in full; (ii) subject to clause (iii) below, accrued
interest on each Deferred Reimbursement Obligation shall be payable on each
Interest Payment Date (as defined in the Working Capital Facility and
incorporated by reference in accordance with Section 3.03(a)(ii)) for such
Deferred Reimbursement Obligation and on the date that such Deferred
Reimbursement Obligation shall be paid in full; provided that interest payable
on each Interest Payment Date prior to the date that such Deferred Reimbursement
Obligation is payable shall be reserved in accordance with Section 6.11(c)(vi)
in lieu of being paid on such Interest Payment Date; and (iii) accrued interest
on any amount (including Current Draw Reimbursement Obligations and Deferred
Reimbursement Obligations) payable in accordance with Section 3.03(b) shall be
payable on demand from time to time, on the last Business Day of each month and
on the date that such amount is paid in full.

 

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                                3.04.        Monthly Sleeve Fee.  The Monthly
Sleeve Fee shall accrue on each day from the Initial Effective Date to and
including the Unwind Conclusion Date and be payable in arrears by REPS to the
Sleeve Provider in monthly installments on each Monthly Payment Date, in each
case, as determined in accordance with Schedule 3.04.

                                3.05.        Make-whole Payment.  In the event
that an Unwind Start Date is declared by the Sleeve Provider in connection with
a Reliant Event of Default or is declared by REPS in accordance with Section
2.06(b), in either case, within two years of the Initial Effective Date, REPS
shall pay to the Sleeve Provider the Make-whole Payment.

                                3.06.        Structuring Fee.  On the Initial
Effective Date, REPS has paid to the Sleeve Provider a one-time structuring fee
(the “Structuring Fee”) in an amount equal to $12,750,000.  On the A&R Date,
REPS shall pay to the Sleeve Provider a one-time structuring fee (the “PJM
Structuring Fee”) in an amount equal to $1,200,000.

                                3.07.        Payments Generally.

(a)           Payments by Reliant Retail Obligors.  Except to the extent
otherwise provided herein, all payments in respect of Reimbursement Obligations,
interest, Monthly Sleeve Fees and other amounts to be made by the Reliant Energy
Obligors under this Agreement, and, except to the extent otherwise provided
therein, all payments to be made by the Reliant Energy Obligors under any other
Transaction Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim to the Sleeve Provider at the account
designated on Schedule 3.07(a) or any other account designated in writing by the
Sleeve Provider to REPS not less than five Business Days before any payment is
made, not later than 3:00 p.m., New York City time, on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day).

(b)           Extensions to Next Business Day.  If the due date of any payment
under this Agreement would otherwise fall on a day that is not a Business Day,
such date shall be extended to the immediately succeeding Business Day and
interest shall be payable for any amount so extended for the period of such
extension (except in the case of the Monthly Sleeve Fee).

                                3.08.        Records; Prima Facie Evidence.

(a)           Maintenance of Records by the Sleeve Provider.  The Sleeve
Provider shall maintain records in which it shall record (i) each ML Guarantee
issued hereunder or other Merrill Collateral provided hereunder, (ii) the amount
of each Reimbursement Obligation, (iii) interest due and payable or to become
due and payable from REPS to the Sleeve Provider hereunder and (iv) the amount
of any sum received by the Sleeve Provider hereunder.

(b)           Effect of Entries.  The entries made in the records maintained
pursuant to paragraph (a) above shall be prima facie evidence of the existence
and amounts of the obligations recorded therein; provided that the failure of
the Sleeve Provider to maintain such records or any error therein shall not in
any manner affect the obligation of REPS to repay the Reimbursement Obligations
in accordance with the terms of this Agreement.

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                                Section 4.               Conditions.

The obligation of the Merrill Parties to enter into any ML Guarantees or Credit
Support Agreements or provide Merrill Collateral, the NYMEX ex-pit and ICE
position transactions referred to in Section 2.03(a), any EFS Transactions, EOO
Transactions, Mirror OTC Contracts or ICE Block Transactions, any agreement to
post or provide cash collateral to Governmental Authorities or other Persons or
any transaction contemplated by Section 2.02(e) is subject to the following
conditions precedent that, both immediately prior to and after giving effect
thereto and to the intended use thereof:

 

(a)           (i) Each of the representations and warranties of the Reliant
Retail Obligors made in Section 5 and in the other Transaction Documents which
is qualified by materiality shall be true and correct and (ii) each of the other
representations and warranties of the Reliant Retail Obligors made in Section 5
and in the other Transaction Documents shall be true and correct in all material
respects, in each case of clause (i) and (ii) on and as of the date of request
for issuance of an ML Guarantee or execution of a Credit Support Agreement or
provision of other Merrill Collateral, with the same force and effect as if made
on and as of such date (or, if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such specific date); and

(b)           no Default relating to a Reliant Event of Default or Trigger Event
shall have occurred and be continuing.

Each request by REPS for the issuance of an ML Guarantee, the execution of a
Credit Support Agreement or provision of Merrill Collateral shall constitute a
certification to the effect that the above conditions have been satisfied.

                                Section 5.               Representations and
Warranties.  Each of the Reliant Retail Obligors hereby represents and warrants
that as of the A&R Date and thereafter:

 

                                5.01.                        Existence,
Qualification and Power; Compliance with Laws.  Such Person (a) is duly
organized or formed, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or organization, (b) has all requisite power
and authority and all requisite governmental licenses, authorizations, consents
and approvals to (i) own its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Transaction Documents to which it
is a party, (c) is duly qualified and is licensed and in good standing under the
Laws of each jurisdiction where its ownership, lease or operation of properties
or the conduct of its business requires such qualification or license, and
(d) is in compliance with all Laws; except in each case referred to in
clause (b)(i), (c) or (d), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

                                5.02.                        Authorization; No
Contravention.  The execution, delivery and performance by such Person of each
Transaction Document to which such Person is party, have been duly authorized by
all necessary corporate or other organizational action, and do not and will not
(a) contravene the terms of any of such Person’s Organizational Documents; (b)
conflict with or result in any breach or contravention of, or the creation of
any Lien under, or require any payment to be made under (i) any Contractual
Obligation to which such Person is a party or

 

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affecting such Person or the properties of such Person or any of its
Subsidiaries, except as could not reasonably be expected to have a Material
Adverse Effect, or (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which such Person or its
property is subject that could reasonably be expected to have a Material Adverse
Effect; (c) violate any Law that could reasonably be expected to have a Material
Adverse Effect; or (d) result in the creation of any Lien other than a Permitted
Lien.  The Reliant Retail Obligors are in compliance with all Contractual
Obligations referred to in clause (b)(i), except to the extent that failure to
do so could not reasonably be expected to have a Material Adverse Effect.

 

                                5.03.        Governmental Authorization; Other
Consents.  Except as to those which have been duly obtained, taken, given or
made and are in full force and effect and except as noted below, no approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person is necessary or required in
connection with (i) the execution, delivery or performance by any Reliant Retail
Obligors of this Agreement or any other Transaction Document, (ii) the grant by
any Reliant Retail Obligors of the Liens granted by it pursuant to the
Transaction Documents, or (iii) the perfection or maintenance of the Liens
created under the Transaction Documents (including the first priority (subject
to Permitted Liens) nature thereof), other than the filing of UCC-1 Financing
Statements and applicable filings with respect to patents, trademarks and
material copyrights.  The Parties recognize that in connection with transaction
contemplated hereby, (1) RESE will be required to notify FERC of a change in its
ownership occurring on the A&R Date as a result of the Sleeve Provider’s
ownership interest in RERH Holdings and (2) one or more of the Reliant Retail
Obligors may be required to seek approval and/or provide notice to a
Governmental Authority prior to or in order to undertake one or more of the
transactions not prohibited by Article 7.

 

                                5.04.        Binding Effect.  This Agreement has
been, and each other Transaction Document, when executed and delivered
hereunder, will have been, duly executed and delivered by each Reliant Retail
Obligor that is party thereto.  This Agreement constitutes, and each other
Transaction Document when so executed and delivered will constitute, a legal,
valid and binding obligation of each Reliant Retail Obligor, enforceable against
each Reliant Retail Obligor that is party thereto in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally and by
general principles of equity, whether such enforceability is considered in a
proceeding at law or in equity.

 

                                5.05.        Financial Statements; No Material
Adverse Effect.

(a)           The Audited Financial Statements (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein and (ii) fairly present in all material
respects the consolidated financial condition of RERH Holdings and its
consolidated Subsidiaries as of the date thereof and their results of operations
and cash flows for the period covered thereby in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein.

 

(b)           The Unaudited Financial Statements (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein and (ii) fairly present in all material
respects the consolidated financial condition of

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RERH Holdings and its consolidated Subsidiaries as of the date thereof and their
results of operations and cash flows for the period covered thereby in
accordance with GAAP consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein, subject, in the case of clauses (i)
and (ii), to the absence of footnotes and to normal year-end audit adjustments.

(c)           The Projected Financial Statements fairly present in all material
respects the transfer of RESE to RERH and the other contributions of the assets
and liabilities of the Retail Energy Business contemplated by this Agreement as
of the A&R Date.

(d)           From the date of the Audited Financial Statements through the A&R
Date, except as disclosed in public filings or in writing to the Sleeve Provider
on or before five Business Days before the A&R Date, there has been no event or
circumstance, either individually or in the aggregate that has had or could
reasonably be expected to have a Material Adverse Effect.

                                5.06.        Litigation.  There are no actions,
suits, proceedings, claims or disputes pending or, to the knowledge of each
Reliant Retail Obligor, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, by or against the Reliant
Retail Obligors or against any of their properties or revenues that (a) purport
to affect or pertain to this Agreement or any other Transaction Document, or any
of the transactions contemplated hereby or (b) except as disclosed in public
filings or in writing to the Sleeve Provider on or before five Business Days
before the A&R Date, exist on or prior to the A&R Date and either individually
or in the aggregate, if determined adversely, could reasonably be expected to
have a Material Adverse Effect.

 

                                5.07.        No Default.  Immediately prior to
the A&R Date, and before giving effect to the amendment and restatement of this
Agreement described in Section 12.17(ii), no Default with respect to a Reliant
Event of Default had occurred and was continuing.  On the A&R Date, and after
giving effect to the amendment and restatement of this Agreement described in
Section 12.17(ii), no Default with respect to a Reliant Event of Default has
occurred and is continuing or would result from the consummation of the
amendment and restatement described in Section 12.17(ii) or the resulting
transactions contemplated by this Agreement or any other Transaction Document.

 

                                5.08.        Ownership of Property; Liens.

 

(a)           Each of the Reliant Retail Obligors has good and marketable title
in fee simple to, or valid leasehold interests in, all real property necessary
or used in the ordinary conduct of its business, except for Permitted Liens and
such defects in title as could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

(b)           The property of the Reliant Retail Obligors is subject to no
Liens, other than Permitted Liens.

(c)           As of the A&R Date, the Reliant Retail Obligors have no fee
interests in real property.

 

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                                5.09.        Environmental Matters.

 

(a)           The Reliant Retail Obligors have been and are in compliance with
all Environmental Laws, including obtaining and complying with all required
environmental permits, other than non-compliances that could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.

(b)           None of the Reliant Retail Obligors nor any property currently or,
to the knowledge of the Reliant Retail Obligors, previously owned, operated or
leased by or for Reliant Retail Obligors is subject to any pending or, to the
knowledge of the Reliant Retail Obligors, threatened, claim, order, agreement,
notice of violation, notice of potential liability or is the subject of any
pending or threatened proceeding or governmental investigation under or pursuant
to Environmental Laws other than those that could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

(c)           As of the A&R Date, none of the Reliant Retail Obligors has a
treatment, storage or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the regulations
thereunder or any state analog.

(d)           There are no facts, circumstances or conditions known to the
Reliant Retail Obligors arising out of or relating to the operations or
ownership of  the Reliant Retail Obligors or of the property owned, operated or
leased by the Reliant Retail Obligors that are not specifically included in the
financial information furnished to the Sleeve Provider that could be reasonably
expected to result in any Environmental Liabilities that could reasonably be
expected to have a Material Adverse Effect, unless such liabilities are (i)
covered by environmental liability insurance, (ii) subject to an indemnity from
any Governmental Authority, or (iii) subject to an indemnity satisfactory to
REPS from a Person that is not an Affiliate of REPS that REPS has determined in
good faith is appropriately credit worthy in relation to the potential amount of
such liabilities.

(e)           As of the A&R Date, no environmental Lien has attached to any
property of the Reliant Retail Obligors and, to the knowledge of the Reliant
Retail Obligors, no facts, circumstance or conditions exist that could,
individually or in the aggregate, reasonably be expected to result in an
environmental Lien that would have a Material Adverse Effect.

(f)            None of the Reliant Retail Obligors is undertaking, and has not
completed, either individually or together with other potentially responsible
parties, any investigation or assessment or remedial action relating to any
actual or threatened release of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law that could reasonably be
expected to have a Material Adverse Effect; and all Hazardous Materials
generated, used, treated, handled or stored at, or transported to or from, any
property currently or formerly owned or operated by the Reliant Retail Obligors
have been disposed of in a manner that could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.

                                5.10.        Insurance.  The properties of the
Reliant Retail Obligors are insured with financially sound and reputable
insurance companies not Affiliates of REPS, in

 

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such amounts (after giving effect to any self-insurance compatible with the
following standards), with such deductibles and covering such risks as are
customarily carried by companies of the same or similar size engaged in similar
businesses and owning similar properties in localities where each Reliant Retail
Obligor operates, which insurance may be under policies obtained by the Reliant
Parent.

 

                                5.11.        Taxes.  The Reliant Retail Obligors
have filed all Federal, state and other material tax returns and reports
required to be filed after giving effect to applicable extensions, except for
tax returns or reports the failure of which to timely file could not reasonably
be expected to have a Material Adverse Effect, and have paid all Federal, state
and other material taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable, except those which are being contested in good faith by appropriate
proceedings diligently conducted and for which adequate reserves have been
provided in accordance with GAAP.  There is no proposed tax assessment against
any Reliant Retail Obligor that would, if made, have a Material Adverse Effect. 
Except for the provisions of the Reliant Parent Services Agreement or any
replacement thereof with respect to tax matters entered into in accordance with
Section 7.15, neither RERH Holdings nor any Subsidiary thereof is party to any
tax sharing agreement that would create any liability for taxes (for any period
either before or after the A&R Date), after taking into account the provisions
of the Reliant Parent Services Agreement or any such replacement.

 

                                5.12.        ERISA Compliance.

 

(a)           Each Plan has been established, operated and administered in
compliance in all material respects with its terms and the applicable provisions
of ERISA, the Code and other Federal or state Laws.  Each Plan that is intended
to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS with respect thereto and, to the best
knowledge of the Reliant Retail Obligors, nothing has occurred which would
prevent, or cause the loss of, such qualification.  RERH Holdings and each ERISA
Affiliate have made all required contributions (both quarterly and annually) to
each Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.

(b)           There are no pending or, to the best knowledge of the Reliant
Retail Obligors, threatened claims, actions or lawsuits or investigations, or
action by any Governmental Authority, with respect to any Plan that could
reasonably be expected to have a Material Adverse Effect.  There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan that has resulted or could reasonably be expected to result
in a Material Adverse Effect.

(c)           (i) No ERISA Event has occurred or is reasonably expected to occur
that could reasonably be expected to have a Material Adverse Effect; (ii) no
Pension Plan has any Unfunded Pension Liability, whether or not waived, that
could reasonably be expected to have a Material Adverse Effect, and no
application for a waiver of the minimum funding standard has been filed or is
expected to be filed with respect to any Pension Plan; (iii) none of the Reliant
Retail Obligors and any of their ERISA Affiliates has incurred, or reasonably
expects to incur,

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any liability under Title IV of ERISA with respect to any Pension Plan or
Multiemployer Plan (other than premiums due and not delinquent under
Section 4007 of ERISA) that could reasonably be expected to have a Material
Adverse Effect; (iv) none of the Reliant Retail Obligors and any of their ERISA
Affiliates has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Sections 4201 or 4243 of ERISA with
respect to a Multiemployer Plan that could reasonably be expected to have a
Material Adverse Effect; and (v) none of the Reliant Retail Obligors and any of
their ERISA Affiliates has engaged in a transaction that could be subject to
Sections 4069 or 4212(c) of ERISA.

                                5.13.        Subsidiaries; Equity Interests.  On
the A&R Date and after giving effect to the RESE Contribution Agreement, (a)
RERH Holdings has no Subsidiaries other than RERH, REPS, RERS, RERR and RESE,
and each such Subsidiary is a Wholly Owned Subsidiary of RERH Holdings, and all
of the outstanding Equity Interests in such Subsidiaries have been validly
issued, are fully paid and nonassessable and are free and clear of all Liens
except those created under the Transaction Documents and the Permitted Liens,
(b) RERH Holdings and its Subsidiaries have no equity investments in any other
Persons, and (c) set forth in Schedule 5.13 is a complete and accurate list of
the jurisdiction of incorporation, the address of principal place of business
and U.S. taxpayer identification number for RERH Holdings and its Subsidiaries.

 

                                5.14.        Margin Regulations; Investment
Company Act; Public Utility Holding Company Act.

 

(a)           None of the Reliant Retail Obligors is engaged or will engage,
principally or as one of its important activities, in the business of purchasing
or carrying Margin Stock, or extending credit for the purpose of purchasing or
carrying Margin Stock.

(b)           None of the Reliant Retail Obligors or any Person Controlling the
Reliant Retail Obligors (i) is in violation of any regulation under the Public
Utility Holding Company Act of 2005, the Federal Power Act or any foreign,
federal or local statute or any other Law of the United States of America or any
other jurisdiction, in each case limiting its ability to incur indebtedness for
money borrowed as contemplated by any Transaction Document, or (ii) is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940.  Neither the issuing of any ML Guarantee nor the provision
of collateral by the Merrill Parties in accordance with this Agreement, nor the
consummation of the other transactions contemplated by the Transaction
Documents, will violate any provision of such Act or any rule, regulation or
order of the SEC thereunder.

                                5.15.        Disclosure.  The Reliant Retail
Obligors have disclosed to the Sleeve Provider all agreements, instruments and
corporate or other restrictions to which the Reliant Retail Obligors are
subject, and all other matters known to it (other than general industry,
political, and economic conditions), that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.  No report,
financial statement, certificate or other information furnished (whether in
writing or orally) by or on behalf of any Reliant Retail Obligor to the Sleeve
Provider in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered to the Sleeve Provider hereunder or
under any other

 

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Transaction Document (in each case, as modified or supplemented by other
information so furnished), at the time furnished or delivered, contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, taken as a whole, in the light of the circumstances
under which they were made, not misleading; provided that with respect to
projected financial information, the Reliant Retail Obligors represent only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time made; and provided further, that the Reliant Retail
Obligors make no representation or warranty, express or implied, with respect to
the Compliance Information delivered to Sleeve Provider in accordance with
Section 2.02(e).

 

                                5.16.        Compliance with Laws.  Each of the
Reliant Retail Obligors is in compliance in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its properties, except in such instances in which (a)
such requirement of Law or order, writ, injunction or decree is being contested
in good faith by appropriate proceedings diligently conducted or (b) the failure
to comply therewith, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.

 

                                5.17.        Intellectual Property; Licenses,
Etc.  The Reliant Retail Obligors own, or possess the right to use, all of the
trademarks, service marks, trade names, copyrights, patents, patent rights,
franchises, licenses and other intellectual property rights (collectively, “IP
Rights”) that are necessary for the operation of their respective businesses,
without conflict with the rights of any other Person, unless the failure to so
own or possess the right to use could not reasonably be expected to have a
Material Adverse Effect.  To the best knowledge of the Reliant Retail Obligors,
no slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by the
Reliant Retail Obligors infringes upon any rights held by any other Person in a
manner that could reasonably be expected to have a Material Adverse Effect.  No
claim or litigation regarding any of the foregoing is pending or, to the best
knowledge of the Reliant Retail Obligors, threatened, which, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.

 

                                5.18.        Solvency.  RERH Holdings is,
together with its Subsidiaries on a consolidated basis, Solvent.

 

                                5.19.        Perfection, Etc..  The Security
Documents, together with (i) the filing of appropriate UCC-1 and, if applicable,
UCC-3, financing statements with the filing offices required under the Security
Agreement, and (ii) the possession of certificated Pledged Securities (together
with blank executed stock powers with respect thereto), if any, create and grant
to the Collateral Trustee for the benefit of the holders of Secured Obligations,
including the Merrill Parties, a valid, first priority (subject to Permitted
Liens), perfected security interest in the Collateral, subject to the terms and
provisions of the Security Agreement.

 

                                5.20.        Employees, Etc.  On the A&R Date,
RERH Holdings and its Subsidiaries have a president, a principal risk officer,
an in-house attorney and sufficient employees that, taken together with the
services provided under arm’s length service contracts

 

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(including the Reliant Parent Service Agreement), they can run the Retail Energy
Business in a manner consistent with the business operations of the Retail
Energy Business as of the A&R Date.

 

                                5.21.                        Information
Technology Systems.  On the A&R Date, RERH Holdings and its Subsidiaries own or
have access to (through arm’s length service contracts including the IT Service
Agreement and the Reliant Parent Services Agreement if then in effect) the
Information Technology Systems necessary to run the Retail Energy Business,
including Information Technology Systems providing capabilities consistent with
the arrangements in place for the Retail Energy Business as of the A&R Date. 
RERH Holdings and its Subsidiaries (a) own all modifications to the software
licensed by SAP America, Inc., to the Reliant Parent or its Affiliates
(including the IT Trust) (the “SAP Software”) with specific application to the
Retail Energy Business of RERH Holdings and its Subsidiaries, including all
modifications for the CCS and EDM modules, and (b) have access to the benefits
of all other modifications to the SAP Software related to the Retail Energy
Business of RERH Holdings and its Subsidiaries through the services provided
under the Master Services Agreement.

 

                                5.22.                        Marks.  On the A&R
Date, RERH Holdings and its Subsidiaries own or have access to (through arm’s
length licenses and other arrangements including the IP License Agreement and
the Reliant Parent Services Agreement if then in effect) the Marks necessary to
run the Retail Energy Business using the “Reliant” name consistent with the
arrangements in place for the Retail Energy Business as of the A&R Date.

 

 

                                Section 6.               Affirmative Covenants. 
From the A&R Date until the Credit Sleeve Termination Date, the Reliant Retail
Obligors shall, and shall cause each of their Subsidiaries, to:

 

                                6.01.                        Financial
Statements.  Deliver to the Sleeve Provider, in form and detail satisfactory to
the Sleeve Provider:

 

(a)           as soon as available, but in any event within 90 days after the
end of each Fiscal Year of RERH Holdings, an audited consolidated balance sheet
of RERH Holdings and its consolidated Subsidiaries as at the end of such Fiscal
Year, and the related consolidated statements of income or operations,
stockholders’ equity, comprehensive income (loss) and cash flows for such Fiscal
Year, setting forth in each case (beginning with Fiscal Year 2006, and in
addition with respect to such Fiscal Year, the unaudited opening balance sheet
used to prepare such audited balance sheet as at the end of Fiscal Year 2006),
the figures as of the end of, and for, the previous Fiscal Year, all in
reasonable detail and prepared in accordance with GAAP, such consolidated
statements to be audited and accompanied by a report and opinion of an
independent registered public accounting firm of nationally recognized standing,
which report and opinion shall be prepared in accordance with the standards of
the Public Company Accounting Oversight Board or its successor and shall not be
subject to any “going concern” or like qualification or exception;

(b)           as soon as available, but in any event within 50 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of RERH
Holdings, an unaudited

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consolidated balance sheet of RERH Holdings and its consolidated Subsidiaries as
at the end of such Fiscal Quarter, and the related unaudited consolidated
statements of income or operations for such Fiscal Quarter and for the portion
of RERH Holdings’ Fiscal Year then ended and cash flows for the portion of RERH
Holdings’ Fiscal Year then ended, setting forth in each case (beginning with
Fiscal Year 2007) in comparative form the figures for the corresponding Fiscal
Quarter of the previous Fiscal Year and the corresponding portion of the
previous Fiscal Year, all in reasonable detail, certified by a Responsible
Officer of RERH Holdings as fairly presenting in all material respects the
financial condition, results of operations and cash flows of RERH Holdings and
its consolidated Subsidiaries in accordance with GAAP, subject only to normal
year-end audit adjustments and the absence of footnotes;

(c)           as soon as available, but in any event within 30 days after the
end of the first and second calendar months of each Fiscal Quarter (beginning
with the first Fiscal Quarter of 2007), a copy of RERH Holdings’ internal
monthly consolidated corporate reporting package (i.e., flash reports) in form
reasonably acceptable to Sleeve Provider; and

(d)           as soon as available, but in any event within 55 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, and 95 days
after the end of the fourth Fiscal Quarter of each Fiscal Year, a financial
forecast (for each quarter remaining in the then current calendar year and each
of the two following calendar years) for the Retail Energy Business of RERH
Holdings and its Subsidiaries in form reasonably acceptable to the Sleeve
Provider (which form shall include a summary balance sheet and statement of
income and cash analysis in a format similar to those prepared for Reliant
Parent prior to the Execution Date).

                                6.02.        Certificates; Other Information. 
Deliver to the Sleeve Provider, in form and detail satisfactory to the Sleeve
Provider:

 

(a)           concurrently with the delivery of the financial statements
referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate
signed by a Responsible Officer of RERH Holdings;

(b)           promptly after any request by the Sleeve Provider, copies of any
detailed audit reports, management letters or recommendations submitted to the
board of directors (or the audit committee of the board of directors) of RERH
Holdings by independent accountants in connection with the accounts or books of
RERH Holdings or any Subsidiary or any audit of any of them;

(c)           promptly after the furnishing or receiving thereof, copies of any
notice of default furnished to, or received from, any holder of debt securities
of RERH Holdings or any Subsidiary thereof pursuant to the terms of any
indenture, guarantee or credit or similar agreement and not otherwise required
to be furnished to the Sleeve Provider pursuant to Section 6.01 or any other
clause of this Section;

(d)           as soon as available, but in any event within 15 days after the
end of each month, a report regarding compliance and non-compliance with the
Risk Management Policy having substantially the same form, scope and level of
detail as the monthly risk management

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report or reports presented to any vice president of risk control or otherwise
to senior management of the Reliant Parent with respect to such month; and

(e)           at least three Business Days prior to the occurrence thereof,
notice of the anticipated closing of (i) any Asset Sale or (ii) any asset sale
under clause (1)(ii) of the definition of Asset Sale occurring during any
calendar quarter after the aggregate amount of such asset sales during such
calendar quarter exceeds $5,000,000;

(f)            promptly, such additional information regarding the business,
financial or corporate affairs of RERH Holdings or any Subsidiary, or compliance
with the terms of the Transaction Documents, as the Sleeve Provider may from
time to time reasonably request.

Documents required to be delivered pursuant to Section 6.01(a) or (b) (to the
extent any such documents are included in materials otherwise filed with the
SEC) shall be delivered electronically and when so delivered, shall be deemed to
have been delivered on the date on which RERH Holdings provides such documents
electronically, including by email or electronic posting; provided that: (i)
RERH Holdings shall at the request of the Sleeve Provider deliver paper copies
of such documents to the Sleeve Provider and (ii) if documents are
electronically posted, RERH Holdings shall notify the Sleeve Provider (by
telecopier or electronic mail) of the posting.  Notwithstanding anything
contained herein, in every instance RERH Holdings shall be required to provide
paper copies of the Compliance Certificates required by Section 6.02(a) to the
Sleeve Provider.  Except for such Compliance Certificates, the Sleeve Provider
shall have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to
monitor compliance by RERH Holdings with any such request for delivery.

                                6.03.        Notices.  Promptly notify the
Sleeve Provider:

 

(a)           after any Responsible Officer’s obtaining knowledge of (i) the
occurrence of any Default with respect to a Reliant Event of Default and the
intended actions of the Reliant Retail Obligors with respect thereto and (ii)
any Level 3 Violation under, and as defined in, the Risk Management Policy (as
opposed to a Level III Violation as defined herein);

(b)           of any matter that has resulted or could reasonably be expected to
result in a Material Adverse Effect (including as a result of (i) breach or
non-performance of, or any default under, a Contractual Obligation of any
Reliant Retail Obligor; (ii) any dispute, litigation, investigation, proceeding
or suspension between any Reliant Retail Obligor and any Governmental Authority;
or (iii) the commencement of, or any material development in, any litigation or
proceeding affecting the Reliant Retail Obligor, including pursuant to any
applicable Environmental Laws); and

(c)            after any Responsible Officer’s obtaining knowledge of the
occurrence of any ERISA Event or of any actual or reasonably likely contribution
failure under Code Section 412, or ERISA Section 302 with respect to any Pension
Plan or the filing of an application seeking waiver of any potential
contribution failure.

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Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the applicable Reliant Retail Obligor setting forth
details of the occurrence referred to therein and stating what action the
applicable Reliant Retail Obligor  has taken and proposes to take with respect
thereto.  Each notice pursuant to Section 6.03(a) shall describe with
particularity any and all provisions of this Agreement and any other Transaction
Document that have been breached.

                                6.04.        Payment of Obligations.  Pay and
discharge as the same shall become due and payable (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets, unless the same are being contested in good faith by appropriate
proceedings diligently conducted and adequate reserves in accordance with GAAP
are being maintained by each Reliant Retail Obligor; and (b) all lawful claims
which, if unpaid, would by law become a Lien upon its property that is not a
Permitted Lien.

 

                                6.05.        Preservation of Existence, Etc.. 
Preserve, renew and maintain in full force and effect its legal existence and
good standing under the Laws of the jurisdiction of its organization except in a
transaction permitted by Section 7.04, 7.05 or 7.06, (b) take all reasonable
action to maintain all rights, privileges, permits, licenses and franchises
necessary or desirable in the normal conduct of its business, except to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect; and (c) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.

                                6.06.        Maintenance of Properties. 
(a) Maintain, preserve and protect all of its material properties and equipment
necessary in the operation of its business in good working order and condition,
ordinary wear and tear excepted; (b) make all necessary repairs thereto and
renewals and replacements thereof; and (c) use the standard of care typical in
the industry in the operation and maintenance of its facilities, in each of
cases (a), (b) and (c), except where the failure to do so could not reasonably
be expected to have a Material Adverse Effect.

 

                                6.07.        Maintenance of Insurance.  Maintain
with financially sound and reputable insurance companies, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons of same or similar size engaged in the same or
similar business, of such types and in such amounts (after giving effect to any
self-insurance compatible with the following standards) as are customarily
carried under similar circumstances by such other Persons and providing for not
less than 30 days’ (or such other period as required by law) prior notice to the
Sleeve Provider and Collateral Trustee of termination, lapse or cancellation of
such insurance; provided that such insurance may be under policies obtained by
Reliant Parent.

 

                                6.08.        Compliance with Laws.  Comply in
all material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property, except
in such instances in which (a) such requirement of Law or order, writ,
injunction or decree is being contested in good faith by appropriate proceedings
diligently conducted or (b) the failure to comply therewith could not reasonably
be expected to have a Material Adverse Effect.

 

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                                6.09.        Books and Records.  (a) Maintain
proper books of record and account, in which entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Reliant Retail Obligors and (b)
maintain such books of record and account in material conformity with all
applicable requirements of any Governmental Authority having regulatory
jurisdiction over the Reliant Retail Obligors.

 

                                6.10.        Inspection Rights.  Permit
representatives and independent contractors of the Sleeve Provider to visit and
inspect any of its properties, to examine its corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with its officers, and independent public
accountants at such reasonable times during normal business hours and as often
as may be reasonably desired, upon reasonable advance notice to REPS, all at the
expense of the Reliant Retail Obligors, and the Reliant Retail Obligors will pay
up to $100,000 during any contract year to the extent of the third party
expenses of the Sleeve Provider incurred in connection therewith (but the
Reliant Retail Obligors shall pay no further expenses in connection therewith);
provided that, the foregoing shall include permitting one representative of the
Sleeve Provider to retain an office in the retail office space of the Reliant
Retail Obligors with access to the information set forth in Schedule 1.01(c) and
to appropriate personnel of the Reliant Retail Obligors and the Reliant Parent
and the administrative floor on which such representative’s office is located
(but not access to the trading floor) during each Business Day; provided further
that when a Reliant Event of Default exists the Sleeve Provider (or any of their
respective representatives or independent contractors) may do any of the
foregoing at the expense of the Reliant Retail Obligors, to the extent
reasonable under the circumstances, without being subject to the expense limit
described above, and at any time during normal business hours and without
advance notice.

 

                                6.11.        Addition and Removal of Transaction
Parties; Collateral Matters; Waterfall.

 

(a)           (i)            Promptly and in any event within thirty (30)
Business Days after any Subsidiaries of RERH Holdings that are not Reliant
Retail Obligors have, on an aggregate basis, net income or book values exceeding
the corresponding Non-Guarantor Cutoff Amounts, deliver to the Sleeve Provider
and Collateral Trustee the following with respect to one or more such
Subsidiaries (as to each such delivery, each a “Designated Subsidiary”) to the
extent necessary to cause the Subsidiaries of RERH Holdings that are not Reliant
Retail Obligors to have on an aggregate basis, net income or book values less
than the corresponding Non-Guarantor Cutoff Amounts: (A) Joinder Agreements
under this Agreement and Joinder Agreements under, and as such term is defined
in, the Collateral Trust Agreement pursuant to which, among other things, the
Designated Subsidiary shall become a party to this Agreement and the Collateral
Trust Agreement and the Security Agreement, (B) appropriate UCC-1 financing
statements with respect to the collateral under the Security Agreement, (C) all
applicable Lien searches, (D) Organizational Documents and other documents of
the type previously provided with respect to Reliant Retail Obligors, (E) a
written opinion of counsel covering those matters addressed in the opinion
delivered on the Initial Effective Date but limited to the Designated
Subsidiary, (F) such other security documents as may be reasonably requested by
the Sleeve Provider or its counsel and all of the foregoing in form and
substance reasonably satisfactory to the Sleeve Provider and its counsel, and
(G) certificates or other

 

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instruments (if any) representing all of the Equity Interests in the Designated
Subsidiary owned by RERH Holdings or its Subsidiaries together with an undated
stock power (or other appropriate document) executed in blank for each such
certificate or other instrument.

(ii)           If any Subsidiary of RERH Holdings is, or will be, sold or
otherwise transferred or disposed of in connection with any transaction
permitted under this Agreement, the Merrill Parties shall take the actions
described in Section 12.04(d) with respect thereto and shall release such
Subsidiary from this Agreement and any obligations with respect to the Credit
Sleeve Obligations and make or approve any conforming changes reasonably
requested by REPS in the Transaction Documents necessary to implement such
release in the reasonable discretion of the Merrill Parties.

(b)           At any time and from time to time, promptly execute and deliver
any and all further instruments and documents and take all such other action as
the Sleeve Provider and the Collateral Trustee may reasonably deem necessary or
desirable in obtaining the full benefits of, or in perfecting and preserving,
the Reimbursement Guarantees and the Liens under the Security Documents.

(c)           Have all revenues of the Reliant Retail Obligors, all working
capital facility proceeds, all proceeds of asset sales other than Asset Sales
and all other amounts from time to time received by the Reliant Retail Obligors
paid directly to or promptly deposited to the Collateral Accounts (except for
proceeds of Asset Sales applied in accordance with Section 7.05 and proceeds of
Available Contributions applied in any manner not prohibited by this Agreement),
and distribute or instruct the Collateral Trustee to distribute funds in the
Collateral Accounts on each Business Day in the following manner and priority:

(i)            (A) to the extent the same are held on behalf of third parties,
or owed to third parties for amounts collected or billed on behalf of third
parties, to the application intended for such funds, including application to
RES and RESC for amounts collected for such entities under the Channelview
Services Agreement (to the extent the same becomes applicable as a result of
change in ERCOT rules and regulations), to third parties for third party refunds
or deposits, transmission and distribution service providers for their charges
collected on their behalf, Governmental Authorities for sales or usage taxes
which are required to be or have been agreed to be collected and paid to them
and to the GLO for payment of the GLO Amount, (B) to Governmental Authorities
for taxes and other amounts due and payable by the Reliant Retail Obligors and
their Subsidiaries to such Governmental Authorities in their capacities as such
(and not in their capacities as Governmental Customers) excluding for this
purpose (x) U.S. federal income taxes, and (y) any state or local taxes other
than Applicable State Taxes, (C) to the directors, officers and employees of the
Reliant Retail Obligors for salary, bonus and other compensation and amounts
then due and payable to such Persons, (D) to the IP Trust and the IT Trust for
payment of all amounts due from the Reliant Retail Obligors under the IP License
Agreement and the IT Service Agreement and (E) to the Reliant Parent or as
directed by the Reliant Parent for Restricted Payments not to exceed the amount
of collateral postings to third parties outstanding on the A&R Date that have
been returned to the Reliant Retail Obligors since the A&R Date;

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(ii)           on each date not later than 10 Business Days following the filing
of any state or local tax return that relates to Allocable State Taxes, the
State Tax Distribution Amount;

(iii)          to the Collateral Trustee for the payment of all amounts due to
the Collateral Trustee under the terms of the Security Documents, including
reasonable legal fees, costs, and other liabilities of any kind incurred by the
Collateral Trustee in connection with the Security Documents, Collateral
Trustee’s Fees (as defined in the Collateral Trust Agreement), and payments to
or incurred by any Agent (as defined in the Collateral Trust Agreement), and
including reimbursement obligations to Secured Counterparties that have made
advance payments to the Collateral Trustee for payment of the foregoing;

(iv)          (A) to the Accepted Counterparties for payment of all amounts then
due and payable under the Power and Hedging Contracts (including the MLCI/REPS
ISDA), (B) to third party service and goods providers (other than any
Replacement Sleeve Provider or Replacement Working Capital Facility Provider),
(C) to other holders of Permitted Debt for payment of all amounts then due and
payable with respect thereto (other than any Replacement Sleeve Provider or
Replacement Working Capital Facility Provider), (D) to Governmental Customers,
including Approved ISOs and the GLO, for all amounts due and payable to
Governmental Customers in connection with the Retail Energy Business, (E) to
energy brokers engaged for all amounts due and payable to such brokers in the
ordinary course of the Retail Energy Business, (F) to REES under the REES/REPS
Power Purchase Agreement, (G) to RES under the RES/REPS Power Purchase
Agreement, (H) to RES and RESC for payment of all amounts then due and payable
under the Channelview Services Agreement not paid under paragraph (i) above and
(I) to Accepted Exchanges for payments of amounts or postings then due and
payable in connection with EFS Transactions, EOO Transactions and ICE Block
Transactions, together with retention in the Collateral Accounts in an amount
equal to all funds received from transactions on an Accepted Exchange which will
be required to be returned to the Accepted Exchange to complete transactions
contemplated in Section 2.03 until such transactions are complete;

(v)           (A) to the ML Guarantee Provider and Sleeve Provider for payment
of interest and principal and other Working Capital Obligations then due and
payable under the Working Capital Facility and (B) to the extent applicable, to
any Replacement Working Capital Provider for payment of interest and principal
and other obligations under the related Replacement Working Capital Facility in
accordance with the terms hereof then due and payable;

(vi)          (A) to the ML Guarantee Provider and Sleeve Provider for payment
of the Reimbursement Obligations and other Credit Sleeve Obligations then due
and payable under this Agreement, including, on each Monthly Payment Date, the
Monthly Sleeve Fees, (B) to the extent applicable, to any Replacement Sleeve
Provider for payment of any credit support, reimbursement, or related
obligations provided by such Replacement Sleeve Provider in accordance with the
terms hereof then due and payable, and (C) to retention in the Collateral
Accounts in an amount equal to all Deferred Reimbursement

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Obligations and interest related thereto; provided that, in the event that funds
in the Collateral Accounts are insufficient to completely satisfy the payment
obligations described in this clause to Sleeve Provider and any Replacement
Sleeve Provider, such funds shall be applied equally and ratably between the
Sleeve Provider and any Replacement Sleeve Provider in proportion to the
respective amounts then due and payable to them;

(vii)         to Reliant Parent for payment of all amounts due under the Reliant
Parent Services Agreement;

(viii)        (A) to the ML Guarantee Provider for pre-payment of all amounts
outstanding under the Working Capital Facility and (B) to the extent applicable,
to any Replacement Working Capital Facility Provider for pre-payment of all
amounts outstanding under the related Replacement Working Capital Facility; and

(ix)           if all amounts owing under clauses (i) through (viii) above have
been paid, no Default with respect to a Reliant Event of Default has occurred
and is continuing and no Default with respect to a Reliant Event of Default
would occur as a result of such payment, any remainder, to the Reliant Retail
Obligors, for application to any purpose determined by the Reliant Retail
Obligors that is not prohibited hereunder, including the making of Restricted
Payments to the extent not restricted hereunder;

provided, however, that during the existence of any Reliant Event of Default,
the Reliant Retail Obligors shall distribute, or shall instruct the Collateral
Trustee to distribute, funds in the Collateral Accounts from time to time as
directed by the Sleeve Provider.

In addition, in the event that, on any Business Day (each such Business Day, an
“Estimation Day”), after giving effect to the application of funds in the
Collateral Accounts in accordance with Sections 6.11(c)(i) through 6.11(c)(viii)
on such Estimation Day, (a) no Loans are outstanding and (b) RERH Holdings
reasonably anticipates that any physical power settlement payments and financial
settlement payments under Power and Hedging Contracts that will be due and owing
during the Estimation Period beginning on such Estimation Day (such amounts
being referred to as the “Estimated Obligations”) will exceed the sum of (i)
funds in the Collateral Accounts on such Estimation Day and (ii) the amount of
the Commitment reasonably expected to be available to RERH Holdings on each date
on which such Estimated Obligations are due and payable (“Available
Commitment”), then, on such Estimation Day, RERH Holdings and its Subsidiaries
shall retain in the Collateral Accounts to the extent available an amount of
Available Cash Flow that, when taken together with the funds already in the
Collateral Accounts on such Estimation Day, the Available Cash Flow that RERH
Holdings reasonably expects will be retained in the Collateral Accounts later in
such Estimation Period, and the Available Commitment, would be sufficient to pay
such Estimated Obligations on the day they are due, before otherwise applying
Available Cash Flow in accordance with Section 6.11(c)(ix).

                                6.12.        Further Assurances.  Promptly upon
request by the Sleeve Provider, (a) correct any material defect or error that
may be discovered in any Transaction Document or in the execution,
acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge,
deliver, record, re-record, file, re-file, register and re-register any and all

 

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such further acts, deeds, certificates, assurances and other instruments as the
Sleeve Provider may reasonably require from time to time in order to (i) carry
out more effectively the purposes of the Transaction Documents, (ii) to the
fullest extent permitted by applicable law, subject any Reliant Retail Obligors’
properties, assets, rights or interests to the Liens now or hereafter intended
to be covered by any of the Transaction Documents, (iii) perfect and maintain
the validity, effectiveness and priority of any of the Transaction Documents and
any of the Liens intended to be created thereunder and (iv) assure, convey,
grant, assign, transfer, preserve, protect and confirm more effectively unto the
Merrill Parties the rights granted or now or hereafter intended to be granted to
the Merrill Parties under any Transaction Document or under any other instrument
executed in connection with any Transaction Document to which RERH Holdings or
any of its Subsidiaries is or is to be a party.

 

                                6.13.        Risk Management Policy

 

Shall take the following actions with respect to the Risk Management Policy:

 

(a)           The Reliant Retail Obligors shall maintain in effect the Risk
Management Policy.  The Reliant Retail Obligors may waive the Risk Management
Policy with respect to individual actions, provided that any waiver of the Risk
Management Policy in respect of a particular action requiring the approval of
the Chief Risk Officer, the Chief Executive Officer or the Board of Directors or
any committee thereof shall require prior written approval of the Sleeve
Provider, which shall not be unreasonably withheld or delayed, and shall be
responded to in any event within three Business Days.  The Reliant Retail
Obligors may amend or otherwise modify in general the Risk Management Policy,
provided that REPS shall promptly provide to the Sleeve Provider copies of final
requests for general amendments or modifications to the Risk Management Policy
promptly after providing such final requests to senior management, and before
becoming effective such amendments or modifications shall be approved by the
Sleeve Provider, which approval shall not be unreasonably withheld or delayed,
and shall be responded to in any event within three Business Days.

 

(b)           The Reliant Retail Obligors shall comply with the Risk Management
Policy to the extent required by the following:

 

(i)            If there shall occur any violation of any Risk Limit under, and
as defined in, the Risk Management Policy, the Reliant Retail Obligors shall
have three Business Days to cure the same after notice thereof delivered to or
received from the Sleeve Provider or, with respect any violation under clause
(a) of the definition of Risk Limit, any Responsible Officer or other executive
officer of REPS obtaining knowledge of such occurrence; provided that if at any
time the mark-to-market loss on position(s) in violation of the Risk Limits
exceeds $25,000,000, the Reliant Retail Obligors shall have only one Business
Day after the date of the delivery or receipt of notice or, with respect to any
violation under clause (a) of the definition of Risk Limit, knowledge to cure
the same such that the position(s) in violation do not exceed such threshold
(however, if such threshold is exceeded during the last day of any three
Business Day cure period, such three Business Day cure period shall be extended
through the following Business Day such that the Reliant Retail Obligors shall
have the fourth Business Day to cure such violation).  If cure is not effected
within such three (or four) Business Day period, then as

 

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the Sleeve Provider’s sole remedy with respect to such violation, other than
under Section 6.13(b)(ii), the Sleeve Provider shall have the right to enter
into hedges with REPS to effect the cure at prices consistent with the prices
the Sleeve Provider would use in transactions with third parties at the
applicable times and in the applicable volumes.  In exercising such right,
Sleeve Provider will use the same standard of care as Sleeve Provider uses in
conducting transactions to correct risk policy violations under Sleeve
Provider’s risk policies.

 

(ii)           In addition to the rights of Sleeve Provider under Section
6.13(b)(i), if there shall occur any Level III Violation, after providing notice
thereof to Sleeve Provider in accordance with Section 6.13(a), at the Sleeve
Provider’s request the Reliant Retail Obligors will take the following actions:

 

                (A)          Notify immediately the Chief Executive Officer,
Chief Financial Officer, Chief Risk Officer and Controller of the Level III
Violation;

 

                (B)           Present to the Merrill Parties within five
Business Days a Working Plan that has been approved by the Chief Executive
Officer;

 

                (C)           Present to Merrill Parties within 30 Business Days
a Remediation Plan that has been approved by the Chief Executive Officer.  The
Merrill Parties shall have two Business Days after receipt of such Remediation
Plan to consult with the Reliant Parties and review and agree upon the same.  If
the Merrill Parties and the Reliant Retail Obligors do not mutually agree on the
Remediation Plan at the end of such two Business Day period, then a third-party
evaluator chosen from the list set forth in Schedule 1.01(a) shall be engaged to
mediate promptly the matters in dispute; and

 

(D)          Submit the Remediation Plan to the Audit Committee promptly after
its determination in accordance with paragraph (C) above.  If the Audit
Committee does not approve the Remediation Plan within six Business Days after
submission, the Reliant Retail Obligors shall consult with the Merrill Parties
and make reasonable modifications to the Remediation Plan based upon comments
from the Audit Committee, and resubmit the same within ten Business Days after
the end of such six Business Day period.

 

It shall be a Reliant Event of Default (a “Risk Management Event of Default”) if
the Reliant Retail Obligors (1) do not comply with the process provided for in
Section 6.13(b)(ii)(A) through (D), and the same is not cured within two
Business Days, or (2) if the resubmitted Remediation Plan described in Section
6.13(b)(ii)(D) above is not implemented by the Reliant Retail Obligors in all
material respects.  A Risk Management Event of Default shall be the sole Reliant
Events of Default or Defaults with respect thereto for any non-compliance with
the Risk Management Policy or breach of Section 6.13(b).

 

(c)           The Sleeve Provider shall monitor compliance with the Risk Limits
described in Exhibit E2 (Energy Hedge Limit, UCAP Hedge Limit, and Basis Hedge
Limit) in

 

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accordance with the provisions of Exhibit E2.

 

                                6.14.        Employees.

(a)           Have, a president, a principal risk officer, an in-house attorney,
such positions to be filled when vacant in accordance with paragraph (b) below,
and sufficient employees that, taken together with the services provided under
arm’s length service contracts (including the Reliant Parent Service Agreement,
if then in effect), RERH Holdings and its Subsidiaries can run the Retail Energy
Business in a manner consistent with the business operations of the Retail
Energy Business as of the A&R Date.

 

                (b)           Consult with the Merrill Parties prior to
appointing any replacement of the president, principal risk officer or in-house
attorney of the Reliant Retail Obligors.

 

                                6.15.        Information Technology Systems.. 
Own or have access to (through arm’s length service contracts including the IT
Service Agreement and the Reliant Parent Services Agreement if the same are then
in effect), at all times, the Information Technology Systems necessary to run
the Retail Energy Business, including Information Technology Systems providing
capabilities consistent with the arrangements in place for the Retail Energy
Business as of the A&R Date.

 

                                6.16.        Marks.  Own or have access to
(through arm’s length licenses and other arrangements including the IP License
Agreement and the Reliant Parent Services Agreement if the same are then in
effect), at all times, the Marks necessary to run the Retail Energy Business
using the “Reliant” name consistent with the arrangements in place for the
Retail Energy Business as of the A&R Date, subject to limitations on the use of
such Marks and such name set forth in the IP License Agreement.

 

                                6.17.        Reliant Parent Services Agreement.

                (a)           Promptly upon receipt, furnish to the Sleeve
Provider the Corporate Cost Center Allocation under the Reliant Parent Services
Agreement for each Fiscal Quarter contemplated by Section 5.1(b) of the Reliant
Parent Services Agreement, including the cost center basis for such Corporate
Cost Center Allocation as between the cost centers referred to on Exhibit C to
the Reliant Parent Services Agreement; provided that at the option of REPS,
certain of the cost centers may be reported on a consolidated basis.  The
Reliant Retail Obligors shall not approve any change in the methodology for
allocation of the costs and expenses giving rise to the Corporate Cost Center
Allocation referred to on Exhibit B to the Reliant Parent Services Agreement
proposed by RECS without giving 30 days prior written notice to the Sleeve
Provider and, in the event RECS proposes to change the methodology for
allocation of such costs and expenses in a manner materially adverse to the
Reliant Retail Obligors (it being expressly understood that an increase is not
in and of itself “materially adverse”), the Reliant Retail Obligors shall not
approve such change without the approval of the Sleeve Provider, such approval
not to be unreasonably withheld or delayed.

 

                (b)           Commencing with the 2008 Fiscal Year, consult with
the Sleeve Provider in the event that the Corporate Cost Center Allocation for
any Fiscal Year reflects an increase of more than 5% over the prior Fiscal
Year.  Solely for purposes of calculating any such increase, the

 

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Corporate Cost Center Allocation for the 2007 Fiscal Year shall be determined as
if RESE was a Reliant Retail Obligor for the entirety of such Fiscal Year.  In
such case, and to the extent that third-party suppliers could reasonably be
expected to provide all or certain of the Administrative Services provided under
the Reliant Parent Services Agreement on a more cost effective basis than under
the Reliant Parent Service Agreement (taking into account all relevant factors
including demobilization and transition costs), REPS shall solicit as promptly
as practicable, through an industry standard request for proposals, bids for
comparable administrative services from recognized third-party service providers
for those Administrative Services determined not to be cost effective under the
Reliant Parent Services Agreement.  Upon receipt and review of the bids
procured, REPS shall choose the service provider best able to provide the
administrative services required (and shall furnish a written assessment of the
bids provided to the Sleeve Provider, together with written support for any bids
proposed to be accepted that are not the lowest cost bids).  REPS shall promptly
deliver the notice required under Section 3.4(b) of the Reliant Parent Services
Agreement with respect to any Administrative Services that are to be performed
by third-party service providers in accordance with the foregoing.

 

                                Section 7.               Negative Covenants. 
From the A&R Date until the Credit Sleeve Termination Date, the Reliant Retail
Obligors shall not, and shall cause their Subsidiaries not to:

 

                                7.01.                        Liens.  Create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien
of any kind on any asset now owned or hereafter acquired, except Permitted
Liens.

 

                                7.02.                        Investments and
Acquisitions.  Make or hold any Investments, except for Permitted Investments or
make any Acquisition, except for a Permitted Acquisition.

 

                                7.03.                        Indebtedness. 
Create, incur, issue, assume, suffer to exist, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise, with respect to any
Indebtedness, and RERH Holdings shall not permit any of its Subsidiaries to
issue any shares of preferred stock, in each case, other than the following
(collectively, “Permitted Debt”):

 

(a)           Indebtedness of RERH Holdings and the Reliant Retail Obligors
under this Agreement, if any, and the Working Capital Facility;

(b)           intercompany Indebtedness (i) between or among Reliant Retail
Obligors and (ii) Indebtedness of Subsidiaries of RERH Holdings that are not
Reliant Retail Obligors to Reliant Retail Obligors; provided that (A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than RERH or any Subsidiary, and (B)
any sale or other transfer of any such Indebtedness to a Person that is not RERH
or any Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by RERH or such Subsidiary, as the case may be, that was not
permitted by this clause;

(c)           Indebtedness of RERH Holdings or any of its Subsidiaries in
respect of workers’ compensation claims, self-insurance obligations, performance
and surety bonds provided by RERH Holdings or a Subsidiary in the ordinary
course of business;

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(d)           Indebtedness of RERH Holdings or any of its Subsidiaries arising
from the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient funds, so long as
such Indebtedness is covered within five business days;

(e)           Indebtedness arising from agreements of RERH Holdings or a
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with the
disposition of any business, assets or Equity Interests of a Subsidiary of RERH
Holdings; provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds (including non-cash
proceeds) actually received by RERH Holdings and/or such Subsidiary in
connection with such disposition;

(f)            Additional Indebtedness of Subsidiaries of RERH Holdings or
purchase money obligations in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, not to exceed $10,000,000, the proceeds
of which are used for, or assumed in connection with, general corporate purposes
of RERH or any of its Subsidiaries;

(g)           the Guarantee by (A) Reliant Retail Obligors of Indebtedness of
Reliant Retail Obligors that is otherwise permitted by this Section 7.03 and (B)
Reliant Retail Obligors of Indebtedness of Subsidiaries of RERH Holdings that
are not Reliant Retail Obligors that is otherwise permitted by this Section
7.03; and

(h)           Indebtedness of Reliant Retail Obligors under Replacement Working
Capital Facilities or in favor of Replacement Sleeve Provider.

                                7.04.        Consolidation and Mergers

 

(a)           Consolidate or merge with or into another Person, or sell, assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of RERH Holdings and its Subsidiaries taken as a whole, in
one or more related transactions, to another Person, except that:

                (i)            so long as no Default with respect to a Reliant
Event of Default exists or would result therefrom, (A) any Subsidiary of RERH
Holdings may consolidate or merge with or into any one or more other
Subsidiaries of RERH Holdings; provided that in the event that a Subsidiary of
RERH Holdings is a Reliant Retail Obligor, such Subsidiary may only consolidate
or merge with or into another Subsidiary of RERH Holdings that is a Reliant
Retail Obligor, and (B) any Person may be merged with or into any Subsidiary of
RERH Holdings if the resulting entity is a Wholly Owned Subsidiary of RERH
Holdings, provided that the provisions of Section 6.11(a) are complied with in
connection with any such transaction involving a Subsidiary of RERH Holdings
that is not a Reliant Retail Obligor;

                (ii)           so long as no Default with respect to a Reliant
Event of Default exists or would result therefrom, any Subsidiary of RERH
Holdings may sell, transfer, assign, convey, lease or otherwise dispose of any
or all of its assets to any one or more

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other Subsidiaries of RERH Holdings, provided that the provisions of Section
6.11(a) are complied with in connection with any such transaction involving a
Subsidiary of RERH Holdings that is not a Reliant Retail Obligor;

(b)           In addition, the Reliant Retail Obligors shall not, nor shall they
permit any of their Subsidiaries to, directly or indirectly, lease all or
substantially all of their properties or assets, in one or more related
transactions, to any Person that is not a Reliant Retail Obligor.

(c)           For the avoidance of doubt, nothing in this Section 7.04 is
intended to restrict the ability of the Reliant Parent to sell, assign,
transfer, convey or otherwise dispose of its interests in RERH Holdings or
prohibit any Asset Sale permitted by Section 7.05.

                                7.05.        Asset Sales.

 

                                (a)           Consummate an Asset Sale unless
(i) it receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the assets or Equity Interests issued or sold or
otherwise disposed of (as reasonably determined by such Reliant Retail Obligor),
(ii) at least 90% of the consideration therefor received in the Asset Sale by
RERH Holdings or such Subsidiary is in the form of cash or Cash Equivalents
(which, except for cash used to close out existing Power and Hedging Contracts
related to the supply for the assets sold, shall be applied to the repayment of
any outstanding principal and interest on the Working Capital Facility and
payment of outstanding Reimbursement Obligations then due, with surplus being
deemed and available for application as Available Cash Flow) and (iii) it has
entered into new or closed out existing Power and Hedging Contracts necessary to
close out substantially all of the supply for the assets sold.  For purposes of
this provision, each of the following shall be deemed to be cash:

 

(A)          any liabilities, as shown on RERH Holdings’ most recent
consolidated balance sheet, of the Reliant Retail Obligors (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Credit Sleeve Obligations) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases such Reliant
Retail Obligor from further liability;

 

(B)           any securities, notes or other Obligations received by a Reliant
Retail Obligor from such transferee that are converted (by sale or other
disposition) by such Reliant Retail Obligor into cash, to the extent of the cash
received in that conversion within 60 days; and

 

(C)           reasonable reserves for indemnity obligations and purchase price
adjustments funded in cash or held back by the purchaser;

 

                                (b)           Consummate any Asset Sale (i)
comprised of Residential Mass Customers, (ii) comprised of beneficial interests
in the IP Trust or the IT Trust, (iii) comprised of the Equity Interests in REPS
or all or substantially all of the assets of REPS or any other Subsidiary of
RERH Holdings party to any Power and Hedging Contracts, or (iv) to the extent a
Default with respect to a Reliant Event of Default would result therefrom.

 

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                                7.06.        Limitation on Issuances and Sales
of Certain Equity Interests.  Transfer, convey, sell, lease or otherwise dispose
of any Equity Interests in any Wholly Owned Subsidiary of RERH Holdings to any
Person (other than RERH or a Wholly Owned Subsidiary of RERH), unless:

(a)                        such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Wholly Owned Subsidiary; and

(b)                       such transfer, conveyance, sale, lease or other
disposition is made in accordance with Section 7.05.

In addition, the Reliant Retail Obligors will not permit any Wholly Owned
Subsidiary of RERH Holdings to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors’ qualifying
shares) to any Person other than to RERH Holdings or a Wholly Owned Subsidiary
of RERH Holdings.

 

                                7.07.        Restricted Payments.  Make any
Restricted Payment by way of the payment of any dividend or distribution in cash
or Cash Equivalents on any Equity Interests of RERH Holdings; or otherwise, make
any Restricted Payment except for the following:

 

 (a)          the payment of any dividend (or, in the case of any partnership or
limited liability company, any similar distribution) by a Subsidiary of RERH
Holdings to RERH Holdings or another Subsidiary of RERH Holdings;

(b)           so long as no Default with respect to a Reliant Event of Default
has occurred and is continuing or would be caused thereby, Restricted Payments
from Available Cash Flow; and

(c)           the transactions with any Person (including any Affiliate of RERH
Holdings) set forth in clauses (b)(i) and (b)(iv) of Section 7.09 and the
funding of any obligations in connection therewith.

                                7.08.        Line of Business.  Engage, or
permit any Subsidiary to engage, in any business other than the Retail Energy
Business, except to such extent as would not be material to the Reliant Retail
Obligors taken as a whole.

 

                                7.09.        Transactions with Affiliates.

 

(a)           Make any payment to, or sell, lease, transfer or otherwise dispose
of any of its properties or assets to, or purchase any property or assets from,
or enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate of RERH Holdings (each, an “Affiliate Transaction”), in each case
without the approval of the Sleeve Provider, which shall not be unreasonably
withheld or delayed.

(b)           The following items shall not be deemed to be Affiliate
Transactions and, therefore, shall not be subject to the provisions of Section
7.09(a):

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(i)            any employment agreement or director’s engagement agreement,
employee benefit plan, officer and director indemnification agreement or any
similar arrangement entered into by RERH Holdings or any of its Subsidiaries in
the ordinary course of business or approved by its Board of Directors;

(ii)           transactions between or among the Reliant Retail Obligors;

(iii)          payment of reasonable directors’ fees to Persons who are not
otherwise Affiliates of RERH Holdings;

(iv)          any issuance of Equity Interests of RERH Holdings to Reliant
Parent;

(v)           Restricted Payments that do not violate the provisions of
Section 7.07;

(vi)          loans or advances to employees in the ordinary course of business
not to exceed $2,000,000 in the aggregate outstanding at any one time;

                (vii)         the Reliant Parent Services Agreement;

                (viii)        the REES/REPS Power Purchase Agreement;

(ix)           the RES/REPS Power Purchase Agreement;

(x)            the Channelview Services Agreement;

(xi)           the IP License Agreement, IP Trust, IP Servicing Agreement, IT
Service Agreement,  IT Trust, and IT Trust Management Agreement;

(xii)          the Intercompany Cash Management Agreement;

(xiii)         any other Transaction Documents, and

                (xiv)        subject to Section 7.05(b), any payments to,
dispositions of properties or assets to, purchases of property or assets from,
or entering into or making or amending any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, an
Affiliate of RERH Holdings to the extent any one such transaction or group of
related transactions (A) is on terms that are no less favorable (as reasonably
determined by RERH Holdings) to RERH Holdings or the relevant Subsidiary than
those that would have been obtained in a comparable transaction by RERH Holdings
or such Subsidiary with an unrelated Person and (B) does not involve
consideration in excess of $5,000,000 when taken together with all other
transactions pursuant to this clause (xiv).

                                7.10.        Restrictive Agreements.  Enter
into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the

 

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ability of any of its Subsidiaries to create, incur or permit to exist any Lien
upon any of its property or assets; or (b) the ability of any of its
Subsidiaries to pay dividends or make any other distributions with respect to
any shares of its capital stock or any other Equity Interest or participation in
its profits owned by any Subsidiaries; or (c) the ability of any of its
Subsidiaries to make or repay loans or advances to it or any of its Subsidiaries
or to Guarantee Indebtedness of it or any of its Subsidiaries or to transfer any
of its properties or assets to RERH Holdings or any other Subsidiary; provided
that the foregoing shall not apply to (i) restrictions and conditions imposed by
Laws or by any Transaction Document, (ii) customary restrictions and conditions
contained in agreements relating to the sale of a Subsidiary or asset pending
such sale; provided that such restrictions and conditions apply only to the
Subsidiary or asset that is to be sold and such sale is permitted hereunder,
(iii) restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness, (iv) customary
non-assignment provisions in any contract, easement or lease, and other
customary encumbrances and restrictions entered into in the ordinary course of
business, and (v) restrictions or conditions contained in any trading, netting,
operating, construction, service, supply, purchase, sale or similar agreement to
which any Subsidiary is a party and which is entered into in the ordinary course
of business; provided that such agreement prohibits the encumbrance of solely
the property or assets of such Subsidiary that are the subject of such
agreement, the payment rights arising thereunder and/or the proceeds thereof and
not to any other asset or property of such Subsidiary or the assets or property
of any other Subsidiary.

 

                                7.11.        Modification and Enforcement of
Transaction Documents.  Consent to any amendment, restatement, supplement,
modification, renewal or replacement of, or enter into any forbearance from
exercising any rights with respect to the terms or provisions contained in, or
initiate or acquiesce to the cancellation, termination or suspension of
performance under, any Transaction Document, or fail to enforce the rights of
the Reliant Retail Obligors under any Transaction Document in any manner that
would be outside of the reasonable business judgment of the Reliant Retail
Obligors (acting in the case of agreements with the Reliant Parent or any
Subsidiary thereof other than the Reliant Retail Obligors as if such agreements
were with third parties), in each case, without the prior written consent of the
Sleeve Provider, such consent not to be unreasonably withheld or delayed.

 

                                7.12.        Fiscal Year.  Change, permit any of
its Subsidiaries to, directly or indirectly change, its Fiscal Year from a
Fiscal Year ending December 31.

 

                                7.13.        Specified Transaction.  Enter into,
or permit any of its Subsidiaries to, directly or indirectly enter into, any
Specified Transaction.

 

                                7.14.        Services.  Provide, or permit any
of its Subsidiaries to provide, commercial revenue generating services in retail
electric markets except for such services described in Schedule 7.14 and such
services consented to by the Sleeve Provider, which consent will not be
unreasonably withheld or delayed.

 

                                7.15.        Tax Agreements.  Enter into, or
permit any of its Subsidiaries to enter into, directly or indirectly, any tax
sharing agreement (a) under which cash payments by

 

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any Reliant Retail Obligor with respect to federal income tax shall be made
other than from Available Cash Flow or other payments permitted by the Tax
Subordination Agreement, (b) under which any Reliant Retail Obligor accrues
liabilities that are not subject to subordination terms substantially similar to
the subordination provisions of the Tax Subordination Agreement, or (c) that
does not contain non-petition language in substantially the form set forth in
the Tax Subordination Agreement.

 

                                7.16.        Posting of Collateral.  From and
after the A&R Date, post directly or indirectly any collateral with respect to
any power, gas or other commodity purchases or sales or any hedging transactions
with any Person other than (a) collateral postings for transactions outstanding
on the A&R Date which, as of the A&R Date, are under obligation to be returned
to the Reliant Retail Obligors, (b) in accordance with Section 2.07 and Section
6.11(c)(iv)(I) and (c) during the Transition Period and the Unwind Period, in
connection with power, gas or other commodity purchases or sales or any hedging
transactions entered into in accordance with Section 2.01(b) and, in which
event, only with Available Funds.

 

                                7.17.        Accepted Products. Permit the
aggregate amount of Accepted Products (measured in Dollars expended) purchased
by RERH Holdings and its Subsidiaries directly or indirectly from Affiliates of
RERH Holdings during any Computation Period to exceed 10% of the aggregate
amount of all Accepted Products (measured in Dollars expended) purchased by RERH
Holdings and its Subsidiaries during such Computation Period; provided, however,
that for the purposes of this Section 7.17, the aggregate amount of Accepted
Products (measured in Dollars expended) purchased by REPS under the Channelview
PPA Confirmation shall be excluded from the calculation.

 

                                Section 8.               Events of Default.

 

                                8.01.                        Reliant Events of
Default.  Each of the following shall constitute a “Reliant Event of Default”:

 

(a)           Non-Payment.  Any Reliant Retail Obligor fails to pay within three
Business Days after the same becomes due, any amount payable to any Merrill
Party hereunder or under any other Transaction Document; or

(b)           Specific Covenants.  Any Reliant Retail Obligor fails to perform
or observe any term, covenant or agreement contained in Section 6.11 or the
separateness covenants in any Retail Organizational Documents, and such failure
continues for five Business Days after the earlier to occur of (i) such Reliant
Retail Obligor’s receiving notice thereof from Sleeve Provider, or (ii) a
Responsible Officer or other executive officer of a Reliant Retail Obligor
obtains knowledge of such occurrence; or

(c)           Other Defaults.  Any Reliant Retail Obligor fails to perform or
observe any other covenant or agreement (not specified in clauses (a) or (b)
above or not addressed by clauses (l) or (m) below) contained in any Transaction
Document on its part to be performed or observed and such failure continues for
15 days after the earlier to occur of (i) such Reliant Retail Obligor’s
receiving notice thereof from Sleeve Provider,

 

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or (ii) a Responsible Officer or other executive officer of such Reliant Retail
Obligor obtains knowledge of such occurrence; or

(d)           Representations and Warranties.  Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of any
Reliant Retail Obligor herein, in any other Transaction Document, or in any
document delivered in connection herewith or therewith shall be incorrect or
misleading in any material respect when made or deemed made; or

(e)           Cross-Default.  Any Reliant Retail Obligor, except with respect to
payments described in paragraph (a) above, (i) fails to make any payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) in respect of any Indebtedness or Guarantee (other than
Indebtedness hereunder) having an aggregate principal amount (including amounts
owing to all creditors under any combined or syndicated credit arrangement) of
more than $1,000,000, or (ii) fails to observe or perform any other agreement or
condition relating to any such Indebtedness or Guarantee or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event occurs, the effect of which default or other event is to cause such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its Stated
Maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or

(f)            Insolvency Proceedings, Etc.  Any Reliant Retail Obligor
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any material
part of their respective property; or any receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed without
the application or consent of such Person and the appointment continues
undischarged or unstayed for 60 calendar days; or any proceeding under any
Debtor Relief Law relating to any such Person or to all or any material part of
their respective property is instituted without the consent of such Person and
continues undismissed or unstayed for 60 calendar days, or an order for relief
is entered in any such proceeding; or

(g)           Inability to Pay Debts; Attachment.  Any Reliant Retail Obligor
becomes unable or admits in writing its inability or fails generally to pay its
debts as they become due; or

(h)           Judgments.  There is entered against any Reliant Retail Obligor a
final judgment or order for the payment of money in an aggregate amount
exceeding $100,000,000 (to the extent not covered by independent third-party
insurance or that has not been paid), and (A) enforcement proceedings are
commenced by any creditor upon such judgment or order, or (B) within thirty (30)
days from the later of (X) the entry of any such judgment or the date of any
such order (as applicable) and (Y) the date any payment is required to be made
on or with respect to any such judgment or order pursuant

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to the terms thereof, the same shall not have been paid, discharged or vacated
or, in the case of a judgment, stayed pending appeal, or shall not have been
discharged or vacated within thirty (30) days from the entry of a final order of
affirmance on appeal; or

(i)            Invalidity of Documents.  (i) Any Security Document shall for any
reason (other than pursuant to the terms thereof or as expressly permitted
thereby) cease to create a valid and perfected first priority Lien (subject to
Permitted Liens) on and security interest in the Collateral purported to be
covered thereby; provided that no such defects pursuant to this clause with
respect to a Lien granted or purported to be granted by any of the Transaction
Documents shall give rise to a Reliant Event of Default under this clause unless
such defects shall adversely affect the aggregate value of the Collateral by an
aggregate amount of $50,000,000 or more; or (ii) any Reliant Retail Obligor
shall so assert such invalidity or lack of perfection or priority; or (iii) at
any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or thereunder or satisfaction in full of all the
Credit Sleeve Obligations thereunder, any other Transaction Document ceases to
be in full force and effect; or any Reliant Retail Obligor or any other Person
contests in any manner the validity or enforceability of any provision of any
other Transaction Document; or any Reliant Retail Obligor denies that it has any
or further liability or obligation under any other Transaction Document, or
purports to revoke, terminate or rescind any provision of any other Transaction
Document; or

(j) Trigger Event.  A Trigger Event occurs and shall remain uncured until the
latest of the following dates: (a) five Business Days after the occurrence of
the Trigger Event, (b) two Business Days after delivery by the Sleeve Provider
to REPS of the Test Results, and (c) two Business Days after the Sleeve Provider
has cured any Computation Failure Event by delivery by the Sleeve Provider to
REPS of the applicable K and VaR computations (for the purposes of this
paragraph, the terms “Computation Failure Event” and “Test Results” shall have
the meanings given to such terms in Schedule 1.01(c)); or

(k) Breach or Termination of Indemnity.  Following the receipt by the Merrill
Parties of the indemnity described in Section 9.03(a), (i) the failure by the
Person providing such indemnity to comply with or perform any agreement or
obligation to be complied with or performed by it in accordance with the
agreement providing such indemnity, (ii) the expiration or termination of such
indemnity or the failing or ceasing of the agreement providing such indemnity to
be in full force and effect or (iii) the Person providing such indemnity
disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges
the validity of, the agreement providing such indemnity; or

(l)  Data Failure Event of Default.  A Data Failure Event of Default shall
occur; or

(m) Risk Management Event of Default.  A Risk Management Event of Default shall
occur.

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                                8.02.        Sleeve Provider Events of Default. 
Any of the following shall constitute a “Sleeve Provider Event of Default”:

 

(a)           Non-Payment.  Any Merrill Party or the Working Capital Facility
Provider fails to pay within three Business Days after the same becomes due, any
amount payable to a Reliant Retail Obligor hereunder or under any other
Transaction Document, including any failure to fund when due under the Working
Capital Facility; or

(b)           Willful Defaults.  Any Merrill Party fails to perform or observe
any covenant or agreement set forth in Sections 2.01 through 2.05 and such
failure continues for ten Business Days after such Merrill Party receiving
written notice thereof from any Reliant Retail Obligor, which notice makes
specific reference to this Section 8.02(b) and provides reasonably detailed
information regarding the facts constituting such failure; provided that any
such failure shall not fall within the provisions of this Section 8.02(b) in the
event that both:  (i) the covenant or agreement the Merrill Party failed to
perform or observe is a covenant or agreement that necessarily involves a
consent, determination or judgment required to be made by any Merrill Party or
Reliant Retail Obligor in a “reasonable” or “commercially reasonable” manner, or
in “good faith” or with “reasonable discretion” or without unreasonably
withholding any such consent (each, a “Decision”); and (ii) there is a good
faith dispute among the parties as to such Decision; provided further, however,
that the foregoing proviso shall not apply at any time that (1) any Merrill
Party is in breach of its obligations to provide or maintain ML Guarantees or
Credit Support Agreements with two or more Core Accepted Counterparties when
required by this Agreement, or (2) any Merrill Party is in breach of its
obligations to post collateral to any two or more Accepted Counterparties when
required by the applicable Credit Support Agreement; or

(c)           Other Defaults.  Any Merrill Party or the Working Capital Facility
Provider fails to perform or observe any other covenant or agreement (excluding
those specified in clause (a) above or addressed by clause (i) below, but
including those specified under clause (b) above) contained in any Transaction
Document on its part to be performed or observed and such failure continues for
30 days after the earlier to occur of (i) the Sleeve Provider receiving notice
thereof from any Reliant Retail Obligor or (ii) a Responsible Officer or other
executive officer of Sleeve Provider obtains knowledge of such occurrence; or

(d)           Representations and Warranties.  Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of any
Merrill Party or the Working Capital Facility Provider herein, in any other
Transaction Document, or in any document delivered in connection herewith or
therewith shall be incorrect or misleading in any material respect when made or
deemed made; or

(e)           Cross-Default.  ML&Co. (i) shall default (after giving effect to
all applicable grace periods) in the payment of any Indebtedness or Guarantee
having an aggregate principal amount (including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $100,000,000
and (ii) either (A) at the time of such default (after giving effect to all
applicable grace periods), the

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final scheduled maturity of such Indebtedness shall have occurred or (B) the
final scheduled maturity of such Indebtedness shall have been accelerated by the
lenders thereunder or the holders thereof; or

(f)            Credit Downgrade.  Any senior unsecured, non-credit enhanced debt
of the ML Guarantee Provider shall fail to have an Investment Grade Rating; or

(g)           Insolvency Proceedings, Etc.  Either Merrill Party or the Working
Capital Facility Provider institutes or consents to the institution of any
proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
for it or for all or any material part of their respective property; or any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of such Person and the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of their respective property is instituted without the consent
of such Person and continues undismissed or unstayed for 60 calendar days, or an
order for relief is entered in any such proceeding; or

(h)           Inability to Pay Debts; Attachment.  Either Merrill Party or the
Working Capital Facility Provider becomes unable or admits in writing its
inability or fails generally to pay its debts as they become due; or

(i)            Computation Failure Event of Default.  A Computation Failure
Event of Default shall occur.

                                Section 9.               Remedies and
Termination.

 

                                9.01.                        Remedies of Sleeve
Provider.  If any Reliant Event of Default shall have occurred and be
continuing, the Sleeve Provider shall have each of the following rights and
remedies:

 

(a)           the right to declare an Unwind Start Date;

(b)           the right to deliver to each Accepted Counterparty notice that all
future trades under an existing Power and Hedging Contract shall not have the
benefit of an ML Guarantee or any Merrill Collateral under such Accepted
Counterparty’s Power and Hedging Contract and related Credit Support Agreement;

(c)           the right to cause REPS to enter into additional power purchase
and hedging activities that reduce the VaR (and REPS may not enter into any
other power purchase and hedging activities without the Sleeve Provider’s prior
written consent); provided that in exercising such right, Sleeve Provider will
use the same standard of care as Sleeve Provider uses in conducting transactions
to correct risk policy violations under Sleeve Provider’s risk policies;

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(d)           the right to setoff any amounts owed by any Merrill Party to any
Reliant Retail Obligor under the Transaction Documents, whether such amounts or
obligations are direct or indirect, absolute or contingent, or matured or
unmatured, against any amounts owed by any Reliant Retail Obligor, including
Credit Sleeve Obligations, whether such obligations are direct or indirect,
absolute or contingent, or matured or unmatured;

(e)           the right of specific performance and injunctive relief to give
effect to the terms and conditions of the Transaction Documents, to the extent
permitted by applicable law, and in connection therewith the Parties acknowledge
that the monetary remedies provided to the Merrill Parties under the Transaction
Documents are insufficient to cover all damages that could be incurred by the
Merrill Parties in connection with such a Reliant Event of Default; and

(f)            any other rights and remedies available at law or in equity with
respect to breach of contract, subject to the provisions of Section 9.04.

                                9.02.        Remedies of REPS.

 

(a)           If any Sleeve Provider Event of Default shall have occurred and be
continuing, REPS shall have each of the following rights and remedies:

 

(i)            the right to declare an Unwind Start Date, without paying any
Make-whole Payment under Section 3.05; and

 

(ii)           the right, without declaring an Unwind Start Date or terminating
any commitments of the Merrill Parties under the Transaction Documents, to cure
or cure the effects of such Sleeve Provider Event of Default.

 

(b)           If a Sleeve Provider Event of Default described in Sections 8.02
(b), (g) or (h) shall have occurred and be continuing, REPS shall have each of
the following additional rights and remedies:

(i)            the right to suspend all obligations of the Reliant Retail
Obligors with respect to the Monthly Sleeve Fees during the period of such
Sleeve Provider Event of Default, on any ratable basis selected by the Reliant
Retail Obligors reflecting Sleeve Provider failures to comply with Sections 2.01
through 2.05;

 

(ii)           in the event that the Unwind Start Date has been declared in
accordance with Section 9.02(a)(i) or the Unwind Period has otherwise commenced,
the right to indemnification by the Merrill Parties upon demand for all direct
losses, costs, expenses and damages incurred by the Reliant Retail Obligors in
connection with locating and obtaining a Replacement Sleeve Provider, including
reasonable legal fees and expenses and the excess, if any, of the overall cost
to the Reliant Retail Obligors of the sleeve fees, interest, and other similar
costs of obtaining credit support for the acquisition of Accepted Products

 

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and working capital for the Retail Energy Business from Replacement Sleeve
Providers, over the same costs under the Transaction Documents;

 

(iii)          in the event that the Unwind Start Date has been declared in
accordance with Section 9.02(a)(i) or the Unwind Period has otherwise commenced,
the right to cause all Secured Obligations of the Merrill Parties under the
Collateral Trust Agreement to become Subordinated Secured Obligations under the
Collateral Trust Agreement;

 

(iv)          the right to setoff any amounts owed by any Reliant Retail Obligor
to any Merrill Party under the Transaction Documents, whether such amounts or
obligations are direct or indirect, absolute or contingent, or matured or
unmatured, against any Credit Sleeve Obligations or Reimbursement Obligations,
whether such obligations are direct or indirect, absolute or contingent, or
matured or unmatured;

 

(v)           the right of specific performance and injunctive relief to give
effect to the terms and conditions of the Transaction Documents, to the extent
permitted by applicable law, and not to exceed 180 days in duration, and in
connection therewith the Parties acknowledge that the monetary remedies provided
to the Reliant Retail Obligors under the Transaction Documents are insufficient
to cover all damages that could be incurred by the Reliant Retail Obligors in
connection with such a Sleeve Provider Event of Default; and

 

(vi)          any other rights and remedies available at law or in equity with
respect to breach of contract, subject to the provisions of Section 9.04.

 

                                9.03.        Certain Intercreditor Agreements.

(a)           Standstill.  Following a Reliant Event of Default, the Sleeve
Provider shall not exercise any of its remedies under Section 9.01 for a 10
Business Day period (the “Restricted Period”) commencing on the date of such
Reliant Event of Default, other than the Sleeve Provider’s rights under Section
9.01(c).  If the Merrill Parties receive a full indemnity of their entire
exposure under the Transaction Documents from a Person with a Credit Rating of
at least the ML Equivalent Credit Rating prior to the last day of the Restricted
Period, the Sleeve Provider shall not exercise any of its remedies under Section
9.01 for a period of 90 days (the “Standstill Period”) commencing the date such
indemnity is received, other than the Sleeve Provider’s rights under Section
9.01(c).  For the avoidance of doubt, the Sleeve Provider may exercise all of
its remedies under Section 9.01 if such Default or Event of Default, as
applicable, is not cured on or prior to the last day of either (i) if no
indemnity is received on or prior to the last day of the Restricted Period, the
Restricted Period, or (ii) if an indemnity is received on or prior to the last
day of the Restricted Period in accordance with the prior sentence, the
Standstill Period.

 

(b)           Bank Cure or Takeout.  If a Standstill Period shall occur, on or
prior to the last day of such Standstill Period, the Sleeve Provider shall:

 

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(i) upon request from the Bank Agent on behalf of the Reliant Parent Lenders and
as soon as is reasonably practicable thereafter, provide the Bank Agent with the
information described in clauses (i) through (iii) of Section 7.01(a) of the
Collateral Trust Agreement, solely related to the Merrill Parties;

 

(ii) permit any Reliant Parent Lender to cure, in a manner reasonably
satisfactory to the Merrill Parties, the related Default or Event of Default, as
applicable, on behalf of the Reliant Retail Obligors (a “Bank Cure”); and

 

(iii) permit any Reliant Parent Lender to cause, in a manner reasonably
satisfactory to the Merrill Parties, the Credit Sleeve Obligations owing to the
Merrill Parties to be terminated and satisfied in full (a “Bank Takeout”),
which, for the avoidance of doubt, may include: the satisfaction, cancellation,
return and reimbursement, as applicable, of all ML Guarantees, all Merrill
Collateral and the Reimbursement Obligations; the termination of all further
obligations of the Merrill Parties in respect of each of the Power and Hedging
Contracts, Credit Support Agreements, the Mirror OTC Contracts; the termination
of the commitment under and the repayment of the Working Capital Obligations; if
applicable, the payment of the Make-whole Payment and any outstanding Monthly
Sleeve Fees; and the repayment of any other amounts owing hereunder to the
Merrill Parties.

 

(c)           Result of Bank Cure or Takeout.  Following a Bank Cure and so long
as the indemnity described in paragraph (a) above remains in full force and
effect, the terms of this Agreement shall continue in full force effect, except
that the Monthly Sleeve Fees shall be as set forth on Schedule 3.04.  Following
the completion of a Bank Takeout and upon written confirmation from the Merrill
Parties that the Credit Sleeve Obligations owing to the Merrill Parties have
been terminated and satisfied in full, the Liens of the Merrill Parties under
the Transaction Documents shall be released.

 

                                9.04.        Certain Limitations on Remedies. 
FOR BREACH OF ANY PROVISION OF THIS AGREEMENT FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL
BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS
SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN
EQUITY ARE WAIVED.  IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED
HEREIN, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY,
SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER
REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.  UNLESS EXPRESSLY HEREIN
PROVIDED, NO PARTY SHALL BE LIABLE UNDER THIS AGREEMENT FOR CONSEQUENTIAL,
INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, INCLUDING CONSEQUENTIAL
LOST PROFITS OR OTHER CONSEQUENTIAL BUSINESS INTERRUPTION DAMAGES, BY STATUTE,
IN TORT OR CONTRACT OR OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT THE
LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT
REGARD TO THE CAUSE OR CAUSES RELATED THERETO,

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INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT OR ACTIVE OR PASSIVE.  TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID
HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT
OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS
INCONVENIENT, AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.

 

                                Section 10.             Unwind

 

                                10.01.                      Permitted Activities
during Unwind Period.

(a)           During the Unwind Period, REPS may exercise one or more of the
following rights with respect to any Post-Unwind Start Date Transactions:

 

(i)  REPS may terminate Post-Unwind Start Date Transactions and pay, to the
extent such payments do not require application of funds in violation of this
Agreement, applicable settlement payments for the Post-Unwind Start Date
Transactions (in which case, the Liens of the Merrill Parties under the
Collateral Trust Agreement securing the Credit Sleeve Obligations shall be
released on the Credit Sleeve Termination Date, and the Merrill Parties shall
take action under Section 12.04(c) in connection therewith);

(ii)  REPS may, to the extent such postings do not require application of funds
in violation of this Agreement, post collateral to cover credit risk for
Post-Unwind Start Date Transactions to the Sleeve Provider or Accepted
Counterparties (in which case when such postings have either replaced or covered
all collateral postings by the Merrill Parties under this Agreement and
arrangements acceptable to the Sleeve Provider in its commercially reasonably
discretion for all potential future collateral postings have been made in
respect of such Post-Unwind Start Date Transactions, the liens of the Merrill
Parties under the Collateral Trust Agreement securing the Credit Sleeve
Obligations shall be released, and the Merrill Parties shall take action under
Section 12.04(c) in connection therewith); provided that for such purposes the
Sleeve Provider will be deemed to be commercially reasonable to the extent that
it applies standards for collateral postings comparable to the standards it
applies generally in its business to counterparties with similar credit ratings
in comparable transactions;

(iii)  the Reliant Retail Obligors may provide shared Liens on a pari passu
basis (or senior basis to the extent Section 9.02(b)(iii) applies) to any
Replacement Sleeve Providers under the terms, including the sharing provisions,
of the Collateral Trust Agreement (in which case the Merrill Parties shall take
action under Section 12.04(b) (or (e), as applicable), in connection therewith)
and the Merrill Parties agree to negotiate in good faith at the request of REPS
with any Replacement Sleeve Providers to make reasonable adjustments to the
terms of the Collateral Trust Agreement or any requested intercreditor terms in
connection therewith;

(iv)  REPS may provide the Sleeve Provider with a counterparty or counterparties
with a ML Equivalent Credit Rating who agree to take assignment of and assume
Reliant Retail’s positions under Post-Unwind Start Date Transactions, and the
Sleeve Provider

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agrees to negotiate in good faith with such counterparty or counterparties to
establish credit terms under which REPS positions can be assumed by such
counterparties under the standard credit policies of the Sleeve Provider (in
which case, the Liens of the Merrill Parties under the Collateral Trust
Agreement securing the Credit Sleeve Obligations shall be released following
such assumption, and the Merrill Parties shall take action under Section
12.04(c) in connection therewith); provided that for such purposes the Sleeve
Provider will be deemed to be acting in good faith to the extent that it applies
standards for credit terms comparable to the standards it applies generally in
its business to counterparties with similar credit ratings in comparable
transactions; and

(v)  REPS may provide the Sleeve Provider with a counterparty or counterparties
with a ML Equivalent Credit Rating, who agree to take assignment of and assume
or replace the ML Guarantees and Credit Support Agreements with respect to the
Post-Unwind Start Date Transactions, and the Sleeve Provider agrees to negotiate
in good faith with such counterparty or counterparties to effect such an
assignment and assumption or replacement (in which case, the Liens of the
Merrill Parties under the Collateral Trust Agreement securing the Credit Sleeve
Obligations shall be released following such assignment and assumption or
replacement, and the Merrill Parties shall take action under Section 12.04(c) in
connection therewith); provided that for such purposes the Sleeve Provider will
be deemed to be acting in good faith to the extent that it applies standards for
assignments and assumptions comparable to the standards it applies generally in
its business to counterparties with similar credit ratings in comparable
transactions.

(b)           At any time and from time to time in connection with such process,
the Merrill Parties and shall promptly execute and deliver any and all further
agreements and documents and take such other actions as REPS may reasonably
request to fully implement the intent of the foregoing provisions in this
Section 10.01.

 

                                Section 11.             Reimbursement Guaranty
by Other Reliant Retail Parties

 

                                11.01.                      Reimbursement
Guaranty of the Obligations.  Subject to the provisions of Section 11.02, the
Reimbursement Guarantors jointly and severally hereby irrevocably and
unconditionally guaranty to the Merrill Parties (i) the due and punctual payment
in full of all Reimbursement Obligations and all other amounts payable by REPS
to the Merrill Parties under the Transaction Documents when the same shall
become due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. Section 362(a)) and (ii) the performance of all other
obligations of REPS hereunder (collectively, the “Guaranteed Obligations”).

 

                                11.02.                      Payment by
Guarantors.  The Reimbursement Guarantors hereby jointly and severally agree, in
furtherance of the foregoing and not in limitation of any other right which any
Merrill Party may have at law or in equity against any Reimbursement Guarantor
by virtue hereof, that upon the failure of REPS to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the

 

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operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)), the Reimbursement Guarantors will upon demand pay, or
cause to be paid, in accordance with the terms of this Agreement, to the Merrill
Parties, an amount equal to the sum of the unpaid principal amount of all
Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on
such Guaranteed Obligations (including interest which, but for REPS’s becoming
the subject of a case under the Bankruptcy Code, would have accrued on such
Guaranteed Obligations, whether or not a claim is allowed against REPS for such
interest in the related bankruptcy case) and all other Guaranteed Obligations
then owed to the Merrill Parties as aforesaid.

 

                                11.03.      Liability of Reimbursement
Guarantors Absolute.  Each Reimbursement Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guaranteed
Obligations.  In furtherance of the foregoing and without limiting the
generality thereof, each Reimbursement Guarantor agrees as follows:

(a)  this Reimbursement Guaranty is a guaranty of payment when due and not of
collectability.  This Reimbursement Guaranty is a primary obligation of each
Reimbursement Guarantor and not merely a contract of surety;

(b)  the obligations of each Reimbursement Guarantor hereunder are independent
of the obligations of REPS and the obligations of any other guarantor (including
any other Reimbursement Guarantor) of the obligations of REPS, and a separate
action or actions may be brought and prosecuted against such Reimbursement
Guarantor whether or not any action is brought against REPS or any of such other
guarantors and whether or not REPS is joined in any such action or actions;

(c)  payment by any Reimbursement Guarantor of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge any
Reimbursement Guarantor’s liability for any portion of the Guaranteed
Obligations which has not been paid; and without limiting the generality of the
foregoing, if the Merrill Parties is awarded a judgment in any suit brought to
enforce any Reimbursement Guarantor’s covenant to pay a portion of the
Guaranteed Obligations, such judgment shall not be deemed to release such
Reimbursement Guarantor from its covenant to pay the portion of the Guaranteed
Obligations that is not the subject of such suit, and such judgment shall not,
except to the extent satisfied by such Reimbursement Guarantor, limit, affect,
modify or abridge any other Reimbursement Guarantor’s liability hereunder in
respect of the Guaranteed Obligations;

(d)  any Merrill Party, upon such terms as it deems appropriate, without notice
or demand and without affecting the validity or enforceability hereof or giving
rise to any reduction, limitation, impairment, discharge or termination of any
Reimbursement Guarantor’s liability hereunder, from time to time may (i) renew,
extend, accelerate, increase the rate of interest on, or otherwise change the
time, place, manner or terms of payment of the Guaranteed Obligations; (ii)
settle, compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the

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Guaranteed Obligations or any agreement relating thereto and/or subordinate the
payment of the same to the payment of any other obligations; (iii) request and
accept other guaranties of the Guaranteed Obligations and take and hold security
for the payment hereof or the Guaranteed Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or
modify, with or without consideration, any security for payment of the
Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or
any other obligation of any Person (including any other Reimbursement Guarantor)
with respect to the Guaranteed Obligations; (v) enforce and apply any security
now or hereafter held by or for the benefit of such Merrill Party in respect
hereof or the Guaranteed Obligations and direct the order or manner of sale
thereof, or exercise any other right or remedy that such Merrill Party may have
against any such security, in each case as such Merrill Party in its discretion
may determine consistent herewith or any applicable security agreement,
including foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable, and even though such action operates to impair or extinguish any
right of reimbursement or subrogation or other right or remedy of any
Reimbursement Guarantor against REPS or any security for the Guaranteed
Obligations; and (vi) exercise any other rights available to it under the
Transaction Documents; and

(e)  this Reimbursement Guaranty and the obligations of the Reimbursement
Guarantors hereunder shall be valid and enforceable and shall not be subject to
any reduction, limitation, impairment, discharge or termination for any reason
(other than payment in full of the Guaranteed Obligations), including the
occurrence of any of the following, whether or not any Reimbursement Guarantor
shall have had notice or knowledge of any of them: (i) any failure or omission
to assert or enforce or agreement or election not to assert or enforce, or the
stay or enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right, power or remedy
(whether arising under the Transaction Documents, at law, in equity or
otherwise) with respect to the Guaranteed Obligations or any agreement relating
thereto, or with respect to any other guaranty of or security for the payment of
the Guaranteed Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including provisions relating to events of default) hereof, any of
the other Transaction Documents or any agreement or instrument executed pursuant
thereto, or of any other guaranty or security for the Guaranteed Obligations, in
each case whether or not in accordance with the terms hereof or such Transaction
Document or any agreement relating to such other guaranty or security; (iii) the
Guaranteed Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect; (iv) any Merrill
Party’s consent to the change, reorganization or termination of the corporate
structure or existence of REPS or any of its Subsidiaries and to any
corresponding restructuring of the Guaranteed Obligations; (v) any failure to
perfect or continue perfection of a security interest in any collateral which
secures any of the Guaranteed Obligations; and (vi) any other act or thing or
omission, or delay to do any other act or thing, which may or might in any
manner or to any extent vary the risk of any Reimbursement Guarantor as an
obligor in respect of the Guaranteed Obligations.

 

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                                11.04.      Waivers by Reimbursement
Guarantors.  Each Reimbursement Guarantor hereby waives, for the benefit of the
Merrill Parties: (a) any right to require any Merrill Party, as a condition of
payment or performance by such Reimbursement Guarantor, to (i) proceed against
REPS, any other guarantor (including any other Reimbursement Guarantor) of the
Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any
security held from REPS, any such other guarantor or any other Person, (iii)
proceed against or have resort to any balance of any Collateral Account or
credit on the books of any Merrill Party in favor of REPS or any other Person,
or (iv) pursue any other remedy in the power of any Merrill Party whatsoever;
(b) any defense arising by reason of the incapacity, lack of authority or any
disability of REPS or any other Reimbursement Guarantor including any defense
based on or arising out of the lack of validity or the unenforceability of the
Guaranteed Obligations or any agreement or instrument relating thereto; (c) any
defense based upon any statute or rule of law which provides that the obligation
of a surety must be neither larger in amount nor in other respects more
burdensome than that of the principal; (d) (i) any principles or provisions of
law, statutory or otherwise, which are or might be in conflict with the terms
hereof, to the extent the same may be waived, (ii) the benefit of any statute of
limitations affecting such Reimbursement Guarantor’s liability hereunder or the
enforcement hereof, and (iii) promptness, diligence and any requirement that any
Merrill Party protect, secure, perfect or insure any security interest or lien
or any property subject thereto; (e) notices, demands, presentments, protests,
notices of protest, notices of dishonor and notices of any action or inaction,
including acceptance hereof, notices of default hereunder or under any agreement
or instrument related thereto, notices of any renewal, extension or modification
of the Guaranteed Obligations or any agreement related thereto, notices of any
extension of credit to REPS and notices of any of the matters referred to in
Section 11.04; and (f) any other defenses or benefits that may be derived from
or afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms hereof.

                                11.05.      Reimbursement Guarantors’ Rights of
Subrogation, Contribution, etc.  Until the Guaranteed Obligations shall have
been indefeasibly paid in full, each Reimbursement Guarantor hereby agrees not
to exercise any claim, right or remedy, direct or indirect, that such
Reimbursement Guarantor now has or may hereafter have against REPS or any other
Reimbursement Guarantor or any of its assets in connection with this
Reimbursement Guaranty or the performance by such Reimbursement Guarantor of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise and
including (a) any right of subrogation, reimbursement or indemnification that
such Reimbursement Guarantor now has or may hereafter have against REPS with
respect to the Guaranteed Obligations, (b) any right to enforce, or to
participate in, any claim, right or remedy that any Merrill Party now has or may
hereafter have against REPS, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by any Merrill
Party.  In addition, until the Guaranteed Obligations shall have been
indefeasibly paid in full, each Reimbursement Guarantor shall withhold exercise
of any right of contribution such Reimbursement Guarantor may have against any
other guarantor (including any other Reimbursement Guarantor) of the Guaranteed
Obligations, including any such right of contribution as contemplated by Section
11.02.  Each Reimbursement Guarantor further agrees that, to the extent the
agreement to withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation,

 

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reimbursement or indemnification such Reimbursement Guarantor may have against
REPS or against any collateral or security, and any rights of contribution such
Reimbursement Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights any Merrill Party may have against REPS, to
all right, title and interest any Merrill Party may have in any such collateral
or security, and to any right any Merrill Party may have against such other
guarantor.  If any amount shall be paid to any Reimbursement Guarantor on
account of any such subrogation, reimbursement, indemnification or contribution
rights at any time when all Guaranteed Obligations shall not have been finally
and indefeasibly paid in full, such amount shall be held in trust for the
Merrill Parties and shall forthwith be paid over to the Merrill Parties to be
credited and applied against the Guaranteed Obligations, whether matured or
unmatured, in accordance with the terms hereof.

 

                                11.06.      Subordination of Other Obligations. 
Any Indebtedness of REPS or any Reimbursement Guarantor now or hereafter held by
any Reimbursement Guarantor (the “Obligee Guarantor”) is hereby subordinated in
right of payment to the Guaranteed Obligations during the existence of a Reliant
Event of Default, and any such indebtedness collected or received by the Obligee
Guarantor during the existence of a Reliant Event of Default shall be held in
trust for the Merrill Parties and shall forthwith be paid over to the Merrill
Parties to be credited and applied against the Guaranteed Obligations but
without affecting, impairing or limiting in any manner the liability of the
Obligee Guarantor under any other provision hereof.

 

                                11.07.      Continuing Reimbursement Guaranty. 
This Reimbursement Guaranty is a continuing guaranty and shall remain in effect
until all of the Guaranteed Obligations shall have been indefeasibly paid in
full.  Each Reimbursement Guarantor hereby irrevocably waives any right to
revoke this Reimbursement Guaranty as to future transactions giving rise to any
Guaranteed Obligations.

 

                                11.08.      Authority of Reimbursement
Guarantors or REPS.  It is not necessary for any Merrill Party to inquire into
the capacity or powers of any Reimbursement Guarantor or REPS or the officers,
directors or any agents acting or purporting to act on behalf of any of them.

 

                                11.09.      Financial Condition of REPS.  Any
Reimbursement Guarantee may be made to REPS or continued from time to time,
without notice to or authorization from any Reimbursement Guarantor regardless
of the financial or other condition of REPS at the time of any such grant or
continuation.  No Merrill Party shall have any obligation to disclose or discuss
with any Reimbursement Guarantor its assessment, or any Reimbursement
Guarantor’s assessment, of the financial condition of REPS.  Each Reimbursement
Guarantor has adequate means to obtain information from REPS on a continuing
basis concerning the financial condition of REPS and its ability to perform its
obligations under the Transaction Documents, and each Reimbursement Guarantor
assumes the responsibility for being and keeping informed of the financial
condition of REPS and of all circumstances bearing upon the risk of nonpayment
of the Guaranteed Obligations.  Each Reimbursement Guarantor hereby waives and
relinquishes any duty on the part of any Merrill Party to disclose any matter,
fact or thing relating to the business, operations or conditions of REPS now
known or hereafter known by any Merrill Party.

 

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                                11.10.                      Bankruptcy, etc.

(a)  So long as any Guaranteed Obligations remain outstanding, no Reimbursement
Guarantor shall, without the prior written consent of Merrill Parties acting
pursuant to the instructions of Requisite Lenders, commence or join with any
other Person in commencing any bankruptcy, reorganization or insolvency case or
proceeding of or against REPS or any other Reimbursement Guarantor or admit in
writing or in any legal proceeding that it is unable to pay its debts as they
become due.  The obligations of Reimbursement Guarantors hereunder shall not be
reduced, limited, impaired, discharged, deferred, suspended or terminated by any
case or proceeding, voluntary or involuntary, involving the bankruptcy,
insolvency, receivership, reorganization, liquidation or arrangement of REPS or
any other Reimbursement Guarantor or by any defense which REPS or any other
Reimbursement Guarantor may have by reason of the order, decree or decision of
any court or administrative body resulting from any such proceeding.

 

(b)  Each Reimbursement Guarantor acknowledges and agrees that any interest on
any portion of the Guaranteed Obligations which accrues after the commencement
of any case or proceeding referred to in clause (a) above (or, if interest on
any portion of the Guaranteed Obligations ceases to accrue by operation of law
by reason of the commencement of such case or proceeding, such interest as would
have accrued on such portion of the Guaranteed Obligations if such case or
proceeding had not been commenced) shall be included in the Guaranteed
Obligations because it is the intention of Reimbursement Guarantors and Merrill
Parties that the Guaranteed Obligations which are guaranteed by Reimbursement
Guarantors pursuant hereto should be determined without regard to any rule of
law or order which may relieve REPS of any portion of such Guaranteed
Obligations.  Reimbursement Guarantors will permit any trustee in bankruptcy,
receiver, debtor in possession, assignee for the benefit of creditors or similar
person to pay the Merrill Parties, or allow the claim of the Merrill Parties in
respect of, any such interest accruing after the date on which such case or
proceeding is commenced.

(c)  In the event that all or any portion of the Guaranteed Obligations are paid
by REPS, the obligations of Reimbursement Guarantors hereunder shall continue
and remain full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Merrill Party as a preference, fraudulent
transfer or otherwise, and any such payments which are so rescinded or recovered
shall constitute Guaranteed Obligations for all purposes hereunder.

 

                                Section 12.             Miscellaneous.

 

                                12.01.                      Notices.  All
notices and other communications provided for herein shall be in writing,
including telecopy and electronic mail, and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy or other means of electronic transmission approved in advance by the
recipient party, as follows:

 

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(a)           if to the REPS:

 

 

RELIANT ENERGY POWER SUPPLY, LLC

1000 Main Street

Houston, Texas  77002

Attention:  Andrew C. Johannesen

Telephone No.:  (713) 497-6417

Telecopy No.:    (713) 497-9289

E-Mail:  AJohannesen@reliant.com

 

with a copy to:

 

RELIANT ENERGY POWER SUPPLY, LLC

1000 Main Street

Houston, Texas  77002

Attention:  Michael L. Jines

Telephone No.:  (713) 497-7465

Telecopy No.:    (713) 497-0140

E-Mail:  MJines@reliant.com

 

 

(b)           if to the Sleeve Provider:

 

MERRILL LYNCH COMMODITIES, INC.

20 East Greenway Plaza

Suite 700

Houston, Texas  77046

Attention:  Legal Department

Telephone No.:  (713) 544-5263

Telecopy No.:    (713) 544-5551

E-Mail: reliantsleeve_notices@ml.com

 

(c)           if to the ML Guarantee Provider:

 

MERRILL LYNCH & CO., INC.

222 Broadway

17th Floor

New York, New York  10038

Attention:  Office of General Counsel

Telephone No.:  (212) 670-0434

Telecopy No.:    (212) 670-4703

E-Mail:  reliantsleeve_notices@ml.com

 

Any Party hereto may change its address, telecopy number or e-mail address for
notices and other communications hereunder by notice to the other Party hereto. 
All notices and other communications given to any Party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt.

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                                12.02.      Confidentiality; Limitation on Use
of Information.  (a)  Any information made available by one Party to another
Party with respect to this Agreement is confidential and shall not be discussed
with or disclosed to any third party, except for such information (i) as may
become generally available to the public other than as a result of a violation
of this Agreement, (ii) as may be required or appropriate in response to any
summons, subpoena, or otherwise in connection with any litigation or to comply
with any applicable law, order, regulation, or ruling or to the extent requested
by any regulatory authority, (iii) which becomes available to a Party on a
non-confidential basis from a source other than the other Party, (iv) as may be
furnished to any person or entity (including that Party’s auditors, attorneys,
advisors, Information Technology Personnel, or financial institutions) with
which the Party has a written agreement or which are otherwise required to keep
the information that is disclosed in confidence, (v) relating to the U.S.
Federal income tax treatment and tax structure of the transactions contemplated
by this Agreement, including all relevant materials relating to such tax
treatment and tax structure (except where confidentiality is reasonably
necessary to comply with the securities laws) or (vi) to the extent required by
Section 7.01 of the Collateral Trust Agreement; provided that Proprietary
Information of a Party shall be shared by the other Party in accordance with
clauses (iv) or (vi) only on a “need to know” or “need to have access” basis). 
Notwithstanding the foregoing, the existence and terms of the ML Guarantees
shall not be considered confidential information.

 

                (b)           In addition to the confidentiality restrictions
with respect to third parties in paragraph (a) above, the Merrill Parties agree
that:

 

(i)            the confidential information of the Reliant Retail Obligors will
not be used by the Merrill Parties except for determining compliance with, and
performance under, the Transaction Documents; and

 

                (ii)           With respect to the information provided to the
Merrill Parties pursuant to Schedule 1.01(c) or otherwise relating to the
transactions or market positions of the Reliant Retail Obligors (“Retail
Proprietary Information”), access to such information will be limited to (A) the
personnel listed on Exhibit I1 and their successors in function with respect to
this Agreement and the personnel of the Merrill Parties that are described in
any updates to such Exhibit provided by the Sleeve Provider from time to time
for such purposes (“Merrill Updates”), subject to the approval of REPS, which
shall not be unreasonably withheld or delayed and (B) information technology
personnel engaged in the operation or maintenance of the information technology
systems used by the Merrill Parties operating within the scope of their duties
(including third-party service providers subject to Section 12.02(a)) (“ML
Information Technology Personnel”); provided that no such personnel shall be
engaged in placing trades in the wholesale electricity or natural gas markets
except under the Transaction Documents.  For the avoidance of doubt, Merrill
Updates and the related REPS approval may be provided via “e-mail” transmission
pursuant to Section 12.01.

 

                (c)           In addition to the confidentiality restrictions
with respect to third parties in paragraph (a) above, the Reliant Retail
Obligors agree that:

 

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(i)            the confidential information of the Merrill Parties will not be
used by the Reliant Retail Obligors except for determining compliance with, and
performance under, the Transaction Documents; and

 

                (ii)           With respect to the information provided to the
Reliant Retail Obligors pursuant to Schedule 1.01(c) or otherwise relating to
transactions, market positions, cost of funds or other market information of the
Merrill Parties (including the information set forth in the proviso below,
“Merrill Proprietary Information” and, together with Retail Proprietary
Information, “Proprietary Information”), access to such information will be
limited to (A) the personnel listed on Part A of Exhibit I2 and their successors
in function with respect to this Agreement and the personnel that are described
in any updates to Part A of such Exhibit provided by the Reliant Retail Obligors
from time to time for such purposes (“Reliant Updates”), subject to the approval
of the Sleeve Provider, which shall not be unreasonably withheld or delayed and
(B) information technology personnel engaged in the operation or maintenance of
the information technology systems used by the Reliant Retail Obligors operating
within the scope of their duties (including third-party service providers
subject to Section 12.02(a))(“Retail Information Technology Personnel, and
together with ML Information Technology Personnel, “Information Technology
Personnel”); provided that proprietary commodity and pricing curves (including
curves relating to power, gas, basis, volatilities and skews), the CD ROM
referred to in Schedule 1.01(c) and the General Principles referred to in
Schedule 1.01(c) will be limited to (A) the personnel listed on Part B of
Exhibit I2 and their successors in function with respect to this Agreement and
the personnel that are described in any updates to Part B of such Exhibit
provided by the Reliant Retail Obligors from time to time for such purposes,
subject to the approval of the Sleeve Provider, which shall not be unreasonably
withheld or delayed and (B) Retail Information Technology Personnel.  For the
avoidance of doubt, Reliant Updates and the related Sleeve Provider approval may
be provided via “e-mail” transmission pursuant to Section 12.01.

 

 

(d)           In connection with the foregoing provisions of this Section 12.02,
(A) the Parties recognize that the Parties are both engaged in wholesale trading
activities in the gas and electricity markets that may from time to time be
adverse, (B) the possession by the Merrill Parties of the confidential
information of the Reliant Retail Obligors, or the possession by the Reliant
Retail Obligors of the confidential information of the Merrill Parties, in
compliance with the foregoing does not constitute a reason for one Party to
limit the ability of the other Party to engage in such adverse trading
activities, and (C) the Parties may in compliance with the foregoing and for the
purposes of the Transaction Documents discuss the confidential information of
the other Parties (other than the Proprietary Information of the other Parties)
internally.

 

 

                                12.03.      Reliant Employees.  For a period of
three years from the Execution Date, the Merrill Parties shall not solicit or
otherwise induce any director, officer or key employee of the Reliant Retail
Obligors, or any officer or key employee of the Reliant Parent or its
Subsidiaries that is actively involved in the negotiation or administration of
this Agreement to

 

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leave the employ of the Reliant Retail Obligors, the Reliant Parent or its
Subsidiaries; provided that (a) this prohibition shall not apply to (i)
directors, officers or key employees of the Reliant Retail Obligors or officers
or key employees of the Reliant Parent or its Subsidiaries who are not full time
employees or who are not actively involved with the Merrill Parties in
negotiating on or administering this Agreement or (ii) officers, directors or
key employees of the Reliant Retail Obligors, the Reliant Parent or its
Subsidiaries who respond to general solicitations or who otherwise independently
seek employment without inducement by any Merrill Party and (b) in the event
that (i) the Reliant Parent or any Subsidiary of the Reliant Parent that
provides services to the Reliant Retail Obligors under the Reliant Parent
Services Agreement becomes subject of a bankruptcy, insolvency or similar
proceeding or (ii) the Reliant Parent Services Agreement is terminated, this
prohibition shall not apply with respect to any such officer or employee of the
Reliant Parent or any of its Subsidiaries who provided services to the Reliant
Retail Obligors under the Reliant Parent Services Agreement.

 

                                12.04.      Provisions relating to Collateral
Trust Agreement and Reimbursement Guarantee.  (1)          The Merrill Parties
hereby agree in favor of the Collateral Trustee, the Secured Counterparties, and
the Reliant Retail Obligors to perform, comply with, and be bound by each of the
covenants, agreements, and obligations contained in the Collateral Trust
Agreement to the extent applicable to the Merrill Parties as Secured
Counterparties under the Collateral Trust Agreement.

 

(2)           The Merrill Parties hereby agree that at the direction of REPS
from time to time and to the extent no Default with respect to a Reliant Event
of Default or Reliant Event of Default exists and no such Default or Reliant
Event of Default would be caused thereby, the Merrill Parties shall or shall
direct the Collateral Trustee, as applicable, to:

 

                (a)           accept additional Collateral in accordance with
Section 2.03 of the Collateral Trust Agreement;

 

                (b)           accept Replacement Sleeve Providers and
Replacement Working Capital Providers and their respective agreements as
additional secured counterparties and secured agreements in accordance with
Section 3.01 and 3.03 of the Collateral Trust Agreement;

 

                (c)           remove the Merrill Parties as secured
counterparties with respect to the Credit Sleeve Obligations in accordance with
Section 3.02 and 3.03 of the Collateral Trust Agreement (A) upon the occurrence
of the Credit Sleeve Termination Date (or, if any Merrill Party is the sole
secured counterparty under the Collateral Trust Agreement upon the occurrence of
the Credit Sleeve Termination Date, at the direction of REPS release all of the
Collateral in accordance with Section 2.07 of the Collateral Trust Agreement);
(B) under the circumstances expressly contemplated by Section 10.01(a)(i),
10.01(a)(ii), 10.01(a)(iv) and 10.01(a)(v) (or, if any Merrill Party is the sole
secured counterparty under the Collateral Trust Agreement at the time of the
occurrence of the events and circumstances set forth in such Sections, at the
direction of REPS release all of the Collateral in accordance with Section 2.07
of the Collateral Trust Agreement);

 

                (d)           with respect to, and to the extent of, property
constituting Collateral that is, or will

 

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be, sold or otherwise transferred or disposed of in connection with any
transaction permitted under this Agreement, release or confirm the release of
such Collateral under Sections 2.04, 2.05  or 2.06 of the Collateral Trust
Agreement, as applicable; provided that (i) to the extent that such sale,
transfer or other disposition is of all of the Equity Interests in a Subsidiary,
the Merrill Parties shall also instruct the Collateral Trustee to release all of
the assets of such Subsidiary that constitute Collateral, (ii) to the extent
that such sale, transfer or other disposition is of all or substantially all of
the assets of a Subsidiary, the Merrill Parties shall also instruct the
Collateral Trustee to release all of the Equity Interests in such Subsidiary
that constitute Collateral and (iii) make or approve any conforming changes
reasonably requested by REPS in the Security Documents necessary to implement
such release in the reasonable discretion of the Merrill Parties;

 

                (e)           to the extent expressly contemplated by Section
9.02(b)(iii), cause all Secured Obligations of the Merrill Parties under the
Collateral Trust Agreement to become Subordinated Secured Obligations under the
Collateral Trust Agreement;

 

                (f)            enter into intercreditor agreements with respect
to the Credit  Sleeve Obligations in accordance with, and to the extent,
expressly contemplated by Section 10.01(a)(iii) and Article IX of the Collateral
Trust Agreement; and

 

                (g)           amend, restate, supplement, modify, renew or
replace, or forbear from exercising any rights with respect to the terms or
provisions contained in, or cancel, terminate or suspend performance under, any
Security Document, or consent to the taking of any of the foregoing actions with
respect to any other Transaction Document, in each case to the extent such
foregoing action is approved by the Sleeve Provider in accordance with Section
7.11 hereof.

 

The Merrill Parties shall timely execute and deliver, provide, return or
otherwise make available or direct the execution and delivery, provision, return
or otherwise making available of all filings, recordings, notices, and other
related documents and agreements, including releases and notices, directions and
other communications to the Collateral Trustee, reasonably required to implement
the foregoing in accordance with the terms of the foregoing.

 

                                12.05.      Waiver.  No failure on the part of
any Party to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.  The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.

 

                                12.06.      Amendments, Etc..  Except as
otherwise expressly provided in this Agreement, any provision of this Agreement
or in any other Transaction Document between or among any of the Merrill
Parties, on one hand, and any of the Reliant Retail Obligors, on the other hand,
may be modified or supplemented only by an instrument in writing signed by the
applicable Parties thereto.

 

 

 

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                                12.07.      Expenses, Etc.

(a)           REPS agrees to pay or reimburse the Sleeve Provider for:  (a) all
reasonable out-of-pocket costs and expenses of the Sleeve Provider (including
the reasonable fees and expenses of legal counsel) in connection with (1) any
Default by the Reliant Retail Obligors and any enforcement or collection
proceedings resulting therefrom, including all manner of participation in or
other involvement with (i) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, (ii) judicial or regulatory proceedings
and (iii) workout, restructuring or other negotiations or proceedings (whether
or not the workout, restructuring or transaction contemplated thereby is
consummated) and (2) the enforcement of this Section 12.07; and (b) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any of the other Transaction Documents or any other document referred to herein
or therein and all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection of
any security interest contemplated by any Security Document or any other
document referred to therein.

                (b)           REPS agrees to reimburse the Merrill Parties for
any amounts paid by the Merrill Parties (i) to cure defaults by REPS or any
Other Reliant Retail Obligor under any Transaction Document or any other
document, contract or agreement to which REPS or such Other Reliant Retail
Obligor is a party or (ii) to any software vendor relating to the use or
maintenance of software (a) used by the Reliant Retail Obligors or the IT Trust
in the Retail Energy Business or (b) to be used by the Reliant Retail Obligors
or the IT Trust in maintaining the Information Technology Systems or related
services needed to operate the Retail Energy Business at the best general
efficiency level of Information Technology Systems and related services used by
the Reliant Retail Obligors or the IT Trust before the time in question (the
amounts referred to in clauses (i) and (ii) being herein collectively referred
to as the “Deferred Cure Reimbursement Obligations”).  Deferred Cure
Reimbursement Obligations may be prepaid but shall mature and be payable on the
date that the Working Capital Facility matures (whether on the Maturity Date
under, and as defined in, the Working Capital Facility, by acceleration or
otherwise).

 

                                12.08.      Successors and Assigns.  This
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective successors and permitted assigns.  Except as expressly set
forth in Section 12.04(1), there shall be no third party beneficiaries of this
Agreement

 

                                12.09.      Assignments.  Neither the Reliant
Retail Obligors nor the Merrill Parties may assign any of their rights or
obligations hereunder without the prior written consent of the other Parties
hereto.

 

                                12.10.      Survival.  The obligations of REPS
under Section 12.07 and any other provision that expressly provides for survival
after termination shall survive the Credit Sleeve Termination Date.

 

 

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                                12.11.      Counterparts.  This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the Parties hereto may execute
this Agreement by signing any such counterpart.

 

                                12.12.      Governing Law; Jurisdiction; Etc.

 

(a)           Governing Law.  This Agreement shall be governed by, and construed
in accordance with, the law of the State of New York.

(b)           Submission to Jurisdiction.  The Parties hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of the Supreme Court of the State of New York sitting
in New York County (including its Appellate Division), and of any other
appellate court in the State of New York (the “New York Courts”), for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby.  Notwithstanding the nonexclusive
submission above:

(A)          With respect to any proceeding initiated by or on behalf of any
Reliant Retail Obligor arising out of or relating to this Agreement or the
transactions contemplated hereby, the Reliant Retail Obligors agree to bring
such proceeding exclusively in the United States District Court for the Southern
District of New York or if such court does not have subject matter jurisdiction
in any of the other New York Courts located in New York, New York, and in such
case EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING;

(B)           With respect to any proceeding initiated by or on behalf of any
Merrill Party arising out of or relating to this Agreement or the transactions
contemplated hereby, which the Merrill Parties elect to bring in the United
States District Court for the Southern District of New York or if such court
does not have subject matter jurisdiction in any of the other New York Courts
located in New York, New York, EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY SUCH LEGAL PROCEEDING; and

(C)           With respect to any proceeding initiated by or on behalf of any
Merrill Party arising out of or relating to this Agreement or the transactions
contemplated hereby, which the Merrill Parties elect to bring in the United
States District Court for the Southern District of Texas (Houston Division) or
if such court does not have subject matter jurisdiction in any of the other
Texas Courts located in Houston, Texas, the Reliant Retail Obligors expressly
reserve their rights to trial by jury.

(c)           Waiver of Venue.  Each Party hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.

 

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(d)           Service of Process.  Each Party to this Agreement irrevocably
consents to service of process in the manner provided for notices in
Section 12.01.  Nothing in this Agreement will affect the right of any Party to
this Agreement to serve process in any other manner permitted by law.

                                12.13.      Certain Dispute Resolution
Procedures.  If a Party (a “Disputing Party”) disputes any Market Information
forming a component used in a calculation under Sections 2.02(a)(iv)(2), (3),
and (4), then (i) the Disputing Party will notify the other Party not later than
the close of business on the Business Day following the date that Disputing
Party received the other Party’s calculation and such Disputing Party will also
provide its calculation of such amount and the applicable Market Information
used to make such calculation, (ii) the Parties will in good faith consult with
each other in an attempt to resolve the dispute and (iii) if the Parties fail to
resolve the dispute by the third (3rd) Business Day following the date the
notice of dispute was delivered, then the Calculation Agent will recalculate the
applicable calculation by: (A) utilizing any Market Information that the Parties
have agreed are not in dispute; and (B) calculating the component that is in
dispute by seeking four actual quotations at mid market from reference market
makers, and taking the arithmetic average of those obtained; provided that if
such number of quotations are not available for a particular component, then
fewer than such number of quotations may be used for such component; and if no
quotations are available for a particular component, then the Calculation Agent
shall use its own calculations for that component.  Following a recalculation
pursuant to this Section, the Calculation Agent will notify the Parties of the
recalculation of such amount not later than 12:00 noon CPT on the fifth Business
Day following the date of the notice of dispute was delivered, and the same
shall be binding for the purposes of this Agreement.  The “Calculation Agent”
shall be a third party agreed to by both REPS and the Sleeve Provider from the
list of third parties in Schedule 12.13; provided that if the Parties are unable
to promptly agree on such third party, then the next third party listed on such
Schedule who has not yet served as Calculation Agent shall be the Calculation
Agent for such dispute.

 

                                12.14.      Captions.  The table of contents and
captions and section headings appearing herein are included solely for
convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.

 

 

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                                12.15.      Limitation on Interest. 
Notwithstanding anything herein to the contrary, if at any time the interest
rate applicable to any Reimbursement Obligation, together with all fees, charges
and other amounts which are treated as interest on such Reimbursement Obligation
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Sleeve Provider in accordance with applicable law,
the rate of interest payable in respect of such Reimbursement Obligations
hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Reimbursement Obligation but
were not payable as a result of the operation of this Section shall be cumulated
and the interest and Charges payable to the Sleeve Provider in respect of other
Reimbursement Obligations or periods shall be increased (but not above the
Maximum Rate therefor) until such cumulated amount, together with interest
thereon at the Federal Funds Rate to the date of repayment, shall have been
received by the Sleeve Provider.

 

                                12.16.      Integration.  This Agreement and the
other Transaction Documents constitute the entire contract among the Parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof.

 

                                12.17.      Amendment and Restatement.  This
Agreement (i) represents an amendment and restatement of the Credit Sleeve and
Security Agreement dated as of September 24, 2006, as previously amended and
restated in connection with the occurrence of the Initial Effective Date as of
December 1, 2006, and (ii) is hereby amended and restated in connection with
RESE becoming an Other Reliant Retail Obligor as of the A&R Date.

 

[signatures follow]

 

 

 

 

 

 

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                                IN WITNESS WHEREOF, the Parties hereto have
caused this Agreement to be duly executed and delivered as of the day and year
first above written.

 

RELIANT ENERGY POWER SUPPLY, LLC

 

 

 

 

 

 

By:

/s/ Lloyd A. Whittington

 

 

Lloyd A. Whittington

 

 

Vice President and Treasurer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Credit Sleeve and Reimbursement Agreement

 

 

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MERRILL PARTIES

 

 

 

 

 

 

 

  MERRILL LYNCH COMMODITIES, INC.,

 

 

as Sleeve Provider

 

 

 

 

 

 

 

 

By:

/s/ Dennis Albrecht

 

Name:

Dennis Albrecht

 

Title:  

Managing Director

 

 

 

 

  MERRILL LYNCH & CO., INC.,

 

 

 

as ML Guarantee Provider

 

 

 

 

 

 

 

 

By:

/s/ Marlene Debel

 

Name:

Marlene Debel

 

Title:  

Assistant Treasurer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Credit Sleeve and Reimbursement Agreement

 

 

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OTHER RELIANT RETAIL OBLIGORS

 

    

RERH HOLDINGS, LLC

 

 

 

 

 

By:

 /s/ Lloyd A. Whittington

 

Lloyd A. Whittington

 

Assistant Treasurer

 

 

 

 

    

RELIANT ENERGY RETAIL HOLDINGS, LLC

 

 

 

 

 

By:

 /s/ Lloyd A. Whittington

 

Lloyd A. Whittington

 

Assistant Treasurer

 

 

 

 

 

RELIANT ENERGY RETAIL SERVICES, LLC

 

 

 

 

 

By:

 /s/ Lloyd A. Whittington

 

Lloyd A. Whittington

 

Vice President and Treasurer

 

 

 

 

    

RE RETAIL RECEIVABLES, LLC

 

 

 

By:

 /s/ Lloyd A. Whittington

 

Lloyd A. Whittington

 

Assistant Treasurer

 

 

 

 

    

RELIANT ENERGY SOLUTIONS EAST, LLC

 

 

 

By:

 /s/ Lloyd A. Whittington

 

Lloyd A. Whittington

 

Vice President and Treasurer

 

 

 

 

 

 

 

 

 

Signature Page to Credit Sleeve and Reimbursement Agreement

 

 

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