Exhibit 10.80
EXECUTION COPY
 
 
ASSET PURCHASE AGREEMENT
By and Among
RELIANT ENERGY CHANNELVIEW LP
And
RELIANT ENERGY SERVICES CHANNELVIEW LLC
AS SELLERS
And
KELSON ENERGY IV LLC
AS BUYER
Dated as of February 25, 2008
 
 

 

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TABLE OF CONTENTS

                      Page  
 
            ARTICLE 1 DEFINITIONS AND CONSTRUCTION     1  
 
           
      1.1.
  Definitions     1  
      1.2.
  Construction.     13  
 
            ARTICLE 2 PURCHASE AND SALE OF THE ACQUIRED ASSETS     14  
 
           
2.1.
  Transfer of Acquired Assets     14  
2.2.
  Excluded Assets     15  
2.3.
  Assumption of Liabilities     17  
2.4.
  Excluded Liabilities     17  
2.5.
  Non-Assignment of Assigned Contracts     18  
 
            ARTICLE 3 CONSIDERATION     20  
 
           
3.1.
  Purchase Price     20  
3.2.
  Deposit     20  
3.3.
  Post-Closing Adjustment.     20  
3.4.
  Allocation of Purchase Price     21  
3.5.
  Equistar Payment     21  
 
            ARTICLE 4 CLOSING AND DELIVERIES     22  
 
           
4.1.
  Closing     22  
4.2.
  Closing Deliveries by Sellers to Buyer     22  
4.3.
  Closing Deliveries by Buyer     23  
4.4.
  RES Fuel Purchase Transactions     24  
 
            ARTICLE 5 REPRESENTATIONS AND WARRANTIES REGARDING THE ACQUIRED
ASSETS     24  
 
           
5.1.
  Organization and Qualification; Authority     24  
5.2.
  No Conflicts; Consents and Approvals     25  
5.3.
  Subsidiaries     25  
5.4.
  Financial Statements     25  
5.5.
  Absence of Undisclosed Liabilities; Certain Developments     25  
5.6.
  Litigation     26  
5.7.
  Compliance with Laws     26  
5.8.
  Permits     26  
5.9.
  Contracts.     26  
5.10.
  Taxes     28  
5.11.
  Employee Benefit Plans; ERISA.     29  
5.12.
  Labor and Employment.     30  
5.13.
  Environmental Matters     31  
5.14.
  Intellectual Property     31  
5.15.
  Real Estate     32  
5.16.
  Insurance     32  
5.17.
  Federal Regulation     32  

 

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5.18.
  Brokers     32  
5.19.
  Conduct of Business and Operations     32  
5.20.
  Sufficiency of Assets     32  
 
            ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER     32  
 
           
6.1.
  Organization and Qualification     32  
6.2.
  Authority     33  
6.3.
  No Conflicts; Consents and Approvals     33  
6.4.
  Legal Proceedings     33  
6.5.
  Compliance with Laws and Orders     33  
6.6.
  Brokers     34  
6.7.
  Financial Resources     34  
6.8.
  No Knowledge of a Sellers’ Breach     34  
6.9.
  Opportunity for Independent Investigation     34  
 
            ARTICLE 7 COVENANTS     34  
 
           
7.1.
  Access.     34  
7.2.
  Conduct of Business Pending the Closing.     35  
7.3.
  Use of Certain Names     37  
7.4.
  Support Obligations.     37  
7.5.
  Termination of Certain Services, Contracts     38  
7.6.
  Insurance     39  
7.7.
  Tax Matters.     39  
7.8.
  Confidentiality.     40  
7.9.
  Employee and Benefit Matters.     40  
7.10.
  Public Announcements     44  
7.11.
  Expenses and Fees     45  
7.12.
  Regulatory and Other Approvals     45  
7.13.
  Further Assurances     46  
7.14.
  Schedule Update     46  
7.15.
  PUCT Matters     47  
7.16.
  Equistar Consents     47  
7.17.
  Boiler Feedwater Pump     47  
7.18.
  Fulfillment of Conditions     47  
7.19.
  Cure of Defaults     47  
7.20.
  2007 Financial Statements     47  
 
            ARTICLE 8 BANKRUPTCY PROCEDURES     48  
 
           
8.1.
  Bankruptcy Actions.     48  
 
            ARTICLE 9 CONDITIONS TO THE CLOSING     49  
 
           
9.1.
  Conditions to the Obligations of Each Party     49  
9.2.
  Conditions to the Obligations of Buyer     49  
9.3.
  Conditions to the Obligations of Sellers     50  
 
            ARTICLE 10 TERMINATION     51  
 
           
10.1.
  Termination     51  

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10.2.
  Effect of Termination     52  
10.3.
  Termination Fees.     52  
 
            ARTICLE 11 INDEMNIFICATION     53  
 
           
11.1.
  Survival     53  
11.2.
  Indemnification.     53  
11.3.
  Waiver of Other Representations.     55  
11.4.
  Waiver of Remedies; Certain Limitations     56  
11.5.
  Procedures for Indemnification     58  
11.6.
  Manner of Payment     59  
 
            ARTICLE 12 MISCELLANEOUS     59  
 
           
12.1.
  Notices     59  
12.2.
  Headings     60  
12.3.
  Assignment     60  
12.4.
  Governing Law     60  
12.5.
  Jurisdiction     60  
12.6.
  Counterparts     61  
12.7.
  Amendments; Extensions.     61  
12.8.
  Entire Agreement     61  
12.9.
  Severability     61  
12.10.
  Joint and Several     61  

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EXHIBITS

     
Exhibit A
  Form of Bill of Sale
Exhibit B
  Form of Assignment and Assumption Agreement (Contracts)
Exhibit C
  Form of Assignment and Assumption Agreement (Lease)
Exhibit D
  Form of RES Assignment and Assumption Agreement
Exhibit E
  Form of Sale Order
Exhibit F
  Interim Period Capital Expenditures
Exhibit G-1
  Administrative Services Transition Services Agreement
Exhibit G-2
  Fuel and Power Transition Services Agreement
Exhibit H
  Form of Escrow Agreement

DISCLOSURE SCHEDULES

     
Schedule 1.1(x)
  Knowledge of Sellers
Schedule 1.1(y)
  Knowledge of Buyer
Schedule 1.1(z)
  Buyer’s Energy Manager
Schedule 2.1(a)
  Real Estate Leases
Schedule 2.1(b)
  Entitled Real Property
Schedule 2.1(c)
  Equipment
Schedule 2.1(d)
  Supplier Contracts
Schedule 2.1(e)
  Other Contracts
Schedule 2.1(f)
  Inventory
Schedule 2.1(h)
  Permits
Schedule 2.1(g)
  Intellectual Property
Schedule 2.1(i)
  Business Records
Schedule 2.2(m)
  Reliant Marks
Schedule 2.2(p)
  Excluded Assets
Schedule 2.4
  Excluded Liabilities
Schedule 4.2(i)
  RES Agreements
Schedule 5.2(b)
  Company Consents
Schedule 5.2(c)
  Sellers’ Governmental Approvals
Schedule 5.4
  Financial Statements
Schedule 5.5
  Undisclosed Liabilities
Schedule 5.6
  Litigation
Schedule 5.7
  Compliance with Laws
Schedule 5.8
  Permits
Schedule 5.9(a)
  Contracts
Schedule 5.9(c)
  Excluded Contracts
Schedule 5.10
  Taxes
Schedule 5.11(a)
  Seller Affiliate Plans
Schedule 5.11(c)
  Favorable Determination Letters
Schedule 5.12(f)
  Seller Affiliate Plan Increases or Acceleration
Schedule 5.13
  Environmental Matters
Schedule 5.14
  Intellectual Property

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Schedule 5.15
  Real Estate
Schedule 6.3(c)
  Buyer’s Governmental Approvals
Schedule 7.2
  Conduct of Business Pending the Closing
Schedule 7.4(a)
  Support Obligations
Schedule 7.9(b)
  Non-Collective Bargaining Contract Employees
Schedule 8.1(b)
  Publications
Schedule 8.1(d)
  Bid Protections
Schedule 9.1(c)
  Certain Consents

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ASSET PURCHASE AGREEMENT
     THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of February 25,
2008 (the “Execution Date”), is made by and between Reliant Energy Channelview
LP, a Delaware limited partnership (“Channelview LP”) and Reliant Energy
Services Channelview LLC, a Delaware limited liability company (“RESC” and
together with Channelview LP, the “Sellers”) and Kelson Energy IV LLC, a
Delaware limited liability company (the “Buyer”).
RECITALS
     WHEREAS, Channelview LP owns the Channelview Facility and certain other
Acquired Assets;
     WHEREAS, on August 20, 2007, Channelview LP filed a voluntary petition for
relief under the Bankruptcy Code in the Bankruptcy Court;
     WHEREAS, RESC owns certain Acquired Assets;
     WHEREAS, on August 20, 2007, RESC filed a voluntary petition for relief
under the Bankruptcy Code in the Bankruptcy Court;
     WHEREAS, on the terms and subject to the conditions set forth in this
Agreement, Buyer desires to purchase from Sellers, and Sellers desire to sell to
Buyer, the Acquired Assets, in a sale authorized by the Bankruptcy Court
pursuant to, inter alia, sections 105, 363, and 365 of the Bankruptcy Code;
     WHEREAS, Buyer also desires to assume, and Sellers desire to assign and
transfer to Buyer, the Assumed Liabilities.
     NOW, THEREFORE, in consideration of the foregoing and their respective
representations, warranties, covenants and undertakings herein contained, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Sellers and Buyer hereby agree as follows:
ARTICLE 1
DEFINITIONS AND CONSTRUCTION
     1.1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
     “2007 Financial Statements” has the meaning set forth in Section 7.20.
     “Accounts Payable” has the meaning set forth in Section 2.4.
     “Accounts Receivable” has the meaning set forth in Section 2.2(c).
     “Acquired Assets” has the meaning set forth in Section 2.1.

 

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     “Administrative Services Transition Services Agreement” means that certain
Transition Services Agreement, to be dated as of the Closing Date, by and among
Operator and Buyer, in substantially the form of Exhibit G-1 hereto.
     “Adverse Ruling” means relief granted by the Bankruptcy Court to a third
party that the Buyer in good faith believes, based on the advice of counsel,
would adversely impact the relief provided in the Sale Order under Section
363(m) of the Bankruptcy Code.
     “Affiliate” means any Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Person specified. For purposes of this definition, control of a Person
means the power, direct or indirect, to direct or cause the direction of the
management and policies of such Person whether through ownership of voting
securities or ownership interests, by contract or otherwise, and specifically
with respect to a corporation, partnership, trust or limited liability company,
shall include direct or indirect ownership of more than 50% of the voting
securities in such corporation or of the voting interest in a partnership or
limited liability company or of the beneficial interest in a trust.
     “Agreement” has the meaning set forth in the Recitals to this Agreement.
     “Assigned Contracts” has the meaning set forth in Section 2.1(e).
     “Assumed Liabilities” has the meaning set forth in Section 2.3.
     “Assumption Agreements” has the meaning set forth in Section 4.2(b).
     “Bankruptcy Code” means Title 11 of the United States Code.
     “Bankruptcy Court” means the United States Bankruptcy Court for the
District of Delaware or such other court having jurisdiction over the Chapter 11
Cases originally administered in the United States Bankruptcy Court of the
District of Delaware.
     “Base Purchase Price” has the meaning set forth in Section 3.1(a).
     “Benefit Plan” means: (a) each “employee benefit plan,” as such term is
defined in Section 3(3) of ERISA, (b) each plan or program that would be an
employee benefit plan if it were subject to ERISA, such as foreign plans and
plans for directors, (c) each stock bonus, stock ownership, stock option, stock
purchase, restricted stock, stock appreciation rights, phantom stock, or other
equity plan (whether qualified or nonqualified), (d) each bonus, deferred
compensation or incentive compensation plan, and (e) any other material employee
benefit plan, program, contract, commitment, policy, agreement or arrangement of
any kind (including, any employment, consulting, retention, disability,
accident, savings and thrift, unemployment compensation, post-retirement, fringe
benefits, cafeteria plans, change in control or severance plan, policy,
arrangement or agreement providing compensation or benefits to any employee
(whether active or on leave of absence) and/or former employee of the Operator,
Sellers, their Affiliates or any Commonly Controlled Entity); provided, that
such term shall not include (1) routine employment policies and procedures,
including wage, vacation, holiday, and sick or other leave policies, (2) workers
compensation insurance, and (3) directors and officers liability insurance.

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     “Bid Procedures Order” has the meaning set forth in Section 8.1(d).
     “Business” means the business of generating and selling steam, electric
power, capacity and ancillary services from the Channelview Facility, as managed
by Channelview LP, or its Affiliates, on the date hereof; or, as applicable,
RESC’s business of purchasing power from third-parties and selling power to
Equistar pursuant to the Energy Supply Agreement, and any business activities of
Channelview LP or RESC incidental to the foregoing.
     “Business Day” means a day other than Saturday, Sunday or any day on which
banks located in the State of New York and the State of Texas are authorized or
obligated to close.
     “Business Records” means all books, files and records (whether in paper or
electronic format) to the extent they apply to the Acquired Assets or the
Business, including customer lists, historical customer files, reports, plans,
data, accounting and tax records, test results, product specifications,
drawings, diagrams, training manuals, procedures manuals, logs, engineering
data, safety and environmental reports and documents, maintenance schedules,
operating and production records, inventory records, business plans, and
marketing and all other studies, documents and records but excluding any
Retained Books and Records.
     “Buyer” has the meaning set forth in the Recitals to this Agreement.
     “Buyer Governmental Approvals” has the meaning set forth in Section 6.3(c).
     “Buyer Indemnified Group” means Buyer and Buyer’s Affiliates and their
respective officers, directors, managers, members, employees and agents.
     “Buyer Savings Plan” has the meaning set forth in Section 7.9(g).
     “Capital Expenditures” means expenditures for capital additions to, or
replacements of, property, plant and equipment included in the Channelview
Facility and other expenditures for repairs on property, plant and equipment
included in the Channelview Facility that would be capitalized by Sellers in
accordance with their normal capitalization policies, which are in accordance
with GAAP.
     “Change of Law” means the adoption, implementation, promulgation, repeal,
modification or reinterpretation of any Law of or by any Governmental Authority
which occurs subsequent to the Execution Date.
     “Channelview Facility” means the 830 MW combined cycle, cogeneration
facility located in Channelview, Texas, and all facilities and equipment owned
or leased by Channelview LP in connection with the Business.
     “Channelview Facility Employees” has the meaning set forth in
Section 5.12(a).
     “Channelview LP” has the meaning set forth in the Recitals to this
Agreement.
     “Channelview September 30 Balance Sheet” has the meaning set forth in
Section 5.5.

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     “Chapter 11 Cases” means collectively, the cases commenced under Chapter 11
of the Bankruptcy Code in the Bankruptcy Court by Channelview LP and RESC, and
which are jointly administered under case no. 07-11160 (MFW).
     “Charter Documents” means, with respect to any Person, the articles of
incorporation or organization and by-laws, the limited partnership agreement,
the partnership agreement or the limited liability company agreement, and/or
such other organizational documents of such Person, including those that are
required to be registered or kept in the place of incorporation, organization or
formation of such Person and which establish the legal personality of such
Person.
     “Claims” has the meaning set forth in Section 2.2(j).
     “Closing” has the meaning set forth in Section 4.1.
     “Closing Date” has the meaning set forth in Section 4.1.
     “Code” means the Internal Revenue Code of 1986, as amended.
     “Collective Bargaining Contract” means that certain Agreement, effective as
of January 1, 2004, between Reliant Energy Corporate Services, LLC, as successor
by merger to Reliant Energy Power Operations I, Inc., and the International
Brotherhood of Electrical Workers Local Union No. 66 Houston, Texas.
     “Commonly Controlled Entity” means any trade or business, whether or not
incorporated, that, together with either Seller, would be a “single employer”
within the meaning of Section 4001(b) of ERISA.
     “Company Consents” has the meaning set forth in Section 5.2(b).
     “Confidentiality Agreement” has the meaning set forth in Section 7.8(a).
     “Consent” means any consent, approval, authorization, qualification, waiver
or notification of a Governmental Authority or other Person.
     “Continuing Employee” means each individual who accepts an offer of
employment from Buyer or its designee as provided in Section 7.9(b), reports to
work with Buyer or its designee, and is hired by Buyer or its designee.
     “Contract” means any written contract, agreement, instrument, bond,
commitment, lease, license, evidence of indebtedness, mortgage, indenture,
purchase order, binding bid, letter of credit, security agreement or other
written legally binding arrangement.
     “Court Auction Determination” has the meaning set forth in Section 8.1(d).
     “Credit Agreement” means that certain Credit Agreement, dated as of
December 15, 1999, as amended, among Channelview LP, the Lenders parties
thereto, The Bank of New York,

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as successor Administrative Agent and Collateral Agent, and Teachers Insurance
and Annuity Association of America, as Institutional Agent.
     “Credit Rating” means, with respect to any Person, each rating given by
Standard & Poor’s or Moody’s, as applicable, to such Person’s long-term,
unsecured, unsubordinated debt obligations not supported by third party credit
enhancement.
     “Cure Cost Reserve Amount” has the meaning set forth in Section 7.19.
     “Cure Costs” means all (i) cure costs required to be paid and all defaults
required to be cured as a condition to assumption and assignment of the Assigned
Contracts pursuant to section 365 of the Bankruptcy Code and (ii) all
contingent, unliquidated or unmatured liabilities under such Assigned Contracts
or under any subcontracts related thereto (whether or not such subcontracts are
Assigned Contracts) arising prior to the Closing Date.
     “Deposit” has the meaning set forth in Section 3.2.
     “Disclosure Schedules” has the meaning set forth in Section 2.1(a).
     “Emission Allowances” means authorizations to emit specified units of
substances, whether those authorizations are described as allowances, offsets,
credits or by another term, from the Channelview Facility that are allocated to
the Channelview Facility and owned by Channelview LP as of the time of Closing,
or to which the Channelview Facility becomes entitled to after Closing, which
units are established by any Governmental Authority with jurisdiction over the
Channelview Facility.
     “Energy Manager” means any one of the entities set forth on Schedule 1.1(z)
or another energy manager, which may be an Affiliate of Buyer, reasonably
satisfactory to Sellers or RES, as applicable.
     “Energy Supply Agreement” means that certain Second Amended and Restated
Energy Supply Agreement, dated as of December 15, 1999, by and between Equistar
and RESC.
     “Entitled Real Property” has the meaning set forth in Section 2.1(b).
     “Environmental Law” means any federal, state, or local law, statute,
ordinance, rule, regulation, code, directive, judicial or administrative order,
judgment, decree, injunction, or requirement of any Governmental Authority,
relating to (a) pollution or the protection, preservation or restoration of the
environment (including air, water vapor, surface water, groundwater, surface
land, subsurface land and natural resources), as the same may be amended or
adopted as of the Closing Date or any date prior to the Closing Date,
(b) Releases or threatened Releases (including, without limitation, Releases
into the ambient air, surface water, groundwater, land, surface and subsurface
strata) or otherwise relating to Hazardous Substances; or (c) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, testing, discharge, control, cleanup, production, or disposal of
Hazardous Substances.
     “Equipment” has the meaning set forth in Section 2.1(c).

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     “Equistar” means Equistar Chemicals LP, a Delaware limited partnership.
     “ERCOT” means the Electric Reliability Counsel of Texas.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.
     “Escrow Agent” means Wilmington Trust Company the escrow agent under the
Escrow Agreement.
     “Escrow Agreement” means the escrow agreement by and between Sellers, Buyer
and the Escrow Agent, in substantially the form of Exhibit H.
     “Estimated Purchase Price” has the meaning set forth in Section 4.3(a).
     “Excluded Assets” has the meaning set forth in Section 2.2.
     “Excluded Liabilities” has the meaning set forth in Section 2.4.
     “Execution Date” has the meaning set forth in the Recitals to this
Agreement.
     “FERC” means the Federal Energy Regulatory Commission.
     “Final Purchase Price” has the meaning set forth in Section 3.3(c).
     “Fuel and Power Transition Services Agreement” means that certain
Transition Services Agreement, to be dated as of the Closing Date, by and among
RES and Buyer, in substantially the form of Exhibit G-2 hereto.
     “Fuel Purchase and Sale Agreement” means that certain Fuel Purchase and
Sale Agreement, dated as of December 15, 1999, by and among RES, Channelview LP
and Equistar.
     “Fuel Supply Agreement” has the meaning set forth in Section 2.5.
     “FutureCare Program” has the meaning set forth in Section 7.9(b).
     “GAAP” means generally accepted accounting principles in the United States
of America.
     “Generator Operator” has the meaning set forth in Section 5.7.
     “Governmental Authority” means (i) any federal, state, local, or foreign
government, (ii) any court, tribunal, arbitrator, authority, agency,
administrative body, taxing authority, commission, official or other
instrumentality of the United States or any state, county, city, municipality,
local authority or other political subdivision or similar governing entity, and
(iii) any governmental, quasi—governmental or non-governmental body
administering, regulating or having general oversight over gas, electricity,
power or other markets, including ERCOT, the Texas Regional Entity and NERC.

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     “Hazardous Substance” means any chemical, material or substance in any
form, whether solid, liquid, gaseous, semisolid, or any combination thereof,
whether waste material, raw material, chemical, finished product, byproduct, or
any other material or article, listed, defined, designated, regulated or
classified as a pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, solid waste, or special waste, or that is otherwise listed or
regulated, or as to which liability could be imposed under any Environmental
Law; including without limitation, petroleum products, and toxic mold.
     “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
     “Indemnified Party” has the meaning set forth in Section 11.5.
     “Indemnifying Party” has the meaning set forth in Section 11.5.
     “Indemnity Security” has the meaning set forth in Section 11.2(c).
     “Intellectual Property” means any and all (a) patents and patent
applications, (b) marks (including trademarks, service marks, certification
marks, collective marks, registered or unregistered), trade names, designs,
expressions and works of authorship, logos, slogans, trade dress and
applications for registration of the foregoing, (c) copyrights, mask works and
applications for registration of the foregoing, and (d) trade secrets and
confidential information, including confidential know-how and any other similar
property, whether or not embodied in tangible form (including but not limited to
technical drawings and specifications, shop drawings, manuals, forms, working
notes and memos, technical and laboratory data, notebooks, samples, engineering
prototypes and computer software).
     “Interest Rate” means the prime per annum rate of interest as published by
The Wall Street Journal.
     “Interim Period” means the period of time from the Execution Date until the
earlier of the Closing Date or termination of this Agreement.
     “Inventory” has the meaning set forth in Section 2.1(f).
     “Investment Grade” means an entity having long term, unsecured,
unsubordinated debt not supported by third party credit enhancement that is
rated “BBB-” or higher by Standard & Poor’s, and “Baa3” or higher by Moody’s,
and that in either case is not on negative credit watch.
     “IRS” means the U.S. Internal Revenue Service.
     “Knowledge” means, in the case of Sellers, the actual knowledge (as opposed
to any constructive or imputed knowledge) of the individuals listed on
Schedule 1.1(x), and in the case of Buyer, the actual knowledge (as opposed to
any constructive or imputed knowledge) of the individuals listed on
Schedule 1.1(y), in each case without inquiry.
     “Laws” means all laws, codes, statutes, rules, regulations, ordinances,
orders and other legally-binding pronouncements having the effect of law of any
Governmental Authority.

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     “Leased Real Property” has the meaning set forth in Section 2.1(a).
     “Lenders” means the lenders party to the Credit Agreement.
     “Lien” means any mortgage, pledge, hypothecation, assessment, levy,
imposition, charge, claim, assignment, security interest, easement, deed,
restriction, transfer restriction, lien or other similar restriction or
encumbrance of any kind.
     “Losses” means any and all judgments, losses, liabilities, amounts paid in
settlement, damages, fines, penalties, supplemental environmental project costs,
deficiencies, losses and expenses (including interest, court costs, reasonable
fees of attorneys, accountants and other experts and other reasonable expenses
of litigation, settlement, judgment or other proceedings or of any claim,
default or assessment).
     “LTMA Support Obligations” shall mean any Support Obligations arising under
that certain Guaranty Agreement, dated as of September 30, 2002, by and between
Reliant Energy Power Generation, Inc. and Siemens Power Generation, Inc.
     “Material Adverse Effect” means any change, event or effect that is
materially adverse to the Acquired Assets, taken as a whole, in each case,
except for any such change, event or effect resulting from or arising out of
(a) changes in economic conditions generally or in the industry in which the
Channelview Facility operates, (b) changes in international, national, regional,
state or local wholesale or retail markets for electric power or fuel or related
products, including those due to actions by competitors (excluding any such
change to the extent it only or disproportionately affects the Acquired Assets
relative to other combined-cycle cogeneration facilities in ERCOT), (c) changes
in general regulatory or political conditions, including any acts of war or
terrorist activities, (d) changes in national, regional, state or local electric
transmission or distribution systems, (e) strikes, work stoppages or other labor
disturbances, (f) increases in costs of commodities or supplies, including fuel,
(g) effects of weather or meteorological events, (h) any Change of Laws, (i) any
actions to be taken pursuant to or in accordance with this Agreement, (j) any
changes, events or effects to which Sellers have cured prior to or as of
Closing, and (k) the Chapter 11 Cases.
     “Material Contracts” has the meaning set forth in Section 5.9.
     “Moody’s” means Moody’s Investors Services, Inc., and its successors.
     “Multiemployer Plan” has the meaning set forth in ERISA § 3(37).
     “NERC” means North American Electric Reliability Corporation.
     “Operator” means Reliant Energy Corporate Services, LLC, a Delaware limited
liability company.
     “Other Contracts” has the meaning set forth in Section 2.1(e).
     “Parties” means each of Buyer and Sellers.

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     “Permits” means all licenses, permits, authorizations, approvals,
registrations, variances, exemptions, concessions, franchises and similar
consents granted or issued by any Governmental Authority.
     “Permitted Exceptions” means (i) all Liens and any defects, exceptions,
restrictions, easements, rights of way and encumbrances (x) disclosed in the
title commitment referenced in Schedule 5.15, (y) which are shown on that
certain TSPS Category 5 Survey made by Carter Burgess, dated September 26, 2002,
or (z) which a search of the public records would reveal; (ii) statutory liens
for Taxes, assessments or other governmental charges not yet due and payable;
(iii) mechanics’, carriers’, workers’, repairers’ and similar Liens arising or
incurred in the ordinary course of business that are not yet delinquent or, if
delinquent, that are being contested in good faith; (iv) zoning, entitlement and
other land use and environmental regulations by any Governmental Authority;
(v) such other Liens, imperfections in title and easements, restrictions and
encumbrances which do not materially detract from the value of, or materially
interfere with the present use of, the Channelview Facility in the aggregate;
(vi) Liens arising under fuel procurement arrangements; (vii) any encumbrances
or liens arising under the Credit Agreement in favor of the Lenders;
(viii) liens for pre-petition ad valorem Taxes which will be satisfied by
Sellers upon Closing; and (ix) any rights of Equistar to purchase the
partnership interests of Channelview LP, pursuant to the Second Amended and
Restated Agreement Steam Supply Agreement, dated as of December 15, 1999,
between Channelview LP and Equistar.
     “Person” means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association, entity or Governmental Authority.
     “Pre-Closing Portion” has the meaning set forth in Section 7.7(b).
     “Prudent Industry Practice” means those practices, methods, equipment,
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used in the North American electric utility
industry by independent operators of electric generation stations of a type and
size similar to those constituting the Channelview Facility during a particular
time period as good, safe and prudent engineering practices in connection with
the operation, maintenance, repair and use of gas turbines, electrical
generators and other equipment and facilities with commensurate standards of
safety, performance, dependability, efficiency and economy, and consistent with
applicable Laws and Regulations. Prudent Industry Practices are not intended to
be limited to the optimum practice or method to the exclusion of others, but
rather to be a spectrum of possible but reasonable practices and methods
generally accepted in the North American electric utility industry during the
relevant time period in light of the circumstances.
     “PUCT” means the Public Utility Commission of Texas.
     “Pump Payments” has the meaning set forth in Section 7.17.
     “Purchase Price Allocation” has the meaning set forth in Section 3.4.
     “QF” has the meaning set forth in Section 5.17.

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     “QSE” means a qualified scheduling entity qualified by ERCOT in accordance
with ERCOT Protocol Section 16, Registration and Qualification of Market
Participants, to submit Balanced Schedules and Ancillary Services bids and
settle payments with ERCOT.
     “Real Estate Leases” has the meaning set forth in Section 2.1(a).
     “Real Property” has the meaning set forth in Section 2.1(b).
     “Related Person” means, with respect to any Person, all past, present and
future directors, officers, members, managers, stockholders, employees,
controlling persons, agents, professionals, attorneys, accountants, investment
bankers, Affiliates or representatives of any such Person.
     “Release” means any release, spill, leak, discharge, abandonment, disposal,
pumping, pouring, emitting, emptying, injecting, leaching, dumping, depositing,
dispersing, allowing to escape or migrate into or through the environment
(including ambient air, surface water, ground water, land surface and subsurface
strata or within any building, structure, facility or fixture) of any Hazardous
Substance, including the abandonment or discarding of Hazardous Substances in
barrels, drums, or other containers.
     “Reliant Energy” has the meaning set forth in Section 2.2(d).
     “Reliant Marks” has the meaning set forth in Section 2.2(m).
     “Representatives” means officers, directors, employees, counsel,
accountants, financial advisers or consultants of either Sellers or Buyer, as
applicable.
     “RES” means Reliant Energy Services, Inc.
     “RES Agreements” has the meaning set forth in Section 4.2(i).
     “RES Assignment and Assumption Agreement” has the meaning set forth in
Section 4.2(i).
     “RES Fuel Purchase Transactions” shall mean those fuel purchase
transactions listed on Schedule 2 of the Fuel and Power Transition Services
Agreement or entered into after the date hereof in accordance with such
Schedule 2.
     “RESC” has the meaning set forth in the Recitals to this Agreement.
     “Retained Books and Records” means: (i) all corporate seals, minute books,
charter documents, corporate stock record books, original tax and financial
records and such other files, books and records to the extent that any of the
foregoing relates to any of the Excluded Assets or Excluded Liabilities or the
organization, existence, capitalization or debt financing of a Seller or of any
Affiliate of a Seller; (ii) all books, files and records that would otherwise
constitute a Business Record but for the fact that disclosure of books, files or
records could (v) disclose information related to a Seller or any of its
Affiliates concerning public utility regulatory matters, including matters
before ERCOT, the FERC, or other similar bodies, (w) violate any legal

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constraints or obligations regarding the confidentiality thereof, provided that
such Seller shall use its commercially reasonable efforts to obtain a waiver of
any such confidentiality restrictions in order to permit such disclosure,
(x) waive any attorney client, work product or like privilege, (y) disclose
information about such Seller or any of its Affiliates that is unrelated to the
Channelview Facility or the Business or (z) disclose information about such
Seller or any of its Affiliates pertaining to energy or project evaluation,
energy or natural gas price curves or projections or other economic predictive
models; or (iii) all books and records prepared in connection with or relating
in any way to the transactions contemplated by this Agreement, including bids
received from other parties and analyses relating in any way to the Acquired
Assets or the Assumed Liabilities.
     “Rule” or “Rules” means the Federal Rules of Bankruptcy Procedure.
     “Sale Motion” has the meaning set forth in Section 8.1(b).
     “Sale Order” means an order: (i) (x) in substantially the form of Exhibit E
hereto, or (y) in such other form which is in form and substance reasonably
acceptable to Sellers and Buyer approving this Agreement and all of the terms
and conditions hereof, and approving and authorizing Sellers to consummate the
transactions contemplated hereby. Without limiting the generality of the
foregoing, such order shall find and provide, among other things, that (a) other
than Permitted Exceptions, the Acquired Assets sold to Buyer pursuant to this
Agreement shall be transferred to Buyer free and clear of all Liens and
liabilities of any Person, such Liens and liabilities to attach to the Purchase
Price, (b) Buyer has acted in good faith within the meaning of section 363(m) of
the Bankruptcy Code and, as such, is entitled to the protections afforded
thereby, (c) this Agreement was negotiated, proposed and entered into by the
parties without collusion, in good faith and from arm’s length bargaining
positions, (d) Buyer is not acquiring or assuming any of Sellers’ or any other
Person’s liabilities except as expressly provided in this Agreement, (e) all
Assigned Contracts shall be assumed by Sellers and assigned to Buyer pursuant to
section 365 of the Bankruptcy Code, (f) the Bankruptcy Court shall retain
jurisdiction to resolve any controversy or claim arising out of or relating to
this Agreement, or the breach hereof as provided in Section 8.1 hereof during
the pendency of the Chapter 11 Cases, (g) this Agreement and the transactions
and instruments contemplated hereby shall be specifically enforceable against
and binding upon, and not subject to rejection or avoidance by, each Seller or
any trustee of a Seller and its applicable estate, (h) is it not a principal
purpose of any Person entering into this Agreement or any transactions
contemplated by this Agreement to evade liability to which such Person would be
subject under Subtitle D of Title IV of ERISA, and (i) the provisions thereof
are non-severable and mutually dependent; and (ii) that does not require the
assignment and assumption of the Cash Flow Participation Agreement, dated as of
December 15, 1999, by and between Channelview LP and Equistar.
     “Schedule Update” has the meaning set forth in Section 7.14.
     “Seller Affiliate Plan” means each Benefit Plan that is sponsored,
administered, maintained or contributed to as of the date of this Agreement by
any Affiliate of either Seller and which Benefit Plan provides benefits with
respect to employees of the Operator who are employed at the Channelview
Facility.

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     “Seller Affiliate Savings Plans” means the Reliant Energy, Inc. Savings
Plan and the Reliant Energy, Inc. Union Savings Plan.
     “Seller Indemnified Group” means each Seller and such Seller’s Affiliates
and their respective officers, directors, employees and agents.
     “Sellers” has the meaning set forth in the Recitals to this Agreement.
     “Sellers’ Governmental Approvals” has the meaning set forth in
Section 5.2(c).
     “Sellers’ Post-Closing Estimate” has the meaning set forth in
Section 3.3(a).
     “Settlement Agreement” means that certain Settlement Agreement, dated as of
July 10th, 2007, by and between Channelview LP, RESC, and Equistar.
     “Severance Plan” means the Reliant Energy, Inc. 2003 Involuntary Severance
Benefits Plan for Employees With Annual Base Pay Less Than $150,000 As Amended
and Restated Effective June 1, 2004.
     “Standard & Poor’s” means Standard & Poor’s Ratings Group (a division of
McGraw Hill, Inc.), and its successors.
     “Straddle Period” has the meaning set forth in Section 7.7(b).
     “Supplier Contracts” has the meaning set forth in Section 2.1(d).
     “Support Obligations” has the meaning set forth in Section 7.4(a).
     “Tax” or “Taxes” means any federal, state, local, or foreign income,
profits, franchise, withholding, ad valorem, personal property (tangible and
intangible), employment, payroll, sales and use, social security (or similar),
disability, occupation, real property, severance, excise, gross receipts,
utility, severance, license, transfer, stamp, premium, windfall profits,
environmental (including taxes under Code § 59A), customs duties, capital stock,
unemployment, registration, utility, production, value added, alternative or
add-on minimum, estimated, and other taxes imposed by a Taxing Authority of any
kind whatsoever, whether computed on a separate or consolidated, unitary or
combined basis or in any other manner, including any interest, penalty or
addition thereto, whether disputed or not.
     “Tax Proceeding” has the meaning set forth in Section 7.7(e).
     “Tax Returns” means any and all returns, reports, statements, information
returns or other similar filings filed or required to be filed with respect to
any Taxes, including any supporting information, schedules, attachments or
amendments thereof.
     “Taxing Authority” means, with respect to any Tax, the Governmental
Authority or political subdivision thereof that imposes such Tax, and the agency
(if any) charged with the collection of such Tax for such entity or subdivision.

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     “Termination Date” has the meaning set forth in Section 10.1.
     “Texas Regional Entity” means the Texas Regional Entity, a Division of
ERCOT.
     “Third-Party Claim” has the meaning set forth in Section 11.5.
     “Transfer Taxes” means all transfer, Real Property transfer, goods and
services, value added, recordation, documentary, stamp, duty, excise and
conveyance Taxes and other similar Taxes, duties, fees or charges, as levied by
any Taxing Authority in connection with the transactions contemplated by this
Agreement, provided, however, that for the avoidance of doubt, the term Transfer
Taxes shall not include any income Taxes based on or measured by net income,
including the Texas franchise or margins tax.
     “Transition Services Agreements” means the Administrative Services
Transition Services Agreement and the Fuel and Power Transition Services
Agreement.
     “Union” has the meaning set forth in Section 7.9(c).
     “WARN Act” means the Worker Adjustment and Retraining Notification Act of
1988, as amended and any similar foreign, state or local law, regulation or
ordinance.
     “Welfare Benefits” has the meaning set forth in Section 7.9(h).
     1.2. Construction.
          (a) All Article, Section, Subsection, Schedule and Exhibit references
used in this Agreement are to Articles, Sections, Subsections, Schedules and
Exhibits to this Agreement unless otherwise specified. The Exhibits and
Schedules attached to this Agreement constitute a part of this Agreement and are
incorporated herein for all purposes.
          (b) If a term is defined as one part of speech (such as a noun), it
shall have a corresponding meaning when used as another part of speech (such as
a verb). Unless the context of this Agreement clearly requires otherwise, words
importing the masculine gender shall include the feminine and neutral genders
and vice versa. The words “includes” or “including” shall mean “includes without
limitation” or “including without limitation,” the words “hereof,” “hereby,”
“herein,” “hereunder” and similar terms in this Agreement shall refer to this
Agreement as a whole and not any particular Section or Article in which such
words appear and any reference to a Law shall include any amendment thereof or
any successor thereto and any rules and regulations promulgated thereunder.
Currency amounts referenced herein are in U.S. Dollars.
          (c) Time is of the essence in this Agreement. Whenever this Agreement
refers to a number of days, such number shall refer to calendar days unless
Business Days are specified. Whenever any action must be taken hereunder on or
by a day that is not a Business Day, then such action may be validly taken on or
by the next day that is a Business Day.
          (d) Sellers may, at their option, include in the Schedules items that
are not material, and any such inclusion, or any references to dollar amounts,
shall not be deemed to be

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an acknowledgment or representation that such items are material or would be
reasonably expected to cause a Material Adverse Effect, to establish any
standard of materiality or to define further the meaning of such terms for
purposes of this Agreement. Information disclosed in each Schedule of the
Sellers’ Disclosure Schedules shall be deemed to be disclosed in each other
Schedule therein, if it is disclosed in such a way as to make reasonably
apparent its relevance or applicability to another Section of this Agreement or
any other Schedule (or subparts thereof) in order to avoid a misrepresentation
hereunder.
          (e) Each Party acknowledges that it and its attorneys have been given
an equal opportunity to negotiate the terms and conditions of this Agreement and
that any rule of construction to the effect that ambiguities are to be resolved
against the drafting Party or any similar rule operating against the drafter of
an agreement shall not be applicable to the construction or interpretation of
this Agreement.
ARTICLE 2
PURCHASE AND SALE OF THE ACQUIRED ASSETS
     2.1. Transfer of Acquired Assets. At the Closing, and upon the terms and
conditions herein set forth, each Seller (as applicable) shall sell to Buyer (or
Buyer’s designee, in the case of the Energy Supply Agreement), and Buyer (or
Buyer’s designee, in the case of the Energy Supply Agreement) shall acquire from
Sellers, all of each Seller’s right, title and interest in, to and under the
Acquired Assets free and clear of Liens, claims and other interests (except for
Permitted Exceptions) pursuant to sections 105, 363 and 365 of the Bankruptcy
Code. “Acquired Assets” shall mean all of each Seller’s right, title and
interest in, to and under all property (tangible or intangible), rights,
goodwill, claims and assets to the extent relating to or used in or held for use
in connection with the Business (except for the Excluded Assets) as the same
exist on the Closing Date including:
          (a) subject to the receipt of any necessary consents or approvals, all
of Sellers’ rights under the leases of real property (the “Real Estate Leases”),
listed on Schedule 2.1(a) of the disclosure schedules accompanying this
Agreement (the “Disclosure Schedules”) and the real property leased by
Channelview LP pursuant to the Real Estate Leases, together with any
improvements and fixtures owned by Channelview LP erected on the real property
subject to the Real Estate Leases (the “Leased Real Property”);
          (b) subject to the receipt of any necessary consents or approvals, all
of Sellers’ rights under the easements, rights of way, real property licenses,
and other real property entitlements used in the Business or listed on
Schedule 2.1(b) (the “Entitled Real Property” and, together with the Leased Real
Property, the “Real Property”);
          (c) all of (i) Sellers’ owned and leased equipment, spare parts,
machinery, furniture, materials, supplies, fixtures, and other personal property
used in the Business, and in connection with Channelview LP, located on the Real
Property or listed on Schedule 2.1(c) (the “Equipment”); and (ii) any rights of
Sellers to the warranties and licenses received from third parties with respect
to the Equipment;

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          (d) subject to the receipt of any necessary consents or approvals, all
of Sellers’ rights under outstanding purchase orders or other similar Contracts
used exclusively in the Business entered into by Channelview LP with any
supplier that are listed on Schedule 2.1(d) of the Disclosure Schedules
(“Supplier Contracts”);
          (e) subject to the receipt of any necessary consents or approvals, all
of Sellers’ rights under the Contracts that are listed on Schedule 2.1(e) of the
Disclosure Schedules (the “Other Contracts” and, together with the Real Estate
Leases, the Entitled Real Property constituting Contracts, and the Supplier
Contracts, the “Assigned Contracts”);
          (f) all (i) inventories of fuel, chemicals and gas wherever located
(including in transit to the Channelview Facility) and owned by Channelview LP
on the Closing Date, or listed on Schedule 2.1(f) (the “Inventory”), and
(ii) any rights of Channelview LP to the warranties received from third parties
with respect to such Inventory;
          (g) any Intellectual Property, including any computer software or
systems (i) located at the Real Property, the offices of RESC or listed on
Schedule 2.1(g) and (ii) owned exclusively by either Seller and licenses held
exclusively by either Seller, to the extent transferable, in each case that
pertain solely to the Business;
          (h) to the extent transferable under applicable Law, all rights of
either Seller under the Permits relating exclusively to the Business including
those listed on Schedule 2.1(h);
          (i) copies of all Business Records (including those listed on
Schedule 2.1(i) to the extent they apply to the Acquired Assets) and the right
to receive mail and other communications addressed to the Sellers that pertain
to the Channelview Facility or the Business;
          (j) all accounts, rights, or allowances involving Emissions
Allowances, and all rights to any future Emission Allowances, if any, that will
be granted or allocated with respect to the Channelview Facility (other than
those Emission Allowances expended in the ordinary course of operation of the
Channelview Facility prior to the Closing);
          (k) subject to Section 2.2(o), all claims, causes of action, choses in
action, rights of set-off of any kind, rights of recovery, whether known or
unknown, in favor of any of the Sellers, and pertaining to, arising out of or
relating to, the Acquired Assets or offsetting any Assumed Liabilities, but
excluding any of the same relating to any Affiliate of the Sellers, or relating
to any matter covered by the Settlement Agreement; and
          (l) all of Channelview LP’s right, title and interest in the
Channelview Facility.
     2.2. Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, the Acquired Assets do not include the following (collectively, the
“Excluded Assets”):
          (a) any right, title or interest of any Person other than a Seller in
any property or asset;

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          (b) all of Sellers’ cash and cash equivalents, marketable securities,
prepaid expenses, advance payments, surety accounts, deposits and other similar
prepaid items (including for the purchase of natural gas), checks in transit and
undeposited checks to the extent attributable to the period prior to the Closing
Date;
          (c) all of Sellers’ accounts and notes receivable to the extent
attributable to the period prior to 11:59 pm on the day prior to the Closing
Date (the “Accounts Receivable”);
          (d) other than assets, property, and other rights specifically
identified in any Schedule referenced in Section 2.1 above, any assets, property
and other rights held or owned by Reliant Energy, Inc. (“Reliant Energy”) or its
Affiliates to the extent not used in the operation of the Business;
          (e) financial information or financial statements and proprietary
manuals (except rights to use manuals specific to and necessary for the
operation of the Business) prepared by or used by either Seller or their
Affiliates to the extent not relating exclusively to the Business;
          (f) all of Sellers’ rights under Contracts that are not Assigned
Contracts;
          (g) all rights to Claims, refunds or adjustments with respect to
Excluded Assets, relating to any proceeding before any Governmental Authority
relating to the period prior to the Closing, and all rights to insurance
proceeds or other insurance recoveries: (i) that are reimbursement for, either
Seller’s or such Seller’s Affiliate’s expenditures made prior to the Closing
Date for which insurance proceeds are available or due to a Seller or such
Seller’s Affiliates or (ii) to the extent relating to Excluded Assets or
Excluded Liabilities;
          (h) any asset of a Seller that would constitute an Acquired Asset (if
owned by such Seller on the Closing Date) that is conveyed or otherwise disposed
of during the period from the date hereof until the Closing Date either: (i) in
the ordinary course of business of the Sellers, (ii) at the direction of the
Bankruptcy Court or (iii) as otherwise permitted by the terms of this Agreement;
          (i) all losses, loss carry forwards and rights to receive refunds,
credits and loss carry forwards with respect to any and all Taxes of Sellers
incurred or accrued on or prior to the Closing Date, including interest
receivable with respect thereto;
          (j) any and all rights, demands, claims, credits, allowances, rebates,
causes of action, known or unknown, pending or threatened (including all causes
of action arising under sections 510, 544 through 551 and 553 of the Bankruptcy
Code or under similar state Laws, including fraudulent conveyance claims, and
all other causes of action of a trustee and debtor-in-possession under the
Bankruptcy Code) or rights of set-off (collectively, “Claims”), of a Seller or
any Affiliate of a Seller: (i) in respect of the Excluded Assets or the Excluded
Liabilities, or (ii) arising out of or relating in any way to the Chapter 11
Cases or any of the transactions contemplated thereby or entered into as a
consequence thereof, including any claims (as defined in section 101(5) of the
Bankruptcy Code) filed, scheduled or otherwise arising in the Chapter 11 Cases;

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          (k) all shares of capital stock or other equity interests of either
Seller and all Affiliates of Sellers;
          (l) all rights of either Seller arising under this Agreement and under
any other agreement between either Seller and Buyer entered into in connection
with this Agreement;
          (m) all rights to or goodwill represented by or pertaining to all
names, marks, trade names, trademarks and service marks incorporating the name
Reliant Energy or any other name set forth on Schedule 2.2(m) (the “Reliant
Marks”) and any brand names or derivatives thereof no matter how used, whether
as a corporate name, domain name or otherwise and including the corporate design
logo associated with any Reliant Mark or variant of any Reliant Mark;
          (n) all Retained Books and Records;
          (o) all rights and Claims of a Seller against any Affiliate of such
Seller relating to the Assigned Contracts that arose prior to the Closing Date;
and
          (p) any assets set forth on Schedule 2.2(p) of the Disclosure
Schedules.
     2.3. Assumption of Liabilities. At the Closing, Buyer shall assume, and
Buyer shall hereafter pay, perform and discharge when due, the following
liabilities and obligations (collectively, the “Assumed Liabilities”):
          (a) all liabilities and obligations of Sellers under the Assigned
Contracts, other than Excluded Liabilities;
          (b) all liabilities and obligations of Sellers under the Permits;
          (c) to the extent provided in Section 7.7(a), Transfer Taxes;
          (d) all liabilities and obligations of Sellers, any of their
Affiliates or any of their respective Related Persons arising under or relating
to any environmental matter (including any liability or obligation arising under
any Environmental Law) relating to the Acquired Assets
          (e) any liability for any Taxes attributable to the Acquired Assets to
the extent arising or accruing (on a pro rata daily basis in the case of Taxes
other than income Taxes) with respect to a period (or any portion thereof)
beginning after the Closing Date; and
          (f) all other liabilities and obligations relating to or arising from
the operation of the Business or the ownership of the Acquired Assets (other
than the Excluded Liabilities), but for purposes of clarity, excluding
liabilities or obligations under the Credit Agreement and any other Contract
(written or oral) which is not an Assigned Contract, including those obligations
of Sellers associated with that certain Channel Area Industrial District
Agreement between Lyondell Petrochemical Company and the City of Houston, dated
as of June 17, 1997.
     2.4. Excluded Liabilities. Buyer is assuming only the Assumed Liabilities,
and all liabilities of Sellers not expressly assumed by Buyer pursuant to
Section 2.3, whether or not

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incurred or accrued, whether asserted before, on or after the Closing Date,
shall be assumed or retained, as the case may be, by Sellers, who shall be
responsible for paying, performing and discharging such liabilities and Buyer
shall not have any responsibility for such liabilities (such liabilities are
hereinafter referred to as the “Excluded Liabilities”), including: (i) all Cure
Costs and other liabilities and obligations with respect to accounts payable
accrued under Assigned Contracts as of 11:59 pm on the day prior to the Closing
Date (the “Accounts Payable”); (ii) liabilities to the extent arising in
connection with Excluded Assets; (iii) any liability for any Taxes attributable
to the Acquired Assets to the extent arising or accruing (on a pro rata daily
basis in the case of Taxes other than income Taxes) with respect to a period (or
any portion thereof) ending on or before the Closing Date; (iv) liabilities with
respect to Benefit Plans (including Seller Affiliate Plans); (v) all liabilities
and obligations of Sellers or any Affiliate thereof representing indebtedness
for money borrowed (or any refinancing thereof); (vi) liabilities with respect
to loans made by and, other than with respect to transactions under the
Transition Services Agreements, accounts payable arising from transactions with
Affiliates; (vii) any liability of any of the Sellers for (a) transaction fees
and expenses and fees and expenses payable to lenders, brokers, financial
advisors, legal counsel, accountants and other professionals, and (b) except as
provided otherwise in Section 7.7(a), Transfer Taxes; (viii) those listed on
Schedule 2.4 of the Disclosure Schedules; (ix) all liabilities arising out of
any exchange act or securities liability; (x) all costs and expenses associated
with the Chapter 11 Cases; (xi) all liability for any claims discharged pursuant
to the Chapter 11 Cases or for claims against either of the Sellers which are
filed after the bar date or disallowed by the Bankruptcy Court; (xii) all
liability for any rejection damages claim filed in the Chapter 11 Cases; and
(xiii) all interests and liabilities that have not been otherwise assumed
pursuant to this Agreement, to the extent that applicable law permits this sale
under Section 363 of the Bankruptcy Code to be free and clear of such interests
and liabilities.
     2.5. Non-Assignment of Assigned Contracts. Anything contained herein to the
contrary notwithstanding, (i) this Agreement shall not constitute an agreement
to assign any Assigned Contracts if, after giving effect to the provisions of
Sections 363 and 365 of the Bankruptcy Code, an attempted assignment thereof,
without obtaining a Consent, would constitute a breach thereof or in any way
negatively affect the rights of Sellers or Buyer, as the assignee of such
Assigned Contracts and (ii) unless Sellers have otherwise violated the
provisions of this Section 2.5, no breach of this Agreement or failure of a
closing condition shall have occurred by virtue of such nonassignment. Sellers
shall use commercially reasonable efforts to obtain the consent of the
counterparties to each Assigned Contract, to the extent that after giving effect
to the provisions of Sections 363 and 365 of the Bankruptcy Code, such Consent
is required; provided, that nothing in this Section 2.5 shall (x) require
Sellers to make any significant expenditure or incur any significant obligation
on its own or on Buyer’s behalf or (y) prohibit Sellers from ceasing operations
or winding up its affairs following the Closing. Any assignment to Buyer of any
Assigned Contracts that shall, after giving effect to the provisions of
Sections 363 and 365 of the Bankruptcy Code, require the Consent of any third
party for such assignment as aforesaid shall be made subject to such Consent
being obtained. Without limiting the foregoing, the Parties agree that, if any
required consent to the assignment or release of RES’ obligations under the Fuel
Purchase and Sale Agreement is not obtained, Buyer and Buyer’s Energy Manager
will enter into an agreement (the “Fuel Supply Agreement”) in form and substance
reasonably acceptable to the Parties, in relation to the Fuel Purchase and Sale
Agreement, pursuant to which (i) RES shall consult with Buyer (or Buyer’s Energy
Manager)

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with respect to transactions occurring under the Fuel Purchase and Sale
Agreement and keep Buyer and Buyer’s Energy Manager advised of all transactions
thereunder, and not take any material discretionary action thereunder without
Buyer or Buyer’s Energy Manager’s consent, not to be unreasonably withheld;
(ii) RES shall not modify, amend or terminate the Fuel Purchase and Sale
Agreement without Buyer’s consent, which consent shall not be unreasonably
withheld or delayed; (iii) RES shall continue to perform and act such that the
gas sold to RES under such agreement shall be resold to the Buyer through the
Buyer’s Energy Manager; (iv) RES shall agree that Buyer’s Energy Manager may be
replaced from time to time in Buyer’s sole discretion with a new Energy Manager,
and (v) RES shall use commercially reasonable efforts to obtain the execution
and delivery by Equistar of the RES Assignment and Assumption Agreement. The
Parties agree further that if RES continues to be directly obligated to purchase
gas from Equistar under the Fuel Purchase and Sale Agreement after the Closing
Date, Buyer’s Energy Manager shall, pursuant to the Fuel Supply Agreement,
accept and purchase from RES all such gas accepted and purchased by RES from
Equistar. The price for such gas shall be equal to the price paid for such gas
by RES, and the terms and conditions of Buyer’s Energy Manager’s purchase of
such gas shall be substantially identical to the terms and conditions on which
RES purchased such gas from Equistar, and, in turn, such gas shall be resold to
the Buyer on such terms and conditions. The Fuel Supply Agreement shall require
RES to indemnify, defend and hold Buyer (and Buyer’s Energy Manager) harmless
from and against any and all claims, losses, damages, liabilities, suits,
payments, costs and expenses, including reasonable attorneys’ fees and costs of
investigation arising out of (i) the performance or breach of the Fuel Purchase
and Sale Agreement by RES except to the extent that a liability arises out of
the breach by Buyer or Buyer’s Energy Manager of the Fuel Supply Agreement, and
(ii) any breach or alleged breach of the Fuel Purchase and Sale Agreement as a
result of the Fuel Supply Agreement (except to the extent that a liability
arises out of the breach by Buyer or Buyer’s Energy Manager of the Fuel Supply
Agreement). Buyer shall indemnify defend and hold RES harmless from and against
any and all claims, losses, damages, liabilities, suits, payments, costs and
expenses, including attorneys’ fees and costs of investigation arising out of
Buyer’s (or Buyer’s Energy Manager’s) breach of the Fuel Supply Agreement. At
least 10 (ten) days prior to Closing, in the event the Parties will execute the
Fuel Supply Agreement as hereinabove provided at Closing, Buyer may request that
Sellers deliver a guaranty of Reliant Energy of RES’ obligations under the
indemnity described in the preceding sentence, such guaranty to be in form and
substance reasonably satisfactory to Buyer and Reliant Energy with a duration of
two (2) years and an aggregate limit of liability of $10 million. If Reliant
Energy, in its sole discretion does not, at least five (5) days prior to
Closing, agree to deliver said guaranty, then Buyer shall have the right,
exercisable during the three (3) day period after Reliant Energy has declined to
deliver the guarantee, to terminate this Agreement without any further
obligation or liability of either Party hereunder, it being understood that
nothing herein shall in any way obligate Reliant Energy to deliver said guaranty
if requested. Notwithstanding anything in this Section 2.5 to the contrary in
using commercially reasonable efforts to obtain any consent described above, RES
shall not be obligated to commence litigation or expend any sums of money to
obtain such consent.

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ARTICLE 3
CONSIDERATION
     3.1. Purchase Price. The purchase price to be paid by Buyer to Sellers for
the Acquired Assets is equal to:
          (a) Four Hundred Sixty Eight Million Dollars ($468,000,000) (the “Base
Purchase Price”), plus
          (b) the amount of Capital Expenditures paid or payable by the Sellers
for work done during the Interim Period, subject to and in accordance with the
budget for which is provided on Exhibit F hereto, plus or minus (as applicable)
          (c) the amount of the LTMA Adjustment calculated in accordance with
Item 6 on Schedule 2.4 .
     3.2. Deposit. On or before the later of (i) February 28, 2008 and (ii) the
first Business Day after the Escrow Agreement is executed by the Escrow Agent,
Buyer will deposit with the Escrow Agent Forty Million Dollars ($40,000,000)
(the “Deposit”). The Deposit shall be held and disbursed pursuant to the terms
of the Escrow Agreement and this Agreement. The Parties shall use commercially
reasonable efforts to cause the execution and delivery of the Escrow Agreement
as soon as possible after the date hereof.
     3.3. Post-Closing Adjustment.
          (a) As soon as practicable after the Closing, but no later than
90 days after the Closing Date, Sellers shall determine the actual adjustment to
the Base Purchase Price pursuant to Section 3.1 as of the Closing Date. Sellers
and Buyer shall cooperate and provide each other access to their respective
books and records and those of Channelview LP as are reasonably requested in
connection with the matters addressed in this Section 3.3. Sellers shall provide
Buyer with written notice of such determinations within such 90 days, along with
reasonable supporting information (the “Sellers’ Post-Closing Estimate”).
          (b) If Buyer objects to any determinations set forth in Sellers’
Post-Closing Estimate, then it shall provide Sellers written notice thereof
within 10 Business Days after receiving Sellers’ Post-Closing Estimate. Such
notice shall specify in reasonable detail Buyer’s objections to specific
determinations, along with reasonable supporting documentation. Any objections
not so specified shall be deemed waived, and Sellers’ determinations to which
specific objections were not so made shall prevail. If the Parties are unable to
agree on the disputed amounts as of the Closing Date within 120 days after the
Closing Date or such longer time as may be agreed by the Parties, the Parties
shall refer such dispute to an internationally recognized accounting firm that
is not the principal accounting firm of Buyer or either Seller, mutually
acceptable to Buyer and Sellers, which firm shall make a final and binding
determination as to all such matters in dispute (and only such matters) on a
timely basis (and such accounting firm shall be instructed to make such
determination within 45 days of such engagement or as soon thereafter as
reasonably practicable) and promptly shall notify the Parties in writing of its
resolution. Such firm shall not have the power to modify or amend any term or
provision of this

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Agreement. The fees and disbursements of the accounting firm shall be allocated
between Buyer and Sellers in inverse proportion as they shall prevail on the
amounts of such disputed items so submitted (as finally determined by such
accounting firm).
          (c) If the Base Purchase Price adjusted using such actual values (as
agreed or determined by the above-referenced accounting firm) (the “Final
Purchase Price”) is greater than the Estimated Purchase Price, then Buyer shall
pay Sellers within 10 Business Days after such actual values are agreed or
determined, by wire transfer of immediately available funds, the difference
between the Final Purchase Price and the Estimated Purchase Price plus interest
thereon at the Interest Rate from the Closing Date through and including the
date of such payment. If the Final Purchase Price is less than the Estimated
Purchase Price, then Sellers shall pay Buyer within 10 Business Days after such
actual values are agreed or determined, by wire transfer of immediately
available funds, the difference between the Estimated Purchase Price and the
Final Purchase Price plus interest thereon at the Interest Rate from the Closing
Date through and including the date of such payment. In each case, the recipient
Party shall designate the account to which such payment is to be made at least
two Business Days prior to the date such payment is due.
     3.4. Allocation of Purchase Price. Within thirty (30) days after the
determination of the Final Purchase Price, Sellers and Buyer shall agree upon an
allocation of the purchase price (as determined in accordance with US federal
income tax principles) among the Acquired Assets in accordance with Section 1060
of the Code and the Treasury Regulations promulgated thereunder (the “Purchase
Price Allocation”), provided that the purchase price shall not be increased by
or otherwise reflect the obligations under any of the Assigned Contracts. Buyer
and Sellers shall work in good faith to resolve any disagreements regarding the
Purchase Price Allocation. If the Parties fail to agree within such 30-day
period upon Purchase Price Allocation, such dispute shall be resolved by an
independent accounting firm mutually acceptable to Buyer and Sellers, and the
decision of such independent accounting firm shall be final and binding on the
Parties. Sellers together shall bear and pay one-half of such fees and other
costs charged by such accounting firm and Buyer shall bear and pay one-half of
such fees and other costs. Sellers and Buyer shall each prepare and timely file
IRS Form 8594 “Asset Acquisition Statement Under Section 1060” and any other
similar statements or forms as are prescribed under federal, state, local or
foreign Tax Law (including any exhibits thereto) to report the Purchase Price
Allocation. The Parties agree that they shall not, and shall not permit their
Affiliates to take a position on any Tax Return or for any Tax purpose that is
inconsistent with the Purchase Price Allocation unless otherwise required by
applicable laws; provided, however, that neither Sellers nor Buyer shall be
obligated to litigate any challenge to the Purchase Price Allocation by any
Governmental Authority. The Parties agree to provide, and shall cause their
Affiliates to provide, each other promptly with any information required to
complete such Tax forms or statements as are required under applicable law to
report the Purchase Price Allocation.
     3.5. Equistar Payment. In accordance with the Settlement Agreement and
provided the Settlement Agreement is then still in effect, Channelview LP agrees
to apply $10,000,000 of its portion of the Purchase Price payable at Closing
either to (in Channelview LP’s discretion): (i) Equistar pursuant to paragraphs
2 and 6 of the Settlement Agreement, or (ii) into the escrow account
contemplated by paragraph 6 of the Settlement Agreement.

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ARTICLE 4
CLOSING AND DELIVERIES
     4.1. Closing. Subject to satisfaction or waiver of the conditions to the
Closing set forth herein, unless the Parties mutually agree otherwise in
writing, the closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place at the offices of Reliant Energy, Inc., 1000 Main
Street, 21st Floor, Houston, Texas 77002 at 10:00 A.M. local time, on the second
Business Day after the conditions to the Closing set forth in Article 11 (other
than actions to be taken or items to be delivered at the Closing) have been
satisfied or waived by the applicable Party or Parties or such other date and at
such other time and place as may be mutually agreed to in writing (the “Closing
Date”). All actions listed in Section 4.2 and Section 4.3 that occur on the
Closing Date shall be deemed to occur simultaneously at the Closing.
     4.2. Closing Deliveries by Sellers to Buyer. At the Closing, the
appropriate Seller shall deliver, or shall cause to be delivered, as applicable,
to Buyer the following:
          (a) subject to the receipt of applicable Company Consents and Sellers’
Governmental Approvals, a bill of sale with respect to the Acquired Assets, duly
executed by the appropriate Seller and substantially in the form of Exhibit A
hereto;
          (b) subject to the receipt of applicable Company Consents and Sellers’
Governmental Approvals, one or more assignment and assumption agreements (the
“Assumption Agreements”), in the form attached as Exhibit B hereto, duly
executed by the appropriate Seller or Related Person with respect to the
Assigned Contracts and Assumed Liabilities;
          (c) subject to the receipt of applicable Company Consents and Sellers’
Governmental Approvals, assignments of the Real Estate Leases and all Entitled
Real Property interests held by Channelview LP, in the form attached as
Exhibit C hereto, including, without limitation, all such interests set forth on
Schedules 2.1(a) and 2.1(b), each duly executed by Channelview LP and in
recordable form;
          (d) the Business Records (either at Closing or as soon as practicable
thereafter);
          (e) (i) an executed copy of the Administrative Services Transition
Services Agreement (to the extent Buyer notifies Sellers at least ten (10) days
prior to the Closing Date that it intends to enter into the Administrative
Services Transition Services Agreement), and (ii) subject to Section 4.4, an
executed copy of the Fuel and Power Transition Services Agreement.
          (f) a duly executed affidavit of non-foreign status that complies with
Section 1445 of the Code;
          (g) duly executed certificates referenced in Section 9.2(c);
          (h) a copy of the Sale Order that has been entered on the docket by
the clerk of the Bankruptcy Court;

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          (i) unless Buyer has elected Gas Services under the Fuel and Power
Transition Services Agreement (which services would include the sale of gas
purchased by RES under the Fuel Purchase and Sale Agreement), either (i) an
assignment and assumption agreement executed by RES (the “RES Assignment and
Assumption Agreement”), in substantially the form attached as Exhibit D hereto,
assigning to Buyer’s designee the agreements which RES is a party as set forth
in Schedule 4.2(i) hereto (the “RES Agreements”), or (ii) if required by
Section 2.5, the Fuel Supply Agreement executed by RES; if Buyer has elected
such Gas Services, then Sellers shall deliver the RES Assignment and Assumption
Agreement or the Fuel Supply Agreement, as applicable, at the time such Gas
Services terminate; and
          (j) a joint direction letter executed by Sellers instructing the
Escrow Agent to (i) transfer $40,000,000 of the funds held in the Deposit Escrow
Account (as defined in the Escrow Agreement) into the Indemnity Escrow Account
(as defined in the Escrow Agreement) and (ii) to transfer all interest earned in
the Deposit Escrow Account as directed by Sellers.
     4.3. Closing Deliveries by Buyer. At the Closing, Buyer shall deliver to
Sellers the following:
          (a) a wire transfer of immediately available funds (to such accounts
as Sellers shall have notified Buyer of at least two Business Days prior to the
Closing Date) in an amount equal to the Base Purchase Price, reduced by the
amount of the Deposit together with any interest earned thereon, as adjusted
pursuant to Sections 3.1(b) and 3.1(c), as estimated in good faith by Sellers
(the “Estimated Purchase Price”). Sellers shall deliver the Estimated Purchase
Price in writing to Buyer at least two Business Days prior to the Closing Date
and shall attach to the calculation of the Estimated Purchase Price a schedule
showing the estimated adjustments to the Base Purchase Price pursuant to
Sections 3.1(b) and 3.1(c);
          (b) an executed counterpart to the Assumption Agreements relating to
the Assigned Contracts and Assumed Liabilities;
          (c) (i) an executed copy of the Administrative Services Transition
Services Agreement (to the extent Buyer notifies Sellers at least ten (10) days
prior to the Closing Date that it intends to enter into the Administrative
Services Transition Services Agreement), and (ii) subject to Section 4.4, an
executed copy of the Fuel and Power Transition Services Agreement;
          (d) a release of the LTMA Support Obligations (other than with respect
to amounts owing prior to Closing) and unless Buyer has elected Gas Services
under the Fuel and Power Transition Services Agreement, either (i) RES
Assignment and Assumption Agreement executed by Buyer in substantially the form
attached as Exhibit D hereto, assigning to Buyer’s designee the RES Agreements,
or (ii) if required by Section 2.5, the Fuel Supply Agreement executed by Buyer
and Buyer’s Energy Manager; if Buyer has elected such Gas Services, then Buyer
shall deliver the RES Assignment and Assumption Agreement or the Fuel Supply
Agreement, as applicable, at the time such Gas Services terminate;
          (e) a joint direction letter executed by Buyer instructing the Escrow
Agent to (i) transfer $40,000,000 of the funds held in the Deposit Escrow
Account into the Indemnity

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Escrow Account and (ii) to transfer all interest earned in the Deposit Escrow
Account as directed by Sellers; and
          (f) a duly executed certificate as described in Section 9.3(c).
     4.4. RES Fuel Purchase Transactions. If Buyer does not intend to utilize
RES’ services under the Fuel and Power Transition Services Agreement, the
Parties shall nonetheless enter into the Fuel and Power Transition Services
Agreement with respect to the sale to Buyer of the fuel purchased by RES under
the RES Fuel Purchase Transactions from and after the Closing Date in accordance
with the terms and conditions of the Fuel and Power Transition Services
Agreement (including without limitation under Article VI thereto concerning the
supplying of credit support) but without payment of the monthly fee set forth in
Section 2.1 of the Fuel and Power Transition Services Agreement. Notwithstanding
the foregoing, if as of Closing or at anytime thereafter, the Parties are able
to cause one or more of the RES Fuel Purchase Transactions to be novated
directly to Buyer’s Energy Manager, then such transactions shall be excluded
from the Fuel and Power Transition Services Agreement. Each of the Parties shall
use commercially reasonable efforts to cause such novations to occur. Each such
novation shall include the acknowledgment of the counterparty under such RES
Fuel Purchase Transaction that it will look solely to RES for the payments of
amounts arising or accruing under such RES Fuel Purchase Transaction prior to
the effective time of such novation.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
REGARDING THE ACQUIRED ASSETS
     Each Seller hereby represents and warrants to Buyer, for itself, and with
respect to the Acquired Assets owned by such Seller that:
     5.1. Organization and Qualification; Authority. Each Seller is duly formed
and existing under the laws of the State of Delaware. Each Seller has the
requisite power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby and
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted or as contemplated herein and in accordance with
Sections 363, 1107 and 1108 of the Bankruptcy Code. Each Seller is qualified to
transact business and, where applicable, is in good standing in each
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary, except in the jurisdictions where the failure to be so
qualified or licensed would not, in the aggregate, be reasonably expected to
have a Material Adverse Effect on such Seller’s ability to perform its
obligations hereunder. The execution and delivery by Sellers of this Agreement
and the performance by each Seller of its respective obligations hereunder have
been duly and validly authorized by all necessary limited partnership or limited
liability company (as applicable) action on behalf of such Seller. This
Agreement has been duly and validly executed and delivered by each Seller and
constitutes the legal, valid and binding obligation of such Seller enforceable
against such Seller in accordance with its terms except as the same may be
limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar Laws relating to or affecting the rights of creditors generally or
by general equitable principles.

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     5.2. No Conflicts; Consents and Approvals. The execution and delivery by
each Seller of this Agreement and each of the documents contemplated hereby does
not, and the performance by such Seller of its obligations under this Agreement
and each of the documents contemplated hereby and the consummation of the
transactions contemplated hereby and thereby will not:
          (a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Charter Documents of such Seller;
          (b) assuming the consents set forth on Schedule 5.2(b) (the “Company
Consents”) have been obtained, require the consent of, notice to or approval of
any Person under any Material Contract which is an Assigned Contract, be in
violation of or result in a default (or give rise to any notice requirement or
right of termination, cancellation or acceleration) under any Material Contract
that is an Assigned Contracts except for any such violations or defaults (or
rights of termination, cancellation or acceleration), as would not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect;
          (c) assuming all required filings, approvals, consents, authorizations
and notices set forth on Schedule 5.2(c) (collectively, the “Sellers’
Governmental Approvals”) including the Sale Order have been made, obtained or
given, (i) conflict with or result in a violation or breach of any term or
provision of any Law or writ, judgment, order or decree applicable to Sellers or
(ii) require the consent of, notice to or approval of any Governmental Authority
under any applicable Law, except in each case such conflicts, violations or
breaches, or the failure to obtain such consents or approvals, which would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect; and
          (d) result in the imposition or creation of a Lien upon or with
respect to the Acquired Assets.
     5.3. Subsidiaries. Sellers have no subsidiaries and do not own equity
interests in any Person.
     5.4. Financial Statements. Attached as Schedule 5.4 are copies of (i) the
audited financial statements of Channelview LP for the years ended December 31,
2005 and December 31, 2006; and (ii) the unaudited balance sheet and statements
of income and cash flow of Channelview LP as of and for the quarter ended
September 30, 2007. The December 31, 2006 financial statements fairly present,
in all material respects and in accordance with GAAP, the financial position and
the results of operations, as the case may be, of Channelview LP as of the dates
and for the periods indicated, except in the case of the interim financial
statement for footnote disclosure and year-end audit adjustments.
     5.5. Absence of Undisclosed Liabilities; Certain Developments. Except as
recorded in the September 30, 2007 Balance Sheet included in Schedule 5.4 (the
“Channelview September 30 Balance Sheet”) or the notes thereto or as disclosed
on Schedule 5.5, and except such liabilities that do not and would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect, to their Knowledge, neither Seller has aggregate liabilities
that would be required to be recorded in a balance sheet prepared in accordance
with GAAP,

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excluding (i) liabilities under Material Contracts, (ii) liabilities under this
Agreement, (iii) liabilities incurred in the ordinary course of business since
September 30, 2007, (iv) liabilities that will be repaid or extinguished on or
prior to the Closing, or not assumed by Buyer pursuant to the terms hereof,
(v) liabilities incurred after the date of this Agreement, in accordance with
Article 8, and (vi) to the extent not otherwise included in (i) — (iii) and (v)
above, administrative expenses in the Chapter 11 Cases.
     5.6. Litigation. Except as disclosed on Schedule 5.6, there is no
litigation pending, or, to either Seller’s Knowledge, threatened in writing
against such Seller before any Governmental Authority or any arbitrator, except
for litigation that would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect. Except as disclosed on Schedule 5.6,
neither Seller is subject to any judgment, writ, decree, injunction, rule or
order of any Governmental Authority (whether preliminary or final) that
prohibits the consummation of the transactions contemplated by this Agreement or
otherwise detracts from the value of, or interferes with the present use of, the
Acquired Assets, other than, in each case, those that would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
     5.7. Compliance with Laws. Except as disclosed on Schedule 5.7, neither
Seller nor Reliant Energy Power Supply LLC, as registered with NERC and the
Texas Regional Entity, as Generator Operator of the Channelview Facility (in
such capacity the “Generator Operator”), is in violation of or has been given
written notice of any current violation of any Law, except violations that would
not reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect. Except as disclosed on Schedule 5.7, with respect to the
Channelview Facility, to Sellers’ Knowledge, no investigation, audit or review
relating to Sellers, the Channelview Facility, the Generator Operator or any of
the other Acquired Assets by any Governmental Authority is pending or
threatened, other than, in each case, those that would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
For the avoidance of doubt, the representation above, insofar as it relates to
the Generator Operator, is only made with respect to any Law applicable to it in
its capacity as Generator Operator.
     5.8. Permits. Each material Permit used with respect to the operation of
the Channelview Facility and the conduct of the Business is set forth on
Schedule 5.8(i). Except as disclosed on Schedule 5.8(ii), neither Seller is in
violation of the terms of any Permit used to conduct their respective businesses
as currently conducted, except for violations which would not reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect.
To Sellers’ Knowledge, such Permits are in full force and effect, except as
would not reasonably be expected to have a Material Adverse Effect.
     5.9. Contracts.
          (a) Excluding Assigned Contracts, any Benefit Plans and any Contracts
with respect to which Buyer will not be bound or have any liability after the
Closing, Schedule 5.9(a) sets forth a list as of the date of this Agreement of
the following Contracts to which either Seller is bound (collectively, the
“Material Contracts”):
     (i) Contracts for the future purchase, exchange or sale of electric power,
steam or ancillary services or fuel;

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     (ii) Contracts for the future transmission of electric power or fuel or for
the storage of fuel;
     (iii) interconnection Contracts;
     (iv) other than Contracts of the nature addressed by Section 5.9(a)(i) —
(ii), Contracts that grant a right or option to purchase any asset of Sellers,
other than in each case, Contracts entered into in the ordinary course of
business consistent with past practices relating to assets with a value of less
than $500,000 individually or $2,000,000 in the aggregate;
     (v) other than Contracts of the nature addressed by Section 5.9(a)(i) —
(ii), Contracts for the future provision of goods or services requiring payments
in excess of $500,000 for each individual Contract, excluding any such Contracts
that are terminable by Sellers without penalty on not more than 30 days’ notice;
     (vi) Contracts under which such Seller has created, incurred, assumed or
guaranteed any outstanding indebtedness for borrowed money or any capitalized
lease obligation, or under which such Seller has imposed a security interest on
any of its assets, tangible or intangible, which security interest secures
outstanding indebtedness;
     (vii) letters of credit or outstanding agreements of guaranty, surety or
indemnification, direct or indirect, by Channelview LP, or by a Seller or any
Affiliate of a Seller for the benefit of Channelview LP;
     (viii) Contracts with Reliant Energy or any Affiliate of Reliant Energy
relating to the future provision of goods or services;
     (ix) Contracts under which Channelview LP has advanced or loaned money
outside of the ordinary course of business;
     (x) employment, consulting or separation Contracts and any Contract that
will result in the payment of any severance, termination, “golden parachute,” or
similar payments to any present or former personnel following termination of
employment or otherwise as a result of the consummation of the transactions
contemplated by this Agreement and each of the agreements executed in connection
therewith;
     (xi) any collective bargaining agreement;
     (xii) outstanding futures, swap, collar, put, call, floor, cap, option or
other Contracts that are intended to benefit from or reduce or eliminate the
risk of fluctuations in the price of commodities, including electric power, fuel
or securities;
     (xiii) Contracts that purport to limit either Sellers’ freedom to compete
in any line of business or in any geographic area;
     (xiv) partnership, joint venture or limited liability company agreements;
and

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     (xv) leases for real property.
     (b) Sellers have provided Buyer with, or access to, true and complete
copies of all Material Contracts.
     (c) Except as a result of the filing of the Chapter 11 Cases or as set
forth on Schedule 5.9(c) hereto, neither Seller is, and to Sellers’ Knowledge,
no counterparty is, in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, would result in such a default under any Assigned Contracts to
which either Seller is a party other than as would not reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect.
     5.10. Taxes. Except as set forth on Schedule 5.10:
          (a) Each Seller has duly filed with the appropriate Taxing Authorities
all Tax Returns required to be filed by it, and such Tax Returns are true,
correct, and complete in all material respects.
          (b) Each Seller has duly paid in full any and all Taxes owed by it
(whether or not shown or required to be shown on any Tax Return, except in each
case where the failure to file such Tax Returns or pay such Tax would not
reasonably be expected to, in the aggregate, have a Material Adverse Effect).
          (c) There are no liens for Taxes upon any Acquired Asset, except for
liens for Taxes not yet due.
          (d) As of the date hereof, to Sellers’ Knowledge, there are no pending
or threatened in writing, Tax audits, examinations, actions, suits, claims,
investigations or proceedings with respect to the ownership of the Acquired
Assets and no outstanding written deficiencies or assessments for any amount of
Tax have been assessed by any Taxing Authority with respect to Taxes relating to
the ownership of the Acquired Assets that have been received by Sellers.
          (e) There are no outstanding agreements extending or waiving the
statutory period of limitations applicable to any claim for, or the period for
the collection or assessment or reassessment of, Taxes due from either Seller
for any taxable period and no request for any such waiver or extension is
currently pending.
          (f) Neither Seller is a party to or bound by any agreement relating to
the sharing or allocation of Taxes.
          (g) Neither Seller is a party to any agreement, Contract, arrangement
or plan that (i) has resulted or could result, separately or in the aggregate,
in the payment of any “excess parachute payment” within the meaning of
Section 280G of the Code (or any similar provision of state, local or foreign
Law) or any amount that would not be fully deductible as a result of Section
162(m) of the Code (or any similar provision of state, local or foreign Law), or
(ii) could provide for the deferral of compensation subject to Section 409A of
the Code (or any similar provision of state, local or foreign Law).

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          (h) Neither Seller currently is the beneficiary of any extension of
time within which to pay any Tax or to file any Tax Return.
          (i) Neither Seller is required to include any item of income in, or
exclude any item of deduction or loss from, taxable income for any taxable
period or portion thereof beginning on or after the Closing Date as a result of
(A) a change in method of accounting for a taxable period beginning on or before
the Closing Date, (B) any “closing agreement” described in Section 7121 of the
Code (or any similar provision of state, local or foreign Law) executed on or
before the Closing Date, (C) any installment sale or open transaction
disposition made on or before the Closing Date, or (D) any prepaid amount
received on or before the Closing Date.
          (j) All Taxes required to be withheld or collected by Sellers have
been duly withheld and collected and have been properly paid or deposited as
required by applicable Laws.
          (k) RESC, at all times since its formation, has been classified and
treated for Tax purposes as a disregarded entity, and not as a corporation.
          (l) Channelview LP, at all times since its formation, has been
classified and treated for Tax purposes as a partnership, and not as a
corporation.
     5.11. Employee Benefit Plans; ERISA.
          (a) Schedule 5.11(a) sets forth a true, correct and complete list, as
of the Execution Date, of all Seller Affiliate Plans. No Continuing Employee is
entitled to, or may become eligible to receive, any benefit from a Benefit Plan
other than a Seller Affiliate Plan. On or before the Execution Date, Sellers
have made available to Buyer copies (including amendments) of (i) each of the
Seller Affiliate Plans, including any plan documents, trust agreements, annuity
contracts, insurance contracts or other funding documents related to a Seller
Affiliate Plan, (ii) the latest determination letter obtained from the IRS with
respect to any Seller Affiliate Plan intended to be qualified or exempt under
Section 401 or 501 of the Code, and (iii) census data for the Channelview
Facility Employees for each Seller Affiliate Plan.
          (b) None of Sellers, Sellers’ Affiliates, or any Commonly Controlled
Entity contribute to, have an obligation to contribute to, or have ever
contributed to, or ever had an obligation to contribute to, any multiemployer
plan (within the meaning of Section 3(37) of ERISA).
          (c) All Seller Affiliate Plans and related trust agreements are and
have been maintained in compliance both as to form and operation with all Laws,
including the Code and ERISA, except to the extent that any such non-compliance
would not reasonably be expected to have a Material Adverse Effect. Except as
set forth in Schedule 5.11(c), a favorable determination letter as to
qualification under Section 401 of the Code has been issued with respect to any
Seller Affiliate Plan intended to be qualified under Section 401 of the Code,
and the related trust has been determined to be exempt from taxation under
Section 501 of the Code. The Sellers and their Affiliates know of no events or
circumstances that have occurred that would adversely affect the qualified
status of any such plans or trusts.

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          (d) Other than as provided under the Collective Bargaining Contract,
no individual listed on Schedule 7.9(b) has ever received employer-subsidized
health care or any other non-pension benefits with respect to employment at the
Channelview Facility for more than 3l days after his or her employment is
terminated (other than as required by part 6 of subtitle B of title I of ERISA)
and has never been promised such employer-subsidized post-termination benefits
with respect to employment at the Channelview Facility.
     5.12. Labor and Employment.
          (a) With respect to each individual employed by Operator who performs
services for the Channelview Facility (the “Channelview Facility Employees”),
except for the Collective Bargaining Contract, Operator is not a party to, nor
is bound by, the terms of any collective bargaining agreement or any other
Contract with any labor union or representative of employees. To Sellers’
Knowledge, there are no union organization campaigns or attempts to organize or
establish any employee association underway or threatened involving employees of
either Seller.
          (b) Channelview LP is in compliance with all laws, rules and
regulations relating to labor relations and employment with respect to the
Continuing Employees, except to the extent that any such non-compliance would
not reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect.
          (c) To Sellers’ Knowledge, no Channelview Facility Employees are in
violation of any term or provision of any employment contract, confidentiality
or other proprietary information disclosure agreement or other contract relating
to the right of any such Person to be employed or engaged by a Seller which
would reasonably be expected to have a Material Adverse Effect.
          (d) To Sellers’ Knowledge, none of Operator’s employment policies or
practices applicable to the Channelview Facility Employees are currently being
audited or investigated by any Governmental Authority which would reasonably be
expected to have a Material Adverse Effect. To Sellers’ Knowledge there are no
current, nor have there been since four (4) years prior to the Closing Date,
any, charges, claims, or demands filed with any Governmental Authority from any
current or former Channelview Facility Employees regarding their employment or
former employment at the Channelview Facility which would reasonably be expected
to have a Material Adverse Effect, including claims or charges of employment
discrimination, sexual harassment or unfair labor practices.
          (e) With respect to the Channelview Facility Employees, Operator has
complied with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours and other Laws,
regulations and requirements related to employment, except to the extent that
any such non-compliance would not reasonably be expected to have a Material
Adverse Effect.
          (f) Except as set forth on Schedule 5.12(f), neither the execution and
delivery of this Agreement or the documents contemplated hereby by the Sellers,
the performance by the Sellers of their obligations hereunder and thereunder,
nor the consummation of the transactions

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contemplated hereby and thereby will (i) materially increase or enhance any
benefits payable to a Continuing Employee under any Seller Affiliate Plan, or
(ii) materially accelerate the time of payment or vesting, or increase the
amount, of any compensation due to any Continuing Employee under a Seller
Affiliate Plan.
     5.13. Environmental Matters. Except for such matters as disclosed on
Schedule 5.13 or for such matters that would not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect:
          (a) With respect to the Acquired Assets, Sellers are in compliance
with all applicable Environmental Laws;
          (b) All Permits required under Environmental Laws for conducting the
operations of the Channelview Facility, as such facility is currently being
operated, have been obtained or applied for and, to the extent obtained, are
currently in full force and effect;
          (c) Neither Channelview LP nor any of its Affiliates, with respect to
the Channelview Facility, have received any written notice of a pending Claim
from any Governmental Authority or other Person alleging that it or the
Channelview Facility is in violation of, or has liability under, any applicable
Environmental Law;
          (d) To Channelview LP’s Knowledge, there has been no disposal or
Release by Sellers or their Affiliates at, on, under or from the Channelview
Facility, except in compliance with Environmental Laws; and
          (e) Neither Channelview LP nor any of its Affiliates have received any
written notice from any Governmental Authority or other Person alleging that
Channelview LP or the Channelview Facility have liability under applicable
Environmental Laws with respect to the disposal or transportation, or the
arrangement for disposal or transportation, of Hazardous Substances from the
Channelview Facility by Channelview LP or any of its Affiliates at or to any
off-site location.
     Notwithstanding any other provision of this Agreement to the contrary, this
Section 5.13 contains the sole and exclusive representations and warranties of
Sellers on environmental matters with respect to Sellers and the Acquired
Assets.
     5.14. Intellectual Property. Except as set forth on Schedule 5.14, or as
would not reasonably be expected to have a Material Adverse Effect, (a) each
Seller owns or has the right to use all Intellectual Property used in the
operations of its respective business as currently conducted; (b) to the
Knowledge of Sellers, no Person has or is infringing or misappropriating any
Intellectual Property of Channelview LP that is exclusively used in the
operation of the Channelview Facility; and (c) to the Knowledge of Sellers, no
Person has or is infringing or misappropriating any Intellectual Property of
RESC that is used exclusively in the running of RESC’s Business. Except for such
violations which would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, neither the Sellers nor the
Channelview Facility have infringed or misappropriated, and the operation of the
Channelview Facility does not infringe or misappropriate any valid rights of
third parties with respect to Intellectual Property.

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     5.15. Real Estate. Channelview LP has delivered or otherwise made available
to Buyer true, correct and complete copies of the surveys, title reports and the
ground lease set forth on Schedule 5.15. Channelview LP does not own any real
property or interest in real property other than pursuant to the Real Estate
Leases or with respect to the Entitled Real Property.
     5.16. Insurance. The Channelview Facility and Sellers are covered by valid
policies of insurance as part of Reliant Energy’s corporate insurance program.
Such insurance coverage shall not survive the Closing.
     5.17. Federal Regulation. As of the Closing Date, the Channelview Facility
meets the requirements for a “Qualifying Cogeneration Facility” as defined in
Section 3(18)(B) of the Federal Power Act, as amended, and the rules and
regulations thereunder and the Public Utility Regulatory Policies Act of 1978,
as amended (a “QF”).
     5.18. Brokers. Neither Seller has any liability or obligation to pay fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
     5.19. Conduct of Business and Operations. To Channelview LP’s Knowledge,
since December 31, 2006, Channelview LP has operated and maintained the
Channelview Facility in accordance with Prudent Industry Practice, except as
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
     5.20. Sufficiency of Assets. Except for the Excluded Assets and assets
consumed in the ordinary course of business, the Acquired Assets include all of
the assets (whether tangible or intangible) used by the Channelview Facility to
conduct the business of the Channelview Facility as conducted as of each of the
date hereof, except as would not reasonably be expected to have a Material
Adverse Effect. Except as would not reasonably be expected to have a Material
Adverse Effect, the Sellers have good title to, or valid license or right to
use, free and clear of all Liens (other than Liens that will be discharged prior
to Closing or pursuant to the Chapter 11 Cases, or Permitted Exceptions), all of
the tangible personal property described in the preceding sentence.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
     In order to induce Sellers to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby represents and warrants to
Sellers that:
     6.1. Organization and Qualification. Buyer is a limited liability company
duly formed and existing under the Laws of the State of Delaware. Buyer is
qualified to transact business and, where applicable, is in good standing in
each jurisdiction where the nature of the business conducted by it makes such
qualification necessary, except in those jurisdictions where the failure to be
so qualified or licensed would not, in the aggregate, be reasonably expected to
result in a material adverse effect on Buyer’s ability to perform its
obligations hereunder.
     6.2. Authority. Buyer has all requisite limited liability company power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the

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transactions contemplated hereby. The execution and delivery by Buyer of this
Agreement and the performance by Buyer of its obligations hereunder have been
duly and validly authorized by all necessary limited liability company action on
behalf of Buyer. This Agreement has been duly and validly executed and delivered
by Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms except as the same may be
limited by bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar Laws relating to or affecting the rights of creditors generally or
by general equitable principles.
     6.3. No Conflicts; Consents and Approvals. The execution and delivery by
Buyer of this Agreement and each of the documents contemplated hereby do not,
and the performance by Buyer of its obligations hereunder and under each of the
documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby will not:
          (a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of its Charter Documents;
          (b) be in violation of or result in a default (or give rise to any
right of termination, cancellation or acceleration) under any material Contract
to which Buyer is a party or by which any of its assets may be bound except for
any such violations or defaults (or rights of termination, cancellation or
acceleration) which would not, in the aggregate, be reasonably expected to
result in a material adverse effect on Buyer’s ability to perform its
obligations hereunder; or
          (c) assuming all required filings, approvals, consents, authorizations
and notices set forth in Schedule 6.3(c) (collectively, the “Buyer Governmental
Approvals”) have been made, obtained or given, (i) conflict with or result in a
violation or breach of any term or provision of any Law or writ, judgment, order
or decree applicable to Buyer or any of its assets or (ii) require the consent
or approval of any Governmental Authority under any applicable Law, except in
each case such conflicts, violations or breaches, or the failure to obtain such
consents or approvals, which would not reasonably be expected to result in a
material adverse effect on Buyer’s ability to perform its obligations hereunder.
     6.4. Legal Proceedings. Buyer has not been served with written notice of
any Claim, and to Buyer’s Knowledge, none is threatened, against Buyer which
seeks a writ, judgment, order or decree restraining, enjoining or otherwise
prohibiting or making illegal any of the transactions contemplated by this
Agreement.
     6.5. Compliance with Laws and Orders. Buyer is not in violation of or has
been given written notice of any current violation of any Law applicable to
Buyer or its assets the effect of which, in the aggregate, would reasonably be
expected to result in a material adverse effect on Buyer’s ability to perform
its obligations hereunder.
     6.6. Brokers. Buyer does not have any liability or obligation to pay fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which Sellers or any of their Affiliates
could become liable or obligated.

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     6.7. Financial Resources. Buyer at Closing will have sufficient funds to
satisfy its obligations required to be performed at Closing.
     6.8. No Knowledge of a Sellers’ Breach. Buyer has no Knowledge of any
breach by either Seller of any representation or warranty made hereunder which
breach would reasonably be expected to result in a Material Adverse Effect, of
which the Buyer has not advised Sellers.
     6.9. Opportunity for Independent Investigation. Prior to its execution of
this Agreement, Buyer has conducted to its satisfaction an independent
investigation and verification of the current condition and affairs of the
Sellers and the Channelview Facility without reliance on Sellers or any of their
Affiliates; provided that such independent investigation and verification shall
not affect the express representations, warranties, covenants or other
obligations of Sellers contained in this Agreement. Buyer has had reasonable and
sufficient access to documents, other information and materials as it considers
appropriate to make its evaluations.
ARTICLE 7
COVENANTS
     The Parties hereby, as applicable, covenant and agree as follows:
     7.1. Access.
          (a) During the Interim Period, to the extent within their reasonable
control in light of the commencement of the Chapter 11 Cases, each Seller (as
applicable) will provide, and will cause its Affiliates to provide, Buyer and
its Representatives with reasonable access during normal business hours to the
Channelview Facility, and the officers and management employees of Sellers and
their Affiliates who are responsible for the Channelview Facility in such a
manner so as not to unreasonably interfere with the business or operations of
Sellers or their Affiliates; provided, that each Seller shall have the right to
(i) have a Representative present for any communication with employees or
officers of such Seller or its Affiliates, and (ii) impose reasonable
restrictions and requirements for safety or operational purposes; provided
further, that the right of access granted hereunder shall not include physical
testing or sampling. Notwithstanding the foregoing, neither Seller shall be
required to provide any information or allow any inspection which (i) such
Seller reasonably believe contravenes applicable Law, (ii) constitutes or allows
access to information protected by attorney/client privilege, or (iii) such
Seller or its Affiliates is required to keep confidential or prevent access to
by reason of any Contract with third parties; provided, however, that Sellers
shall advise Buyer of the existence of such Contracts at Closing. Following the
Closing, Sellers shall be entitled to retain copies of all books and records
relating to the ownership and/or operation of their respective businesses (as
applicable) and at Buyer’s request after the Closing, to the extent such books
and records have not been disposed of, Sellers shall at Buyer’s sole cost and
expense, provide Buyer with a copy of any such books and records.
          (b) Buyer agrees to indemnify, defend and hold harmless Sellers, their
Affiliates and their Representatives from and against any and all Losses
incurred by Sellers, their Affiliates, their Representatives or any other Person
arising out of the access rights under this

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Section 7.1, including any Claims by any of Buyer’s Representatives for any
injuries or Losses while present at the Channelview Facility, EVEN IN INSTANCES
OF THE NEGLIGENCE OF SELLERS, THEIR AFFILIATES OR THEIR REPRESENTATIVES, BUT NOT
TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLERS,
THEIR AFFILIATES OR THEIR REPRESENTATIVES.
          (c) Each Party agrees that, after the Closing Date, it will use its
commercially reasonable efforts to cooperate with and make available to the
other Party and its Representatives for reviewing and making copies or taking
extracts, upon reasonable notice and during normal business hours, books and
records and information of or relating to the Acquired Assets which are
necessary or useful in connection with any investigation, dispute or proceeding
or audit by a Governmental Authority, or any claim by or against a third party
involving the Acquired Assets (other than in connection with disputes between
the Parties); provided that no such Party shall be required to make available
any information, books or records, the disclosure of which would cause a waiver
of any applicable privilege or breach of an obligation of confidentiality to a
third-party and either party may make access to such information, books and
records conditioned upon execution and delivery of a confidentiality agreement
reasonably satisfactory to the party requesting disclosure. Further, after the
Closing, Buyer shall grant to Sellers or their Representatives the access and
right to make copies or take extracts described in the preceding sentence for
such other purpose as may be reasonably requested by either Seller. The Party
requesting any such books and records, information or cooperation shall bear all
of the out-of-pocket costs and expenses of the other Party reasonably incurred
in connection therewith (including out-of-pocket expenses to third parties
incurred by any Party).
     7.2. Conduct of Business Pending the Closing.
          (a) Except as otherwise contemplated by this Agreement or set forth in
Schedule 7.2, during the Interim Period, Sellers will, to the extent within
their reasonable control in light of the commencement of the Chapter 11 Cases:
     (i) use their commercially reasonable efforts to operate and maintain the
Channelview Facility and the Business in the ordinary course of business
consistent with past practices and in accordance with Prudent Industry Practice;
     (ii) use their commercially reasonable efforts to (A) preserve its present
business operations, organization (including management) and goodwill with
respect to the Channelview Facility and (B) preserve its present relationship
with Persons having business dealings with respect to the Channelview Facility;
     (iii) provide to Buyer copies of invoices paid or to be paid during or
attributable to the Interim Period; and
     (iv) provide to Buyer copies of the monthly operations reports delivered to
Lenders.
          (b) Except as otherwise contemplated by this Agreement, as set forth
in Schedule 7.2, as required by any Material Contract or material Permit of
either Seller, or as consented to by Buyer, which consent shall not be
unreasonably withheld, conditioned or

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delayed, during the Interim Period, each Seller (as applicable) will, to the
extent within its reasonable control (and as applicable in light of the
Chapter 11 Cases) with respect to the Business, the Channelview Facility or the
other Acquired Assets, not:
     (i) other than any Permitted Exceptions, permit or allow any Lien securing
indebtedness for borrowed money against any of the Acquired Assets;
     (ii) except in the ordinary course of business consistent with past
practice, terminate, amend or renegotiate in any material respect or grant a
waiver of any material term of, or give any material consent with respect to,
any Material Contract which is an Assigned Contract or Permit, or enter into a
Contract after the Execution Date that would be a Material Contract if entered
into prior to the Execution Date (other than Contracts that will be fully
performed prior to Closing or renewals of Contracts in place on the Execution
Date);
     (iii) other than accounts payable incurred in the ordinary course of
business consistent with past practices or otherwise incurred pursuant to the
Material Contracts (or Contracts entered into in accordance with clause
(ii) above, after the Execution Date that would be Material Contracts if entered
into prior to the Execution Date), incur, create, assume or otherwise become
liable for indebtedness for borrowed money or issue any debt securities or
assume or guarantee the obligations of any other Person unless in any such case
paid in full and discharged at or before the Closing;
     (iv) fail to maintain their limited partnership or limited liability
company existence or merge or consolidate with any other Person or acquire all
or substantially all of the assets of any other Person;
     (v) issue or sell any membership interests, partnership interests or
securities or rights convertible into membership interests, partnership
interests or securities;
     (vi) liquidate, dissolve, recapitalize, reorganize or otherwise wind up its
business or operations if any such action would impact the transactions
contemplated hereby;
     (vii) except in the ordinary course of business, sell, assign, license,
transfer, convey, lease or otherwise dispose of any assets with a value in
excess of $500,000;
     (viii) make or change any material election with respect to Taxes;
     (ix) make any material change in its accounting principles, methods or
policies, except as otherwise required by GAAP or applicable Law;
     (x) make any loans or purchase any securities of any Person, except for
short-term investments or cash equivalents made in the ordinary course of
business consistent with past practices;
     (xi) cancel, terminate or allow any material property or liability
insurance policy to lapse;

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     (xii) cancel any debts, discount any receivables or waive any claims in
excess of $500,000;
     (xiii) amend or modify its Charter Documents if such amendment or
modification would affect such Seller’s ability to perform its respective
obligations hereunder or under the documents contemplated hereby; or
     (xiv) agree or commit to do any of the foregoing.
     Notwithstanding the foregoing, each Seller may take commercially reasonable
actions in accordance with Prudent Industry Practice with respect to emergency
situations and to comply with applicable Law so long as such Seller shall, and
with respect to Channelview LP, to the extent within its reasonable control in
light of the commencement of the Chapter 11 Cases, promptly (but no later than
two (2) Business Days after the taking of any such action) inform Buyer of such
actions.
     For purposes of clarification, it is understood and agreed that Capital
Expenditures made by Sellers for the items and in the amounts set forth in the
budget attached hereto as Exhibit F shall be deemed to have been commercially
reasonable and made by Sellers to operate and maintain the Channelview Facility
and the Business in the ordinary course of business.
     7.3. Use of Certain Names. Within 30 days following the Closing, Buyer
shall cease using the Reliant Marks, including eliminating the Reliant Marks
from all Acquired Assets and disposing of any unused stationery and literature
including the Reliant Marks, and thereafter, Buyer shall not, and shall cause
the Channelview Facility not to, use the Reliant Marks or any logos, trademarks,
trade names, patents or other Intellectual Property rights belonging to Sellers
or any of their Affiliates, or which Sellers or any of their Affiliates have the
right to use, and Buyer acknowledges that it, its Affiliates and the Channelview
Facility have no rights whatsoever to use such Intellectual Property. Sellers
hereby agree not to object to Buyer’s use of any Reliant Marks in connection
with the operation of the Channelview Facility during the aforementioned thirty
(30) day period.
     Without limiting the foregoing, within 30 days after the Closing Date,
Buyer shall provide evidence to Sellers, in a format that is reasonably
acceptable to Sellers, that Buyer has provided notice to all applicable
Governmental Authorities and all counterparties to the Assigned Contracts
regarding the sale of the Acquired Assets to Buyer and the new addresses for
notice purposes.
     7.4. Support Obligations.
          (a) Prior to Closing, Buyer shall use commercially reasonable efforts
to effect the full and unconditional release, effective as of the Closing, of
the Sellers and their Affiliates from any credit support obligations provided by
Sellers or such Affiliates with respect to the Acquired Assets or the Business,
which are specifically listed on Schedule 7.4(a) at the time required under such
schedule (collectively, the “Support Obligations”), including by offering within
a reasonable time in advance of such release replacement bonds, guaranties,
letters of credit, cash collateral and/or escrow arrangements, as needed, to
effect the replacement of such

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Support Obligations, in accordance with the applicable requirements of such
Support Obligations. Sellers shall reasonably cooperate with Buyer in such
effort.
          (b) If Buyer is not successful, following the use of commercially
reasonable efforts, in obtaining the complete and unconditional release of
Sellers and their Affiliates from the LTMA Support Obligations as of Closing,
then Sellers shall have the right to waive the condition to Closing set forth in
Section 9.3(a); and
     (i) from and after the Closing, Buyer shall continue to use commercially
reasonable efforts to obtain promptly the full and unconditional release of
Sellers and their Affiliates from the LTMA Support Obligations;
     (ii) Buyer shall indemnify Sellers (as applicable) and their Affiliates for
any liabilities, losses, costs or expenses incurred by Sellers or their
Affiliates in connection with the LTMA Support Obligations arising or accruing
after the Closing (excluding any such liabilities, losses, costs or expenses
resulting from any breach of the LTMA Support Obligations) by Sellers and their
Affiliates;
     (iii) Buyer shall not, and shall cause its Affiliates not to, effect any
amendments or modifications or any other changes to the contracts or obligations
to which any of the LTMA Support Obligations relate, or to otherwise take any
action that in either case would reasonably be expected to increase, extend or
accelerate the liability of either Seller or their Affiliates under the LTMA
Support Obligations, without such Seller’s prior written consent; and
     (iv) Buyer shall deliver to Sellers at the Closing and maintain at all
times thereafter until the full and unconditional release of the LTMA Support
Obligations in accordance with this Section 7.4, at Sellers’ election, either
(A) an irrevocable, standby letter of credit in the amount of the maximum amount
of exposure under the LTMA Support Obligations, in form and substance and from
an issuing bank reasonably satisfactory to Sellers or (B) a guaranty of the
Buyer’s obligations hereunder with respect to the LTMA Support Obligations from
a Person with a Credit Rating of Investment Grade, which guarantee shall be in
form and substance reasonably satisfactory to Sellers.
     7.5. Termination of Certain Services, Contracts. Except as otherwise
provided in the Administrative Services Transition Services Agreement and for
purposes of clarity, Buyer shall be responsible for providing all
administrative, operating and energy management services, including tax, legal,
insurance, financial reporting, operations and maintenance services, technical
support and banking services for the Acquired Assets from and after the Closing,
and any and all arrangements under which such services are provided by Reliant
Energy or an Affiliate shall not be assigned to Buyer and/or shall be
terminated, as applicable, including serving as a QSE or a “Retail Electric
Provider” with respect to the Channelview Facility.
     7.6. Insurance. Sellers shall be solely responsible for providing insurance
to the Channelview Facility and the Business for periods prior to the Closing.
Buyer shall be solely responsible for providing insurance to the Channelview
Facility and the Business for all periods after the Closing. Buyer acknowledges
that no insurance coverage or policy maintained for the

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Channelview Facility or the Business will extend beyond the Closing for the
benefit of Buyer. Buyer shall provide evidence of such independent coverage to
Sellers as of Closing. Notwithstanding any provision hereof to the contrary, if,
before the Closing, all or any material portion of the Acquired Assets is
(a) condemned or taken by eminent domain or is the subject of a pending or
threatened condemnation or taking which has not been consummated, or
(b) materially damaged or destroyed by fire or other casualty, Sellers shall
notify Buyer promptly in writing of such fact, and (i) in the case of
condemnation or taking, Sellers shall assign or pay, as the case may be, any
proceeds thereof to Buyer at the Closing and (ii) in the case of a fire or other
casualty, Sellers shall either restore such Acquired Asset to substantially the
same condition as before such casualty or assign the insurance proceeds
therefrom to Buyer at Closing.
     7.7. Tax Matters.
          (a) Transfer Taxes. Notwithstanding anything in this Agreement to the
contrary, all Transfer Taxes shall be paid one-half by Buyer and one-half by
Sellers. Buyer shall file all Tax Returns required to be filed to report
Transfer Taxes.
          (b) Responsibility for Pre-Closing Taxes. Sellers shall be responsible
for all Taxes relating to the Acquired Assets with respect to any period (or
portion thereof) ending on or before the Closing Date. Sellers shall pay, and
shall indemnify Buyer, for any such Taxes. For this purpose, in the case of any
taxable period that includes (but does not end on) the Closing Date (a “Straddle
Period”), Taxes (including any applicable withholding obligations) other than
income or franchise Taxes will be allocated between the portion of the Straddle
Period ending on the Closing Date (“Pre-Closing Portion”) and the portion of the
Straddle Period beginning on the day after the Closing Date. The amount of such
Taxes allocable to the Pre-Closing Portion will be determined on the basis of a
deemed closing of the books of Sellers as of the close of business on the
Closing Date; provided, that in the case of ad valorem Taxes and any other Tax
that is a fixed amount for the entire taxable period, the amount of each such
Tax allocable to the Pre-Closing Portion will be equal to the product of each
such Tax multiplied by a fraction, the numerator of which is the number of days
in the Straddle Period from the commencement of such period through and
including the Closing Date, and the denominator of which is the number of days
in the entire Straddle Period. The amount of Taxes (other than income or
franchise Taxes) for a Straddle Period not allocable to the Pre-Closing Portion
shall be allocable to the portion of the Straddle Period beginning the day after
the Closing Date.
          (c) Income and Franchise Taxes. Notwithstanding anything in this
Agreement to the contrary, each Seller shall be responsible for reporting for
any income or franchise Taxes for which it may be liable. Without limiting the
foregoing, Sellers shall be responsible for reporting and paying the Texas
franchise Tax and any associated penalties and interest with respect to the
total revenues of Sellers attributable to the Business through and including the
Closing Date. Buyer shall be responsible for reporting and paying the Texas
franchise Tax with respect to the total revenues of the Acquired Assets after
the Closing Date.
          (d) Texas Temporary Credits. Buyer (i) acknowledges and agrees that a
purchaser of the Acquired Assets will not be entitled to any Channelview Texas
temporary credits; and (ii) agrees that the Sellers shall have no obligation to
the Buyer from and after the Closing, with respect thereto.

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          (e) Cooperation. Buyer and Sellers shall cooperate fully as and to the
extent reasonably requested by either Party, in connection with the filing of
Tax Returns relating to the Acquired Assets and any audit, litigation or other
proceeding (each a “Tax Proceeding”) with respect to such Tax Returns. Such
cooperation shall include, the retention and (upon request and until the
expiration of the applicable statute of limitations,) the provision of records
and information relating solely to the Acquired Assets which are reasonably
relevant to any such Tax Return or Tax Proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. Promptly following receipt of any notice of
a Tax Proceeding relating to the Acquired Assets with respect to a taxable
period (or portion thereof) ending on or before the Closing Date, the
appropriate Seller or Buyer, as the case may be, shall inform the other Party of
such Tax Proceeding. The Buyer and Sellers further agree, upon reasonable
request, to use their commercially reasonable efforts to obtain any certificate
or other document from any Taxing Authority or any other Person, or make any
election, as may be necessary to mitigate, reduce, or eliminate any Tax that
could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
     7.8. Confidentiality.
          (a) All nonpublic information provided to, or obtained by, Buyer or
its Representatives in connection with the transactions contemplated hereby
shall be “Evaluation Material” for purposes of the letter dated May 24, 2007
between Channelview LP and Kelson Energy, Inc., an Affiliate of Buyer (the
“Confidentiality Agreement”), the terms of which shall continue in force until
the Closing; provided, that Buyer may disclose such information as may be
necessary in connection with seeking Buyer Governmental Approvals.
          (b) Notwithstanding anything to the contrary set forth herein or in
any other agreement to which the Parties hereto are parties or by which they are
bound, the obligations of confidentiality contained herein and therein, as they
relate to the Acquired Assets, shall not apply to the U.S. federal tax structure
or U.S. federal tax treatment of the Acquired Assets and the Parties hereto (and
any employee, Representative, or agent of any party hereto) may disclose to any
and all persons, without limitation of any kind, the U.S. federal tax structure
and U.S. federal tax treatment of the Acquired Assets. The preceding sentence is
intended to cause the Acquired Assets not to be treated as having been offered
under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or
any successor provision) of the Treasury Regulations promulgated under
Section 6011 of the Internal Revenue Code of 1986, as amended, and shall be
construed in a manner consistent with such purpose. In addition, each Party
hereto acknowledges that it has no proprietary or exclusive rights to the tax
structure of the Acquired Assets or any tax matter or tax idea related to the
Acquired Assets.
     7.9. Employee and Benefit Matters.
          (a) On or before the Closing, Channelview LP shall take, or shall
cause to be taken, all actions necessary to cause the Continuing Employees to
cease to accrue any additional benefits on or after the Closing Date under all
Seller Affiliate Plans (except as set forth in the Transition Services Agreement
to the extent applicable). Prior to the Closing Date, Sellers shall provide
Buyer or its designee with census information for the Continuing Employees and
all

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Seller Affiliate Plan documents as necessary for Buyer to construct and
implement the benefit plans required by this Section 7.9.
          (b) Within 45 days after the Execution Date, but effective as of the
Closing Date, Buyer or its designee shall offer employment (which shall be
contingent on the occurrence of the Closing to each individual who is
(i) eligible for employment under applicable law, (ii) actively at work on the
Closing Date, and (iii) listed as “actively at work” on Schedule 7.9(b)).
Sellers shall not, and shall cause their affiliates to not, discourage such
employees from accepting, or otherwise interfere with, the offers made by Buyer
or its designee, although such employees may, on their own initiative, post for
and be considered for open position with Sellers’ Affiliates. For purposes of
this Section 7.9, an employee is not “actively at work” if the employee applied
for long-term disability benefits or is receiving long-term disability benefits
under any long-term disability plan or program established or maintained by
Sellers, Sellers’ Affiliates or any Commonly Controlled Entity as of the Closing
Date. All employees described in the preceding sentence shall be listed as “not
actively at work” on Schedule 7.9(b). The list of employees identified as “not
actively at work” on Schedule 7.9(b) shall be updated as of the Closing Date.
Each offer of employment shall be consistent with the provisions of this
Section 7.9 and shall remain open for a period of at least 10 days. For a period
of at least one year beginning on the Closing Date and subject to the Collective
Bargaining Contract (for covered Continuing Employees) and the remaining
paragraphs of this Section 7.9 and such individual’s continued employment with
Buyer or its designee, Buyer or its designee shall cause each such Continuing
Employee to be provided with compensation (including annual incentive
compensation) on a substantially equivalent basis to the compensation provided
to such employee by the Operator immediately prior to the Closing and benefits
(including severance benefits and worker’s compensation benefits) on a basis
substantially similar in the aggregate to those provided to such employee by the
Operator immediately prior to the Closing (but excluding participation in a
defined benefit plan, any right to employer contributions to a defined
contribution plan, participation in an employee stock purchase plan, and
participation in any stock-based compensation program, in each case, to the
extent not offered to employees of Buyer or its designee). Notwithstanding the
foregoing sentence, Buyer shall not be required to provide post-retirement
medical benefits to any Continuing Employee except for (i) amounts required to
be contributed on an annual basis under the Collective Bargaining Contract to
accounts of eligible Continuing Employees established by Buyer or its designee
to replicate amounts referred to as “Basic Credits”, “Additional Credits” and
“Interest” under the Reliant Energy FutureCare program as of the date hereof
(“FutureCare Program”), (ii) providing access to accounts under the FutureCare
Program for eligible Continuing Employees as required under the Collective
Bargaining Contract, and (iii) as required under part 6 of subtitle B of title I
of ERISA. After Closing, subject to the Collective Bargaining Contract (for
covered Continuing Employees), the employment policies and practices of Buyer or
its designee shall apply to the Continuing Employees. Individuals listed on
Schedule 7.9(b) who are not actively at work on the Closing Date will not become
employees of Buyer or its designee until such time as they are medically
certified to return to work, provided such release is within 6 months of the
Closing Date. Offers of employment by Buyer or its designee to these employees
will be made consistent with the conditions outlined in this Section 7.9.
          (c) Buyer acknowledges and agrees that (i) certain employees employed
at the Channelview Facility are represented by the International Brotherhood of
Electrical Workers and

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its Local Union No. 66 (the “Union”) pursuant to the terms of the Collective
Bargaining Contract, (ii) Buyer, or its designee, as applicable, will continue
to recognize the Union as the exclusive bargaining representative of the
employees whose employment is covered by the Collective Bargaining Contract,
(iii) the Collective Bargaining Contract will continue to be effective until it
expires by its own terms or is renegotiated, and (iv) Buyer or its designee will
assume and be bound by the terms, conditions and provisions of the Collective
Bargaining Contract. Buyer further acknowledges that, subject to the terms of
the Collective Bargaining Contract and applicable Law, Buyer or its designee
shall offer employment (which shall be contingent on the occurrence of the
Closing) to the employees covered by the Collective Bargaining Contract. The
employment policies and practices of Buyer or its designee shall apply to the
Continuing Employees covered by the Collective Bargaining Contract to the extent
consistent with the Collective Bargaining Contract. Nothing herein is intended
to restrict or prohibit the ability of Buyer or its designee to negotiate
modifications of the Collective Bargaining Contract with the Union.
          (d) Buyer shall cause the employee benefit plans and programs
maintained after the Closing by Buyer or its designee to recognize each
Continuing Employee’s years of service and level of seniority prior to the
Closing Date with the Operator (including service and seniority with any other
employer that was previously recognized by the Operator) for purposes of terms
of employment and eligibility, vesting and benefit determination (but not for
benefit accrual under any defined benefit plan) under such plans and programs.
Buyer shall cause each employee welfare benefit plan or program sponsored by
Buyer or its designee in which a Continuing Employee may be eligible to
participate on or after the Closing Date to waive any preexisting condition
exclusion with respect to participation and coverage requirements applicable to
such Continuing Employee, to the extent that a Continuing Employee provides
Buyer with a certificate of creditable coverage as defined in Section 701(c)(1)
of ERISA.
          (e) To the extent consistent with the Collective Bargaining Contract,
as applicable, Buyer shall cause, or as applicable shall cause its designee to
cause, each Continuing Employee and his or her eligible dependents (including
all such Continuing Employee’s dependents covered immediately prior to the
Closing Date by a Seller Affiliate Plan that is a group health plan) to be
offered coverage under a group health plan maintained by Buyer or its designee
that (i) provides medical and dental benefits to the Continuing Employee and
such eligible dependents effective immediately upon the Closing Date and
(ii) credits such Continuing Employee, for the year during which such coverage
under such group health plan begins, with any deductibles and co-payments
already incurred during such year under a Seller Affiliate Plan that is a group
health plan.
          (f) Buyer expressly agrees that it assumes all obligations to provide
any required notice under the WARN Act, or other applicable Laws, and to pay all
severance payments, damages for wrongful dismissal and related costs, with
respect to the termination of any employee of the Operator employed at the
Channelview Facility that occurs on or after the Closing Date. Sellers, as
applicable, shall remain liable for any such liabilities that may arise as a
result of any action taken by Seller prior to the Closing Date.
          (g) Sellers (as applicable) shall cause each Continuing Employee to be
permitted to elect on the Closing Date (or as soon thereafter as reasonably
practicable) a direct

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rollover of his/her account balance under a Seller Affiliate Savings Plan to a
defined contribution plan designated by Buyer (the “Buyer Savings Plan”), and
Sellers shall cause the applicable Seller Affiliate Savings Plan to deliver to
the Buyer Savings Plan as soon as reasonably practicable after such date the
promissory notes and other loan documentation, if any, of each Continuing
Employee who has elected such a direct rollover in accordance with the
procedures as determined by Sellers and Buyer. Buyer and Sellers shall cooperate
and take such actions, if any, as are necessary to permit the continuation of
loan repayments by Continuing Employees to the Seller Affiliate Savings Plans by
payroll deductions during the 90-day period beginning on the Closing Date;
provided, however, that if a Continuing Employee makes a direct rollover
election as described in this Section 7.9(g) within such 90-day period, then the
applicable Seller Affiliate Savings Plan shall continue to accept loan
repayments from such Continuing Employee by payroll deduction until the date of
such direct rollover. Buyer shall cause the Buyer Savings Plan to accept the
direct rollover of electing Continuing Employees’ benefits in cash and, if
applicable, promissory notes that are not accelerated from the Seller Affiliate
Savings Plans. Sellers represent, warrant and agree with respect to the Seller
Affiliate Savings Plans, and Buyer represents warrants and agrees with respect
to the Buyer Savings Plan, that, as of each date of a rollover described in this
Section 7.9(g), such plan (i) is intended to satisfy the requirements of
Sections 401(a), (k), and (m) of the Code and (ii) will have received, or a
pending application will have been timely filed for, a favorable determination
letter from the IRS regarding such qualified status and covering amendments
required to have been adopted prior to the expiration of the applicable remedial
amendment period. Except as required by Law or as required by the Collective
Bargaining Contract, Buyer or its designee shall not be required to provide any
particular benefit under the Buyer Savings Plan. Except as required by Law or as
required by the Collective Bargaining Contract, Buyer or its designee shall not
be required to provide any particular benefit under the Buyer Savings Plan.
          (h) Claims of Continuing Employees and their eligible beneficiaries
and dependents for medical, dental, prescription drug, life insurance, and/or
other welfare benefits (“Welfare Benefits”) (other than long-term disability
benefits) that are incurred before the Closing Date shall be the sole
responsibility of the Seller Affiliate Plans. Claims of Continuing Employees and
their eligible beneficiaries and dependents for Welfare Benefits (other than
long-term disability benefits) that are incurred on or after the Closing Date
shall be the sole responsibility of Buyer or its designee. Claims for workers
compensation and unemployment compensation arising prior to Closing shall be the
sole responsibility of Sellers and their Affiliates. For purposes of the
preceding provisions of this paragraph, a medical/dental claim shall be
considered incurred on the date when the medical/dental services are rendered or
medical/dental supplies are provided, and not when the condition arose or when
the course of treatment began. Claims for long-term disability benefits that are
made under a Seller Affiliate Plan prior to the Closing Date, or that relate to
any condition of a Continuing Employee existing as of the Closing Date as a
result of which such Continuing Employee is not actively at work on the Closing
Date, shall be the sole responsibility of the Seller Affiliate Plan. Except as
provided in the preceding sentence, claims of Continuing Employees and their
eligible beneficiaries and dependents for long-term disability benefits that are
incurred from and after the Closing Date shall be the sole responsibility of
Buyer or its designee. For purposes of the preceding provisions of this
paragraph, claims for long-term disability benefits based on an injury or
illness occurring prior to the Closing Date will be deemed to have been incurred
prior to the Closing Date. In the case of any claim for benefits other than a
medical/dental claim or a long-term

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disability claim, a claim will be deemed to have been incurred upon the
occurrence of the event giving rise to such claim.
          (i) Except to the extent required by applicable Law, Sellers shall not
pay Continuing Employees their accrued and unused vacation, and Buyer or its
designee, as applicable, shall provide, without duplication of benefits, all
such Continuing Employees with vacation time rather than cash in lieu of
vacation time for all accrued and unused vacation through the Closing Date.
          (j) If, within the one-year period beginning on the Closing Date,
(i) a Continuing Employee voluntarily terminates his or her employment with
Buyer or its designee within 30 days after the date upon which he or she is
notified that the principal place of his or her employment is changing to a
location that is 25 miles or more from the location of such employee’s principal
place of employment immediately prior to the Closing Date, or (ii) the
employment of a Continuing Employee is terminated by Buyer or its designee for a
reason other than cause (as that term is defined in the Severance Plan as of the
Closing Date, but based on the terms of the plan as in effect on the Execution
Date), then, in any such case, Buyer or its designee, as applicable, shall
provide such Continuing Employee with severance benefits at least equal to the
severance benefits which such Continuing Employee would have received under the
Severance Plan had the employment of such Continuing Employee been terminated
under circumstances entitling him or her to benefits under such plan. Such
severance benefits shall be determined based on the terms of the Severance Plan
in effect on the Execution Date, but Buyer or its designee shall take into
account such Continuing Employee’s aggregate service with Buyer or its designee
and his or her pre-Closing Date service recognized pursuant to Section 7.9(d).
Notwithstanding the foregoing, the provisions of this Section 7.9(k) shall not
apply to any Continuing Employee who is covered by the Collective Bargaining
Contract.
          (k) No assets or liabilities of any Seller Affiliate Plan shall be
transferred to, or assumed by, Buyer or its designee.
     7.10. Public Announcements. Sellers and Buyer will consult with each other
before issuing, and provide each other a reasonable opportunity to review and
make reasonable comment upon, any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable Law or any listing agreement with the
NYSE, will not issue any such press release or make any such public statement
prior to such consultation; provided, that each of the Parties may issue a press
release or make any public statement in response to specific questions by the
press, analysts, investors or those attending industry conferences or financial
analyst conference calls; provided further, that each Party may make disclosures
to Persons bound by a confidentiality obligation to the disclosing Party that
covers such disclosed information.
     7.11. Expenses and Fees. Except as expressly provided otherwise herein, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such
expenses.
     7.12. Regulatory and Other Approvals. During the Interim Period:

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          (a) The Parties will, in order to consummate the transactions
contemplated hereby, (i) take all commercially reasonable steps necessary, and
proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable, to obtain or make, as applicable, all
necessary or appropriate waivers, consents, approvals and authorizations of,
filings with and notices to all third parties and Governmental Authorities
required in order to consummate the transactions contemplated by this Agreement
and (ii) provide such other information and communications to such Governmental
Authorities or other Persons as such Governmental Authorities or other Persons
may reasonably request in connection therewith.
          (b) The Parties will provide prompt notification to each other when
any such waiver, consent, approval, authorization, filing or notice referred to
in Section 7.13(a) is obtained, taken, made, given or denied, as applicable, and
will advise each other of any material communications with any Governmental
Authority or other Person regarding any of the transactions contemplated by this
Agreement.
          (c) In furtherance of the foregoing covenants:
     (i) Each Party shall prepare, as soon as is practical following the
execution of this Agreement, all necessary filings in connection with the
transactions contemplated by this Agreement that may be required by FERC, the
PUCT or other Governmental Authority or under the HSR Act or any other federal,
state or local Laws. Each Party shall submit such filings as soon as
practicable, but in no event later than ten (10) Business Days after the
execution hereof for filings with the FERC, and ten (10) Business Days after the
execution hereof for filings under the HSR Act. The Parties shall request
expedited treatment of any such filings, shall promptly furnish each other with
copies of any notices, correspondence or other written communication from the
relevant Governmental Authority, shall promptly make any appropriate or
necessary subsequent or supplemental filings and shall cooperate in the
preparation of such filings as is reasonably necessary and appropriate (provided
that HSR Act filings and attachments need not be exchanged or preapproved by the
other party and provided that any exchange of information between Sellers and
Buyer in connection with any filings shall be done in a manner that complies
with applicable antitrust laws). Buyer and Sellers shall each pay 50% of the
filing fees in connection with submissions by the Parties pursuant to the HSR
Act. Except as described in the immediately preceding sentence, each Party shall
bear its own costs incurred in connection with the filing.
     (ii) The Parties shall not, and shall cause their respective Affiliates not
to, take any action that could reasonably be expected to adversely affect the
approval of any Governmental Authority of any of the aforementioned filings.
Without limiting the foregoing, Buyer agrees that except as may be agreed in
writing by Sellers or as may be expressly permitted pursuant to this Agreement,
it shall not, and shall not permit any of its subsidiaries or Affiliates to,
acquire, develop or construct any electric generation or transmission facility,
enter into any Contract with respect to any electric generation or transmission
facility, or otherwise obtain control over any electric generation or
transmission facility, located within the State of Texas or the control areas
operated by ERCOT or take any action with any Governmental Authority relating to
the foregoing, or agree, in writing or otherwise, to do any of the foregoing, in
each case which could

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reasonably be expected to materially delay the consummation of the transactions
contemplated hereby or result in the failure to satisfy any condition to
consummation of the transactions contemplated hereby.
     (iii) Buyer shall cooperate in good faith with the Governmental Authorities
and undertake promptly any and all action required to complete lawfully the
transactions contemplated by this Agreement, including proffering and consenting
to a governmental order providing for the sale or other disposition, or the
holding separate, of particular Acquired Assets or of any other assets or lines
of business of Buyer or its Affiliates in order to remedy any competition
concerns that any Governmental Authority may have. The entry by any Governmental
Authority in any legal proceeding of a governmental order permitting the
consummation of the transactions contemplated hereby but requiring any of the
assets or lines of business of Buyer or its Affiliates to be held separate or
sold or disposed of thereafter (including the Acquired Assets) shall not be
deemed a failure to satisfy any condition to Closing.
          (d) Each Party agrees that, after the Closing Date, it will cooperate
in good faith with the other Parties to complete in a timely manner, all
post-closing filings and notices required by FERC or any other Governmental
Authorities.
     7.13. Further Assurances. Subject to the terms and conditions of this
Agreement, at any time or from time to time after the Closing, at any Party’s
request and without further consideration, the other Party shall execute and
deliver to such Party such other instruments of sale, transfer, conveyance,
assignment and confirmation, provide such materials and information and take
such other actions and execute and deliver such other documents as such Party
may reasonably request in order to consummate the transactions contemplated by
this Agreement.
     7.14. Schedule Update. From time to time, but no less than 15 days prior to
the Closing Date, either Seller may, at its option, supplement or amend and
deliver updates to the Disclosure Schedules (each a “Schedule Update”) that are
necessary to complete or correct any information in such Schedules or in any
representation or warranty of such Seller provided, however, that no such
updates shall be permitted with respect to Schedules 2.1(a), (b), (c), (g), (h),
Schedule 2.2(p), Schedule 7.2, Schedule 7.4(a), and Schedule 8.1(d). If Buyer
has the right to terminate the Agreement pursuant to Section 10.1(c) as a result
of such Schedule Update and does not exercise such right by the tenth day after
delivery of the Schedule Update then such Schedule Update shall be deemed to
have amended the appropriate Schedule or Schedules as of the date of this
Agreement, to have qualified the representations and warranties contained in
Article 5 as of the date of this Agreement and to have cured any
misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of the existence of such matter.
     7.15. PUCT Matters. Buyer understands and acknowledges that RESC is
certificated by the PUCT to provide retail electric service to Channelview LP
and Equistar under Certificate No. 10044. Buyer acknowledges and accepts the
obligation to take all steps required prior to Closing to (i) apply for its own
PUCT certification as a “Retail Electric Provider” and (ii) engage a QSE to act
on Buyer’s behalf with regard to sales of electricity at retail.

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     7.16. Equistar Consents. Buyer will act in good faith and cooperate with
Sellers in obtaining any and all consents of Equistar required for the
transaction contemplated by this Agreement.
     7.17. Boiler Feedwater Pump. Provided such installation is not completed
prior to Closing, and pursuant to paragraph 4.B of the Settlement Agreement (as
in effect on the date hereof), Buyer agrees to complete the installation of the
Pump (as defined in the Settlement Agreement) in accordance with the terms and
conditions of the Settlement Agreement. Sellers shall pay to Buyer amounts
incurred by Buyer, to the extent such amounts are reimbursable by Equistar, and
at the time such amounts would otherwise be due from Equistar in accordance with
Section 4.B of the Settlement Agreement, for its share of the work performed
after the Closing Date in connection with the installation of the Pump as
required by the Settlement Agreement, subject to receipt by Sellers of an
appropriate invoice and supporting documentation (the “Pump Payments”).
     7.18. Fulfillment of Conditions. Subject to the terms and conditions
herein, each of the Parties hereto shall use its commercially reasonable efforts
to consummate and make effective, as soon as reasonably practicable, the
transactions contemplated hereby, including the satisfaction of all conditions
thereto set forth herein, to the extent it can reasonably do so.
     7.19. Cure of Defaults. At or prior to Closing, each Seller shall (i) cure
any and all defaults under the Assigned Contracts required to be cured under the
Bankruptcy Code in order to assign such Contract to Buyer pursuant to
Section 365 thereof, and (ii) pay all Cure Costs that are required to be paid as
a condition to the assumption and assignment of such Assigned Contracts under
section 365 of the Bankruptcy Code. At Closing, Sellers shall establish a
reserve of cash in a bank account (the “Cure Cost Reserve Amount”) in an amount
sufficient to satisfy any disputed Cure Costs and any Cure Costs not settled or
paid (whether or not then due and payable) prior to Closing. After Closing,
Sellers shall promptly resolve, settle and/or pay from the Cure Cost Reserve
Amount all remaining Cure Costs.
     7.20. 2007 Financial Statements. It is understood and agreed between Buyer
and Sellers that if the audit of the financial statements of Channelview LP for
the period ended December 31, 2007 (the “2007 Financial Statements”) is
completed on or prior to Closing, a true, correct and complete copy of the
audited 2007 Financial Statements shall be promptly provided to Buyer. If the
audit of the 2007 Financial Statements is not completed prior to Closing (i.e.,
the auditors have not completed their review and approval thereof), Sellers
shall provide at Closing (and, to the extent necessary, at any time thereafter
that further information is reasonably requested by Buyer, provided that such
information has to such date been retained by Sellers or their Affiliates) to
Buyer the current form of the 2007 Financial Statements that are under review by
the auditors, contact information for such auditors, all correspondence to and
from such auditors relating to the 2007 Financial Statements which does not
contain confidential information about the Sellers’ Affiliates, and any other
relevant documentation and/or materials in Sellers’ possession or control that
is reasonably requested by Buyer in order for the auditors to complete the audit
of the 2007 Financial Statements. Buyer, acknowledges that Sellers’ auditors are
under no obligation to, and may opt not to, complete an audit of the 2007
Financial Statements.

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ARTICLE 8
BANKRUPTCY PROCEDURES
     8.1. Bankruptcy Actions.
          (a) The approval of this Agreement by the Bankruptcy Court is required
for the Agreement to be binding and enforceable against the Sellers.
          (b) Not later than two (2) days after the date hereof, Channelview LP
shall file with the Bankruptcy Court and provide sufficient notice to all
parties entitled to notice under applicable provisions of the Bankruptcy Code
and Rules, including all Persons who have asserted liens, encumbrances or other
interests in the Acquired Assets, counsel to any official committee appointed in
the Chapter 11 Cases, the United States trustee, all creditors of any debtor in
the Chapter 11 Cases and all parties to the Assigned Contracts, in form and
substance reasonably satisfactory to Buyer, of the motion of the Sellers seeking
entry of the Sale Order (the “Sale Motion”). In addition, notice of the Sale
Motion and the proposed entry of the Sale Order shall be given by Sellers (at
Sellers’ expense) by publication of a notice, in form and substance reasonably
satisfactory to Buyer, in each publication listed on Schedule 8.1(b).
Channelview LP shall seek a hearing on the Sale Motion to occur as soon as
possible in accordance with the Local Rules of the Bankruptcy Court. In the
event that an auction of the Acquired Assets is required by the Bankruptcy
Court, the Sellers shall use commercially reasonable efforts to have the Sale
Order entered on or before sixty (60) days after the date hereof. In the event
that no auction of the Acquired Assets is required by the Bankruptcy Court, the
Sellers shall use commercially reasonable efforts to have the Sale Order entered
on or before thirty (30) days after the date hereof. Each Seller shall promptly
provide Buyer with drafts of all documents, motions, orders, filings or
pleadings, that such Seller proposes to file with the Bankruptcy Court that
relate to (i) this Agreement or the transactions contemplated hereunder,
(ii) entry of the Sale Order, (iii) the Sale Motion or (iv) Buyer, and will
provide Buyer with a reasonable opportunity to review such documents in advance
of their service and filing. Each Seller shall consult and cooperate with Buyer,
and consider in good faith the views of Buyer with respect to all such filings.
Buyer covenants and agrees that it shall cooperate with Channelview LP in
connection with furnishing information or documents to Channelview LP to satisfy
the requirements of adequate assurance of future performance under section
365(f)(2)(B) of the Bankruptcy Code.
          (c) Seller shall promptly make any filings, take all actions, and use
all reasonable efforts to obtain any and all other approvals and orders of the
Bankruptcy Court necessary or appropriate for consummation of the transactions
contemplated hereby, subject to Seller’s obligations to comply with any order of
the Bankruptcy Court and other applicable Laws. Buyer will, if requested by
Sellers, reasonably cooperate with the Sellers with respect to the Chapter 11
Cases in order to consummate the transactions contemplated hereunder, and will
not take any action opposing or attempting to delay or hinder the transactions
contemplated hereby in the Chapter 11 Cases.
          (d) Notwithstanding anything in this Agreement to the contrary, if the
Bankruptcy Court declines to enter the Sale Order on the basis that an auction
for the Acquired Assets should first take place (a “Court Auction
Determination”), Sellers shall, within 48 hours

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of such determination, file a bidding procedures motion with the Bankruptcy
Court, in form and substance reasonably satisfactory to Buyer, seeking the entry
of an order approving the bid protections and procedures set forth on
Schedule 8.1(d) (“Bid Procedures Order”).
ARTICLE 9
CONDITIONS TO THE CLOSING
     9.1. Conditions to the Obligations of Each Party. The obligations of the
Parties to proceed with the Closing are subject to the satisfaction on or prior
to the Closing Date of all of the following conditions, any one or more of which
may be waived in writing (other than the condition contained in Section 9.1(d),
the satisfaction of which cannot be waived), in whole or in part, as to a Party
by such Party:
          (a) no judgment, injunction, order or decree of a court or other
Governmental Authority of competent jurisdiction or other condition arising
under Law shall be in effect which has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
the consummation of the transactions contemplated by this Agreement (each Party
agreeing to use its commercially reasonable efforts, including appeals to higher
courts, to have any judgment, injunction, order or decree lifted);
          (b) (i) any waiting period applicable to consummation of the
transactions contemplated by this Agreement under the HSR Act shall have expired
or been terminated, and (ii) all Sellers’ Governmental Approvals designated with
an asterisk on Schedule 5.2(c) and Buyer’s Governmental Approvals designated
with an asterisk on Schedule 6.3(c) shall have been filed, made or obtained, as
the case may be;
          (c) Subject to Section 2.5, the consents, waivers and approvals listed
on Schedule 9.1(c) shall have been obtained (with no conditions that would
reasonably be expected to materially and adversely impact the rights and
obligations under the applicable Assigned Contract for which such consent,
waiver or approval is provided) either from the applicable third party or
through entry of the Sale Order; and
          (d) the Bankruptcy Court shall have entered the Sale Order, and the
Sale Order shall not have been stayed, and no Adverse Ruling shall be in effect.
     9.2. Conditions to the Obligations of Buyer. The obligation of Buyer to
proceed with the Closing is subject to the satisfaction on or prior to the
Closing Date of the following further conditions, any one or more of which may
be waived, in whole or in part, by Buyer:
          (a) Sellers shall have performed their obligations hereunder required
to be performed by such Seller at or prior to the Closing Date, unless the
failure to perform would not reasonably be expected to have a Material Adverse
Effect (except for Channelview LP’s obligations contained in Section 3.5, which,
assuming the Settlement Agreement is then still in effect, shall have been
performed in full through an application of a portion of the payment of the
Purchase Price in accordance with Section 3.5);

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          (b) the representations and warranties of each Seller contained in
this Agreement (without regard to “materiality”, “material adverse effect”,
Material Adverse Effect or similar qualifiers) shall be true and correct as of
the Closing Date (except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier date),
except for failures to be true and correct that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
          (c) Buyer shall have received certificates signed on behalf of each
Seller by an executive officer of each Seller indicating that the conditions
provided in Section 9.2(a) and Section 9.2(b) have been satisfied;
          (d) Sellers shall have complied with their obligations under
Section 7.19 in all material respects;
          (e) Sellers shall have delivered each of the items required by
Section 4.2;
          (f) Buyer shall have received a letter from URS consenting to Buyer’s
reliance on the Phase I Environmental Site Assessment, dated as of
November 2007, as updated December 20, 2007, in form and substance reasonably
acceptable to Buyer; and
          (g) since the Execution Date, no Material Adverse Effect shall have
occurred and be continuing.
     9.3. Conditions to the Obligations of Sellers. The obligation of Sellers to
proceed with the Closing is subject to the satisfaction on or prior to the
Closing Date of the following further conditions, any one or more of which may
be waived, in whole or in part, by Sellers:
          (a) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date;
          (b) the representations and warranties of Buyer contained in this
Agreement (without regard to “materiality”, “material adverse effect”, or
similar qualifiers) shall be true and correct as of the Closing Date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case as of such earlier date), except for failures to be true and
correct that would not reasonably be expected, individually or in the aggregate,
to have a material adverse effect on Buyer’s ability to perform its obligations
hereunder;
          (c) Sellers shall have received a certificate signed on behalf of
Buyer by an executive officer of Buyer indicating that the conditions provided
in Section 9.3(a) and Section 9.3(b) have been satisfied;
          (d) Sellers shall have received the complete and unconditional release
of Sellers and their Affiliates from the LTMA Support Obligations (other than
with respect to amounts owing prior to Closing) and unless Buyer has elected Gas
Services under the Fuel and Power Transition Services Agreement, either (i) the
full execution of the RES Assignment and Assumption Agreement, or (ii) or if
required by Section 2.5, the Fuel Supply Agreement shall have been executed by
Buyer and Buyer’s Energy Manager; and

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          (e) Buyer shall have delivered each of the items required by
Section 4.3.
ARTICLE 10
TERMINATION
     10.1. Termination. This Agreement may be terminated and the consummation of
the transactions contemplated hereby may be abandoned at any time prior to the
Closing only under one of the following circumstances:
          (a) by mutual written consent of Sellers and Buyer; or
          (b) by either Sellers or Buyer:
     (i) if the Closing has not occurred on or before 6 months after the
Execution Date (such date, the “Termination Date”) provided, that the right to
terminate this Agreement pursuant to this Section 10.1(b)(i) shall not be
available to any Party whose breach of any provision of this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur by the
Termination Date; or
     (ii) if any court of competent jurisdiction in the United States or other
United States Governmental Authority shall have issued a final order, decree or
ruling or taken any other final action restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement
and such order, decree, ruling or other action is or shall have become final and
nonappealable;
          (c) by Buyer if there has been a material breach by either Seller of
any representation, warranty, covenant or agreement contained in this Agreement
which (x) would result in a failure of a closing condition set forth in
Section 9.2(a) — (e) (which is not waived) and (y) cannot be cured prior to the
Termination Date; provided that Buyer is not then in breach in any material
respect of any representation, warranty, covenant or agreement contained herein;
and
          (d) by either Seller (i) if Buyer has not made the Deposit on the date
required to be made pursuant to Section 3.2, or (ii) if there has been a
material breach by Buyer of any representation, warranty, covenant or agreement
contained in this Agreement which (x) would result in a failure of a closing
condition set forth in Section 9.3(a) — (e) (which is not waived) and (y) cannot
be cured prior to the Termination Date; provided that Sellers are not then in
breach in any material respect of any representation, warranty, covenant or
agreement contained herein.
     The Party desiring to terminate this Agreement pursuant to Section 10.1
(other than pursuant to Section 10.1(a)) shall give notice of such termination
to the other Party.
     10.2. Effect of Termination. In the event of termination of this Agreement
by either Sellers or Buyer prior to the Closing pursuant to the provisions of
Section 10.1, this Agreement shall forthwith become void, and there shall be no
liability or further obligation on the part of Buyer or Sellers or their
respective officers or directors (except pursuant to Section 7.1(b),
Section 7.8, Section 7.11, Section 10.2, Section 10.3, Article 11, Section 12.4
and Section 12.5,

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all of which shall survive the termination); provided, that nothing in this
Section 10.2 shall relieve any Party from liability for any willful breach of
this Agreement by such Party prior to termination of this Agreement.
     10.3. Termination Fees.
          (a) If this Agreement is terminated pursuant to Section 10.1(d), then
in lieu of all other claims and remedies that might otherwise be available with
respect thereto, including elsewhere hereunder and notwithstanding any other
provision of this Agreement, Buyer shall pay immediately to Sellers as
liquidated damages in connection with such termination, an amount in immediately
available funds equal $40,000,000, and Sellers shall have the right immediately
to draw on the Deposit to satisfy such payment obligation of Buyer.
          (b) The provision for payment of liquidated damages in this
Section 10.3 has been included because, in the event of a termination of this
Agreement pursuant to Section 10.1(d), the actual damages to be incurred by
Sellers can reasonably be expected to approximate the amount of liquidated
damages called for herein and because the actual amount of such damages would be
difficult if not impossible to measure accurately.
          (c) If this Agreement is terminated pursuant to Section 10.1(c),
Sellers shall pay (and shall be jointly and severally responsible for the
payment thereof) to Buyer all of Buyer’s reasonable third-party costs and
expenses (including reasonable attorneys’ and accountants’ fees and related
expenses) incurred by Buyer in connection with the transactions contemplated by
this Agreement, including: (i) Buyer’s due diligence review with respect to the
Acquired Assets (including costs and expenses for third party consultants and
related reports); (ii) the negotiation of this Agreement, the exhibits attached
hereto and the documents to be executed pursuant hereto; and (iii) analysis of
securities, Tax and other transaction related issues. Provided, however, that in
the event this Agreement is terminated pursuant to Section 10.1(c), Sellers
shall only be responsible for Buyer’s third-party expenses to the extent such
expenses do not exceed $2,000,000; provided further that in the event this
Agreement is terminated pursuant to Section 10.1(c) as a result of a willful
breach of this Agreement by Sellers, Sellers shall pay immediately to Buyer as
liquidated damages in connection with such termination, $15,000,000 in
immediately available funds. Any obligation of Sellers to pay damages hereunder
shall be an administrative expense under Section 507(a)(1) of the Bankruptcy
Code and shall be payable as specified herein and not be subject to any defense,
counterclaim, offset, recoupment or reduction of any kind whatsoever.
ARTICLE 11
INDEMNIFICATION
     11.1. Survival. All representations, warranties, covenants and agreements
contained herein, and the right to commence any Claim with respect thereto,
shall terminate upon the Closing Date, except that (a) the representations and
warranties of Sellers and Buyer contained herein shall survive until the first
anniversary of the Closing Date, (b) the representations and warranties
contained in Section 5.10 shall survive until thirty (30) days after the
expiration of the applicable statute of limitations, and (c) the covenants and
agreements of the Parties contained

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herein that by their terms are to be performed after the Closing Date, shall
survive and continue in effect in accordance with their terms; provided, that in
the event written notice of any Claim for indemnification under
Section 11.2(a)(i), Section 11.2(a)(ii), Section 11.2(d)(i) or
Section 11.2(d)(ii) shall have been given in accordance herewith within the
applicable survival period setting forth such Claim in reasonable detail
(including a reasonable specification of the legal and factual basis for such
Claim and the Loss incurred), the representations, warranties, covenants and
agreements that are the subject of such indemnification Claim shall survive with
respect to that Claim until such time as the Claim is fully and finally
resolved.
     11.2. Indemnification.
          (a) Subject to the provisions of this Article 11, from and after the
Closing, Sellers shall jointly and severally indemnify, defend and hold the
Buyer Indemnified Group harmless from and against any and all Losses, whether
arising out of contract, tort, strict liability, other Law or otherwise,
actually incurred by any of them to the extent arising out of or resulting from:
     (i) any breach as of the Closing Date of a representation or warranty made
by either Seller herein (including the related Schedules);
     (ii) any breach of any covenant or agreement of either Seller herein;
     (iii) the Excluded Liabilities; and
     (iv) any failure of Sellers to make the Pump Payments to Buyer in
accordance with Section 7.17.
          (b) Notwithstanding anything to the contrary in this Agreement,
Sellers shall not be liable for any Losses with respect to the matters set forth
in Section 11.2(a) unless (x) a Claim is timely asserted during the survival
period specified in Section 11.1, (y) the Loss with respect to the particular
act, circumstance, development, event, fact, occurrence or omission exceeds
$500,000 (aggregating all Losses arising from substantially identical facts) and
(z) the aggregate of all Losses under Section 11.1(a) exceeds, on a cumulative
basis, 2% of the Final Purchase Price and then only to the extent of such
excess. Notwithstanding anything to the contrary in this Agreement, the
aggregate liability of Sellers to the Buyer Indemnified Group arising under or
related to the matters set forth in this Agreement, whether based in contract,
tort, strict liability, other Law or otherwise, shall not exceed 15% of the
Final Purchase Price, provided that the foregoing limitations shall not apply to
the Excluded Liabilities and the Pump Payments.
          (c) In connection with Sellers’ obligations under this Section 11.2,
upon Closing, pursuant to Sections 4.2(j) and 4.3(e), Forty Million Dollars
($40,000,000) will be transferred into the Indemnity Escrow Account (the
“Indemnity Security”) to be held and disbursed pursuant to the terms of the
Escrow Agreement and this Agreement; provided, however, the Sellers may at any
time and in their sole discretion, withdraw the Indemnity Security so long as
Reliant Energy simultaneously provides Buyer with a guaranty of all of Sellers’
obligations under this Section 11.2, in form and substance reasonably
satisfactory to Buyer, such guaranty to terminate one (1) year from the Closing
Date. It is further agreed that at

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any time, beginning one (1) year from the Closing Date, if Sellers have not
replaced the Indemnity Security with a guaranty of Reliant Energy, Sellers may
withdraw the entire amount of the Indemnity Security and any accrued interest
without providing any replacement security, provided, however, if a claim has
been made on the Indemnity Security, the amount remaining in the Indemnity
Escrow Account may not be less than the amount of such claim (if the amount of
such claim is indeterminate, the amount remaining in the Indemnity Escrow
Account shall be the highest reasonable estimate for such claim in the
reasonable judgment of Buyer).
          (d) Subject to the provisions of this Article 11, from and after the
Closing, Buyer hereby agrees to indemnify, defend and hold the Seller
Indemnified Group harmless from and against any and all Losses, whether arising
out of contract, tort, strict liability, other Law or otherwise, actually
incurred by any of them to the extent arising out of or resulting from:
     (i) any breach as of the Closing Date of a representation or warranty made
by Buyer herein;
     (ii) any breach of any covenant or agreement of Buyer herein; and
     (iii) the Assumed Liabilities.
          (e) THE PARTIES INTEND AND AGREE THAT THE INDEMNITY OBLIGATIONS SET
FORTH IN THIS SECTION 11.2 ARE INTENDED TO AND SHALL EXTEND TO AND COVER ANY AND
ALL LOSSES RESULTING FROM OR CAUSED IN WHOLE OR IN PART BY ANY ACTIVE, PASSIVE,
AFFIRMATIVE, SOLE, CONCURRENT OR OTHER NEGLIGENCE, STRICT LIABILITY OR OTHER
FAULT OF, REGARDLESS OF WHETHER SUCH LOSSES RESULT FROM OR ARE CAUSED IN WHOLE
OR IN PART BY ANY ALLEGED OR ACTUAL NEGLIGENCE OR OTHER FAULT OF, (I) ANY OF THE
BUYER INDEMNIFIED PARTIES WITH RESPECT TO SECTION 11.2(a), AND (II) ANY OF THE
SELLER INDEMNIFIED PARTIES WITH RESPECT TO SECTION 11.2(d); and shall be the
sole and exclusive remedy of the parties hereunder from and after the Closing.
          (f) Notwithstanding anything to the contrary contained in this
Agreement, for purposes of determining whether there has been a breach and the
amount of any Losses that are the subject matter of a claim for indemnification
hereunder, each representation and warranty in this Agreement and each
certificate or document delivered pursuant to this Agreement shall be read
without regard and without giving effect to the term(s) “material” or “Material
Adverse Effect”, or any derivation thereof, in each instance where the effect of
such term(s) would be to make such representation and warranty less restrictive
(as if such standard or qualification were deleted from such representation and
warranty).
          (g) The indemnification obligations set forth in this Section 11.2 are
made notwithstanding any investigation by or on behalf of Buyer or the result of
any investigation and notwithstanding the participation of Buyer in the Closing.
     11.3. Waiver of Other Representations.

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          (a) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS
THE EXPLICIT INTENT OF EACH PARTY HERETO, AND THE PARTIES HEREBY AGREE, THAT
NONE OF SELLERS OR ANY OF THEIR AFFILIATES OR REPRESENTATIVES HAS MADE OR IS
MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR
ORAL, INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION,
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO THE ACQUIRED ASSETS, OR ANY PART THEREOF, EXCEPT THOSE EXPRESS
REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 5. NOTWITHSTANDING ANYTHING
IN THIS AGREEMENT TO THE CONTRARY, IT IS THE EXPLICIT INTENT OF EACH PARTY
HERETO, AND THE PARTIES HEREBY AGREE, THAT NEITHER BUYER NOR ITS AFFILIATES OR
REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED REPRESENTATION OR
WARRANTY, EXCEPT THOSE EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN
ARTICLE 6. IN PARTICULAR, AND WITHOUT IN ANY WAY LIMITING THE FOREGOING,
(I) NEITHER SELLER MAKES ANY REPRESENTATION OR WARRANTY REGARDING ANY
ENVIRONMENTAL MATTERS EXCEPT AS EXPRESSLY SET FORTH IN SECTION 5.13, (II)
NEITHER SELLER MAKES ANY REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO ANY
FINANCIAL PROJECTIONS OR FORECASTS RELATING TO THE ACQUIRED ASSETS, AND
(III) NEITHER SELLER MAKES ANY REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT
TO INFORMATION PROVIDED TO BUYER IN RESPONSE TO QUESTIONS PRESENTED BY BUYER OR
OTHER INFORMATION PROVIDED TO BUYER RELATING TO THE ACQUIRED ASSETS; PROVIDED,
THAT THIS SENTENCE SHALL NOT LIMIT THE EXPRESS REPRESENTATIONS AND WARRANTIES
CONTAINED IN ARTICLE 5.
          (b) EXCEPT FOR THOSE EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED
IN ARTICLE 5, THE ACQUIRED ASSETS ARE BEING TRANSFERRED “AS IS, WHERE IS, WITH
ALL FAULTS,” AND SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF
ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF
THE ACQUIRED ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER
INCIDENTS OF THE ACQUIRED ASSETS.
          (c) BUYER ACKNOWLEDGES THAT IT HAS INVESTIGATED TO ITS SATISFACTION,
THE CONDITION AND SUITABILITY OF ALL ASPECTS OF THE ACQUIRED ASSETS AND ALL
MATTERS AFFECTING THE VALUE OR DESIRABILITY OF THE ACQUIRED ASSETS, INCLUDING,
BUT NOT LIMITED TO, THE OPERATIONAL ASPECTS OF THE CHANNELVIEW FACILITY,
POTENTIAL ENVIRONMENTAL HAZARDS ARISING FROM THE PRESENCE ON OR ABOUT THE
PROPERTY OF HAZARDOUS SUBSTANCES, INCLUDING ASBESTOS, FORMALDEHYDE, RADON GAS,
LEAD-BASED PAINT, OTHER LEAD CONTAMINATION, FUEL OR CHEMICAL STORAGE TANKS,
CAVERNS, PIPELINES, ELECTROMAGNETIC FIELDS, PHOSPHO-GYPSUM OR POLYCHLORINATED
BIPHENYLS. EXCEPT AS EXPRESSLY PROVIDED HEREIN,

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NEITHER THE SELLERS, NOR THEIR AFFILIATES OR REPRESENTATIVES MAKES OR HAS MADE
ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR
ORAL, AS TO THE PHYSICAL CONDITION OF THE ACQUIRED ASSETS, THE USES OF THE
ACQUIRED ASSETS OR ANY LIMITATIONS THEREON, THE INCOME TO BE DERIVED THEREFROM,
THE COSTS OF OPERATION, COMPLIANCE WITH LAW, AND/OR ANY REQUIREMENTS FOR
ALTERATIONS OR IMPROVEMENTS TO COMPLY WITH LAW, INCLUDING ANY REPRESENTATIONS OR
WARRANTIES PERTAINING TO ZONING, ENVIRONMENTAL OR OTHER LAW; THE UTILITIES,
PIPELINES OR OTHER PHYSICAL EQUIPMENT AND FIXTURES ON THE REAL PROPERTY
COMPRISING OR ASSOCIATED WITH THE ACQUIRED ASSETS OR ANY OTHER ASPECT OF THE
ECONOMIC OPERATIONS ON SUCH REAL PROPERTY; THE CONDITIONS OF THE SOILS, WATER OR
GROUNDWATER OF, OR IN THE VICINITY OF, SUCH REAL PROPERTY; THE PRESENCE OR
ABSENCE OF ELECTROMAGNETIC FIELDS, TOXIC MATERIALS OR HAZARDOUS SUBSTANCES ON OR
UNDER SUCH REAL PROPERTY OR IN THE VICINITY OF SUCH REAL PROPERTY; OR ANY OTHER
MATTER BEARING ON THE USE, VALUE OR CONDITION OF THE ACQUIRED ASSETS.
     11.4. Waiver of Remedies; Certain Limitations. Notwithstanding anything in
this Agreement to the contrary:
          (a) the Parties hereby agree that no Party shall have any liability,
and no Party shall make any Claim, for any Loss or other matter, under, relating
to or arising out of this Agreement or any other document, agreement,
certificate or other matter delivered pursuant hereto, whether arising out of
contract, tort, strict liability, other Law or otherwise, except as expressly
set forth in Section 3.3, Section 7.1(b), Article 10 and this Article 11.
          (b) NO PARTY SHALL BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY,
INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES OR LOST PROFITS, WHETHER BASED ON
CONTRACT, TORT, STRICT LIABILITY, OTHER LAW OR OTHERWISE AND WHETHER OR NOT
ARISING FROM THE OTHER PARTY’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT
LIABILITY OR OTHER FAULT, EXCEPT SUCH DAMAGES THAT ARE PAYABLE TO A THIRD PARTY
WITH RESPECT TO A THIRD PARTY CLAIM FOR WHICH ANY PERSON IS SEEKING
INDEMNIFICATION HEREUNDER;
          (c) in calculating any amount of Losses recoverable pursuant to
Section 11.2(a) or Section 11.2(d), the amount of such Losses shall
appropriately take into account Tax consequences and be reduced by (i) any
insurance proceeds actually received relating to such Loss, net of any related
deductible and any expenses to obtain such proceeds, and (ii) any recoveries
from third parties pursuant to indemnification (or otherwise) with respect
thereto, net of any expenses incurred by the Indemnified Party in obtaining such
third party payment. The Parties agree to treat any indemnification payment
pursuant to this Article 11 as an adjustment to the Purchase Price for all Tax
purposes unless otherwise required by applicable Law. The Indemnified Party
shall use its commercially reasonable efforts to seek insurance recoveries in
respect of Losses to be indemnified hereunder. In the event any insurance
proceeds or other

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recoveries from third parties (described in clause (ii) of this Section 11.4(c))
are actually realized (in each case net of expenses of such recoveries) by an
Indemnified Party subsequent to the receipt by such Indemnified Party of an
indemnification payment hereunder in respect of the claims to which such
insurance proceedings or third party recoveries described in clause (ii) of this
Section 11.4(c) relate, appropriate refunds shall be made promptly to the
Indemnifying Party regarding the amount of such indemnification payment (net of
reasonable attorney’s fees and other expenses incurred in connection with such
recoveries);
          (d) no Representative or Affiliate of either Seller shall have any
personal liability to Buyer or any other Person as a result of the breach of any
representation, warranty, covenant, agreement or obligation of such Seller in
this Agreement and no Representative or Affiliate of Buyer shall have any
personal liability to Sellers or any other Person as a result of the breach of
any representation, warranty, covenant, agreement or obligation of Buyer in this
Agreement;
          (e) no member of the Buyer Indemnified Group shall be entitled to
indemnification under this Article 11 if the facts and circumstances giving rise
to such claim for indemnification would result in a breach of Section 6.8
hereof;
          (f) each Party shall have a duty to use commercially reasonable
efforts to mitigate any Loss suffered by such Party in connection with this
Agreement;
          (g) No Seller shall have any liability for any Losses that represent
the cost of repairs, replacements or improvements which enhance the value of the
repaired, replaced or improved asset above its value on the Closing Date or
which represent the cost of repair or replacement exceeding the reasonable cost
of repair or replacement;
          (h) Buyer, on behalf of itself and its Affiliates (including RESC),
hereby releases, waives and discharges forever each Seller and its Affiliates
from all present and future Claims and from all Losses, present and future, that
are or may be attributable to the matters described in Section 11.3;
          (i) From and after Closing, Buyer, on behalf of itself and its
Affiliates, agrees to release and indemnify and hold harmless Sellers, their
Affiliates and the managers, officers, directors and employees of Channelview LP
and RESC (acting in their capacity as such) from and against any Losses for
controlling member liability or breach of fiduciary duty or other duty relating
to any pre-Closing actions or failures to act (including negligence or gross
negligence) in connection with the Business prior to the Closing; provided that
nothing in this Section 11.4(h) shall effect Sellers’ obligations under
Section 11.2(a)-(c). THE PARTIES INTEND AND AGREE THAT THE INDEMNITY OBLIGATIONS
SET FORTH IN THIS SECTION 11.4(i) ARE INTENDED TO AND SHALL EXTEND TO AND COVER
ANY AND ALL LOSSES RESULTING FROM OR CAUSED IN WHOLE OR IN PART BY ANY ACTIVE,
PASSIVE, AFFIRMATIVE, SOLE, CONCURRENT OR OTHER NEGLIGENCE, STRICT LIABILITY OR
OTHER FAULT OF, REGARDLESS OF WHETHER SUCH LOSSES RESULT FROM OR ARE CAUSED IN
WHOLE OR IN PART BY ANY ALLEGED OR ACTUAL NEGLIGENCE OR OTHER FAULT OF ANY OF
THE PERSONS TO BE INDEMNIFIED PURSUANT TO THIS SECTION 11.4(i);

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          (j) THE REMEDIES FOR ENVIRONMENTAL CLAIMS SET FORTH IN THIS AGREEMENT
SHALL BE THE BUYER’S SOLE AND EXCLUSIVE REMEDIES AND BUYER EXPRESSLY WAIVES ALL
OTHER RIGHTS OF RECOVERY AGAINST SELLERS UNDER ANY ENVIRONMENTAL LAW INCLUDING,
BUT NOT LIMITED TO, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND
LIABILITY ACT (CERCLA) AND THE RESOURCE CONSERVATION AND RECOVERY ACT (RCRA).
     11.5. Procedures for Indemnification. Whenever a Claim shall arise for
indemnification resulting from or in connection with a Claim by a third party (a
“Third-Party Claim”), the Person entitled to indemnification (the “Indemnified
Party”) shall promptly notify the Party from which indemnification is sought
(the “Indemnifying Party”) of such Claim and, when known, the facts constituting
the basis of such Claim; provided, that failure to notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability it may have to the
Indemnified Party, except to the extent that the Indemnifying Party has been
prejudiced by such failure. Following receipt of notice of any such Third-Party
Claim, and unless the assumption of such defense by the Indemnifying Party would
be inappropriate due to a conflict of interest, the Indemnifying Party shall
have the option, at its cost and expense, to assume the defense of such
Third-Party Claim and to retain counsel (not reasonably objected to by the
Indemnified Party) to defend any such claim or legal proceeding, and the
Indemnifying Party shall not be liable to the Indemnified Party for any fees of
other counsel or any other expenses (except as expressly provided to the
contrary herein) with respect to the defense of such Claim, other than
reasonable fees and expenses of counsel employed by the Indemnified Party for
any period during which the Indemnifying Party has not assumed the defense
thereof. In the defense of such Claim, the Indemnifying Party shall act in good
faith and conduct the defense actively and diligently, and in the event the
Indemnifying Party is not complying with the foregoing, the Indemnified Party
shall have the right to assume the defense of such Claim. The Indemnified Party
shall have the option of joining the defense of such Claim (which shall be at
the sole cost and expense of the Indemnified Party) with counsel not reasonably
objected to by the Indemnifying Party and counsel for each party shall, to the
extent consistent with such counsel’s professional responsibilities, cooperate
with the other party and any counsel designated by that party. In effecting the
settlement or compromise of, or consenting to the entry of any judgment with
respect to, any such Third-Party Claim with respect to which the Indemnifying
Party has assumed the defense in accordance with this Section 11.5, the
Indemnifying Party, or the Indemnified Party, as the case may be, shall act in
good faith, shall consult with the other party and shall enter into only such
settlement or compromise or consent to the entry of any judgment as the other
party shall consent, such consent not to be unreasonably withheld, conditioned
or delayed; provided that no such consent shall be required if (a) there is a
full release of the Indemnified Party and (b) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party. An
Indemnifying Party shall not be liable for any settlement, compromise or
judgment entered into by the Indemnified Party not made in accordance with the
preceding sentence. Notwithstanding the rights of Sellers under this
Section 11.5 with respect to the defense of claims, the Buyer shall control any
environmental remediation performed at the Channelview Facility, and shall have
the right to take any action required, in Buyer’s reasonable judgment, by
prudent environmental management and plant operation. Notwithstanding anything
to the contrary in this Section 11.5, the Parties shall jointly control any Tax
Proceeding involving Taxes attributable to a Straddle Period.

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     11.6. Manner of Payment. Except as otherwise provided herein, any payment
with respect to an indemnification obligation owing hereunder shall be made by
wire transfer of immediately available funds to an account designated by such
indemnified party, within ten (10) days after determination thereof.
ARTICLE 12
MISCELLANEOUS
     12.1. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally to, or mailed by
registered or certified mail (return receipt requested) if and when received by,
or sent via facsimile if and when received by, the Parties at the following
addresses (or at such other address for a Party as shall be specified by like
notice):
If to Sellers, to:
Reliant Energy Channelview LP
Reliant Energy Services, Inc.
1000 Main Street, 12th Floor
Houston, Texas 77002
Attention: General Counsel
Facsimile: (713) 537-7465
With a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, NY 10038
Attention: Michael S. Shenberg
Facsimile: (212) 806-6006
If to Buyer, to:
Kelson Energy IV LLC
6700 Alexander Bell Drive
Columbia, Maryland 21046
Attention: President
Facsimile: (410) 872-9460
With a copy to:
Dickstein Shapiro LLP
1825 Eye Street, N.W.
Washington, DC 20006
Attention: Larry F. Eisenstat, Patrick W. Lynch
Facsimile: (202) 420-2201

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     12.2. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
     12.3. Assignment. This Agreement (including the documents and instruments
referred to herein) shall not be assigned by operation of Law or otherwise by
any Party hereto without the prior written consent of the other Parties hereto,
which consent shall not be unreasonably withheld or delayed; provided that Buyer
may assign its rights and interests hereunder (but not any of its obligations)
to (i) any Affiliate, or (ii) any persons providing financing to Buyer in
connection with the transactions contemplated hereby. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns.
     12.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS PRINCIPLES OTHER THAN
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).
     12.5. Jurisdiction. For so long as Sellers are subject to the jurisdiction
of the Bankruptcy Court, the parties hereto irrevocably elect as the sole
judicial forum for the adjudication of any matters arising under or in
connection with the Agreement, and consent to the exclusive jurisdiction of, the
Bankruptcy Court. After Sellers are no longer subject to the jurisdiction of the
Bankruptcy Court, any legal action or proceeding with respect to this Agreement
or the transactions contemplated hereby shall be brought exclusively in the
courts of the State of New York sitting in New York County or of the United
States for the Southern District of New York, and by execution and delivery of
this Agreement, each of the Parties consents to the jurisdiction of those
courts. Each of the Parties irrevocably waives any objection, including any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any action or
proceeding in such jurisdiction in respect of this Agreement or the transactions
contemplated hereby.
     12.6. Counterparts. This Agreement may be executed in two or more
counterparts, and by facsimile and/or electronic transmission, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
     12.7. Amendments; Extensions.
          (a) This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the Parties.
          (b) At any time a Party may (i) extend the time for the performance of
any of the obligations or other acts of the other Party, (ii) waive any
inaccuracies in the representations and warranties of the other Party contained
herein or in any document delivered pursuant hereto

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and (iii) waive compliance with any of the covenants or agreements of the other
Party contained herein. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such Party. The failure or delay of any Party to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
     12.8. Entire Agreement. This Agreement, the Confidentiality Agreement and
the other agreements contemplated hereby constitute the entire agreement between
the Parties with respect to the subject matter hereof and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
Parties with respect to the subject matter of this Agreement. No representation,
inducement, promise, understanding, condition or warranty not set forth herein
has been made or relied upon by any Party. Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the Parties
hereto any rights or remedies hereunder except as expressly provided otherwise
in Section 7.1(b), Section 7.5, Section 7.10, Section 7.14 and Article 11.
     12.9. Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of applicable Law,
or public policy (including any term or provision of Section 12.5), then such
term or provision shall be severed from the remaining terms and provisions of
this Agreement (including the remaining terms and provisions of Section 12.5),
and such remaining terms and provisions shall nevertheless remain in full force
and effect.
     12.10. Joint and Several. Each Seller shall be jointly and severally liable
for the payment and performance of all “Seller” obligations and liabilities
hereunder.
[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.

            RELIANT ENERGY CHANNELVIEW LP
      By:   Reliant Energy Channelview (Texas) LLC,         General Partner of
Reliant Energy Channelview LP              By:   /s/ Andrew C. Johannesen      
  Name:   Andrew C. Johannesen        Title:   Vice President and Treasurer     
    RELIANT ENERGY SERVICES
CHANNELVIEW LLC
      By:   Reliant Energy Services, Inc.,         Manager of Reliant Energy
Services Channelview LLC              By:   /s/ Andrew C. Johannesen        
Name:   Andrew C. Johannesen        Title:   Vice President and Treasurer       
  KELSON ENERGY IV LLC
      By:   /s/ Neal Cody         Name:   Neal Cody        Title:   President   
 

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