PARTICIPATING PREFERRED STOCK PURCHASE AGREEMENT

by and between

RELIANT ENERGY, INC.

and

FR RELIANT HOLDINGS LP
October 10, 2008Table of Contents

Page

  1.   Definitions 1  

  2.   Authorization, Purchase and Sale of Stock 6  

  2.1   Authorization 6  

  2.2   Purchase and Sale of the Participating Preferred Stock 6  

  2.3   Closing 6  

  2.4   Certificate of Designation. 6  

  2.5   Termination of Letter Agreement 6  

  2.6   Strategic Review 6  

  3.   Representations and Warranties of the Company 7  

  3.1   Corporate Existence and Power 7  

  3.2   Capitalization. 7  

  3.3   Authorization 9  

  3.4   Valid Issuance; Preference; No Manipulation; General Solicitation; No
Integration 9  

  3.5   No Regulatory Approvals; No Conflict 10  

  3.6   SEC Reports; Financial Statements. 11  

  3.7   Undisclosed Liabilities. 12  

  3.8   Contracts. 12  

  3.9   Affiliate Transactions. 13  

  3.10   No Adverse Changes. 13  

  3.11   Title. 13  

  3.12   Compliance with Law; Permits. 13  

  3.13   Litigation. 14  

  3.14   Tax Matters. 14  

  3.15   Broker; Fees. 15  

  3.16   Anti-Takeover Provisions Not Applicable. 15  

  3.17   Rights Agreement. 15  

  3.18   Trading in Common Stock. 15  

  4.   Representations and Warranties of the Purchaser 16  

  4.1   Organization 16  

  4.2   Authorization 16  

  4.3   No Conflict 16  

  4.4   Purchase Entirely for Own Account 16  

  4.5   Investment Company 16  

  4.6   Investor Status 17  

  4.7   Securities Not Registered 17  

  4.8   Trading in Company Securities 17  

  4.9   Broker; Fees 17  

  4.10   Funds 17  

  5.   Covenants 18  

  5.1   Commercially Reasonable Efforts 18  

  5.2   Interim Actions 18  

  5.3   Notification of Certain Matters. 18  

  5.4   Confidentiality. 19  

  5.5   Treatment of the Participating Preferred Stock by the Company. 19  

  5.6   Trading in Company Securities. 19  

  5.7   Board of Directors Representation 19  

  5.8   Commitment Letter. 19  

  5.9   Exclusivity 19  

  5.10   Investor Rights Agreement. 20  

  5.11   Access to Information. 20  

  6.   Conditions Precedent 21  

  6.1   Conditions to the Obligations of Each Party 21  

  6.2   Conditions to the Obligations of the Company 21  

  6.3   Conditions to the Obligations of the Purchaser 22  

  7.   Termination 23  

  7.1   Conditions of Termination 23  

  7.2   Effect of Termination 24  

  8.   Miscellaneous Provisions 24  

  8.1   Public Statements or Releases 24  

  8.2   Interpretation 25  

  8.3   Notices 25  

  8.4   Severability 26  

  8.5   Governing Law. 26  

  8.6   Waiver 27  

  8.7   Expenses; Termination Fee 27  

  8.8   Successors and Assigns 28  

  8.9   Third Parties 28  

  8.10   Counterparts 28  

  8.11   Entire Agreement; Amendments 28  

  8.12   Survival 28  

  8.13   Specific Performance. 28  

  8.14   Representation by Counsel; Mutual Drafting 28  

Exhibits

     
Exhibit A
Exhibit B
  Form of Certificate of Designation
Form of Investor Rights Agreement

 

1

Table of Defined Terms

     
Page
  Page

                 
Action
    14          
Affiliate
    1          
Agreement
    1          
Alternative Transaction
    1          
Bankruptcy Code
    3          
Board of Directors
    1          
Business Day
    2          
Bylaws
    7          
Certificate of Designation
    2          
Certificate of Incorporation
    7          
Closing
    6          
Closing Date
    6          
Closing Date Deferral
    7          
Code
    2          
Commitment Letter
    17          
Common Stock
    1          
Company
    1          
Company Disclosure Schedules
    7          
Company Options
    2          
Company Preferred Stock
    7          
Company Restricted Stock
    7          
Company Restricted Units
    8          
Company Rights Plan
    2          
Company Voting Debt
    8          
Company’s knowledge
    3          
Confidentiality Agreement
    19          
Contract
    2          
Conversion Shares
    6          
Credit Agreement
    2          
Deferral Date
    7          
DGCL
    8          
Dispute
    26          
End Date
    2          
Equity Interests
    2          
Exchange Act
    2          
FPA
    3          
GAAP
    3          
Goldman Commitment Letter
    21          
Governmental Authority
    3          
HSR Act
    3          
Insolvency Event
    3          
Investment
    6          
Investor Rights Agreement
    3          
knowledge of the Company
    3          
Law
    3          
Letter Agreement
    1          
Liens
    4          
Material Adverse Effect
    4          
Material Contracts
    5          
ML Letter Agreement
    21          
Order
    5          
Permits
    5          
Person
    5          
Preferred Stock
    1          
Purchase Price
    6          
Purchaser
    1          
Recently Filed SEC Reports
    5          
Restraint
    21          
Restrictions
    19          
Rights Agreement
    15          
SEC
    10          
SEC Reports
    11          
Securities Act
    5           Series B Convertible Participating Preferred Stock
    6  
Significant Subsidiary
    5          
Stock Plans
    5          
Strategic Review
    6          
Subsidiary
    5          
Tax Return
    15          
Taxes
    14          
Termination Fee
    27          
Transaction Agreements
    5          
Transactions
    9          
Treasury Regulations
    5          
Waiver Expiry Date
    6          
WEGB
    1          

2

PARTICIPATING PREFERRED STOCK PURCHASE AGREEMENT

PARTICIPATING PREFERRED STOCK PURCHASE AGREEMENT, dated as of October 10, 2008
(this “Agreement”), by and between RELIANT ENERGY, INC., a Delaware corporation
(the “Company”), and FR Reliant Holdings LP, a Delaware limited partnership (the
“Purchaser”).

WHEREAS, the Company and First Reserve Fund XII, L.P. entered into a letter
agreement dated September 29, 2008 outlining the terms of Purchaser’s commitment
to make the Investment (as defined below) in the Company (the “Letter
Agreement”);

WHEREAS, the Company has authorized the sale and issuance of shares of Series B
Convertible Participating Preferred Stock, par value $0.001 per share, of the
Company (the “Participating Preferred Stock”), which shares will be upon
issuance, convertible into shares of common stock, par value $0.001 per share,
of the Company (the “Common Stock”); and

WHEREAS, the Company desires to sell to the Purchaser, and the Purchaser desires
to purchase from the Company, shares of Participating Preferred Stock, subject
to the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants in this Agreement contained, the parties agree as
follows:

1. Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:

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

“Alternative Transaction” any (i) merger, consolidation or sale of all or
substantially all of the consolidated assets or equity of the Company, directly
or indirectly, or any similar business combination transaction, (ii) direct or
indirect sale of 50% or more of the equity of the wholesale electric generation
business of the Company (the “WEGB”) or a sale of assets representing 50% or
more of (x) the nameplate-rated generating capacity of the WEGB or (y) the gross
margin contribution (determined based on the last four completed fiscal quarters
for which information is available at the time of such transaction) of the WEGB
or (iii) direct or indirect sale or disposition (including under the terms of
the CSRA (as defined in the ML Letter Agreement)) of all or substantially all of
the equity or assets of the retail electric business of the Company.

“Board of Directors” means the Board of Directors of the Company.

“Business Day” means a day other than a Saturday, Sunday, federal or State of
New York or State of Texas holiday or other day on which commercial banks in New
York City or Houston are authorized or required by law to close.

“Certificate of Designation” means the Certificate of Designation with respect
to the Participating Preferred Stock (the form of which is attached hereto as
Exhibit A) to be adopted by the Board of Directors of the Company and filed with
the Secretary of State of the State of Delaware.

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

“Company Options” means outstanding options to acquire shares of Common Stock
from the Company granted under any Stock Plan.

“Company Rights Plan” means the Rights Agreement by and between Reliant Energy,
Inc. (formerly known as Reliant Resources, Inc.) and The Chase Manhattan bank,
Rights Agent, dated as of January 15, 2001.

“Contract” means any note, bond, mortgage, indenture, lease, contract,
agreement, obligation or commitment.

“Credit Agreement” means the Credit and Guaranty Agreement among Reliant Energy,
Inc., as Borrower, the Other Loan Parties referred to therein as guarantors, the
lenders party thereto, Deutsche Bank AG New York Branch, as Administrative Agent
and Collateral Agent, Deutsche Bank Securities Inc. and J.P. Morgan Securities
Inc., as Joint Lead Arrangers, Deutsche Bank Securities Inc., J.P. Morgan
Securities Inc., Goldman Sachs Credit Partners L.P., Merrill Lynch Capital
Corporation, and ABN AMRO Bank N.V., as Joint Bookrunners with respect to the
Revolving Credit Facility and Deutsche Bank Securities Inc., J.P. Morgan
Securities Inc., Goldman Sachs Credit Partners L.P., Merrill Lynch Capital
Corporation and Bear, Stearns & Co. Inc., as Joint Bookrunners with respect to
the Pre-Funded L/C Facility, dated as of June 12, 2007, as amended.

“End Date” means November 28, 2008; provided, however, that the End Date shall
be extended automatically (but not beyond December 31, 2008) by a day for every
day beyond October 31, 2008 that the Waiver Expiry Date is extended. In
addition, if the Waiver Expiry Date is extended to a date beyond December 31,
2008, then the Purchaser shall have the right to extend the End Date to the day
immediately after the Waiver Expiry Date by giving written notice of such
extension to the Company prior to the termination of this Agreement.

“Equity Interests” means any share, capital stock, partnership, membership or
similar interest in any Person or any security or option convertible,
exchangeable or exercisable therefor or right in respect of any thereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“FPA” means the Federal Power Act, as amended, and the rules and regulations
promulgated thereunder.

“GAAP” means generally accepted accounting principles, as in effect in the
United States of America.

“Governmental Authority” means any nation or government or any agency, public or
regulatory authority, instrumentality, department, commission, court,
arbitrator, ministry, tribunal or board of any nation or any government or
political subdivision thereof, in each case, whether multi-national, national,
federal, tribal, provincial, state, regional, local or municipal, or any
self-regulatory organization.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder.

“Insolvency Event” means, with respect to any Person, the occurrence of any of
the following:

(a) such Person shall (A) (i) voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United States Code, Sections 101
et. seq. (the “Bankruptcy Code”) or any other federal, state or foreign
bankruptcy, insolvency, liquidation or similar Law, (ii) consent to the
institution of, or fail to contravene in a timely and appropriate manner, any
such proceeding or the filing of any such petition, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator or similar
official for such Person or for a substantial part of its property or assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit
of creditors or (vi) take any action for the purpose of effecting any of the
foregoing or (B) such Person shall become unable, admit in writing its inability
or fail generally to pay its debts as they become due; or

(b) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (A) relief in respect of such Person or of a substantial
part of the property or assets of such Person, under the Bankruptcy Code or any
other federal, state or foreign bankruptcy, insolvency, receivership or similar
Law, (B) the appointment of a receiver, trustee, custodian, sequestrator or
similar official for such Person or for a substantial part of the property of
such Person or (C) the winding-up or liquidation of such Person; and such
proceeding or petition shall continue undismissed for sixty (60) days or an
order or decree approving or ordering any of the foregoing shall have been
entered.

“Investor Rights Agreement” means the form of Investor Rights Agreement attached
hereto as Exhibit B.

“knowledge of the Company” or “Company’s knowledge” means the actual knowledge
of the executive officers of the Company.

“Law” means applicable statutes, treaties, laws, directives, common law, rules,
ordinances, regulations, codes, licensing requirements, governmental guidelines
or interpretations having the force of law, permits, rules and bylaws, in each
case, of a Governmental Authority, stock exchange or industry self- regulatory
organization.

“Liens” means any mortgages, liens, security interests, pledges, charges,
equities easements, rights of way, options, claims, restrictions or encumbrances
of any kind.

“Material Adverse Effect” means any event, change, condition, occurrence or
development of a set of circumstances or facts, which, individually or together
with any other event, change, condition, occurrence or development, has, or
would reasonably be expected to have, a material adverse effect on the business,
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole, or on the ability of the Company to perform its obligations
under this Agreement, the Investor Rights Agreement and the Certificate of
Designation and to consummate the transactions contemplated hereby and thereby,
except to the extent of (i) any such effect relating to or resulting from
general changes in or affecting the industry or industries in which the Company
or its Subsidiaries operate, including (A) any changes or developments in
national, regional, state or local wholesale or retail markets for electric
power, capacity, fuel or related products including those changes or
developments due to actions by competitors or suppliers or due to changes in
commodities prices or hedging markets therefor, (B) any changes or developments
in national, regional, state or local electric transmission or distribution
systems or (C) any changes or developments in national, regional, state or local
wholesale or retail electric power and capacity prices (in all cases referred to
in this clause (i) other than such effects having a materially disproportionate
impact on the Company as compared to other market participants generally),
(ii) any such effect resulting from changes in Law or GAAP (other than such
effects having a materially disproportionate impact on the Company as compared
to other similarly situated companies), (iii) any such effect resulting from
changes in financial markets or general economic conditions (other than such
effects having a materially disproportionate impact on the Company as compared
to other market participants), (iv) any such effect demonstrated by the Company
to have resulted from the announcement of the execution of or performance of
this Agreement and the transactions contemplated hereby, (v) any such effect
resulting from any act of God or other calamity, national or international,
political or social conditions (including the engagement by any country in
hostilities, whether commenced before, on or after the date hereof, and whether
or not pursuant to the declaration of a national emergency or war), or the
occurrence of any military or terrorist attack (other than such effects having a
materially disproportionate impact on the Company as compared to other market
participants), or (vii) any change in the Company’s Common Stock price or
trading volume or in the Company’s credit rating or any such effect resulting
from any failure of the Company to meet projections or forecasts, whether
internal or maintained by analysts; provided, that the exception in this clause
(vii) shall not prevent or otherwise affect a determination that any event,
change, condition, occurrence or development underlying or as a consequence of
such change or failure has resulted in, or contributed to, a Material Adverse
Effect. Notwithstanding any provision of the preceding sentence to the contrary,
(i) the occurrence of an Insolvency Event in respect of the Company or
Subsidiary of the Company or (ii) any event, change, occurrence or development
that is reasonably likely to prevent, materially delay or materially impair the
consummation of the transactions contemplated by this Agreement, shall be deemed
to constitute a Material Adverse Effect.

“Material Contracts” means (i) all “material contracts” of the Company within
the meaning of Item 601 of Regulation S-K of the SEC and (ii) all Contracts of
the Company restricting the payment of dividends upon, or the redemption or
conversion of, the shares of the Participating Preferred Stock or the Conversion
Shares.

“Order” means any order, writ, judicial or administrative judgment, direction,
settlement, determination, Permit, injunction, decree, stipulation or award by,
of, or subject to any Governmental Authority.

“Permits” means all permits, consents, approvals, registrations, licenses,
authorizations, qualifications and filings with and under all federal, state,
local or foreign Laws and Governmental Authorities and all industry or other
non-governmental self-regulatory organizations.

“Person” means any individual, corporation, limited liability company, limited
or general partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government, any agency or political subdivisions
thereof or other “Person” as contemplated by Section 13(d) of the Exchange Act.

“Recently Filed SEC Reports” means the SEC Reports of the Company filed or and
any reports furnished by the Company to the SEC and available publicly
(including exhibits and other items incorporated by reference), in each case on
and after January 1, 2008 and prior to the date hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended, and all of
the rules and regulations promulgated thereunder.

“Significant Subsidiary” shall have the meaning as defined in Article 1,
Rule 1-02(w) of Regulation S-X, promulgated pursuant to the Securities Act.

“Stock Plans” means the Reliant Energy, Inc. Employee Stock Purchase Plan, the
Reliant Energy, Inc. 2002 Long-Term Incentive Plan, the Reliant Energy, Inc.
Long-Term Incentive Plan, the Reliant Energy, Inc. Transition Stock Plan, and
the Reliant Energy, Inc. 2002 Stock Plan, in each case, as amended to the date
hereof.

“Subsidiary” means, with respect to any Person, any other Person of which the
first Person owns, directly or indirectly, securities or other ownership
interests having voting power to elect a majority of the board of directors or
other Persons performing similar functions for such Person (or, if there are no
such voting interests, more than 50% of the equity interests of the second
Person).

“Transaction Agreements” shall mean this Agreement and the Investor Rights
Agreement.

“Treasury Regulations” shall mean the regulations promulgated under the Code.

“Waiver Expiry Date” means the date referred to in clause (c) of the definition
of “Waiver Expiry Date” in the ML Letter Agreement, as such date may be amended
from time to time.

2. Authorization, Purchase and Sale of Stock.

2.1 Authorization. The Company has (i) authorized and created a series of its
preferred stock consisting of 350,000 shares of Participating Preferred Stock,
par value $0.001 per share, designated as its “Series B Convertible
Participating Preferred Stock”and (ii) authorized the issuance of the shares of
Common Stock issuable upon conversion of the Participating Preferred Stock (the
“Conversion Shares”). The terms, limitations and relative rights and
preferences, conversion and other rights, voting powers, restrictions,
qualifications and terms and conditions of redemption of the Participating
Preferred Stock are set forth in the Certificate of Designation.

2.2 Purchase and Sale of the Participating Preferred Stock. Subject to and upon
the terms and conditions set forth in this Agreement, at the Closing, the
Company shall issue and sell to the Purchaser, and the Purchaser shall purchase
from the Company, 350,000 shares of Participating Preferred Stock, free and
clear of any Liens (the “Investment”), at a purchase price of $1,000 per share.

2.3 Closing. Subject to any Closing Date Deferral (as defined below), the
closing of the purchase and sale of the Participating Preferred Stock (the
“Closing”) shall take place (i) at 10:00 a.m., New York time, at the offices of
Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017
or (ii) at such other place and at such date and time as the Company and the
Purchaser may agree (the actual date of the Closing, the “Closing Date”), as
soon as reasonably practicable but, in any event, no earlier than twelve
(12) Business Days after the date hereof and no later than the third
(3rd) Business Day after the day on which the last condition set forth in
Article 6 is satisfied or waived (other than those conditions that by their
nature cannot be satisfied until the Closing Date, but subject to the
satisfaction or waiver of such conditions). At the Closing, the Company shall
deliver to the Purchaser stock certificates representing the shares of
Participating Preferred Stock, free and clear of any Liens, against payment by
the Purchaser of $350,000,000 by wire transfer of immediately available United
States funds to the Company (the “Purchase Price”).

2.4 Certificate of Designation. Prior to the Closing, the Company shall file
with the Secretary of State of the State of Delaware the Certificate of
Designation to be effective in accordance with applicable Law at or prior to the
Closing.

2.5 Termination of Letter Agreement. Upon execution of this Agreement, the
Letter Agreement shall be null and void and have no effect.

2.6 Strategic Review. The Purchaser acknowledges that the Board of Directors of
the Company has publicly announced the commencement of a review of strategic
alternatives available to the Company (the “Strategic Review”). Notwithstanding
anything in this Agreement to the contrary, the Purchaser agrees that if the
Company believes that execution of a definitive agreement with respect to an
Alternative Transaction is reasonably likely to occur within fifteen (15) days
following the date on which the Closing would otherwise be required pursuant to
Section 2.3, the Company shall be entitled on one occasion to, at its option, to
defer (the “Closing Date Deferral”) the Closing Date for up to fifteen (15) days
following the date upon which Closing is otherwise required pursuant to
Section 2.3, subject in all events to the satisfaction or waiver of the
conditions in Article 6 and to the rights of each of the parties under
Article 7; provided that in no event shall any Closing Date Deferral extend the
Closing beyond December 31, 2008. The date to which the Company extends the
Closing pursuant to this Section 2.6 is the “Deferral Date”.

3. Representations and Warranties of the Company. Except as set forth in (i) the
disclosure schedules delivered by the Company to the Purchaser prior to the
execution and delivery of this Agreement (the “Company Disclosure Schedules”)
(each section of which qualifies the correspondingly numbered representation or
warranty to the extent specified therein and such other representations or
warranties to the extent a matter in such section is disclosed in such a way as
to make its relevance to such other representations or warranties reasonably
apparent) or (ii) the Recently Filed SEC Reports (to the extent such information
is disclosed in reasonable detail and is disclosed in such a way as to make its
relevance to the applicable representations and warranties contained herein
reasonably apparent), the Company hereby represents and warrants to the
Purchaser as follows:

3.1 Corporate Existence and Power. Each of the Company and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, except where the failure to be in good standing
has not had, and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. The Company has all requisite
corporate power and authority to carry on its business as now conducted, to
execute and deliver this Agreement and the Investor Rights Agreement, to execute
and file the Certificate of Designation, to issue the Participating Preferred
Stock and the Conversion Shares issuable upon conversion of the Participating
Preferred Stock, to consummate the other transactions contemplated hereby and
thereby and by the Certificate of Designation and to perform its obligations
hereunder and thereunder and under the Certificate of Designation. True,
complete and correct copies of the Third Restated Certificate of Incorporation
(the “Certificate of Incorporation”) and the Third Amended and Restated Bylaws
(the “Bylaws”) of the Company, as of the date of this Agreement, have previously
been publicly filed by the Company and are available to the Purchaser.

3.2 Capitalization.

(a) The authorized capital stock of the Company consists of 2,000,000,000 shares
of Common Stock, and 125,000,000 shares of preferred stock, par value $0.001 per
share (the “Company Preferred Stock”). At the close of business on October 7,
2008, (A) 349,801,992 shares of Common Stock were issued and outstanding, of
which 68,542 shares were subject to future vesting requirements or risk of
forfeiture back to the Company or a right of repurchase by the Company
(collectively, “Company Restricted Stock”) and (B) 36,954,530 shares of Common
Stock were reserved and available for issuance pursuant to the Stock Plans, of
which 8,601,582 shares were subject to outstanding Company Options with a
weighted average exercise price of $13.2005 per share, and 1,029,938 shares of
Common Stock were subject to restricted stock unit awards granted under the
Company Stock Plans (such unit awards, together with any other restricted stock
unit awards granted to employees of the Company after October 7, 2008 in the
ordinary course of business consistent with past practice, the “Company
Restricted Units”).

(b) As of the date of this Agreement, (i) except as described in Section 3.2(a)
or 3.2(d), there were no outstanding options, stock appreciation rights,
“phantom” stock rights, performance awards, units, dividend equivalent awards,
rights to receive shares of Common Stock on a deferred basis, rights to purchase
or receive Common Stock or other equity-based awards that are settleable in
Common Stock issued or granted by the Company or any of the Company Subsidiaries
to any current or former director, officer, employee or consultant of the
Company or any of the Company Subsidiaries and (ii) no shares of Company
Restricted Stock or Company Restricted Units were subject to performance-based
vesting criteria. All outstanding shares of Common Stock are, and all shares
which may be issued pursuant to the exercise of Company Options and the vesting
of Company Restricted Units will be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right under
any provision of the General Corporation Law of the State of Delaware (the
“DGCL”), as amended, the certificate of incorporation of the Company as in
effect from time to time, the by-laws of the Company as in effect from time to
time, or any contract to which the Company is a party or otherwise bound. During
the period from October 7, 2008, to the date of this Agreement, there have been
no issuances, reservations for issuance or grants by the Company or any of the
Company Subsidiaries of any shares of capital stock (including Company
Restricted Stock) or other voting securities or Equity Interests of the Company
(other than issuances or grants of shares of Common Stock pursuant to (A) the
Stock Plans in the ordinary course of business consistent with past practice and
(B) the exercise of Company Options outstanding on October 7, 2008, as required
by their terms as in effect on October 7, 2008). The consummation of the
transactions contemplated by this Agreement, the terms of the Participating
Preferred Stock and the Investor Rights Agreement will not trigger the
anti-dilution provisions or other price adjustment mechanisms of any outstanding
subscriptions, options, calls, warrants, commitments, contracts, preemptive
rights, rights of first refusal, demands, conversion rights or other agreements
or arrangements under which the Company or any of its Subsidiaries is or may be
obligated to issue or acquire shares of any of its capital stock that have not
been properly waived.

(c) There are no outstanding bonds, debentures, notes or other indebtedness of
the Company or any of the Company Subsidiaries (i) having the right to vote on
any matters on which holders of capital stock or other Equity Interests of the
Company or any of the Company Subsidiaries may vote (“Company Voting Debt”) or
(ii) convertible into Equity Interests of the Company.

(d) Except as provided for in the Company Rights Plan, or pursuant to the Stock
Plans, as of the date of this Agreement, there are (i) no options, warrants,
calls, rights, convertible or exchangeable securities, commitments, contracts,
arrangements or undertakings of any kind to which the Company or any of the
Company Subsidiaries is a party or by which any of them is bound obligating the
Company or any of the Company Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, (A) shares of capital stock or other voting
securities or Equity Interests of, or any security convertible or exercisable
for or exchangeable into any capital stock or other voting securities or Equity
Interests of, the Company or any of the Company Subsidiaries or (B) any Company
Voting Debt and (ii) no other rights the value of which is in any way based on
or derived from, or that give any person the right to receive any economic
benefit or right similar to or derived from the economic benefits and rights
accruing to holders of capital stock or other voting securities or Equity
Interests of the Company or any of the Company Subsidiaries. As of the date of
this Agreement, there are no outstanding contractual obligations of the Company
or any of the Company Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of the Company Subsidiaries.

(e) None of the Company nor any of the Company Subsidiaries is a party to any
voting agreement with respect to the voting of any shares of capital stock or
other voting securities or Equity Interests of the Company or any of the Company
Subsidiaries.

3.3 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization of the
Participating Preferred Stock, and the filing of the Certificate of Designation,
the authorization, execution, delivery and performance of the Transaction
Agreements and the consummation of the transactions contemplated hereby and
thereby, including the issuance of the Conversion Shares upon the conversion of
the Participating Preferred Stock (the “Transactions”), has been taken; no vote
of the stockholders of the Company is necessary to adopt this Agreement and
approve the Transactions under the DGCL, the rules of the New York Stock
Exchange, or the Certificate of Incorporation and the Bylaws. Assuming this
Agreement constitutes the legal and binding agreement of the Purchaser, this
Agreement constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or fraudulent conveyance and similar Laws
relating to or affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing. At or
prior to the Closing, the Company will have reserved for issuance the shares of
Common Stock initially issuable upon conversion of the Participating Preferred
Stock.

3.4 Valid Issuance; Preference; No Manipulation; General Solicitation; No
Integration.

(a) The Participating Preferred Stock being purchased by the Purchaser pursuant
to this Agreement will, upon issuance pursuant to the terms of this Agreement
and upon payment therefor, be duly authorized, validly issued, fully paid and
non-assessable, free and clear of any Liens or preemptive or similar rights.
Upon their issuance in accordance with the terms of the Participating Preferred
Stock, the Conversion Shares will be duly authorized, validly issued, fully paid
and non-assessable, free and clear of any Liens or preemptive or similar rights.
Subject to the accuracy of the representations made by the Purchaser in
Section 4, the offer, sale and issuance to the Purchaser of the
            shares of Participating Preferred Stock and their conversion into
Conversion Shares will be in compliance with applicable exemptions from the
registration and prospectus delivery requirements of the Securities Act and will
have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state “blue sky” securities laws. As of the date hereof, the
Company is eligible to file a registration statement on Form S-3 under the
Securities Act and is current in its filings with the Securities and Exchange
Commission (the “SEC”) under Section 13(a) of the Exchange Act.

(b) The Company has no authorized or outstanding class of equity securities
ranking as to dividends, redemption or distribution of assets upon a liquidation
senior to or pari passu with the Participating Preferred Stock.

(c) The Company has not taken, in violation of applicable Law, any action
designed to, or that might reasonably be expected to cause or result in,
stabilization or manipulation of the price of the Common Stock to facilitate the
transactions contemplated hereby or the sale or resale of the shares of Common
Stock.

(d) Neither the Company nor any other Person or entity authorized by the Company
to act on its behalf has engaged in a general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) of
investors with respect to offers or sales of the Participating Preferred Stock.
The Company has not, directly or indirectly, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as defined in
the Securities Act) which, to the Company’s knowledge, is or will be integrated
with the Participating Preferred Stock sold pursuant to this Agreement.

3.5 No Regulatory Approvals; No Conflict. No material consent, approval, order
or authorization from, or filing, registration or declaration with, any Person
or Governmental Authority that has not been obtained is required for (i) the
execution, delivery and performance of the Transaction Agreements by the
Company, (ii) the filing of the Certificate of Designation and the issuance of
the Participating Preferred Stock or (iii) except with respect to the expiration
or earlier termination of any applicable waiting period under the HSR Act and
any approvals or consents required under the FPA, the issuance of the Conversion
Shares upon conversion of the Participating Preferred Stock. The execution,
delivery and performance of the Transaction Agreements by the Company and the
consummation of the other transactions contemplated hereby will not
(A)(i) conflict with or result in any violation of any provision of the
Certificate of Incorporation or the Bylaws or the organizational documents of
any of the Company’s Subsidiaries, (ii) violate, or be in conflict with or
constitute a default (with or without notice or lapse of time or both) under,
any term or provision of, or any right of termination, cancellation or
acceleration arising under any Contract or cause any liabilities or additional
fees to be due thereunder or (iii) conflict with or violate any Law or Order
applicable to the Company or any of its Subsidiaries or on the business or
material properties or assets of the Company or any of its Subsidiaries, or
(B) result in the imposition of any Lien on the business or material properties
or assets of the Company or any of its Subsidiaries, except in the case of
clauses (A)(ii), (A)(iii) and (B) as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. None of the
execution and delivery of the Transaction Agreements, the issuance of the
Participating Preferred Stock and the Conversion Shares and the consummation of
the other transactions contemplated hereby and thereby and by the Certificate of
Designation or the performance of the obligations of the Company hereunder and
thereunder or under the Certificate of Designation will result in the
suspension, revocation, impairment or forfeiture of any Permit (as defined
below) applicable to the Company or any of its Subsidiaries, their businesses or
operations or any of their assets or properties, except for such suspensions,
revocations, impairments, forfeitures or renewals that would not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect.

3.6 SEC Reports; Financial Statements.

(a) The Company has filed with the SEC all forms, reports, schedules, proxy
statements (collectively, and in each case including all exhibits and schedules
thereto and documents incorporated by reference therein and including all
registration statements and prospectuses filed with the SEC, the “SEC Reports”)
required to be filed by the Company with the SEC since January 1, 2007. As of
its date of filing, each SEC Report complied in all material respects with the
requirements of the Exchange Act or the Securities Act, and none of such SEC
Reports (including any and all financial statements included therein) contained
when filed (except to the extent revised or superseded by a subsequent filing
with the SEC that is publicly available prior to the date hereof) any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.

(b) Each of the consolidated financial statements (including the notes thereto)
included in the SEC Reports (i) complied as to form required by published rules
and regulations of the SEC related thereto as of its date of filing with the
SEC, (ii) complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (iii) has been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or otherwise permitted by the SEC on Form 10-Q or any successor form
under the Exchange Act) and (iv) presents fairly in all material respects the
consolidated financial position of Company and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended, subject (in the case of unaudited financial
statements) to normal year-end adjustments and any other adjustments described
therein or in the notes or schedules thereto or the absence of footnotes (none
of which are material).

(c) The unaudited balance sheet and the related unaudited statement of
operations and unaudited statement of cash flows for the period ended on
June 30, 2008, included in its Quarterly Report on Form 10-Q for the quarter
ended June 30, 2008, as filed in the Recently Filed SEC Reports (i) present
fairly in all material respects the financial condition of the Company as of
such date and the results of operations for the six (6) month period then ended
and (ii) were prepared on a basis consistent with the Company’s past practice,
subject to normal year-end adjustments and the absence of footnotes (none of
which are material).

(d) The Company and its Subsidiaries have designed and maintain a system of
internal controls over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP. The Company
(i) has designed and maintains disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms and is
accumulated and communicated to the Company’s management as appropriate to allow
timely decisions regarding required disclosure, and (ii) has disclosed, based on
its most recent evaluation of such disclosure controls and procedures prior to
the date hereof, to the Company’s auditors and the audit committee of the Board
of Directors (A) any significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting that are
reasonably likely to adversely affect in any material respect the Company’s
ability to record, process, summarize and report financial information and
(B) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal controls over
financial reporting. The Company has made available to the Purchaser a summary
of any such disclosure made by management to the Company’s auditors and audit
committee since January 1, 2007.

3.7 Undisclosed Liabilities. Except for liabilities included or reserved for in
the unaudited consolidated balance sheet of the Company as of June 30, 2008 or
disclosed in the notes thereto included in its Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008, as filed with the SEC, neither the Company nor
any of its Subsidiaries had, and since such date none of them has incurred,
liabilities, including contingent liabilities, or any other obligations
whatsoever that are or could be material (individually or in the aggregate) to
the Company and its Subsidiaries of a nature required (if known) to be disclosed
on a consolidated balance sheet or in the related notes thereto, taken as a
whole, except liabilities incurred in the ordinary course of business subsequent
to June 30, 2008 and except for such liabilities that would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.

3.8 Contracts.

(a) Set forth on Schedule 3.8(a) is a list of all Contracts restricting the
payment of dividends upon, or the redemption or conversion of, the shares of the
Participating Preferred Stock or the Conversion Shares.

(b) Neither the Company nor any of its Subsidiaries is, or to the knowledge of
the Company, is alleged to be (nor, to the Company’s knowledge, is any other
party to any Material Contract) in material default under, or in material breach
or material violation of, any Material Contract, and no event has occurred
which, with the giving of notice or passage of time or both, would constitute a
material default by the Company or any other party under any Material Contract.
Other than Material Contracts which have terminated or expired in accordance
with their terms, each of the Material Contracts is in full force and effect and
is a legal, valid and binding obligation of the Company and, to the knowledge of
the Company, the other parties thereto enforceable against the Company and, to
the knowledge of the Company, such other parties in accordance with its terms
(subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).

3.9 Affiliate Transactions. Other than in the ordinary course of business on an
arm’s length basis, there are no transactions between the Company, on the one
hand, and any (A) officer or director of the Company or any of its Subsidiaries,
(B) to the knowledge of the Company, record or beneficial owner of five
(5) percent or more of the voting securities of the Company or (C) affiliate or
family member of any such officer or director or, to the knowledge of the
Company, record or beneficial owner, on the other hand, except employee benefit
plans, executive compensation or director compensation, indemnification
agreements and similar transactions. Neither the Company nor any of its
Subsidiaries is a guarantor or indemnitor of any indebtedness of any of the
persons set forth in the foregoing clause (A) or, to the knowledge of the
Company, clauses (B) through (C).

3.10 No Adverse Changes. Since June 30, 2008, there has not been a Material
Adverse Effect.

3.11 Title. Except for Liens created under or permitted by the Credit Agreement,
the Company and each of its Subsidiaries have good and marketable title to their
respective owned properties and assets, and good title to their respective
leasehold estates in leased properties and assets, in each case subject to no
Lien, other than Liens that would not reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect.

3.12 Compliance with Law; Permits.

(a) Neither the Company nor any of its Subsidiaries (i) is in material violation
or default of the Certificate of Incorporation or the Bylaws, or the
organizational documents of any of its Subsidiaries, (ii) is in violation or
default of any Order or any Law, except for such violations and defaults that
would not reasonably be expected to result in, individually or in the aggregate,
a Material Adverse Effect or (iii) has received, since January 1, 2008, any
written notice of, and to the knowledge of the Company, no investigation or
review is in process or threatened by any Governmental Authority with respect
to, any material violation or alleged violation of any Order or Law.

(b) Except as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, (i) the Company and its
Subsidiaries hold all Permits necessary for the lawful conduct of their
respective businesses as they are presently being conducted, (ii) all Permits
are in full force and effect, (iii) the Company and its Subsidiaries are in
compliance with the terms of the Permits, (iv) there are no pending or, to the
knowledge of the Company, threatened, modifications, amendments, cancellations,
suspensions, limitations, nonrenewals or revocations of any Permit, and
(v) there has occurred no event which (whether with notice or lapse of time or
both) could reasonably be expected to result in or constitute the basis for such
a modification, amendment, cancellation, suspension, limitation, nonrenewal or
revocation thereof.

3.13 Litigation. There is no Action pending, or to the Company’s knowledge,
currently threatened against the Company or any of its Subsidiaries which would
reasonably be expected to result in, individually or in the aggregate, a
Material Adverse Effect. To the Company’s knowledge, no Governmental Authority
is threatening to impose a material adverse Order on the Company or any of its
Subsidiaries. As of the date hereof, except as set forth in the Recently Filed
SEC Reports, there is no material claim, action, suit, case, arbitration,
litigation, or any proceeding by or before any Governmental Authority (an
“Action”) by the Company or any of its Subsidiaries currently pending.

3.14 Tax Matters.

(a) (i) All material Tax Returns that have been required to be filed by or on
behalf of the Company and its Subsidiaries have been timely filed (subject to
any extensions which the Company or any of its Subsidiaries has timely filed)
and such Tax Returns were, at the time of filing, true, correct and complete in
all material respects, (ii) all material Taxes of the Company and its
Subsidiaries due and payable, whether or not shown on such Tax Returns, have
been paid in full, or where payment is not due, such Taxes if accrued as of the
date of the Company’s most recent financial statements, have been adequately
provided for on such financial statements, (iii) since the date of the Company’s
most recent financial statements, none of the Company or any of its Subsidiaries
has incurred any liability for material Taxes outside the ordinary course of
business consistent with past practice, (iv) no examination or audit of any Tax
Return relating to any material Taxes of the Company or any of its Subsidiaries
or with respect to any material Taxes due from the Company or any of its
Subsidiaries by the Internal Revenue Service or the appropriate state, local or
foreign taxing authority is currently in progress or, to the knowledge of the
Company, threatened or contemplated, (v) no assessment of material Tax has been
proposed in writing against the Company or any of its Subsidiaries or any of
their assets or properties, (vi) no waiver of statutes of limitation have been
given by or requested with respect to any material Taxes of the Company or its
Subsidiaries, (vii) there are no Liens for Taxes on any asset of the Company or
any of its Subsidiaries other than for Taxes not yet due and payable, or if due,
(A) not delinquent or (B) being contested in good faith by appropriate
proceedings, (viii) neither the Company nor any of its Subsidiaries has any
current material liability, and to the knowledge of the Company no events or
circumstances have occurred which could result in any material liability, for
Taxes of any Person (other than the Company and its Subsidiaries) (A) under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign Law), or (B) as a transferee or successor, (ix) none of the Company
or any of its Subsidiaries has been either a “distributing corporation” or a
“controlled corporation” in a distribution occurring during the last two
(2) years in which the parties to such distribution treated the distribution as
one to which Section 355 of the Code is applicable, (x) all material Taxes
required to be withheld, collected or deposited by the Company and each of its
Subsidiaries have been timely withheld, collected or deposited, as the case may
be, and to the extent required, have been paid to the relevant taxing authority,
(xi) neither the Company nor any of its Subsidiaries has been a party to a
“reportable transaction,” as such term is defined in Treasury Regulations
Section 1.6011-4(b)(1), and (xii) neither the Company nor any of its
Subsidiaries is a party to, is bound by or has any obligation under any Tax
sharing or Tax indemnity Contract or similar arrangement, except under any such
Contract or arrangement entered into in the ordinary course of business.

(b) For purposes of this Agreement, the term (i) “Taxes” means all taxes,
charges, fees, levies or other assessments imposed by any United States federal,
state, local or foreign taxing authority, including, but not limited to, income,
excise, property, sales and use, transfer, franchise, payroll, withholding,
social security or other taxes, including any interest, penalties or additions
attributable thereto, and (ii) “Tax Return” means any return, report,
information return or other similar document (including any related or
supporting information) filed or required to be filed with any taxing authority
with respect to Taxes, including any amendments thereto.

3.15 Broker; Fees. Except for Goldman Sachs & Co. neither the Company nor any of
its Subsidiaries has employed any broker or finder, or incurred any liability
for any brokerage or finders’ fees or any similar fees or commissions in
connection with the transactions contemplated by this Agreement.

3.16 Anti-Takeover Provisions Not Applicable. The Board of Directors has duly
authorized and approved this Agreement, the Investor Rights Agreement and the
Certificate of Designation and the transactions contemplated hereby and thereby
such that no other action or approval of the Board of Directors or any Person is
needed to exempt this Agreement, the Investor Rights Agreement and the
Certificate of Designation and the transactions contemplated hereby and thereby
from the restrictions of Section 203 of the DGCL (or any similar Laws).

3.17 Rights Agreement.  Immediately prior to the execution of this Agreement,
the Board of Directors of the Company adopted resolutions pursuant to Section 1
of the Rights Agreement between Reliant Resources, Inc. and The Chase Manhattan
Bank, as Rights Agent, including a form of Rights Certificate, dated as of
January 15, 2001 (the “Rights Agreement”) providing that the Purchaser shall not
be deemed an “Acquiring Person” (as defined in the Rights Agreement) solely as a
result of entering into this Agreement and/or the other transactions
contemplated hereby (including issuance of the Conversion Shares) unless and
until such time as the Purchaser or any Affiliate or Associate (each as defined
in the Rights Agreement) of the Purchaser shall purchase or otherwise become the
Beneficial Owner (as defined in the Rights Agreement) of additional shares of
Common Stock (other than pursuant to the terms of the Participating Preferred
Stock), unless the Purchaser, together with all Affiliates and Associates of the
Purchaser, is not then the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding. The resolutions referred to in this Section 3.17
have not been rescinded, modified or withdrawn.

3.18 Trading in Common Stock. From and including September 29, 2008 through the
date hereof, the Company has not, directly or indirectly, repurchased or
redeemed any shares of Common Stock or otherwise engaged in any market making
activities that could have impacted the trading value of the Common Stock.

4.  Representations and Warranties of the Purchaser. The Purchaser represents
and warrants to the Company as follows:

4.1 Organization. The Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of Delaware and has the requisite
power and authority to consummate the transactions contemplated by this
Agreement and the other Transaction Agreements to which it will be a party and
to perform each of its obligations hereunder and thereunder.

4.2 Authorization. All partnership action on the part of the Purchaser or its
limited partners or general partner necessary for the authorization, execution,
delivery and performance of this Agreement and the other Transaction Agreements
to which it will be a party and the consummation of the Transactions has been
taken. Assuming this Agreement constitutes the legal and binding agreement of
the Company, this Agreement constitutes a legal, valid and binding obligation of
the Purchaser, enforceable against the Purchaser in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or fraudulent conveyance and
similar laws relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.

4.3 No Conflict. No material consent, approval, order or authorization from, or
filing, registration or declaration with, any Person or Governmental Authority
that has not been obtained is required for the execution, delivery and
performance of the Transaction Agreements by Purchaser. The execution, delivery
and performance of the Transaction Agreements by the Purchaser and the
consummation of the other transactions contemplated hereby will not (i) conflict
with or result in any violation of any provision of the limited partnership
agreement, certificate of formation or other equivalent organizational documents
of the Purchaser, (ii) violate, or be in conflict with or constitute a default
(with or without notice or lapse of time or both) under, any term or provision
of, or any right of termination, cancellation or acceleration arising under any
Contract or cause any liabilities or additional fees to be due thereunder or
(iii) conflict with or violate any Law or Order applicable to the Purchaser or
on the business or material properties or assets of the Purchaser, other than,
in the case of (iii) above, as would not, individually or in the aggregate, be
reasonably expected to materially delay or hinder the ability of the Purchaser
to perform its obligations under the Transaction Agreements.

4.4 Purchase Entirely for Own Account. The Purchaser is acquiring the
Participating Preferred Stock (and the Conversion Shares) for its own account
and not with a view to, or for sale in connection with, any distribution of the
Participating Preferred Stock or Conversion Shares in violation of the
Securities Act. The Purchaser has no present agreement, undertaking,
arrangement, obligation or commitment providing for the disposition of the
Participating Preferred Stock or Conversion Shares.

4.5 Investment Company. The Purchaser is not an “investment company”, a company
“controlled” by an “investment company”, or an “investment adviser” within the
meaning of the Investment Company Act or of 1940, as amended, or the Investment
Advisers Act of 1940, as amended.

4.6 Investor Status. The Purchaser certifies and represents to the Company that
it is an “accredited investor” as defined in Rule 501 of Regulation D
promulgated under the Securities Act. The Purchaser’s financial condition is
such that it is able to bear the risk of holding the Participating Preferred
Stock for an indefinite period of time and the risk of loss of its entire
investment. The Purchaser has been afforded the opportunity to ask questions of
and receive answers from the management of the Company concerning this
investment and has sufficient knowledge and experience in investing in companies
similar to the Company so as to be able to evaluate the risks and merits of its
investment in the Company. Purchaser acknowledges and affirms that it has
completed an investigation, analysis and evaluation of the Company, that it has
made all such reviews and inspections of the business, results of operations and
financial condition of the Company as it deemed necessary or appropriate, and
that in making its decision to enter into this Agreement and consummate the
transactions contemplated hereby it has relied on such investigation, analysis,
and evaluation of the representations and warranties set forth in Article 3.

4.7 Securities Not Registered. The Purchaser understands that the shares of
Participating Preferred Stock has not been registered under the Securities Act,
by reason of their issuance by the Company in a transaction exempt from the
registration requirements of the Securities Act, and that the Participating
Preferred Stock must continue to be held by the Purchaser unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration. The Purchaser understands that the exemptions from
registration afforded by Rule 144 (the provisions of which are known to it)
promulgated under the Securities Act depend on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.

4.8 Trading in Company Securities. Neither the Purchaser nor its Affiliates
have, directly or indirectly, entered into any hedging, short sale, derivative,
put or call transaction or any similar transaction with respect to any equity
securities of the Company from the date of the Letter Agreement through the date
hereof.

4.9 Broker; Fees. Neither Purchaser nor any of its Affiliates has employed any
broker or finder, or incurred any liability for any brokerage or finders’ fee or
any similar fees or commissions in connection with the transactions contemplated
by this Agreement.

4.10 Funds. Attached here to is a true, accurate and complete copy of the
executed equity commitment letter to provide equity financing to the Purchaser
(the “Commitment Letter”). As of the date hereof, the Commitment Letter, in the
form so delivered, is a legal, valid and binding obligation of the Purchaser and
the other party thereto. The Commitment Letter is in full force and effect and
has not been withdrawn or terminated (and no party thereto has indicated an
intent to so withdraw or terminate) or otherwise amended or modified in any
respect, and the Purchaser is not in breach of any of the terms or conditions
set forth therein and no event has occurred which, with or without notice, lapse
of time or both, could reasonably be expected to constitute a material breach or
failure to satisfy a condition precedent set forth therein. The proceeds from
the Commitment Letter constitute all of the financing required for the
consummation of the transactions contemplated by this Agreement, and are
sufficient for the satisfaction of all of the Purchaser’s obligations under this
Agreement, including the payment of the aggregate purchase price hereunder. The
Purchaser has fully paid any and all commitment fees or other fees on the dates
and to the extent required by the Commitment Letter. The Commitment Letter
contains all of the conditions precedent to the obligations of the parties
thereunder.

5. Covenants.

5.1 Commercially Reasonable Efforts. From and after the date hereof through the
Closing Date, and with respect to the filings, consents and approvals under the
HSR Act and FPA referred to below, following the Closing, subject to the terms
and conditions of this Agreement (including Sections 6.1(b), 6.1(c) and 6.3(f),
which for the avoidance of doubt, shall include working in good faith to enter
into definitive documentation by the Waiver Expiry Date (but in any event prior
to the End Date) with each of the parties to the ML Letter Agreement and
Affiliates of Goldman Sachs & Co. in connection with the satisfaction of
Sections 6.1(b) and 6.1(c), respectively), each party will use commercially
reasonable efforts to take, or cause to be taken, all appropriate actions, to
satisfy all conditions in this Agreement and to file, or cause to be filed, all
documents and to do, or cause to be done, all things necessary, proper or
advisable to consummate the Transactions (including to permit the Purchaser’s
exercise of voting rights under Section 4(a) of the Certificate of Designation
and to permit the conversion of the Participating Preferred Stock under
Section 5 of the Certificate of Designation), including preparing and filing as
promptly as reasonably practicable all applications, documentation and other
information to effect all necessary filings or declarations with, or orders,
consents, waivers, approvals, authorizations, licenses, consents, certificates,
registrations, approvals or other permits of, any Governmental Authority or
other Person; provided, that as soon as reasonably practicable, but in all
events within thirty (30) days of the date hereof, the parties shall prepare and
file all applications and other documents and information under the HSR Act and
FPA as are necessary to authorize the exercise of the Purchaser’s voting rights
under Section 4(a) of the Certificate of Designation and the conversion of the
Participating Preferred Stock under Section 5 of the Certificate of Designation.

5.2 Interim Actions. If during the period between the date hereof and the
earlier of the Closing Date and the date this Agreement is terminated, the
Company takes any action that, had the Participating Preferred Stock been
outstanding at such time, (i) would have resulted in a distribution or payment
to the holders of the Participating Preferred Stock, (ii) would, or together
with other like events could, have resulted in any adjustments to the terms of
the Participating Preferred Stock, including the Conversion Price (as defined in
the Certificate of Designation), or (iii) would have required the prior approval
of or consent by the holders of the Participating Preferred Stock, then the
taking of any such action by the Company shall require the approval of the
Purchaser.

5.3 Notification of Certain Matters. Following the execution of this Agreement
and prior to the Closing, the Company shall give prompt written notice to the
Purchaser of the occurrence or non-occurrence of any event known to the Company
the occurrence or non-occurrence of which would reasonably be expected to cause
any representation or warranty contained in Article 3 to be untrue in manner
that would be reasonably likely to result in the failure of any condition set
forth in Article 6, or the failure of the Company to comply with or satisfy any
covenant or agreement under any of the Transaction Agreements. Following the
execution of this Agreement and prior to the Closing, the Purchaser shall give
prompt written notice to the Company of the occurrence or non-occurrence of any
event known to the Purchaser the occurrence or non-occurrence of which would
reasonably be expected to cause any representation or warranty contained in
Article 4 to be untrue in a manner that would be reasonably likely to result in
the failure of any condition set forth in Article 6, or the failure of the
Purchaser to comply with or satisfy any covenant or agreement under this
Agreement.

5.4 Confidentiality. The Purchaser acknowledges that it is bound by the
Confidentiality Agreement, dated September 25, 2008 (the “Confidentiality
Agreement”), between the Company and First Reserve XII Advisors, L.L.C., which
Confidentiality Agreement will continue in full force and effect in accordance
with its terms.

5.5 Treatment of the Participating Preferred Stock by the Company. The Company
shall not treat the Participating Preferred Stock (based on its terms) as
“preferred stock” as defined in Treasury Regulations Section 1.305-5(a) unless
required to do so pursuant to a “determination” (as defined in Section 1313(a)
of the Code).

5.6 Trading in Company Securities.

(a) The Purchaser agrees that it shall not and shall cause its Affiliates not
to, directly or indirectly, enter into any hedging, short sale, derivative, put
or call transaction or any similar transaction with respect to any equity
securities of the Company (the “Restrictions”), in each case for the six
(6) month period beginning September 29, 2008; provided, that, notwithstanding
anything to the contrary, all Restrictions shall lapse upon the occurrence of a
Change of Control (as defined in the Certificate of Designation).

(b) The Company agrees that it shall not, directly or indirectly, repurchase or
redeem any shares of Common Stock or otherwise engage in any market making
activities that could impact the trading value of the Common Stock, in each case
for the six (6) month period beginning September 29, 2008.

5.7 Board of Directors Representation. Pursuant to the Investor Rights
Agreement, prior to or at the Closing, the Board of Directors shall increase the
number of directors by one (1) and duly elect one (1) designee of the Purchaser
to fill such newly created directorship in accordance with Article III,
Section 3 the Bylaws.

5.8 Commitment Letter. The Purchaser shall take, or cause to be taken, all
actions and do, or cause to be done, all things necessary, proper or advisable
to consummate the financing transactions described in the Commitment Letter,
including seeking to enforce its rights under the Commitment Letter. The
Purchaser shall not permit any replacement of, or amendment or modification to
be made to, or any waiver of any material provision or remedy under, the
Commitment Letter.

5.9 Exclusivity. From and after the date hereof to the Closing Date or the
earlier termination of this Agreement in accordance with its terms, none of the
Company or any of its Subsidiaries, Affiliates, officers, directors, employees,
attorneys, accountants, investment bankers and other agents or representatives
will, directly or indirectly, solicit or encourage any offers, bids or
indications of interest, or initiate or engage in negotiations with any Person
other than the Purchaser, in any such case with respect to any direct or
indirect acquisition or purchase by any Person or entity from the Company or any
of its Significant Subsidiaries of any debt or equity securities of the Company
or any of its Significant Subsidiaries that would replace or obviate the need
for the issuance of the Participating Preferred Stock; provided, however, that
the foregoing shall not (i) apply to (x) indebtedness in the ordinary course of
business consistent with past practice or (y) the indebtedness contemplated in
the Commitment Letter, dated September 29, 2008, with GSLP I Offshore Holdings
Fund A, L.P., GSLP I Offshore Holdings Fund B, L.P., GSLP I Offshore Holdings
Fund C, L.P. and GSLP I Onshore Holdings Fund, L.L.C. (or any debt financing
arrangement in lieu thereof on terms no less favorable to the Company) or
(ii) be deemed to restrict the ability of the Company or any of its Subsidiaries
to solicit any offer, bid or indication of interest with respect to, or to
initiate or engage in negotiations or enter into any agreement with any Person
with respect to, any merger, consolidation or sale of all or substantially all
of the assets or equity of the Company or any of its Subsidiaries, or any
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any Subsidiary thereof.

5.10 Investor Rights Agreement. At or prior to the Closing, each of the Company
and the Purchaser shall execute and deliver the Investor Rights Agreement.

5.11 Access to Information.

(a) Subject to the terms of the Confidentiality Agreement, from the date hereof
through the Closing, the Company shall deliver to the Purchaser the items set
forth in Section 3.1 of the Investor Rights Agreement on the terms set forth
therein.

(b) Upon reasonable notice and subject to the terms of the Confidentiality
Agreement, between the date hereof and the Closing the Company shall, and shall
cause each of its Subsidiaries to, afford to the Purchaser, reasonable access,
during normal business hours during the period prior to the Closing, to all
their respective properties, books, contracts, commitments and records;
provided, however, that such access and information shall only be provided to
the extent that in the reasonable good faith judgment of the Company, after
consultation with legal counsel, such access or the provision of such
information would not violate applicable Law; provided, further, that the
foregoing shall not require the Company (i) to permit any inspection, or to
disclose any information, that in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third Persons or violate any of
its obligations with respect to confidentiality if the Company shall have used
reasonable efforts to obtain the consent of such third Person to such inspection
or disclosure and such consent was not obtained or (ii) to disclose any
privileged information of the Company or any of its Subsidiaries so long as the
Company has taken all reasonable steps to permit inspection of or to disclose
information described in this clause (ii) on a basis that does not compromise
the Company’s or such Subsidiary’s privilege with respect thereto. The parties
shall seek appropriate substitute disclosure arrangements under circumstances in
which the proviso to the immediately proceeding sentence applies.

6. Conditions Precedent.

6.1 Conditions to the Obligations of Each Party. The obligations of the Company
and the Purchaser to consummate the purchase and sale of the Participating
Preferred Stock at the Closing are subject to the satisfaction or waiver of the
following conditions:

(a) No temporary restraining order, preliminary or permanent injunction or other
judgment or order issued by any court or agency of competent jurisdiction (each,
a “Restraint”) shall be in effect which prohibits, restrains or renders illegal
the consummation of the Investment (provided, that prior to asserting that this
condition has not been satisfied, the party asserting that this condition has
not been satisfied shall have used its reasonable best efforts (in the manner
contemplated by Section 5.1) to prevent the entry of any such Restraint and to
appeal as promptly as practicable any judgment that may be entered).

(b) The Company shall have entered into definitive documentation consistent with
(or no less favorable to the Company than) the terms set forth in the Letter
Agreement, dated as of September 29, 2008, from Merrill Lynch Commodities, Inc.
Merrill Lynch Capital Corporation and Merrill Lynch & Co., Inc. to Retail Energy
Power Supply, LLC and each of its subsidiaries (the “ML Letter Agreement”), a
copy of which has been previously provided to the Purchaser. The Company and
Merrill Lynch shall have (i) entered into such definitive documentation on or
before the Waiver Expiry Date and (ii) each complied in all material respects
with its obligations under the ML Letter Agreement (including any amendment
thereto). There shall exist no pending litigation between the Company and any
party to the Retail Facilities (as defined in Annex B of the Goldman Commitment
Letter) as of the Closing Date.

(c) The Company shall have entered into definitive documentation with respect to
new term loans in the amount of at least $650,000,000 on terms substantially the
same as (or no less favorable to the Company than) those described in the
commitment letter of Affiliates of Goldman Sachs & Co. dated September 29, 2008
and previously provided to the Purchaser, the closing of the financing pursuant
to such definitive documentation shall have occurred, and the Company shall have
borrowed term loans thereunder that yield cash proceeds to the Company (before
fees and after discounts) of at least $624,000,000 (the “Goldman Commitment
Letter”).

6.2 Conditions to the Obligations of the Company. The obligation of the Company
to consummate the sale of the Participating Preferred Stock to the Purchaser at
the Closing is subject to the satisfaction or waiver of the following further
conditions:

(a) The representations and warranties of the Purchaser (i) set forth in Section
4.8 shall be true and correct on the date of this Agreement and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date and (ii) set forth in Sections 4.1 through 4.7, Section 4.9 and
Section 4.10, shall be true and correct on the date of this Agreement and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date, except in the case of clause (ii) where the failure to be so true
and correct would not, individually or in the aggregate, reasonably be likely to
have an effect on the Purchaser that will, or would reasonably be expected to,
materially delay or hinder the ability of the Purchaser to perform its
obligations under the Transaction Agreements; provided, however, that such
representations and warranties made as of a specific date need only be true and
correct (subject to the qualifications set forth above) as of such date only.

(b) The Purchaser shall have performed in all material respects all obligations,
and complied in all material respects with the agreements and covenants,
required to be performed by or complied with by it hereunder at or prior to the
Closing.

(c) The Purchaser shall have delivered to the Company a certificate, executed by
an officer of the Purchaser, dated as of the Closing Date, to the effect that
the conditions specified in Sections 6.2(a) and 6.2(b) have been satisfied.

6.3 Conditions to the Obligations of the Purchaser. The obligation of the
Purchaser to consummate the sale of the Participating Preferred Stock to the
Purchaser at the Closing is subject to the satisfaction or waiver of the
following further conditions:

(a) The representations and warranties of the Company (i) set forth in Sections
3.2(a), 3.3, 3.4(a), 3.4(b), 3.10, , 3.17 and 3.18 shall be true and correct on
the date of this Agreement and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date and (ii) set forth in
Article 3, other than in Sections 3.2(a), 3.3, 3.4(a), 3.4(b), 3.10, 3.16, 3.17
and 3.18 shall be true and correct on the date of this Agreement and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date (without giving effect to qualifications as to materiality or
Material Adverse Effect contained therein), except (in the case of clause (ii))
where the failure to be so true and correct would not, individually or in the
aggregate, have a Material Adverse Effect; provided, however, that in the case
of clauses (i) and (ii) such representations and warranties made as of a
specific date need only be true and correct (subject to the qualifications set
forth above) as of such date only.

(b) The Company shall have performed in all material respects all obligations,
and complied in all material respects with the agreements and covenants,
required to be performed by or complied with by it hereunder at or prior to the
Closing.

(c) The Certificate of Designation shall have been duly filed by the Company
with the Secretary of State of the State of Delaware, and the Purchaser shall
have received confirmation from the Secretary of State of the State of Delaware
reasonably satisfactory to it that such filing has occurred and is effective.

(d) The Company shall have delivered to the Purchaser a certificate, executed by
the Chief Executive Officer of the Company, dated as of the Closing Date, to the
effect that the conditions specified in Sections 6.3(a) and 6.3(b) have been
satisfied.

(e) Except as set forth in the Recently Filed SEC Reports, there shall not have
been any Material Adverse Effect since the date hereof, including, for the
avoidance of doubt, an Insolvency Event in respect of the Company or any
Significant Subsidiary of the Company.

(f) Any amendment or modification to the ML Letter Agreement (other than any
extension of the waiver expiration date) shall not be adverse to the Purchaser
in any material respect.

(g) Since the date hereof, no new material information shall have come to the
Purchaser’s attention that is inconsistent in any material respect with
information publicly disclosed by the Company prior to September 29, 2008 or
otherwise disclosed by the Company to the Purchaser (or any of its Affiliates)
prior to such date, in any such case where such new information represents or
indicates a material and adverse change from the state of affairs so disclosed
(with materiality determined by reference to the Company and its Subsidiaries,
taken as a whole).

(h) The Company shall not be in default (as such term is defined in each
respective instrument and which shall not include a party’s waiver of an alleged
default) under any material debt instrument required to be filed as an Exhibit
to the Company’s 10-K or the CSRA and Working Capital Facility (as defined in
the ML Letter Agreement).

7. Termination.

7.1 Conditions of Termination. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement may be terminated at any time before
the Closing:

(a) by mutual consent of the Company and the Purchaser;

(b) by either the Company or the Purchaser if:

(i) the Closing shall not have occurred on or prior to 5:00 p.m., New York time,
on the End Date (or, if later, the Deferral Date) and the party seeking to
terminate this Agreement pursuant to this Section 7.1(b)(i) shall not have
breached in any material respect its obligations under this Agreement; or

(ii) any Restraint having the effect set forth in Section 6.1(a) shall be in
effect and shall have become final and nonappealable.

(c) by the Purchaser if any of the conditions in Section 6.1 or Section 6.3 are
incapable of being satisfied by the End Date (or, if later, the Deferral Date)
and the Purchaser shall not have breached in any material respect its
obligations under this Agreement;

(d) by the Company if any of the conditions in Section 6.1 or Section 6.2
(except Sections 6.1(b) and 6.1(c)) are incapable of being satisfied by the End
Date (or, if later, the Deferral Date) and Company shall not have breached in
any material respect its obligations under this Agreement;

(e) by the Purchaser if (i) the Board of Directors approves and authorizes an
Alternative Transaction or (ii) the Company enters into a definitive agreement
providing for an Alternative Transaction;

(f) by the Company in conjunction with entering into a definitive agreement
providing for an Alternative Transaction;

(g) By the Purchaser if the Company shall have breached or failed to perform any
of its representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform (i) would result in a failure
of a condition set forth in Section 6.1 or Section 6.3 and (ii) cannot be cured
by the End Date, or, if later, the Deferral Date, provided that the Purchaser
shall have given the Company written notice, delivered at least thirty (30) days
prior to such termination, stating the Purchaser’s intention to terminate this
Agreement pursuant to this Section 7.1(g) and the basis for such termination; or

(h) By the Company if the Purchaser shall have breached or failed to perform any
of its representations, warranties, covenants or other agreements contained in
this Agreement, which breach or failure to perform (i) would result in a failure
of a condition set forth in Section 6.1 or Section 6.2 and (ii) cannot be cured
by the End Date, or if later, the Deferral Date, provided that the Company shall
have given the Purchaser written notice, delivered at least thirty (30) days
prior to such termination, stating the Company’s intention to terminate this
Agreement pursuant to this Section 7.1(h) and the basis for such termination.

7.2 Effect of Termination. In the event of any termination pursuant to
Section 7.1, this Agreement shall become null and void and have no effect, other
than in respect of any breach hereof prior to such termination, and Section 8.7
shall continue to apply following termination in accordance with its terms.

8. Miscellaneous Provisions.

8.1 Public Statements or Releases. The Purchaser and the Company will consult
with each other before issuing, and provide each other the reasonable
opportunity to review and comment on, any press release or other public
statements with respect to this Agreement or the transactions contemplated
hereby, and shall not issue any such press release or make any such public
statement prior to such consultation, unless required by applicable Law or the
rules of a national securities exchange. In the event that any party concludes
that it is required by law or the rules of a national securities exchange to
make a public statement with respect to this Agreement or the transactions
contemplated herby or make any public filing with respect thereto, including any
filing with the SEC, such party will immediately provide to the other parties
hereto for review a copy of any such press release, statement or filing, and
will not issue any such press release, or make any such public statement or
filing, prior to such consultation and review, unless required by applicable Law
or the rules of a national securities exchange.

8.2 Interpretation. Section and subsection references are to this Agreement
unless otherwise specified. The headings in this Agreement are included for
convenience of reference only and will not limit or otherwise affect the meaning
or interpretation of this Agreement. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they will be deemed to be followed by
the words “without limitation.” The phrase “the date of this Agreement,” and
terms of similar import, unless the context otherwise requires, will be deemed
to refer to the date set forth in the first paragraph of this Agreement. The
meanings given to terms defined in this Agreement will be equally applicable to
both the singular and plural forms of such terms. All matters to be agreed to by
any party must be agreed to in writing by such party unless otherwise indicated
in this Agreement. References to agreements, policies, standards, guidelines or
instruments, or to statutes or regulations, are to such agreements, policies,
standards, guidelines or instruments, or statutes or regulations, as amended or
supplemented from time to time (or to successors thereto).

8.3 Notices. All notices, requests and other communications to any party
hereunder shall be in writing, by reliable overnight delivery service (with
proof of service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), or by email or facsimile, and shall
be given:

(a) If to the Company, to:

Reliant Energy, Inc.
1000 Main Street, 12th Floor
Houston, Texas 77002
Attention: General Counsel
Email: MJines@reliant.com
Fax:  (713) 537-7465

with a copy to (which shall not constitute notice):

Skadden, Arps, Slate, Meagher & Flom LLP
1000 Louisiana Street
Suite 6800
Houston, Texas 77002
Attention: Frank Ed Bayouth II
Email: fbayouth@skadden.com
Fax: (713) 655-5200

(b) If to the Purchaser, to:

FR Reliant Holdings LP  
c/o First Reserve Corporation,  
One Lafayette Place  
Greenwich, CT  06850
Attention: Alan G. Schwartz
Email: aschwartz@firstreserve.com
Fax: (203) 661-6729

with a copy to (which shall not constitute notice):

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Email: wcurbow@stblaw.com
Fax: (212) 455-2502

or such other address, email or facsimile number as such party may hereafter
specify by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by facsimile, when such
facsimile is transmitted to the facsimile number specified above and electronic
confirmation of transmission is received or (ii) if given by any other means,
when delivered at the address specified in this Section 8.3.

8.4 Severability. If any part or provision of this Agreement is held
unenforceable or in conflict with applicable Laws, the invalid or unenforceable
part or provisions shall be replaced with a provision which accomplishes, to the
extent possible, the original business purpose of such part or provision in a
valid and enforceable manner, and the remainder of this Agreement shall remain
binding upon the parties.

8.5 Governing Law.

(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Any disagreement, issue, dispute, claim, demand
or controversy arising out of or relating to this Agreement (each, a “Dispute”)
shall be brought in the United States District Court for the Southern District
of New York in New York, New York or any New York State court sitting in New
York, New York, so long as one of such courts shall have subject matter
jurisdiction over such Dispute. Each of the parties hereby irrevocably consents
to the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such Dispute and irrevocably waives, to the fullest extent
permitted by Law, any objection that it may now or hereafter have to the laying
of the venue of any such Dispute in any such court and that any such Dispute
which is brought in any such court has been brought in an inconvenient forum.
Process in any such Dispute may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 8.3 shall be deemed effective service of process on such
party.

(b) EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 8.5.

8.6 Waiver. No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be, or be construed as, a further or continuing waiver of any such term,
provision or condition or as a waiver of any other term, provision or condition
of this Agreement.

8.7 Expenses; Termination Fee. The Company shall be responsible for its own
expenses incurred in connection with the Investment and the other transactions
contemplated by the Transaction Agreements. In addition, the Company agrees to
reimburse the Purchaser for all of its reasonable out-of-pocket fees and
expenses or to pay directly such fees and expenses of the Purchaser, including
the fees and expenses of attorneys, accountants and consultants employed by it,
in connection with the Investment and the other transactions contemplated by the
Transaction Agreements, whether or not the Closing occurs or this Agreement is
terminated; provided, however, that the Company shall not be obligated to pay
such Purchaser’s fees and expenses if Purchaser is in material breach of this
Agreement. In addition, in the event that (a) this Agreement is terminated
pursuant to Section 7.1(e) or Section 7.1(f) or under any other Section
contained in Section 7.1 (other than Section 7.1(h)) if at the time of
termination under such other Section, termination under Section 7.1(e) or
Section 7.1(f) was permitted, or (b) this Agreement is terminated pursuant to
Section 7.1 for any reason (other than any termination (x) pursuant to Section ,
(y) in the circumstances described in clause (a) above or (z) under the
circumstances described in clause (c) below) and prior to the date ninety
(90) days after the date of termination hereof, the Company, directly or
indirectly, enters into any definitive agreement providing for an Alternative
Transaction, or (c) the End Date has been extended to December 15, 2008 or later
by virtue of an extension of the Waiver Expiry Date and this Agreement is
thereafter terminated pursuant to Section 7.1 for any reason (other than any
termination (x) by the Company pursuant to Section 7.1(h) or (y) under the
circumstances described in clause (a) above), then the Company shall pay the
Purchaser $35 million in cash, by wire transfer of immediately available funds
to an account designated by the Purchaser in writing (the “Termination Fee”).
The Company shall pay the Termination Fee immediately upon, and as a condition
to the effectiveness of, termination in the case of a termination of this
Agreement by the Company in the circumstances described in either of clauses
(a) or (c) above. In the case of a Termination Fee due under clause (b) of this
Section 8.7, the Company shall pay the Termination Fee not later than the end of
business on the second (2nd) Business Day following its entry into the
definitive agreement providing for such Alternative Transaction. In the case of
a Termination Fee due under clause (a) or (c) of this Section 8.7 where the
Purchaser is the terminating party, the Company shall pay the Termination Fee
not later than the end of business on the second (2nd) Business Day following
termination of this Agreement. For the avoidance of doubt, the Company shall not
be required to pay more than one Termination Fee under any circumstances. In
circumstances where payment of the Termination Fee is required hereunder, upon
such payment, when made, such Termination Fee shall be the Purchaser’s sole and
exclusive remedy in respect of the termination of this Agreement (including for
the avoidance of doubt the events giving rise to such termination).

8.8 Successors and Assigns. The provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of the other party hereto (and any purported assignment without such
consent shall be void and without effect).

8.9 Third Parties. This Agreement does not create any rights, claims or benefits
inuring to any Person that is not a party nor create or establish any third
party beneficiary to this Agreement or any other Transaction Agreement.

8.10 Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.

8.11 Entire Agreement; Amendments. This Agreement, the Investor Rights
Agreement, and the Confidentiality Agreement constitute the entire agreement
between the parties respecting the subject matter of this Agreement and
supersede all prior agreements, negotiations, understandings, representations
and statements respecting the subject matter of this Agreement, whether written
or oral. No modification, alteration, waiver or change in any of the terms of
this Agreement shall be valid or binding upon the parties unless made in writing
and duly executed by the parties.

8.12 Survival. The representations and warranties contained in this Agreement
shall terminate upon the first to occur of the Closing or the termination of
this Agreement. The covenants and agreements contained in this Agreement shall
survive the Closing indefinitely until such covenant or agreement is fully
performed in accordance with the terms of such covenant and agreement.

8.13 Specific Performance. Each of the parties hereto acknowledges and agrees
that, in the event of any breach of any covenant or agreement contained in this
Agreement by the other party, monetary damages may be inadequate with respect to
any such breach and the non-breaching party may have no adequate remedy at law.
It is accordingly agreed that each of the parties hereto shall be entitled, in
addition to any other remedy to which they may be entitled at law or in equity,
to seek injunctive relief and/or to compel specific performance to prevent
breaches by the other party hereto of any covenant or agreement of such other
party contained in this Agreement.

8.14 Representation by Counsel; Mutual Drafting. The parties hereto agree that
they have been represented by counsel during the negotiation and execution of
this Agreement and have participated jointly in the negotiation and drafting of
this Agreement and hereby waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties,
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.

*        *        *        *

3

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

RELIANT ENERGY, INC.

By:
Name:
Title:

FR RELIANT HOLDINGS LP

By:
Name:
Title:

4

EXHIBIT A

FORM OF CERTIFICATE OF DESIGNATION

OF

SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK

OF

RELIANT ENERGY, INC.

Reliant Energy, Inc. (the “Company”), a corporation organized and existing under
the General Corporation Law of the State of Delaware (the “DGCL”), hereby
certifies, pursuant to Section 151 of the DGCL, that the following resolutions
were duly adopted by its Board of Directors (the “Board”) on [     ]:

WHEREAS, the Company’s Third Restated Certificate of Incorporation (the
“Certificate of Incorporation”), authorizes 125,000,000 shares of preferred
stock, par value $0.001 per share (the “Preferred Stock”), issuable from time to
time in one or more series; and

WHEREAS, the Certificate of Incorporation expressly vests with the Board the
authority to establish and fix the number of shares to be included in any series
of Preferred Stock and the designations, powers, preferences, rights,
qualifications, limitations and restrictions of the shares of such series.

NOW, THEREFORE, BE IT RESOLVED, that a series of Preferred Stock with the
designations, powers, preferences, rights, qualifications, limitations and
restrictions as provided herein is hereby authorized and established as follows:

1. Number; Designation; Rank.

1.1 This series of convertible participating Preferred Stock is designated as
the “Series B Convertible Participating Preferred Stock” (the “Series B
Preferred Stock”). The number of shares constituting the Series B Preferred
Stock is 350,000 shares, par value $0.001 per share.

1.2 The Series B Preferred Stock ranks, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Company senior in
preference and priority to the common stock of the Company, par value $0.001 per
share (the “Common Stock”), and each other class or series of Equity Security of
the Company the terms of which do not expressly provide that it ranks senior in
preference or priority to, or on parity with, the Series B Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company (collectively with the Common Stock, the “Junior Securities”).

2. Dividends.

2.1 Each holder of issued and outstanding Series B Preferred Stock will be
entitled to receive out of funds legally available for the payment of dividends
for each share of Series B Preferred Stock, with respect to each dividend
period:

(a) dividends at a rate per annum equal to the Applicable Rate of the sum of
(A) $1,000 per share (the “Original Purchase Price”) plus (B) all accrued,
accumulated and unpaid dividends that are payable on such share of Series B
Preferred Stock, in each case as adjusted for any stock dividends, splits,
combinations and similar events (the “Regular Dividends”); and

(b) participating dividends of the same type as any dividends or other
distribution, whether cash, in kind or other property, payable or to be made on
outstanding shares of Common Stock equal to the amount of such dividends or
other distribution as would be made on the largest number of shares of Common
Stock into which such share of Series B Preferred Stock could be converted on
the record date of such dividends or other distribution on the Common Stock,
assuming such converted             shares of Common Stock were outstanding on
the applicable record date for such dividend or other distribution (the
“Participating Dividends” and, together with Regular Dividends, the
“Dividends”)). For purposes of calculating any Participating Dividend to be paid
during the Reset Period or as to which the applicable record date was during the
Reset Period, the initial Conversion Price shall be deemed to be $8.00 (subject
to adjustment as provided in 5); provided, however, that if (1) any
Participating Dividend is paid during or in respect of the Reset Period and
(2) the actual initial Conversion Price exceeds $8.00 (subject to adjustment as
provided in 5), then notwithstanding anything in these resolutions to the
contrary, the next succeeding Dividend(s) otherwise payable by the Company shall
be reduced by an aggregate amount equal to (i) the aggregate amount, if any (the
“Overage Amount”), by which (x) the amount of any Participating Dividends
calculated pursuant to this sentence exceeds (y) the amount that such
Participating Dividends would have been calculated to be using such actual
initial Conversion Price, plus (ii) an additional amount on the unapplied
Overage Amount at a rate per annum equal to 14%, compounded quarterly.

2.2 Regular Dividends will accrue and accumulate on a daily basis from the date
of issuance and are payable quarterly in arrears on the last day of each March,
June, September and December, or, if such date is not a Business Day, the next
succeeding Business Day (each such day, a “Regular Dividend Payment Date”). The
amount of Regular Dividends payable for each full quarterly dividend period will
be computed by dividing the annual rate by four. The amount of Regular Dividends
payable for the initial dividend period, or any other dividend period shorter or
longer than a full quarterly dividend period, will be computed on the basis of a
360-day year consisting of twelve 30-day months. Regular Dividends will be paid
to the holders of record of Series B Preferred Stock as they appear in the
records of the Company at the close of business on the 15th day of the calendar
month in which the applicable Regular Dividend Payment Date falls or on such
other date designated by the Board for the payment of Regular Dividends that is
not more than sixty (60) days or less than ten (10) days prior to such Regular
Dividend Payment Date. Any payment of a Regular Dividend will first be credited
against the earliest accumulated but unpaid Regular Dividend due with respect to
such share that remains payable.

2.3 Regular Dividends are payable only in cash. Regular Dividends will accrue
and accumulate whether or not the Company has earnings or profits, whether or
not there are funds legally available for the payment of Regular Dividends and
whether or not Regular Dividends are declared. As set forth in 2.2, Regular
Dividends will accumulate and compound quarterly to the extent they are not
paid.

2.4 Participating Dividends are payable at the same time as and when such
dividend or other distribution on Common Stock is paid to the holders of Common
Stock. So long as any share of Series B Preferred Stock is outstanding, (i) no
dividend or other distribution may be declared or set aside for payment upon any
Common Stock unless the full corresponding Participating Dividend on all shares
of Series B Preferred Stock then outstanding has been or is contemporaneously
declared or set aside for payment and (ii) no dividend or other distribution may
be paid on any Common Stock unless the corresponding Participating Dividend on
all shares of Series B Preferred Stock then outstanding has been or is
contemporaneously paid in full.

2.5 So long as any share of Series B Preferred Stock is outstanding, no dividend
may be declared or paid or set aside for payment or other distribution declared
or made upon any Junior Securities of any kind, nor may any Junior Securities of
any kind be redeemed, purchased or otherwise acquired for any consideration (or
any moneys be paid to or made available for a sinking fund for the redemption of
any shares of any such Junior Securities) by the Company (except by conversion
into or exchange for other Junior Securities and except for the redemption of
Rights issued pursuant to the Company Rights Plan (provided that the rights
associated with any Common Stock issued upon conversion of the Series B
Preferred Stock would also be so redeemed)), unless, in each case, full
cumulative Dividends (including those in arrears) on all shares of Series B
Preferred Stock then outstanding have been or are contemporaneously declared and
paid in full (including for the then current dividend period).

2.6 Each holder of issued and outstanding Series B Preferred Stock acknowledges
that the payment of Dividends hereunder, and any redemption or repurchase of the
Series B Preferred Stock pursuant to Section 6 or Section 7, is subject to and
may be limited by restrictions imposed by the Company’s Debt.

3. Liquidation Preference.

3.1 Upon any voluntary or involuntary liquidation, dissolution or winding up of
the Company, each share of Series B Preferred Stock entitles the holder thereof
to receive and to be paid out of the assets of the Company available for
distribution, before any distribution or payment may be made to a holder of any
Junior Securities, an amount in cash per share equal to the greater of (i) the
sum of (A) the Original Purchase Price per share plus (B) all accrued,
accumulated and unpaid Dividends on such share of Series B Preferred Stock, in
each case as adjusted for any stock dividends, splits, combinations and similar
events (such sum, as adjusted, the “Regular Liquidation Preference”) and (ii) an
amount equal to the amount the holders of Series B Preferred Stock would have
received upon liquidation, dissolution or winding up of the Company had such
holders converted their shares of Series B Preferred Stock into shares of Common
Stock immediately prior to such liquidation, dissolution or winding up (the
“Participating Liquidation Preference”, and such greater amount, the
“Liquidation Preference”). For purposes of calculating any Participating
Liquidating Preference to be paid during the Reset Period or as to which the
applicable record date was during the Reset Period, the initial Conversion Price
shall be deemed to be $8.00 (subject to adjustment as provided in 5).

3.2 After payment to the holders of Series B Preferred Stock of the full
Liquidation Preference to which they are entitled, the holders of Series B
Preferred Stock, in such capacity, will have no right or claim to any of the
assets of the Company.

3.3 The value of any property not consisting of cash that is distributed by the
Company to the holders of the Series B Preferred Stock in payment of Dividends
or Liquidation Preference will equal the Fair Market Value thereof.

3.4 For the purposes of this 3, neither of (i) the sale, lease, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company, (ii) the consolidation or merger of the Company with or into one or
more Persons, nor (iii) a Change in Control shall be deemed to be a liquidation,
dissolution or winding-up of the Company.

4. Voting Rights; Board Representation.

4.1 The holders of Series B Preferred Stock are entitled to vote on all matters
on which the holders of Common Stock are entitled to vote, and except as
otherwise provided herein or by law, the holders of Series B Preferred Stock
will vote together with the holders of Common Stock as a single class. Each
holder of Series B Preferred Stock is entitled to a number of votes equal to the
number of shares of Common Stock into which all of the outstanding shares of
Series B Preferred Stock held by such holder on the record date are convertible
on such record date; provided, however, that the voting rights granted under
this 4.1 shall be conditioned upon, and shall only be effective upon, the
expiration or earlier termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”)
and the receipt of all applicable consents or approvals under the Federal Power
Act, as amended (the “FPA”), in each case as required to be obtained prior to
the exercise of such voting rights by the Original Holder (provided further, for
the avoidance of doubt, to the extent the Original Holder determines at any
time, in its sole discretion, to exercise the voting rights provided in this 4.1
as to all or any portion of the Series B Preferred Stock, then upon written
notice to the Company specifying the applicable number of shares, the Original
Holder (or any successor or transferee thereof) immediately thereafter shall be
granted the voting rights specified under this 4.1 with respect to such
specified shares of Series B Preferred Stock so long as the granting of such
voting rights does not require any prior expiration, termination, approval or
consent under the HSR Act or FPA). For purposes of determining the number of
votes to which a holder of Series B Preferred Stock is entitled for any vote
during the Reset Period or as to which the applicable record date was during the
Reset Period, the initial Conversion Price shall be deemed to be $8.00 (subject
to adjustment as provided in 5).

4.2 So long as any shares of Series B Preferred Stock remain outstanding, except
as otherwise provided by law, the Company may not take any of the following
actions without the prior vote or written consent of holders representing at
least a majority of the then outstanding shares of Series B Preferred Stock,
voting together as a separate class:

(a) any issuance of shares of Series B Preferred Stock or other shares of
Preferred Stock (excluding the issuance of Series A Preferred Stock of the
Company pursuant to the Company Rights Plan or any successor thereto);

(b) any amendment, repeal, alteration, addition, deletion or other change to the
powers, designations, preferences, rights, qualifications, limitations or
restrictions of the Series B Preferred Stock in any manner, including but not
limited to by way of merger, consolidation or otherwise (unless pursuant to or
in connection with, and in any such case effective only upon the consummation
of, a transaction that constitutes a Change of Control), and whether by Board
resolution, amendment to the Certificate of Incorporation or Bylaws or
otherwise;

(c) any authorization (and if authorized, any increase in the authorized
amount), creation or issuance (including by way of merger, consolidation,
reclassification or otherwise (unless pursuant to or in connection with, and in
any such case effective only upon the consummation of, a transaction that
constitutes a Change of Control) of any new class or series of capital stock
having rights, preferences or privileges senior to or on parity with the
Series B Preferred Stock;

(d) any amendment, repeal, alteration, addition, deletion or other change of any
provision of the Certificate of Incorporation or the Bylaws of the Company in
any manner (including by way of merger, consolidation or otherwise (unless
pursuant to or in connection with, and in any such case effective only upon the
consummation of, a transaction that constitutes a Change of Control)) that
adversely affects the powers, designations, preferences, rights, qualifications,
limitations or restrictions of the Series B Preferred Stock to the holders
thereof;

(e) any authorization or making of any repurchase or redemption of any shares of
Common Stock or any other engagement in any market making activities that could
impact the trading value of the Common Stock during the Reset Period;

(f) any liquidation or dissolution or the filing of a voluntary petition for
bankruptcy or the adoption of any plan for any of the foregoing;

(g) incurrence of any Debt (excluding (A) up to $750 million under the Facility
or a similar arrangement that replaces or refinances the Facility and (B) any
Debt the proceeds of which are used (I) to replace, refinance or defease any
existing Debt provided that the principal amount (or accreted value, if
applicable) of such newly incurred Debt does not exceed the principal amount (or
accreted value, if applicable) of the existing Debt so replaced, refinanced or
defeased (plus all accrued interest on such existing Debt and the amount of all
expenses, costs and fees and premiums incurred in connection therewith) or
(II) to redeem in full or in part the Series B Preferred Stock under the terms
set forth herein) that would cause on a pro forma basis the ratio of
(x) Consolidated Total Debt (including for such purposes the Series B Preferred
Stock) to (y) Consolidated EBITDA for the four fiscal quarters most recently
ended for which financial statements are available prior to such incurrence to
exceed 5.00 to 1.00; and

(h) entry into any contract, understanding or other arrangement to do any of the
foregoing, except if such contract, understanding or arrangement expressly
provides that the undertaking of any of the foregoing is subject to the prior
approval of the holders of Series B Preferred Stock.

4.3 Effective as of the consummation of the purchase of the Series B Preferred
Stock by the Original Holder on the Original Issuance Date, the number of
directors constituting the Board shall be automatically increased by one (1) and
the Original Holder shall have the right to designate one (1) individual (herein
referred to as the “Preferred Nominee”), and the Board shall appoint such
Preferred Nominee to such newly created directorship. The Preferred Nominee so
appointed shall serve until the next annual meeting of the stockholders of the
Company and until his or her successor is elected and qualifies, unless the
Preferred Nominee is earlier removed pursuant to 4.4 below. The Board shall
cause the Company to include the Preferred Nominee in the slate of nominees
recommended by the Board to the holders of Common Stock for election at the 2009
annual meeting of stockholders of the Company and, subject to 4.4, for
reelection at every meeting thereafter and shall use all commercially reasonable
efforts to cause the election of the Preferred Nominee, including soliciting
proxies in favor of his or her election. In the event the Preferred Nominee
resigns, is unable to serve as a member of the Board, is removed from the Board
or fails to be elected as a member of the Board at any annual stockholders
meeting, the Original Holder shall have the right to nominate another individual
(a “Substitute Nominee”) and the Board shall appoint such Substitute Nominee to
fill the vacancy created by the resignation or removal of the prior Preferred
Nominee, at which point such Substitute Nominee shall be deemed to be the
Preferred Nominee.

4.4 Notwithstanding the foregoing, at such time as the outstanding shares of
Series B Preferred Stock (or Common Stock issued on conversion of Series B
Preferred Stock or a combination thereof) beneficially owned by the Original
Holder and its Affiliates are less than 50% of the shares of Series B Preferred
Stock issued to the Original Holder or its Affiliates on the Original Issuance
Date (or Common Stock issuable upon conversion of such Series B Preferred Stock
(taking into account any adjustments under 5.4), as applicable), then,
automatically and immediately, without any further action on the part of the
Company or the Board, the Preferred Nominee shall be removed from the Board and
the number of directors constituting the Board shall be automatically decreased
by one, and thereafter, the Original Holder shall not be entitled to designate
the Preferred Nominee or any Substitute Nominee under this 4. The Company and
the Board shall take any and all actions within their respective power to ensure
compliance with the terms of this 4.4.

5. Conversion.

Each share of Series B Preferred Stock is convertible into shares of Common
Stock as provided in this 5.

5.1 Optional Conversion. Each holder of Series B Preferred Stock is entitled to
convert, at any time and from time to time (provided that no such holder shall
be permitted to convert except to the extent that any applicable waiting period
under the HSR Act and any applicable consents or approvals under the FPA
required in connection with such conversion shall have expired, terminated or
been obtained, as the case may be), at the option and election of such holder,
any or all outstanding shares of Series B Preferred Stock held by such holder
into a number of duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock equal to the amount determined by dividing (i) the sum of
the Original Purchase Price plus, subject to the last sentence of this 5.1, the
amount of all accrued, accumulated and unpaid Regular Dividends by (ii) the
Conversion Price in effect at the time of conversion. The “Conversion Price”
initially means the lesser of (x) $11.00 and (y) the greater of (A) the lowest
volume weighted average of the trading prices per share of Common Stock on the
NYSE during regular trading hours measured for any twenty (20) consecutive
trading day period over the six (6) month period beginning September 29, 2008
(the “Reset Period”) and (B) $8.00. The Conversion Price is subject to
adjustment from time to time as provided in this 5. At the time of any
conversion hereunder, the Company may elect to pay in cash the accrued and
accumulated Regular Dividends for the then-current quarter which would otherwise
be payable on the next Regular Dividend Payment Date to the holders of the
Series B Preferred Stock who elect to convert shares of Series B Preferred Stock
pursuant to this Section 5(a).

5.2 Fractional Shares. No fractional shares of Common Stock will be issued upon
conversion of the Series B Preferred Stock. In lieu of fractional shares, the
Company shall pay cash equal to such fractional amount multiplied by the Fair
Market Value as of the Conversion Date (as defined in 5.3). If more than one
share of Series B Preferred Stock is being converted at one time by the same
holder, then the number of full shares issuable upon conversion will be
calculated on the basis of the aggregate number of shares of Series B Preferred
Stock converted by such holder at such time.

5.3 Mechanics of Conversion.

(a) In order to convert shares of Series B Preferred Stock into shares of Common
Stock, the holder must surrender the certificates representing such shares of
Series B Preferred Stock, accompanied by transfer instruments reasonably
satisfactory to the Company, free of any adverse interest or liens at the office
of the Company’s transfer agent (or at the principal office of the Company, if
the Company serves as its own transfer agent), together with written notice that
such holder elects to convert all or such number of shares represented by such
certificates as specified therein. The date of receipt of such certificates,
together with such notice, by the transfer agent or the Company will be the date
of conversion (the “Conversion Date”). As soon as practicable after the
Conversion Date, but in no event more than two (2) trading days after the
Conversion Date, the Company shall promptly issue and deliver (or cause to be
delivered) to such holder a certificate (or evidence of book entry) for the
number of shares of Common Stock to which such holder is entitled, together with
a check or cash for payment of fractional shares, if any, in exchange for the
certificates formerly representing shares of Series B Preferred Stock. Such
conversion will be deemed to have been made on the Conversion Date, and the
Person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such Conversion Date. In case fewer than all the shares
represented by any such surrendered certificate(s) are to be converted, a new
certificate or certificates shall be issued representing the unconverted shares
of Series B Preferred Stock without cost to the holder thereof, except for any
documentary, stamp or similar issue or transfer tax due because any certificates
for shares of Common Stock or Series B Preferred Stock are issued in a name
other than the name of the converting holder. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of Common
Stock upon conversion or due upon the issuance of a new certificate for any
shares of Series B Preferred Stock not converted other than any such tax due
because shares of Common Stock or a certificate for shares of Series B Preferred
Stock are issued in a name other than the name of the registered holder.

(b) The Company shall at all times reserve and keep available, free from any
preemptive rights, out of its treasury or authorized but unissued shares of
Common Stock (or a combination of both) for the purpose of effecting the
conversion of the Series B Preferred Stock the highest number of shares of
Common Stock deliverable upon the conversion of all outstanding Series B
Preferred Stock (assuming for the purposes of this calculation that all
outstanding shares of Series B Preferred Stock are held by one holder), and the
Company shall take all actions to amend its Certificate of Incorporation to
increase the authorized amount of Common Stock if necessary therefor. Before
taking any action which would cause an adjustment reducing the Conversion Price
below the then par value of the shares of Common Stock issuable upon conversion
of the Series B Preferred Stock, the Company will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and non-assessable shares of Common
Stock at such adjusted Conversion Price.

(c) From and after the Conversion Date, Dividends on the Series B Preferred
Stock to be converted on such Conversion Date will cease to accrue; such shares
of Series B Preferred Stock will no longer be deemed to be outstanding; and all
rights of the holder thereof as a holder of Series B Preferred Stock in respect
of the             shares of Series B Preferred Stock to be converted (except
the right to receive from the Company the Common Stock upon conversion) shall
cease and terminate with respect to such shares; provided that, in the event
that a share of Series B Preferred Stock is not converted due to a default by
the Company or because the Company is otherwise unable to issue the requisite
shares of Common Stock, such share of Series B Preferred Stock will remain
outstanding and will be entitled to all of the rights thereof as provided
herein.

(d) In the event that a share of Series B Preferred Stock is converted into
Common Stock after the close of business on a record date for the Regular
Dividends, in lieu of payment of such dividend on the Regular Dividend Payment
Date related thereto, all or part of such dividend shall, at the option of the
Company and subject to the first sentence of 5.3(f) below, be payable in
share(s) of Common Stock equal to the amount of such dividend (or the amount of
the portion thereof to be so paid in shares of Common Stock, if applicable)
divided by the Conversion Price pursuant to this 5.

(e) If the conversion is in connection with any sale, transfer or other
disposition of shares of Series B Preferred Stock, the conversion may, at the
option of any holder tendering any share of Series B Preferred Stock for
conversion, be conditioned upon the closing of the sale, transfer or the
disposition of shares of Series B Preferred Stock with the underwriter,
transferee or other acquirer in such sale, transfer or disposition, in which
event such conversion of such shares of Series B Preferred Stock shall not be
deemed to have occurred until immediately prior to the closing of such sale,
transfer or other disposition.

(f) The Company shall comply with all federal and state laws, rules and
regulations and applicable rules and regulations of the NYSE. If any shares of
Common Stock to be reserved for the purpose of conversion of shares of Series B
Preferred Stock require registration with or approval of any Person or Group
under any federal or state law or the rules and regulations of the NYSE before
such shares may be validly issued or delivered upon conversion, then the Company
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be. So long as any Common Stock into
which the shares of Series B Preferred Stock are then convertible is then listed
on the NYSE, the Company will list and keep listed on the NYSE, upon official
notice of issuance, all             shares of such Common Stock issuable upon
conversion.

(g) All shares of Common Stock which may be issued upon conversion of the
            shares of Series B Preferred Stock will, upon issuance by the
Company, be duly and validly issued, fully paid and non-assessable, not issued
in violation of any preemptive rights arising under law or contract and free
from all liens and charges with respect to the issuance thereof, and the Company
shall take no action which will cause a contrary result.

5.4 Adjustments to Conversion Price.

(a) Special Definitions. For purposes of this 5, the following definitions
apply:

(i) “Options” means any rights, options, warrants or similar securities to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.

(ii) “Convertible Securities” means any debt or other evidences of indebtedness,
capital stock or other securities directly or indirectly convertible into or
exercisable or exchangeable for Common Stock.

(iii) “Additional Shares of Common Stock” means any shares of Common Stock
issued (whether from the Company’s treasury or authorized and unissued shares of
capital stock) or, as provided in clause (ii) below, deemed to be issued by the
Company after the Original Issuance Date; provided that, notwithstanding
anything to the contrary contained herein, Additional Shares of Common Stock
will not include any of the following:

      (i)             shares of Common Stock issued or issuable as a Dividend or
other distribution on shares of Series B Preferred Stock or Common Stock;

      (ii)             shares of Common Stock issued or issuable upon conversion
of shares of Series B Preferred Stock and any other Convertible Security issued
and outstanding on the Original Issuance Date;

      (iii)             shares of Common Stock issued or issuable prior to the
Original Issuance Date or subsequently issued, in either case, to employees,
officers or directors of the Company or its Subsidiaries pursuant to the
Company’s benefit plans or arrangements approved by the Board;

      (iv)             shares of Common Stock issued in connection with a public
offering;

      (v)             shares of Common Stock issued in connection with the
acquisition of any business, products, technologies or other assets from any
Persons pursuant to any transaction approved by the Board; and

      (vi)             shares of Common Stock issued or issuable pursuant to any
shareholder rights plan adopted or modified by the Board; provided that any
Common Stock issuable upon conversion of the Series B Preferred Stock would be
entitled to such rights.

(iv) “Measurement Date” means (i) with respect to a dividend, distribution or
issuance to the Company’s stockholders, the record date for determining the
stockholders entitled to receive such dividend, distribution or issuance, and
(ii) with respect to a transaction not contemplated by clause (i), the public
announcement of such transaction (or, if no such public announcement is made,
the date of issuance).

(b) Deemed Issuances of Additional Shares of Common Stock. The maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise, conversion or exchange of Options or
Convertible Securities will be deemed to be Additional Shares of Common Stock
issued as of the time of the issuance of such Options or Convertible Securities;
provided, however, that:

(i) No adjustment in the Conversion Price will be made upon the subsequent
issuance of shares of Common Stock upon the exercise, conversion or exchange of
such Options or Convertible Securities;

(ii) To the extent that Additional Shares of Common Stock are not issued
pursuant to any such Option or Convertible Security upon the expiration or
termination of an unissued, unexercised, unconverted or unexchanged Option or
Convertible Security, the Conversion Price will be readjusted to the Conversion
Price that would have been in effect had such Option or Convertible Security (to
the extent outstanding immediately prior to such expiration or termination)
never been issued; and

(iii) In the event of any change in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any Option or Convertible
Security, excluding a change resulting from the anti-dilution provisions
thereof, but including a repricing of the exercise or conversion price thereof,
the Conversion Price then in effect will be readjusted to the Conversion Price
that would have been in effect as if, on the date of issuance, such Option or
Convertible Security were exercisable, convertible or exchangeable for such
changed number of shares of Common Stock.

(c) Determination of Consideration. The Fair Market Value of the consideration
received by the Company for the issue of any Additional Shares of Common Stock
will be computed as follows:

(i) Cash and Property. Aggregate consideration consisting of cash and other
property will:

      (i) insofar as it consists of cash, be computed at the aggregate of cash
received by the Company, excluding amounts paid or payable for accrued interest
or accrued dividends;

      (ii) insofar as it consists of property other than cash, be computed at
the Fair Market Value thereof on the Measurement Date; and

      (iii) insofar as it consists of both cash and other property, be the
proportion of such consideration so received, computed as provided in clauses
(1) and (2) above, as determined in good faith by the Board.

(ii) Options and Convertible Securities. The aggregate consideration per share
received by the Company for Options and Convertible Securities will be
determined by dividing:

      (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Company upon
the full and complete exercise, conversion or exchange of such Options or
Convertible Securities, by

      (ii) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the full and complete
exercise, conversion or exchange of such Options or Convertible Securities.

(d) Stock Splits and Combinations. If the outstanding shares of Common Stock are
split into a greater number of shares, the Conversion Price then in effect
immediately before such split will be proportionately decreased. If the
outstanding             shares of Common Stock are combined into a smaller
number of shares, the Conversion Price then in effect immediately before such
combination will be proportionately increased. These adjustments will be
effective at the close of business on the date the split or combination becomes
effective.

(e) Issuances of Additional Shares of Common Stock. If the Company issues or is
deemed to issue Additional Shares of Common Stock to any Person or Group without
consideration or for a consideration per share less than the Fair Market Value
per share of Common Stock immediately prior to the Measurement Date, then the
Conversion Price will be reduced, effective at the close of business on the date
of issuance, to a price determined by multiplying such Conversion Price by a
fraction:

(i) the numerator of which will be the sum of (x) the number of
            shares of Common Stock outstanding, on a fully diluted basis,
immediately prior to the Measurement Date, plus (y) the number of
            shares of Common Stock which the aggregate consideration received by
the Company for the total number of Additional Shares of Common Stock so issued
would purchase at the Fair Market Value per share of Common Stock immediately
prior to the Measurement Date, and

(ii) the denominator of which will be the sum of (x) the number of
            shares of Common Stock that are outstanding, on a fully diluted
basis, immediately prior to the Measurement Date, plus (y) the number of such
Additional Shares of Common Stock issuable or so issued;

provided, however, that if, at the time of any conversion, the Conversion Price
then in effect would result in the issuance of a number of shares of Common
Stock representing more than 19.9% of the shares of Common Stock outstanding as
of the Original Issuance Date, then, for purposes of such conversion, the
Conversion Price shall be that amount that would result in the issuance of an
aggregate number of shares of Common Stock equal to 19.9% of the
            shares of Common Stock outstanding as of the date hereof, and in
lieu of any further adjustment to the Conversion Price that otherwise would be
applicable but for this proviso, the Company shall pay to such converting holder
(not later than 15 Business Days after the Conversion Date) an amount per share
of Series B Preferred Stock equal to the difference between (a) the Fair Market
Value of the             shares of Common Stock (including fractional shares)
into which such share of Series B Preferred Stock would have otherwise converted
as of the Conversion Date if the foregoing proviso had not otherwise restricted
the reduction of the Conversion Price and (b) the Fair Market Value of the
shares of Common Stock (including fractional             shares) into which such
share of Series B Preferred Stock are converted on of the Conversion Date after
given effect to this proviso. For purposes of the foregoing, the “Fair Market
Value” of a share of Common Stock shall be deemed to be the average of the daily
closing prices for the ten (10) consecutive trading days immediately following
the Conversion Date.

(f) Minimum Adjustment. Notwithstanding the foregoing, the Conversion Price will
not be reduced if the amount of such reduction would be an amount less than
$0.01, but any such amount will be carried forward and reduction with respect
thereto will made at the time that such amount, together with any subsequent
amounts so carried forward, aggregates to $0.01 or more.

(g) Rules of Calculation; Treasury Stock. All calculations will be made to the
nearest one-hundredth of a cent or to the nearest one-ten thousandth of a share,
as the case may be. The number of shares of Common Stock outstanding will be
calculated on the basis of the number of issued and outstanding shares of Common
Stock on the Measurement Date, not including shares held in the treasury of the
Company. The Company shall not pay any dividend on or make any distribution to
            shares of Common Stock held in treasury.

(h) Waiver. Notwithstanding the foregoing, the Conversion Price will not be
reduced if the Company receives, within ten (10) days following the Measurement
Date, written notice from the holders representing at least a majority of the
then outstanding shares of Series B Preferred Stock, voting together as a
separate class, that no adjustment is to be made as the result of a particular
issuance of Additional Shares of Common Stock. This waiver will be limited in
scope and will not be valid for any issuance of Additional Shares of Common
Stock not specifically provided for in such notice.

(i) Tax Adjustment. Anything in this 5 notwithstanding, the Company may, but
shall not be required to, make such downward adjustments to the Conversion
Price, in addition to those required by this 5, to the extent that the Company,
in its sole discretion, determines that such adjustments may prevent any event
from being treated for U.S. federal income tax purposes as a taxable
distribution to the holders of Common Stock.

(j) Par Value. Anything in this 5 notwithstanding, no adjustment to the
Conversion Price shall reduce the Conversion Price below the then par value per
share of Common Stock, and any such purported adjustment shall instead reduce
the Conversion Price to such par value.

(k) No Duplication. If any action would require adjustment of the Conversion
Price pursuant to more than one of the provisions described in this 5 in a
manner such that such adjustments are duplicative, only one adjustment shall be
made.

5.5 Effect of Reclassification, Divestiture, Merger or Sale. If any of the
following events occur, namely (x) any reclassification of the outstanding
shares of Common Stock (other than a stock split or combination to which 5.4
applies), (y) any merger, consolidation or other combination of the Company with
another Person as a result of which holders of Common Stock become entitled to
receive capital stock, other securities or other property (including but not
limited to cash and evidences of indebtedness) with respect to or in exchange
for such Common Stock, or (z) any sale, conveyance or other transfer of all or
substantially all of the assets of the Company to any other Person as a result
of which all holders of Common Stock become entitled to receive capital stock,
other securities or other property (including but not limited to cash and
evidences of indebtedness) with respect to or in exchange for such Common Stock,
in each case other than in connection with (i) a voluntary or involuntary
liquidation, dissolution or winding up as to which 3 applies or (ii) a Change in
Control requiring the Company to make (and consummate without withdrawal) a
Change in Control Offer under 7, then appropriate provision will be made in any
such transaction so that the shares of Series B Preferred Stock will be
convertible into the kind and amount of shares of capital stock, other
securities or other property (including but not limited to cash and evidences of
indebtedness) receivable upon such reclassification, merger, consolidation,
combination, sale, conveyance or transfer by a holder of a number of shares of
Common Stock issuable upon conversion of such shares of Series B Preferred Stock
(assuming, for such purposes, a sufficient number of authorized shares of Common
Stock available to convert all such Series B Preferred Stock) immediately prior
to such reclassification, merger, consolidation, combination, sale, conveyance
or transfer; provided that:

(a) if the holders of Common Stock were entitled to exercise a right of election
as to the kind or amount of capital stock, other securities or other property
(including but not limited to cash and evidences of indebtedness) receivable
upon such reclassification, merger, consolidation, combination, sale, conveyance
or transfer, then appropriate provision will be made in any such transaction so
that the holders of Series B Preferred Stock shall be entitled to exercise an
equivalent right of election as to the kind and amount of capital stock, other
securities or other property (including but not limited to cash and evidences of
indebtedness) receivable in respect of each share of Common Stock which would
have otherwise been issuable upon conversion of the Series B Preferred Stock
upon such reclassification, merger, consolidation, combination, sale, conveyance
or transfer (which shall be deemed to be the kind and amount so receivable per
share by a plurality of the holders of Common Stock in the event such holder of
Series B Preferred Stock shall fail to make a timely election); or

(b) if a tender offer (which includes any exchange offer) is made to and
accepted by the holders of Common Stock under circumstances in which, upon
completion of such tender offer, the maker thereof, together with members of any
Group of which such maker is a part, and together with any Affiliate or
Associate of such maker and any members of any such Group of which any such
Affiliate or Associate is a part, own beneficially more than 50% of the
outstanding shares of Common Stock, appropriate provision will be made in any
such transaction so that each holder of Series B Preferred Stock will thereafter
be entitled to receive, upon conversion of such shares, the kind and amount of
capital stock, other securities or other property (including but not limited to
cash and evidences of indebtedness) to which such holder would actually have
been entitled as a holder of Common Stock if such holder had converted such
holder’s Series B Preferred Stock immediately prior to the expiration of such
tender offer, accepted such tender offer and all of the Common Stock held by
such holder had been purchased pursuant to such tender offer, subject to
adjustments (from and after the consummation of such tender offer) as nearly
equivalent as possible to the adjustments provided for in 5.4.

This 5.5will similarly apply to successive reclassifications, changes, mergers,
consolidations, combinations, sales, conveyances and transfers. If 5.5applies to
any event or occurrence, 5.4 will not apply to such event or occurrence.

5.6 Notice of Record Date. In the event of:

(a) any stock split or combination of the outstanding shares of Common Stock;

(b) any declaration or making of a dividend or other distribution to holders of
Common Stock in Additional Shares of Common Stock, any other capital stock,
other securities or other property (including but not limited to cash and
evidences of indebtedness);

(c) any reclassification, merger, consolidation, combination, sale, conveyance
or transfer to which 5.5 applies;

(d) the dissolution, liquidation or winding up of the Company; or

(e) any other event constituting a Change in Control;

then the Company shall file with its corporate records and mail (or cause to be
mailed) to the holders of the Series B Preferred Stock at their last addresses
as shown on the records of the Company, at least ten (10) days prior to the
record date specified in (A) below, at least twenty (20) days prior to the date
specified in (B) below, or as soon as practicable after the date specified in
(C) below, a notice stating:

(i) the record date of such stock split, combination, dividend or other
distribution, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such stock split,
combination, dividend or other distribution are to be determined,

(ii) the date on which such reclassification, merger, consolidation,
combination, sale, conveyance, transfer, liquidation, dissolution, winding up or
other Change in Control described in (i) or (iv) of such definition, is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record will be entitled to exchange their shares of Common Stock
for the capital stock, other securities or other property (including but not
limited to cash and evidences of indebtedness) deliverable upon such
reclassification, merger, consolidation, combination, sale, conveyance,
transfer, liquidation, dissolution, winding up or other Change in Control, or

(iii) with respect to a Change in Control described in clause (ii) or (iii) of
such definition, the date on which the Company has knowledge that the Change in
Control has occurred.

5.7 Certificate of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this 5, the Company at its
expense shall promptly as reasonably practicable compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series B Preferred Stock a certificate, signed by an officer of the Company,
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based and shall file a copy of
such certificate with its corporate records. The Company shall, upon the
reasonable written request of any holder of Series B Preferred Stock, furnish to
such holder a similar certificate setting forth (i) the calculation of such
adjustments and readjustments in reasonable detail, (ii) the Conversion Price
then in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of capital stock, other securities or other property (including but not
limited to cash and evidences of indebtedness) which then would be received upon
the conversion of Series B Preferred Stock.

6. Redemption.

      Each share of Series B Preferred Stock is redeemable as provided in this
6.

6.1
  Redemption at Option of the Company.
 
   

(a) On and after the third anniversary of the Original Issuance Date (the “Third
Anniversary”), the Company, at its option and election, may redeem all, but not
less than all, of the outstanding shares of Series B Preferred Stock for cash
consideration equal to the Original Purchase Price per each share of Series B
Preferred Stock plus all accrued, accumulated and unpaid Dividends, provided
that if the redemption is consummated on or prior to the fifth anniversary of
the Original Date of Issuance (the “Fifth Anniversary”), in addition to the
amount set forth above, such cash consideration will include a “make-whole”
premium calculated to provide the present value as of the date such
            shares are being redeemed (the “Redemption Date”) of the remaining
Regular Dividends that would otherwise have accrued through the Fifth
Anniversary (with the “make-whole” amount calculated using a discount rate equal
to the Treasury Rate as of a date three (3) Business Days prior to the
Redemption Date plus fifty (50) basis points (the “Discount Rate”)) (such
amount, “Company’s Redemption Price”); provided, further, that prior to any such
redemption by the Company, following receipt of the notice of redemption
pursuant to 6.1(b), a holder of Series B Preferred Stock shall have the option
to elect a conversion pursuant to 5.1.

(b) The Board shall fix a record date for the determination of the shares of
Series B Preferred Stock to be redeemed pursuant to 6.1(a) above, and the
Company shall deliver or cause to be delivered a notice of redemption not less
than twenty (20) nor more than sixty (60) days prior to the Redemption Date,
addressed to the holders of record of the Series B Preferred Stock as they
appear in the records of the Company. Each such notice must state the following:
(A) the record date and Redemption Date; (B) the Company’s Redemption Price as
of the scheduled Redemption Date (it being understood that the actual Company’s
Redemption Price will be determined as of the actual Redemption Date); (C) in
the event there are multiple holders of Series B Preferred Stock to be redeemed,
the name of the redemption agent to whom, and the address of the place to where,
the shares of Series B Preferred Stock are to be surrendered for payment of the
Company’s Redemption Price; and (D) that dividends on the shares of Series B
Preferred Stock to be redeemed will cease to accrue on such Redemption Date.

6.2 Redemption at the Option of the Holder.

(a) On and after the seventh anniversary of the Original Issuance Date (the
“Seventh Anniversary”), each holder of Series B Preferred Stock (each a
“Holder”), at such Holder’s option and election, shall have the right to require
the Company to redeem any or all of the outstanding shares of Series B Preferred
Stock held of record by such Holder for a per share cash consideration equal to
the Original Purchase Price, plus accrued, accumulated and unpaid Dividends (the
“Holder’s Redemption Price”), and the Redemption Date shall be specified in such
Holder’s Redemption Notice (as defined below), which date shall not be fewer
than forty-five (45) nor later than ninety (90) days following delivery of such
Holder’s Redemption Notice.

(b) In the event a Holder of Series B Preferred Stock shall elect to effect a
redemption pursuant to 6.2(a) above, the Holder shall mail a written notice of
such redemption to the Company in the form of Exhibit A (a “Holder’s Redemption
Notice”), not less than forty-five (45) days nor more than ninety (90) days
prior to the Redemption Date. Upon receipt by the Company of the Holder’s
Redemption Notice, the Holder of the shares of Series B Preferred Stock in
respect of which such Holder’s Redemption Notice was given shall (unless such
Holder’s Redemption Notice is withdrawn as specified below) thereafter be
entitled to receive the Holder’s Redemption Price with respect to such shares of
Series B Preferred Stock, subject to this 6. Notwithstanding anything herein to
the contrary, any Holder’s Redemption Notice delivered to the Company hereunder
shall be irrevocable unless the Company consents in writing to the revocation
thereof. The Company will promptly return to the respective Holders thereof all
certificates (if any) representing any shares of Series B Preferred Stock with
respect to which a Holder’s Redemption Notice has been revoked in compliance
with this 6.2, in which case, upon such return, the Holder’s Redemption Notice
with respect thereto shall be deemed to have been withdrawn.

6.3 Mechanics of Redemption.

(a) In the event there are multiple holders of Series B Preferred Stock due
payment on a Redemption Date, the Company shall deposit with a redemption agent
in trust, prior to such Redemption Date, funds consisting of cash or cash
equivalents sufficient to pay the Company’s Redemption Price or Holder’s
Redemption Price, as the case may be, on the Redemption Date. The redemption
agent must be a bank or trust company in good standing, organized under the laws
of the United States of America or any jurisdiction thereof, having capital and
surplus of at least $5 billion. The deposit in trust with the redemption agent
shall be irrevocable, except that the Company shall be entitled to receive from
the redemption agent (i) cash amounts representing Company Redemption Prices or
Holder’s Redemption Prices, as the case may be, with respect to shares of
Series B Preferred Stock that are no longer to be redeemed, whether by
conversion or otherwise; and (ii) the interest or other earnings, if any, earned
on any such deposit. The holders of the shares of Series B Preferred Stock
redeemed shall have no claim to such interest or other earnings, and any funds
so deposited with the redemption agent and unclaimed by the holders of the
Series B Preferred Stock entitled thereto at the expiration of six (6) months
after the Redemption Date shall be repaid, together with any interest or other
earnings thereon, to the Company, and after any such repayment, the holders of
the shares entitled to the funds so returned to the Company shall look only to
the Company for such payment, without interest. Notwithstanding the deposit of
such funds, the Company shall remain liable for the payment of the Company
Redemption Price or the Holder’s Redemption Price, as the case may be, to the
extent such price is not paid as provided herein.

(b) The Company shall pay (or cause to be paid) the applicable redemption price
(together with any taxes required to be paid by the Company pursuant to 6.3(c)
below) on the Redemption Date upon surrender of the certificates representing
the             shares of Series B Preferred Stock to be redeemed (properly
endorsed or assigned for transfer, if the Company shall so require and letters
of transmittal and instructions therefor on reasonable terms are included in the
notice sent by the Company); provided that if such certificates are lost, stolen
or destroyed, the Company may require such holder to indemnify the Company, in a
reasonable amount and in a reasonable manner, prior to paying such redemption
price.

(c) In case fewer than all the shares of Series B Preferred Stock represented by
any such certificate are to be redeemed in connection with a redemption pursuant
to 6.2, a new certificate shall be issued representing the unredeemed shares of
Series B Preferred Stock without cost to the holder thereof, except for any
documentary, stamp or similar issue or transfer tax due because any certificate
for             shares Series B Preferred Stock are issued in a name other than
the name of the registered holder. The Company shall pay any documentary, stamp
or similar issue or transfer tax due upon the issuance of a new certificate for
any shares of Series B Preferred Stock not redeemed other than any such tax due
because a certificate for             shares Series B Preferred Stock is issued
in a name other than the name of the registered holder.

(d) From and after the Redemption Date, Dividends on the Series B Preferred
Stock to be redeemed on such Redemption Date will cease to accrue; such shares
of Series B Preferred Stock will no longer be deemed to be outstanding; and all
powers, designations, preferences and other rights of the holder thereof as a
holder of Series B Preferred Stock (except the right to receive from the Company
the applicable redemption price) shall cease and terminate with respect to such
shares; provided that in the event that a share of Series B Preferred Stock is
not redeemed due to a default in payment by the Company or because the Company
is otherwise unable to pay the Holder’s Redemption Price in cash in full, such
share of Series B Preferred Stock will remain outstanding and will be entitled
to all of the powers, designations, preferences and other rights (including but
not limited to the accrual and payment of Dividends and the conversion rights)
as provided herein.

(e) Notwithstanding anything in this 6 to the contrary, each holder shall retain
the right to convert shares of Series B Preferred Stock to be redeemed at any
time on or prior to the Redemption Date.

7. Change in Control.

7.1 Offer to Repurchase.

(a) In the event of a Change in Control, the Company shall make an offer to each
holder of Series B Preferred Stock to repurchase, at the option and election of
the holder thereof, each share of Series B Preferred Stock then outstanding (the
“Change in Control Offer”) at a purchase price per share in cash, calculated as
of the Repurchase Date, equal to the Original Purchase Price plus all accrued,
accumulated and unpaid Dividends thereon plus, in the event of a Change in
Control prior to the Fifth Anniversary, a “make-whole” premium calculated to
provide thereon the present value of the remaining Regular Dividends through the
Fifth Anniversary (with the “make-whole” amount calculated using the discount
rate equal to the Treasury Rate as of the date of such Change in Control plus
fifty (50) basis points (such greater amount, the “Repurchase Price”). For
purposes of calculating the then-applicable Conversion Price immediately prior
to a Change in Control during the Reset Period, the initial Conversion Price
shall be deemed to be $8.00 (subject to adjustment as provided in 5).

(b) The “Repurchase Date” shall be the date on which the Change in Control is
consummated (the “Change in Control Closing Date”), unless Section 7(a)(iv)
applies to any repurchase, in which case the Repurchase Date shall be the first
Business Day after which the offers referred to in Section 7(a)(iv) have been
completed. The Board shall fix a record date for the determination of the
            shares of Series B Preferred Stock subject to the Change in Control
Offer. As soon as practicable after the announcement of such transaction or
execution of such agreement providing for such Change in Control, the Company
shall commence the Change in Control Offer by delivering a notice (the “Change
in Control Notice”), not less than thirty (30) days prior to the Repurchase
Date, addressed to the holders of record of the Series B Preferred Stock as they
appear in the records of the Company. Each Change in Control Notice must state
that: (A) the Change in Control Offer may be accepted by delivery of a written
irrevocable notice from the holder specifying the number of shares of Series B
Preferred Stock to be repurchased; (B) to be effective, acceptance of the Change
in Control Offer must be received by the Company by a specified date (which
shall be no less than thirty (30) days following the date of such Change in
Control Notice and no more than thirty (30) days prior to the estimated
Repurchase Date) (C) the Repurchase Price as of the scheduled Repurchase Date
(it being understood that the actual Repurchase Price will be determined as of
the actual Repurchase Date); (D) the name of the paying agent to whom, and the
address of the place to where, the Series B Preferred Stock are to be
surrendered for payment of the Repurchase Price; (E) if tendered for payment,
dividends on the shares to be repurchased will cease to accrue on the Repurchase
Date; (F) any shares of Series B Preferred Stock not tendered for payment shall
be converted in accordance with 7.1(e); (G) the consummation of the Change in
Control Offer and the payment of the Repurchase Price shall be subject to the
consummation of the Change in Control; (H) the closing of any redemption in
respect of a Change in Control will not occur until after completion of any
required Change of Control offers to holders of any Debt or the repayment or
redemption of any Debt required to be redeemed or repaid in connection with the
Change in Control; and (I) the circumstances and material facts regarding such
Change in Control. If the Change in Control is not consummated, the Change in
Control Offer shall be automatically withdrawn.

(c) Notwithstanding this 7, the Change in Control Offer shall be subject to, and
be made in compliance with, Regulation 14E under the Exchange Act and any other
federal and state securities laws, as applicable, including any applicable time
periods. The Company shall notify the holders of the results of the Change in
Control Offer on or as soon as practicable after the Repurchase Date.

(d) Notwithstanding this 7, to the extent necessary to comply with the Company’s
indentures, credit agreements, note purchase agreements, or other agreements
evidencing Debt, the closing of any redemption in respect of a Change in Control
will not occur until after completion of any required change of control offers
to holders of any such indebtedness or the repayment or redemption of any Debt
required to be redeemed or repaid in connection with the Change in Control.

(e) Notwithstanding anything herein to the contrary, if any holder of Series B
Preferred Stock does not accept a Change in Control Offer with respect to all
shares of Series B Preferred Stock held by such holder, or if having accepted a
Change in Control Offer a holder fails to comply with the terms and provisions
set forth in this 7 or in the Change of Control Notice, then upon the Repurchase
Date the shares of Series B Preferred Stock held by such holder with respect to
which such Change in Control Offer was not accepted or such terms and provisions
were not complied with, as applicable (the “Withheld Shares”) shall,
automatically and without any action on the part of such holder, be converted
into the kind and amount of shares of capital stock, other securities or other
property (including but not limited to cash and evidences of indebtedness)
receivable upon such Change in Control by a holder of a number of shares of
Common Stock issuable upon conversion of such shares of Series B Preferred Stock
(assuming, for such purposes, a sufficient number of authorized shares of Common
Stock available to convert all such Series B Preferred Stock) immediately prior
to such Change in Control; provided that: (x) if the holders of Common Stock
were entitled to exercise a right of election as to the kind or amount of
capital stock, other securities or other property (including but not limited to
cash and evidences of indebtedness) receivable upon such Change in Control, then
such shares of Series B Preferred Stock shall be converted into the kind and
amount so receivable per share by a plurality of the holders of Common Stock;
and (y) if such Change in Control is effected pursuant to a tender offer (which
includes any exchange offer) such shares of Series B Preferred Stock will be
converted into the kind and amount of capital stock, other securities or other
property (including but not limited to cash and evidences of indebtedness) to
which such holder would actually have been entitled as a holder of Common Stock
if such holder had converted such holder’s Series B Preferred Stock immediately
prior to the expiration of such tender offer, accepted such tender offer and all
of the Common Stock held by such holder had been purchased pursuant to such
tender offer; provided further that this Section 7(a)(v) shall not apply to any
Change of Control described in clause (vi) of the definition of “Change of
Control.”

7.2 Mechanics of Repurchase.

(a) Unless waived by the holders representing a majority of the outstanding
            shares of Series B Preferred Stock, the Company shall deposit with a
paying agent in trust no later than the date of the consummation of the Change
in Control, funds consisting of cash or cash equivalents sufficient to pay the
Repurchase Price in cash on the Repurchase Date. The paying agent must be a bank
or trust company in good standing, organized under the laws of the United States
of America or any jurisdiction thereof, having capital and surplus of at least
$5 billion. The deposit in trust with the paying agent shall be irrevocable,
except that the Company shall be entitled to receive from the paying agent
(A) cash amounts representing Repurchase Prices with respect to shares of
Series B Preferred Stock that are no longer to be repurchased and (B) the
interest or other earnings, if any, earned on any such deposit. The holders of
the shares of Series B Preferred Stock repurchased shall have no claim to such
interest or other earnings, and any funds so deposited with the paying agent and
unclaimed by the holders of the Series B Preferred Stock entitled thereto at the
expiration of six (6) months from the Repurchase Date shall be repaid, together
with any interest or other earnings thereon, to the Company, and after any such
repayment, the holders of the shares entitled to the funds so returned to the
Company shall look only to the Company for such payment, without interest.
Notwithstanding the deposit of such funds, the Company shall remain liable for
the payment of the Repurchase Price to the extent such Repurchase Price is not
paid as provided herein.

(b) The paying agent on behalf of the Company shall pay (or shall cause to be
paid) the Repurchase Price (together with any taxes required to be paid by the
Company pursuant to 7.2(c) below) on the Repurchase Date upon surrender of the
certificates representing the shares of Series B Preferred Stock to be
repurchased (properly endorsed or assigned for transfer, if the Company shall so
require and letters of transmittal and instructions therefor on reasonable terms
are included in the notice sent by the Company); provided that if such
certificates are lost, stolen or destroyed, the Company may require such holder
to indemnify the Company, in a reasonable amount and in a reasonable manner,
prior to paying such Repurchase Price.

(c) In case fewer than all the shares represented by any such certificate are to
be repurchased, a new certificate shall be issued representing the unrepurchased
            shares without cost to the holder thereof, except for any
documentary, stamp or similar issue or transfer tax due because any certificate
for shares Series B Preferred Stock are issued in a name other than the name of
the registered holder. The Company shall pay any documentary, stamp or similar
issue or transfer tax due upon the issuance of a new certificate for any shares
of Series B Preferred Stock not repurchased other than any such tax due because
a certificate for shares Series B Preferred Stock is issued in a name other than
the name of the registered holder.

(d) From and after the Change of Control Closing Date, Dividends on the Series B
Preferred Stock to be repurchased on the Repurchase Date will cease to accrue;
such shares of Series B Preferred Stock will no longer be deemed to be
outstanding; and all powers, designations, preferences and other rights of the
holder thereof as a holder of Series B Preferred Stock (except the right to
receive from the Company the Repurchase Price) shall cease and terminate with
respect to such shares[; provided, however, that in the event that the
Repurchase Price with respect to any share of Series B Preferred Stock is not
paid on the Repurchase Date, the right to receive such payment shall
automatically be converted into a number of new shares of Series B Preferred
Stock of the Company (or the surviving entity, as applicable) equal to the
amount of such payment divided by $1,000 (the “New Preferred Shares”). The terms
of such New Preferred Shares shall be identical to the terms of the Series B
Preferred Stock including with respect to the powers, designations, preferences
and other rights (including but not limited o the accrual and payment of
Dividends and the conversion rights) of the shares of Series B Preferred Stock;
provided that there shall be no right to a “make-whole” premium upon any
redemption of or change in control offer with respect to such New Preferred
Shares. The Company (or the surviving entity, as applicable) shall take all
action necessary to authorize and issue the New Preferred Shares.] [to be
finalized prior to Closing].

(e) Notwithstanding anything in this 7 to the contrary, each holder shall retain
the right to convert shares of Series B Preferred Stock to be repurchased
(pursuant the terms of 5) at any time on or prior to the Repurchase Date.

(f) The Company shall not be required to make a Change in Control Offer if an
Affiliate in control of the Company makes the Change in Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this 7 and purchases all shares of Series B Preferred Stock validly tendered
under such Change in Control Offer.

(g) The Company shall not be entitled to consummate any Change in Control unless
it complies, in all material respects, with the provisions of this 7 and makes
any required payments of the Repurchase Price pursuant to the terms of this 7.

8. Additional Definitions. For purposes of these resolutions, the following
terms shall have the following meanings (All accounting terms not specifically
or completely defined herein shall be construed in conformity with GAAP applied
on a consistent basis, except as otherwise specifically prescribed herein):

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

8.2 “Acquisition” means any transaction or any series of related transactions by
which a Person (1) acquires any going business (including a power generation
facility) or all or substantially all of the assets of any other Person, or
division thereof, whether through purchase of assets, merger, or otherwise or
(2) directly or indirectly acquires greater than 50% of the Voting Stock of any
other Person.

8.3 “Applicable Rate” means 14%; provided that the Applicable Rate shall mean
16% if the Company shall fail to make cash payment in full of Regular Dividends
on two or more consecutive Regular Dividend Payment Dates (and shall remain 16%
until all Regular Dividends in arrears are paid) unless (i) such failure to make
payment is the result of any restrictive covenant contained in any Debt contract
in effect on October 10, 2008 or any successor or replacement contract pursuant
to a refinancing of such Debt (provided that the restrictive covenant resulting
in the failure to pay Regular Dividends in such successor or replacement
contract is not more restrictive with respect to the payment of Regular
Dividends to the Company than the corresponding restrictive covenant in effect
on October 10, 2008) or (ii) the payment of such Regular Dividends is prohibited
by applicable Law.

8.4 “Asset Sale” means:

(a) the sale, lease (other than an operating lease), conveyance or other
disposition of any assets; and

(b) the issuance of Equity Interests in any of the Company’s Subsidiaries.

Notwithstanding the foregoing, none of the following items will be deemed to be
an Asset Sale:

(1) any single transaction or series of related transactions that involves
assets with gross cash proceeds of $10,000,000 or less;

(2) a transfer of assets between or among the Company and its Subsidiaries;

(3) an issuance of Equity Interests by a Subsidiary to the Company or to another
Subsidiary of the Company;

(4) the sale or lease of products, services or accounts receivable in the
ordinary course of business and any sale or other disposition of damaged, worn
out or obsolete assets or assets no longer used or useful in the Company’s or
any of its Subsidiaries’ business;

(5) the sale or other disposition of cash or cash equivalents;

(6) sales of accounts receivable, equipment and related assets (including
contract rights) in connection with a securitization program;

(7) the payment of any dividend or repurchase of any capital stock;

(8) a disposition resulting from any condemnation;

(9) a disposition of assets in connection with a foreclosure, transfer or deed
in lieu of foreclosure or other exercise of remedial action; and

(10) the sale or disposition of (a) fuel or (b) emission credits, in each case
in the ordinary course of business.

8.5 “Associate” has the meaning assigned to such term in Rule 12b-2 under the
Exchange Act.

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

8.7 “beneficial owner” or “beneficially own” has the meaning given such term in
Rule 13d-3 under the Exchange Act, and a Person’s beneficial ownership of
securities will be calculated in accordance with the provisions of such Rule;
provided, however, that a Person will be deemed to be the beneficial owner of
any security which may be acquired by such Person whether within sixty (60) days
or thereafter, upon the conversion, exchange or exercise of any rights, options,
warrants or similar securities to subscribe for, purchase or otherwise acquire
(x) capital stock of any Person or (y) debt or other evidences of indebtedness,
capital stock or other securities directly or indirectly convertible into or
exercisable or exchangeable for such capital stock of such Person.

8.8 “Business Day” means a day other than a Saturday, Sunday, federal or State
of New York or State of Texas holiday or other day on which commercial banks in
New York City or Houston are authorized or required by law to close.

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

8.10 “capital stock” means any and all shares, interests, participations or
other equivalents (however designated, whether voting or non-voting) of capital
stock, partnership interests (whether general or limited) or equivalent
ownership interests in or issued by such Person, and with respect to the Company
includes, without limitation, any and all shares of Common Stock and Preferred
Stock.

8.11 “Change in Control” means the occurrence of any of the following:

(a) the adoption of a plan relating to the liquidation or dissolution of the
Company other than (A) the consolidation with, merger into or transfer of all or
part of the properties and assets of any Subsidiary of the Company to the
Company or any other Subsidiary of the Company and (B) the merger of the Company
with an Affiliate solely for the purpose of reincorporating the Company or
reforming the Company in another jurisdiction;

(b) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any Person (including any
“person” as that term is used in Section 13(d) of the Exchange Act, but
excluding any employee benefit plan of the Company or any of its Subsidiaries,
and any person or entity acting in its capacity as trustee, agent or other
fiduciary or administrator of any such plan), other than any holder of Series B
Preferred Stock, becomes the beneficial owner, directly or indirectly, of more
than 50% of the Voting Stock of the Company, measured by voting power rather
than number of shares;

(c) the first day on which a majority of the members of the board of directors
of the Company are not Continuing Directors;

(d) the Company consolidates with, or merges with or into, any Person, or any
Person consolidates with, or merges with or into, the Company, or the Company
engages in any similar business combination transaction, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company or such other Person is converted into or exchanged for cash, securities
or other property, other than any such transaction where the Voting Stock of the
Company outstanding immediately prior to such transaction remain, is converted
into or is exchanged for Voting Stock of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance);

(e) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or assets of the
Company and its Subsidiaries taken as a whole to any Person (including any
“person” as that term is used in Section 13(d) of the Exchange Act, but
excluding any employee benefit plan of the Company or any of its Subsidiaries,
and any person or entity acting in its capacity as trustee, agent or other
fiduciary or administrator of any such plan); provided that a Change in Control
shall not include a spin-off or similar in-kind distribution to the stockholders
of the Company in which the holders of Series B Preferred Stock are entitled to
such distribution as Participating Dividends or pursuant to 5.5 without other
adjustment to the Conversion Price if the rights of the holders of Series B
Preferred Stock pursuant to the Certificate of Designation and the Investor
Rights Agreement are preserved and not impaired after giving effect to such
spin-off or in-kind distribution; or

(f) the direct or indirect sale, transfer, conveyance or other disposition of
all or substantially all of the Wholesale Electricity Generation business of the
Company, in one or a series of related transactions.

8.12 “Company Rights Plan” means that certain Rights Agreement, dated as of
January 15, 2001, between Reliant Resources, Inc. and The Chase Manhattan Bank,
as such Rights Agreement may be amended or replaced from and after the date
hereof.

8.13 “Consolidated EBITDA” means, for any period for the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP, an
amount equal to, without any duplication, net income (before giving effect to
the cumulative effect of changes in accounting principles and discontinued
operations and before income taxes and franchise taxes to the extent based on
the income of such Person and its Subsidiaries) for such period (provided that
except to the extent distributed to the Company the net income for such period
of any Person that is not a consolidated Subsidiary of the Company or is
accounted for by the equity method of accounting shall be excluded), plus the
following, in each case only to the extent deducted (and not added back) in
determining net income for such period (a) Consolidated Interest Charges for
such period, plus (b) depreciation, depletion, impairment, abandonment and
amortization expense for such period, plus (c) interest and fees expensed under
any receivables monetization or securitization during such period, plus (d) net
unrealized losses related to trading or non-trading energy derivatives, plus
(e) cash dividends or distributions actually received during such period from an
entity which is not a consolidated Subsidiary of such Person, and minus (f) net
unrealized gains related to trading or non-trading energy derivatives; provided,
however, for purposes of this definition, (i) gains and losses on the
disposition of assets not in the ordinary course of business, (ii) any other
non-cash charge or gain, (iii) consolidated EBITDA attributable to Reliant
Energy Channelview, L.P., and (iv) any extraordinary or other non-recurring item
or expense, including severance costs, shall be excluded to the extent incurred
or realized during such period in accordance with GAAP from the calculation of
Consolidated EBITDA. If during any period for which Consolidated EBITDA is being
determined, the Company or any Subsidiary shall have (a) made or consummated any
Acquisition for gross consideration of $10,000,000 or more (including Debt
assumed), then Consolidated EBITDA shall be determined on a pro forma basis for
such period as if such Acquisition had been made or consummated as of the
beginning of the first day of such period or (b) made or consummated any Asset
Sale that is not fully included in discontinued operations, then Consolidated
EBITDA shall, to the extent such Asset Sale is not excluded from Consolidated
EBITDA pursuant to the foregoing proviso, be determined on a pro forma basis for
such period as if such Asset Sale had been made or consummated as of the
beginning of the first day of such period. Furthermore, there shall be added
back to Consolidated EBITDA the amount of any cash charges incurred as a result
of, or a condition to, the termination of a contract with non-Affiliates under
which the Company or a Subsidiary is obligated in an amount not to exceed in any
fiscal year the lesser of (x) $200 million and (y) (i) $100 million plus
(ii) beginning with fiscal year 2008, an amount not less than zero equal to (A)
$100 million minus (B) the amount added back to Consolidated EBITDA under this
sentence for the immediately preceding fiscal year (the “Carry Forward Amount”),
but no portion of the Carry Forward Amount shall be used in the applicable
fiscal year until the entire amount (without giving effect to any Carry Forward
Amount) permitted to be added back to Consolidated EBITDA for such fiscal year
has been used plus (iii) a portion elected by the Company of the amount
permitted to be added back to Consolidated EBITDA under this sentence in the
next succeeding fiscal year (the “Carry Back Amount”) without giving effect to
any Carry Back Amount after such next succeeding fiscal year minus (iv) the
portion of the Carry Back Amount for such fiscal year that the Company elected
to add to Consolidated EBITDA under this sentence in the immediately preceding
fiscal year.

8.14 “Consolidated Interest Charges” means, without duplication, for any period
for the Company and its Subsidiaries on a consolidated basis in accordance with
GAAP, (a) the total interest expense for such period (including the Monthly
Sleeve Fee, as defined in the Credit Sleeve and Reimbursement Agreement dated as
of September 24, 2006 among RERH Holdings, LLC and certain of its Subsidiaries,
Merrill Lynch Commodities, Inc. and Merrill Lynch & Co., Inc., as amended and
restated on August 1, 2007), plus (b) the interest expense during such period
attributable to (i) the fees and yield paid in connection with, or interest
expense attributable to, any account receivables securitization or monetization
permitted hereunder, and (ii) any capitalized interest during such period, plus
(c) all cash dividends and distributions paid on preferred or preference stock,
plus (d) to the extent deducted in determining total interest expense, net
unrealized gains under any interest rate swap agreement, interest cap agreement,
interest collar agreement, and other agreements or arrangements designed to
manage interest rate risk (excluding any ongoing settlement payments in
connection with interest rate swap agreements) and existing on the Original
Issuance Date (“Interest Hedges”), minus (e)(i) the total interest income of
such Person and its Subsidiaries, including interest income from any escrow or
trust account, (ii) in all cases whether expensed or amortized, any interest
expense attributable to the extent added in determining total interest expense,
the upfront cost and net unrealized losses under any Interest Hedges (excluding
ongoing settlement payments in connection with permitted interest rate swap
agreements), and (iii) interest expense attributable to Debt repaid or required
to be repaid under any agreement evidencing Debt in connection with an Asset
Sale.

8.15 “Consolidated Total Debt” means, as of any date of its determination, all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP, minus, without duplication, all cash and cash equivalents
that are not restricted cash, in an aggregate amount not to exceed
$1,000,000,000, and solely to the extent such cash and cash equivalents do not
constitute broker, counterparty and customer margin/collateral assets and/or are
not deposited with or held on behalf of such broker, counterparty or customer.

8.16 “Continuing Directors” means, as of any date of determination, any member
of the board of directors of the Company who (a) was a member of such board of
directors on the Original Issuance Date; or (b) was nominated for election or
elected to such board of directors with the approval of a majority of the
Continuing Directors who were members of such board at the time of such
nomination or election.

8.17 “Debt” means (a) the total amount of indebtedness in accordance with GAAP,
including any fair value adjustments, and other obligations for borrowed money
(whether by loan or the issuance of debt securities) of the Company and its
Subsidiaries including the unreimbursed amount of any drawings under letters of
credit issued for the account of the Company or any of its Subsidiaries but
excluding the amount of debt required to be replaced in connection with an Asset
Sale, (b) all Capital Lease Obligations and Attributable Debt in respect of sale
and leaseback transactions (other than those associated with the REMA Lease),
Synthetic Lease Obligations or financing leases, (c) obligations under any
accounts securitization or monetization arrangement permitted hereunder and not
recorded on the Company balance sheet for that period and (d) all guaranties of
payment or collection of any obligations described in clauses (a) through (c) of
this definition of any other Person; provided, however, that Debt shall not
include: (i) any guaranties that may be incurred by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business or
similar transactions or arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds, so long as such Debt is covered within five business days,
(ii) any obligations or guaranties of performance of obligations under
performance bonds or in respect of workers’ compensation claims, self-insurance
obligations, and bankers’ acceptances in the ordinary course of business to the
extent not drawn, (iii) trade accounts payable in the ordinary course of
business, (iv) customer advance payments and customer deposits arising in the
ordinary course of business, (v) the liability of a Person (other than a
Subsidiary that is a corporation or limited liability company and holds the
general partnership interest) as a general partner of a partnership for Debt at
such partnership if the partnership is not a Subsidiary of such Person,
(vi) Debt arising from agreements of the Company providing for indemnification,
adjustment of purchase price or similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets or equity
interests of a Subsidiary; provided, that the maximum aggregate liability in
respect of all such Debt shall at no time exceed the gross proceeds (including
non-cash proceeds) actually received by the Company in connection with such
disposition; and (vii) any completion or performance guarantees (or similar
guarantees that a project or a Subsidiary perform as planned to the extent not
drawn).

In determining the outstanding amount of any Debt: (a) the amount of money
borrowed shall be the outstanding principal amount thereof, (b) the amount of
all unreimbursed letters of credit shall be the unreimbursed amount thereof,
(c) the amount of any accounts monetization or securitization shall be the
amount invested by the investor therein, and (d) the amount of guaranties shall
be the amount of the guaranteed obligations determined as provided above in this
sentence.

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

8.19 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder from time to time.

8.20 “Facility” means the Credit and Guaranty Agreement, dated as of June 12,
2007, among the Company, as the Borrower, the other loan parties thereto as
Guarantors, the other lenders party thereto and Deutsche Bank AG New York
Branch, as Administrative Agent.

8.21 “Fair Market Value” of Common Stock or any other security or property means
the fair market value thereof as determined in good faith by the Board, which
determination must be set forth in a written resolution of the Board, in
accordance with the following rules:

(a) for Common Stock or other security traded or quoted on the NYSE or other
national securities exchange or automated quotation system, the Fair Market
Value will be the average of the closing prices of such security on the NYSE or
such exchange or quotation system over a consecutive trading day period of one
(1) to thirty (30) trading days, as selected by the Board in good faith, ending
on the trading day immediately prior to the date of determination;

(b) for any security that is not so traded or quoted, the Fair Market Value
shall be determined: (x) mutually by the Board and the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock, or (y) by a
nationally recognized investment bank, appraisal or accounting firm (whose fees
and expenses will be paid by the Company) selected by mutual agreement between
the Board and the holders representing a majority of the then outstanding shares
of Series B Preferred Stock; or

(c) for any other property, the Fair Market Value shall be determined by the
Board in good faith assuming a willing buyer and a willing seller in an
arm’s-length transaction; provided that if holders representing a majority of
the then outstanding shares of Series B Preferred Stock object to a
determination of the Board made pursuant to this clause (iii), the Fair Market
Value of such property shall be as determined by nationally recognized
investment bank, appraisal or accounting firm (whose fees and expenses will be
paid by the Company) selected by mutual agreement between the Board and such
holders.

8.22 “GAAP” means generally accepted accounting principles, as in effect in the
United States of America from time to time. If at any time any change in GAAP
would affect the computation of Consolidated EBITDA or Consolidated Interest
Charges, or Debt and either the Company or holders of a majority of the shares
of Series B Preferred Stock (“Required Holders”) shall so request, the Company
and the holders of the Series B Preferred Stock shall negotiate in good faith to
amend such ratio or requirement to preserve the original intent thereof in light
of such change in GAAP (subject to the approval of the Required Holders and the
Company); provided, that until so amended, (i) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein and
(ii) the Company shall provide to the holders of the Series B Preferred Stock
financial statements and other documents required hereunder or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in GAAP.

8.23 “Governmental Authority” means any nation or government or any agency,
public or regulatory authority, instrumentality, department, commission, court,
arbitrator, ministry, tribunal or board of any nation or any government or
political subdivision thereof, in each case, whether multi-national, national,
federal, tribal, provincial, state, regional, local or municipal, or any
self-regulatory organization.

8.24 “Group” has the meaning assigned to such term in Section 13(d)(3) of the
Exchange Act.

8.25 “hereof”, “herein” and “hereunder” and words of similar import refer to
these resolutions as a whole and not merely to any particular clause, provision,
section or subsection.

8.26 “Investor Rights Agreement” means the Investor Rights Agreement, dated the
Original Issuance Date, by and between the Company and the Original Holder, as
it may be amended from time to time.

8.27 “Law” means applicable statutes, treaties, laws, directives, common law,
rules, ordinances, regulations, codes, licensing requirements, governmental
guidelines or interpretations having the force of law, permits, rules and
bylaws, in each case, of a Governmental Authority, stock exchange or industry
self- regulatory organization.

8.28 “NYSE” means the New York Stock Exchange or any securities exchange or
other automated quotation system on which the Common Stock is then listed or
quoted.

8.29 “Original Holder” means FR Reliant Holdings LP.

8.30 “Original Issuance Date” means the date on which the first share of
Series B Preferred Stock was issued.

8.31 “Person” means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, government, any agency or political
subdivisions thereof or other “Person” as contemplated by Section 13(d) of the
Exchange Act.

8.32 “REMA” means Reliant Energy Mid-Atlantic Power Holdings, LLC, a Delaware
limited liability company, and its successors.

8.33 “REMA Lease” means, collectively, the obligations of REMA as facility
lessee under the Facility Lease Agreements, each dated as of August 24, 2000 and
each between REMA and, respectively, Conemaugh Lessor Genco, LLC, Keystone
Lessor Genco, LLC, and Shawville Lessor Genco, LLC, and under the related
participation agreements and other documents executed in connection therewith.

8.34 “Rights” shall have the meaning given thereto in the Company Rights Plan
(or the comparable right under any successor or substitute shareholder rights
plan).

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

8.36 “Subsidiary” means, with respect to any Person, any other Person of which
the first Person owns, directly or indirectly, securities or other ownership
interests having voting power to elect a majority of the board of directors or
other Persons performing similar functions for such Person (or, if there are no
such voting interests, more than 50% of the Equity Interests of the second
Person).

8.37 “Treasury Rate” means, with respect to any date of determination, the yield
to maturity at the time of computation of United States Treasury securities with
a constant maturity (as compiled and published in the most recent Federal
Reserve Statistical Release H.15(519) that has become publicly available at
least two Business Days prior to such date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from such date to the first day after the Fifth
Anniversary; provided, however, that if the period from such date to the first
day after the Fifth Anniversary is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from such date to the first day after the Fifth Anniversary is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.  

8.38 “Voting Stock” of any Person as of any date means the capital stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.

9. Miscellaneous. For purposes of these resolutions, the following provisions
shall apply:

9.1 Status of Cancelled Shares. Shares of Series B Preferred Stock which have
been converted, redeemed, repurchased or otherwise cancelled shall be retired
and have the status of authorized and unissued shares of Preferred Stock,
without designation as to series until such shares are once more, subject to the
limitations contained in 4, designated as part of a particular series by the
Board.

9.2 Severability. If any right, preference or limitation of the Preferred Stock
set forth in this resolution (as such resolution may be amended from time to
time) is invalid, unlawful or incapable of being enforced by reason of any rule
of law or public policy, all other rights, preferences and limitations set forth
in this resolution (as so amended) which can be given effect without the
invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.

9.3 Headings. The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.

[Rest of page intentionally left blank.]

5 IN WITNESS WHEREOF, the Company has caused this Certificate of Designation to
be executed by a duly authorized officer of the Company as of October [*], 2008.

RELIANT ENERGY, INC.

         
By:
    —      Name: Michael L. Jines

Title: Senior Vice President, General Counsel and Corporate Secretary

6

Exhibit A

FORM OF NOTICE OF ELECTION OF REDEMPTION

(To be executed by the registered holder in order to redeem Series B Preferred
Stock)

The undersigned hereby elects to redeem (the “Redemption”)      shares of
Series B Convertible Participating Preferred Stock (“Series B Preferred Stock”),
represented by stock certificate No(s).      (the “Stock Certificate”) of
Reliant Energy, Inc. (the “Company”) according to the conditions of the
Certificate of Designations establishing the terms of the Series B Preferred
Stock (the “Certificate of Designations”), as of the date written below. An
original of each Stock Certificate is attached hereto (or evidence of loss,
theft or destruction thereof).

The undersigned hereby represents and warrants that the undersigned is the
registered holder of the shares of Series B Preferred Stock represented by the
Stock Certificate, with good title to such shares, free and clear of all liens,
claims and encumbrances, and not subject to any adverse claims.

The Company is not required to effect the Redemption unless it has funds legally
available for the payment of the Holder’s Redemption Price (as defined in the
Certificate of Designations) and until the original Stock Certificate(s) (or
satisfactory evidence of loss, theft or destruction thereof) are received by the
Company; provided that, if the original Stock Certificate(s) are lost, stolen or
destroyed, the Board of Directors may require the holder to indemnify the
Company, in a reasonable amount and in a reasonable manner, prior to payment of
the Holder’s Redemption Price.

Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designations. Certificates
representing the shares of Series B Preferred Stock to be redeemed are to be
surrendered for payment at the office of the Company located at the following
address (unless the Company notifies the holder in writing of a substitute
address):

Reliant Energy, Inc.
1000 Main Street
Houston, Texas 77002
Tel: [*]
Fax: [*]
Attention: Corporate Secretary

 
Number of shares of Series B
Preferred Stock to be redeemed:
Redemption Date:
Holder’s Address:
Facsimile Number:
Address where the
Redemption Price is to be sent:
Holder’s Social Security or Taxpayer Identification Number:
 

Signature:      

Name (print):

Date:      

7

EXHIBIT B

FORM OF

RELIANT ENERGY, INC.

INVESTOR RIGHTS AGREEMENT

8

October [*], 2008
TABLE OF CONTENTS

Page

                         
1.
  Registration Rights             1  
 
    1.1     Definitions     1  
 
    1.2     Request for Registration     3  
 
    1.3     Company Registration     4  
 
    1.4     Obligations of the Company     6  
 
    1.5     Furnish Information     9  
 
    1.6     Expenses of Demand Registration     9  
 
    1.7     Expenses of Company Registration     9  
 
    1.8     Indemnification     9  
 
    1.9     Reports Under Securities Exchange Act of 1934     11  
 
    1.10     Assignment of Registration Rights     12  
 
    1.11     Termination of Registration Rights     12  
 
    1.12     Shelf Registration     12  
 
    1.13     Additional Rights     13  
 
    1.14     Delay of Registration     14  
 
    1.15     Suspension Notice     14  
 
    1.16     No Free Writing Prospectus     14  
2.
  Corporate Governance             14   3.   Certain Covenants of the Company
and the Investor     15  
 
    3.1     Delivery of Financial Statements     15  
 
    3.2     Inspection     16  
 
    3.3     Standstill     16  
 
    3.4     Trading in Company Securities     16  
 
    3.5     Treatment of the Series B Preferred Stock by the Company.     16  
 
    3.6     Management Assistance.     16  
 
    3.7     Confidentiality.     17  
4.
  Miscellaneous             17  
 
    4.1     Successors and Assigns     17  
 
    4.2     Governing Law     17  
 
    4.3     Counterparts     18  
 
    4.4     Titles and Subtitles     18  
 
    4.5     Notices     18  
 
    4.6     Expenses     18  
 
    4.7     Amendments and Waivers     18  
 
    4.8     Severability     19  
 
    4.9     Aggregation of Stock     19  
 
    4.10     Confidentiality     19  
 
    4.11     Entire Agreement     19  
 
    4.12     Titles and Subtitles     19  
 
    4.13     Publicity     19  
 
    4.14     Termination.     19  
 
    4.15     Specific Performance.     19  

INVESTOR RIGHTS AGREEMENT

THIS INVESTOR RIGHTS AGREEMENT (this “Agreement”) is made as of      , 2008, by
and between RELIANT ENERGY, INC., a Delaware corporation (the “Company”) and FR
RELIANT HOLDINGS LP, a Delaware limited partnership (the “Investor”).

RECITALS

WHEREAS, the Investor has, pursuant to that certain Preferred Stock Purchase
Agreement, dated as of October 10, 2008, between the Company and the Investor
(the “Securities Purchase Agreement”), agreed to purchase shares of the
Company’s Series B Convertible Participating Preferred Stock, par value $0.001
per share (the “Series B Preferred Stock”);

WHEREAS, the shares of Series B Preferred Stock are convertible into shares of
the Company’s Common Stock, par value $0.001 per share (the “Common Stock”); and

WHEREAS, pursuant to the Securities Purchase Agreement, the Company and the
Investor agreed to enter into this Agreement at the closing under the Securities
Purchase Agreement in order to grant the Investor certain registration rights
and other rights as set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, covenants, and
conditions set forth herein, the parties hereto hereby agree as follows:

1. Registration Rights. The Company covenants and agrees as follows:

1.1 Definitions. For purposes of this Agreement:

(a) The term “Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

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

(c) The term “Code” means the Internal Revenue Code of 1986, as amended.

(d) The term “Confidentiality Agreement” has the meaning set forth in the
Securities Purchase Agreement.

(e) The term “FINRA” means the Financial Industry Regulatory Authority, Inc.

(f) The term “Form S-3” means such form under the Act as in effect on the date
hereof or any registration form under the Act subsequently adopted by the SEC
that permits inclusion or incorporation of substantial information by reference
to other documents filed by the Company with the SEC.

(g) The term “Holder” means any Person owning, or having the right to acquire,
Registrable Securities or any assignee thereof in accordance with Section 1.10
hereof.

(h) The term “1934 Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

(i) The term “Person” means any individual, corporation, company, limited
liability company, partnership, association, trust, joint venture, group or any
other entity or organization, including any government or political subdivision
or any agency or instrumentality thereof.

(j) The term “Qualified Holder” means any Person or group of Affiliated Persons
(including the Investor and its Affiliates) that owns more than fifty percent
(50%) of the shares of Series B Preferred Stock issued to the Investor on the
date of original issuance (or Common Stock issued upon conversion of such
Series B Preferred Stock (taking into account any adjustments under Section 5(d)
of the Certificate of Designation, or a combination thereof)).

(k) The terms “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.

(l) The term “Registrable Securities” means (i) the Series B Preferred Stock,
(ii) the Common Stock issuable or issued upon conversion of the Series B
Preferred Stock and (iii) any Common Stock issued as (or issuable upon the
conversion or exercise of any warrant, right or other security that is issued
as) a dividend or other distribution with respect to, or in exchange for, or in
replacement of, the shares referenced in (i) and (ii) above; provided, however,
that the term “Registrable Securities” shall exclude in all cases any
Registrable Securities (i) sold by a Person to the public pursuant to an
effective registration statement under the Act or in compliance with Rule 144 of
the Act or (ii) eligible to be sold without volume limitation or other
restrictions as to manner of sale by Holders in accordance with Rule 144 of the
Act.

(m) The number of shares of “Registrable Securities then outstanding” when
referring to (a) the Series B Preferred Stock, shall be determined by the number
of shares of Series B Preferred Stock outstanding that are Registrable
Securities; and (b) the Common Stock, shall be determined by the number of
shares of Common Stock outstanding that are, and the number of shares of Common
Stock issuable pursuant to then exercisable or convertible securities that are,
Registrable Securities.

(n) The term “SEC” means the Securities and Exchange Commission.

(o) The term “Underwritten Offering” means an offering in which securities of
the Company are sold to one or more investment banking firms for resale to the
public (including pursuant to Section 1.2 or 1.3 hereof).

1.2 Request for Registration.

(a) Subject to the terms and conditions of this Section 1.2, if the Company
shall receive at any time a written request from the Holder(s) of a majority of
the Registrable Securities then outstanding (collectively, the “Requesting
Holder”), requesting that the Company file a registration statement under the
Act covering the registration of all or any portion of the Registrable
Securities then outstanding having an aggregate price to the public (net of any
underwriter’s discounts or commissions) of not less than $50,000,000 then the
Company shall:

(i) within ten (10) days of the receipt thereof, give written notice of such
request to all Holders; and

(ii) effect as soon as practicable, and in any event within ninety (90) days of
the receipt of such request, the registration under the Act of all Registrable
Securities that the Holders request to be registered, together with all or such
portion of the Registrable Securities of any Holder or Holders joining in such
request pursuant to the terms of this Agreement, subject to the limitations of
subsection 1.2(b), within fifteen (15) days of the mailing of such notice by the
Company in accordance with Section 4.5.

(b) If the Requesting Holder intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise the
Company as a part of its request made pursuant to subsection 1.2(a) and the
Company shall include such information in the written notice referred to in
subsection 1.2(a)(i). The underwriter will be selected by the Requesting Holder
and shall be reasonably acceptable to the Company. In such event, the right of
any Holder to include Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in such underwriting to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 1.2, if the underwriter advises the Requesting
Holder in writing that marketing factors require a limitation of the number of
shares to be underwritten, then the Requesting Holder shall so advise all
Holders of Registrable Securities that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders electing to include
shares in the offering in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting by the Requesting Holder shall not be reduced unless all other
securities are first entirely excluded from the underwriting.

(c) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.2, a certificate
signed by the Chief Executive Officer of the Company stating that in the good
faith judgment of a majority of the Board of Directors of the Company (the
“Board of Directors”) it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer taking action with respect to such filing for a period
of not more than ninety (90) days after receipt of the request of the Requesting
Holder; provided, however, that the Company may not postpone the filing or
effectiveness of one or more registration statements for more than ninety
(90) days in the aggregate in any twelve (12) month period.

(d) In addition, notwithstanding anything to the contrary set forth herein, the
Company shall not be obligated to effect, or to take any action to effect, any
registration pursuant to this Section 1.2:

(i) after the Company has effected three (3) registrations pursuant to this
Section 1.2 and such registrations have been declared or ordered effective;
provided, however, that for purposes of this clause (i), each Underwritten
Offering under Section 1.12(b) shall constitute a registration pursuant to this
Section 1.2 that has been declared or ordered effective;

(ii) during the period starting with the date sixty (60) days prior to the
Company’s good faith estimate of the date of filing of, and ending on a date one
hundred eighty (180) days after the effective date of, a registration statement
filed by the Company pursuant to Section 1.2 or 1.3 hereof; provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to be effective; or

(iii) if the Requesting Holder proposes to dispose of shares of Registrable
Securities that are eligible for resale under a shelf registration statement (or
pursuant to an amendment or supplement thereto) that is effective and available
pursuant to Section 1.12(a) or (b).

1.3 Company Registration.

(a) If the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
any of its stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
solely to the sale of securities to participants in an employee stock plan or
with respect to corporate reorganizations or other transactions under Rule 145
of the Act, or a registration on any form that does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration at
least twenty (20) days prior to the initial filing with the SEC of such
registration statement. Upon the written request of each Holder given within ten
(10) days after mailing of such notice, the Company shall, subject to the
provisions of Section 0 below, include in the registration statement all of the
Registrable Securities that each such Holder has requested to be registered.

(b) In connection with any Underwritten Offering, the Company shall not be
required under this Section 1.3 to include any of the Holders’ securities in
such underwriting unless such Holders accept the terms of the underwriting
reasonably necessary to effect the offer or sale of the Registrable Securities
and as agreed upon between the Company and the underwriters selected by it (or
by other Persons entitled to select the underwriters), and then only as set
forth below:

(i) If a registration is initiated as an Underwritten Offering by and on behalf
of the Company, and the managing underwriter advises the Company in writing that
in its opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering without having
an adverse effect on such offering, including the price at which such securities
can be sold, then the Company shall include in such registration the maximum
number of shares that such underwriter advises can be so sold without having
such effect, allocated (i) first, to the securities the Company proposes to sell
and (ii) second, to other securities (including Registrable Securities)
requested to be included in such registration by the stockholders of the Company
on a pro rata basis (based on the selling stockholders’ relative ownership of
Registrable Securities or on such other basis as such holders may agree among
themselves and the Company).

(ii) If a registration is initiated as an Underwritten Offering on behalf of a
holder of the Company’s securities (other than a Holder of Registrable
Securities pursuant to Section 1.2), and the managing underwriter advises the
Company in writing that in its opinion the number of securities requested to be
included in such registration exceeds the number that can be sold in such
offering without having an adverse effect on such offering, including the price
at which such securities can be sold, then the Company shall include in such
registration the maximum number of shares that such underwriter advises can be
so sold without having such effect, allocated (i) first, to the securities
requested to be included therein by the holder(s) requesting such registration
and (ii) second, to other securities (including Registrable Securities)
requested to be included in such registration by other security holders, the
Company and the Holders, pro rata among such holder(s), the Company and the
Holders on the basis of the number of shares requested to be registered by them.

(c) For purposes of determining apportionment among selling stockholders, for
any selling stockholder which is a Holder of Registrable Securities and which is
a partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing Persons shall be
deemed to be a single “selling stockholder,” and any pro-rata reduction with
respect to such “selling stockholder” shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such “selling stockholder,” as defined in this sentence. In
connection with any offering involving an underwriting of shares of the
Company’s capital stock, each Holder agrees to comply with the terms set forth
in the underwriters agreement between the Company and the one or more
underwriters participating in such offering. Notwithstanding anything to the
contrary set forth herein, the Company may withdraw a registration statement
initiated under this Section 1.3 at any time prior to the time it becomes
effective; provided that, in such event, the Company shall reimburse Holders of
Registrable Securities requested to be included in such registration for all
out-of-pocket expenses (including reasonable fees and expenses of counsel)
incurred with respect to such registration prior to such withdrawal by the
Company.

1.4 Obligations of the Company. Whenever required under this Section 1 to effect
the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:

(a) Unless an automatic shelf registration statement (as defined in
Section 1.12) is effective at such time pursuant to which such Registrable
Securities may be resold, prepare and, in any event within forty-five (45) days
after the end of the period within which a request for registration may be given
to the Company, file with the SEC a registration statement with respect to such
Registrable Securities and use its reasonable best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred eighty
(180) days (or such longer period as may be reasonably requested by the Holders
in the event of a shelf-registration statement);

(b) Prepare and file with the SEC such amendments and supplements to such
registration statement (including 1934 Act documents incorporated by reference
into the registration statement) and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all Registrable Securities covered by
such registration statement until the earlier of;

(i) the time all of such securities have been disposed of; or

(ii) the expiration of one hundred eighty (180) days (or such longer period as
may be requested by such Holders in the event of a shelf-registration
statement).

(c) Furnish to the Holders such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them; provided, however, that the
Company shall have no obligation to furnish copies of a final prospectus if the
conditions of Rule 172(c) under the Act are satisfied by the Company;

(d) If required under applicable law, use its reasonable best efforts to
register and qualify the securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Holders, and do any and all other acts and things
which may be reasonably necessary or advisable to enable the Holders to
consummate the disposition in such jurisdictions; provided that the Company
shall not be required in connection therewith, or as a condition thereto to
qualify to do business, to file a general consent to service of process in any
such states or jurisdictions or to subject itself to taxation in such
jurisdictions;

(e) In the event of any Underwritten Offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering (each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement);

(f) Notify promptly each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; and at
the request of any such Holder promptly prepare and furnish to such Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the purchaser
of such shares such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in light
of the circumstances then existing;

(g) Cause all such Registrable Securities registered pursuant hereunder to be
listed on each securities exchange or nationally recognized quotation system on
which similar securities issued by the Company are then listed;

(h) Make available for inspection by any selling Requesting Holder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney or accountant retained by any such selling
Requesting Holder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company’s
officers and directors to supply all information reasonably requested by any
such selling Requesting Holder, underwriter, attorney or accountant in
connection with such registration statement; provided, however, that such
selling Requesting Holder, underwriter, attorney or accountant shall agree to
hold in confidence and trust all information so provided;

(i) Furnish to each selling Requesting Holder a copy of all documents proposed
to be filed with and all correspondence from or proposed to be sent to the SEC
in connection with any such offering other than non-substantive cover letters
and the like, which documents will be subject to the review of counsel of the
Requesting Holders prior to any filing or mailing to permit reasonable
opportunity to review and comment in light of the circumstances;

(j) Notify promptly counsel for the Holders of Registrable Securities included
in such registration statement and the managing underwriter or agent and confirm
such notice in writing (i) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment to the
prospectus shall have been filed, (ii) of the receipt of any comments from the
SEC, (iii) of any request by the SEC to amend the registration statement or
amend or supplement the prospectus or for additional information, and (iv) of
the issuance by the SEC of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the use of any
preliminary prospectus, or of the suspension of the qualification of the
registration statement for offering or sale in any jurisdiction, or of the
institution or threatening of any proceedings for any of such purposes;

(k) Make reasonable best efforts to prevent the issuance of any stop order
suspending the effectiveness of the registration statement or of any order
preventing or suspending the use of any preliminary prospectus and, if any such
order is issued, to obtain the withdrawal of any such order as soon as
practicable;

(l) If requested by the managing underwriter or agent or any Holder of
Registrable Securities covered by the registration statement, promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or agent or such Holder reasonably
requests to be included therein, including, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter or agent,
the purchase price being paid therefor by such underwriter or agent; and
(ii) make all required filings of such prospectus supplement or post-effective
amendment as soon as practicable after being notified of the matters
incorporated in such prospectus supplement or post-effective amendment;

(m) Cooperate with the Holders of Registrable Securities covered by the
registration statement and the managing underwriter or agent, if any, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legends) representing securities to be sold under the registration
statement, and enable such securities to be in such denominations and registered
in such names as the managing underwriter or agent, if any, or such Holders may
request;

(n) Provide a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration;
and

(o) Cooperate with each seller of Registrable Securities and each underwriter or
agent participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with FINRA
or the New York Stock Exchange.

In addition to the foregoing, in the event of an Underwritten Offering for which
the Company is required to include any Registrable Securities pursuant to the
terms of this Agreement, the Company shall:

(x) enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering;

(y) Use its reasonable best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in substantially the form as may be given to the
underwriters in such public offering, addressed to the underwriters and (ii) a
letter dated such date, from the independent certified public accountants of the
Company, in substantially the form as may be given by independent certified
public accountants to underwriters in such public offering, addressed to the
underwriters; provided in any such case, the Company is required to provide such
opinion or letter, as the case may be, to the underwriters in such offering; and

(z) Cause members of the Company’s senior management team to cooperate in a
reasonable manner with any reasonable request made by the Requesting Holder and
any underwriters to make themselves reasonably available to participate in any
“road shows” or other selling efforts in connection with any Underwritten
Offering.

1.5 Furnish Information. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder’s Registrable Securities.

1.6 Expenses of Demand Registration. All expenses (other than underwriting
discounts and commissions) incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers’ and accounting fees, blue
sky fees and expenses and fees and the reasonable disbursements of counsel for
the Company and one counsel for the Holders shall be borne by the Company;
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses); provided further, however, that
if at the time of such withdrawal, the Holders (i) have learned of a material
adverse change in the condition, business, or prospects of the Company that was
not known to the Holders at the time of their request or have been advised by
the underwriter that the registration should be withdrawn (either, a “Withdrawal
Event”), and (ii) have withdrawn the request with reasonable promptness
following the occurrence of such Withdrawal Event, then the Holders shall not be
required to pay any of such expenses and shall not forfeit their right to one
(1) demand registration pursuant to Section 1.2.

1.7 Expenses of Company Registration. The Company shall bear and pay all
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to
Section 1.3 for each Holder (which right may be assigned as provided in
Section 1.10), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto, blue sky fees and expenses and the reasonable fees and disbursements of
counsel for the Company and one counsel for the selling Holders selected by
them, but excluding underwriting discounts and commissions relating to
Registrable Securities.

1.8 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Section 1:

(a) To the extent permitted by law, the Company will indemnify and hold harmless
each Holder, each of its officers, directors, Affiliates, members or general and
limited partners, any underwriter (as defined in the Act) for such Holder and
each Person, if any, who controls such Holder or underwriter within the meaning
of the Act or the 1934 Act, against any losses, claims, damages, or liabilities
(joint or several), and actions or proceedings (whether commenced or threatened)
in respect thereof (collectively, “Claims”) to which they may become subject
under the Act, or the 1934 Act or other federal or state securities law, insofar
as such Claims arise out of or are based upon any of the following statements,
omissions or violations (collectively a “Violation”): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus, offering
circular, free writing prospectus, if any, or other documents contained therein
or any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act or other federal or state
securities law or any rule or regulation promulgated under the Act, the 1934 Act
or other federal or state securities law; and the Company will pay to each such
Holder, underwriter or controlling Person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this subsection 1.8(a) shall not apply to amounts paid in
settlement of any such Claim if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such Claim to the extent that it
arises out of or is based upon a Violation that occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling Person.

(b) To the extent permitted by law, each selling Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who has signed
the registration statement, each Person, if any, who controls the Company within
the meaning of the Act, any underwriter, any other Holder selling securities in
such registration statement and any controlling Person of any such underwriter
or other Holder, against any Claims to which any of the foregoing Persons may
become subject, under the Act, the 1934 Act or other federal or state securities
law, insofar as such Claims arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred by
any Person intended to be indemnified pursuant to this subsection 1.8(b), in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this subsection 1.8(b) shall not apply
to amounts paid in settlement of any such Claim if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
1.8(b) exceed the net proceeds from the offering received by such Holder.

(c) Promptly after receipt by an indemnified party under this Section 1.8 of
notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 1.8, deliver to the indemnifying party
a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
that may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding.

(d) If the indemnification provided for in this Section 1.8 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall, to the extent permitted by applicable law, contribute to the amount paid
or payable by such indemnified party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified party on
the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations; provided, however, that in no event shall any Holder’s
cumulative, aggregate liability under this Section 1.8(d), or under
Section 1.8(b), or under such sections together, exceed the net proceeds from
the applicable offering received by such Holder. Notwithstanding anything to the
contrary herein, no party shall be liable for contribution under this
Section 1.8(d), except to the extent and under the circumstances as such party
would have been liable to indemnity under Section 1.8(a) or Section 1.8(b), as
the case may be, if such indemnification were enforceable under applicable law.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control with respect to the parties to such agreement.

(f) The obligations of the Company and Holders under this Section 1.8 shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.

1.9 Reports Under Securities Exchange Act of 1934. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act
(“Rule 144”) and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144;

(b) if required to file reports with the SEC under the Act, use its reasonable
best efforts to file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and

(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Act and the
1934 Act, or that it qualifies as a registrant whose securities may be resold
pursuant to Form S-3 (at any time after it so qualifies), and (ii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the SEC that permits the selling of any such securities without
registration or pursuant to such form.

1.10 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 1 may be assigned by a
Holder to a transferee or assignee of such securities provided that (a) the
Company is, within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 1.11 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.

1.11 Termination of Registration Rights. No Holder shall be entitled to exercise
any right provided for in this Section 1 at such time as such Holder ceases to
hold any Registrable Securities.

1.12 Shelf Registration.

(a) To the extent the Company is a well-known seasoned issuer (as defined in
Rule 405 under the Act) (a “WKSI”), then (i) within three (3) business days
following the Closing (as defined in the Securities Purchase Agreement), the
Company shall file an automatic shelf registration statement (as defined in
Rule 405 under the Act) (an “automatic shelf registration statement”) which
registers the Registrable Securities purchased by the Investor at the Closing
and (ii) at the time any registration request is submitted to the Company that
is not covered by the automatic registration statement filed by the Company
pursuant to clause (i) above, and such registration request requests that the
Company file an automatic shelf registration statement on Form S-3, the Company
shall file an automatic shelf registration statement which covers those
Registrable Securities which are requested to be registered. To the extent the
Company is no longer a WKSI, then upon the request from a Requesting Holder to
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such
Requesting Holder, the Company shall comply with the notification and
registration requirements set forth in Section 1.2(a)(i) and (ii) with respect
to such request by the Requesting Holder. Subject to Section 1.11, if the
automatic shelf registration statement has been outstanding for at least three
(3) years, at the end of the third year the Company shall, upon written request
by the Holders, refile a new automatic shelf registration statement covering the
Registrable Securities, if there are any remaining Registrable Securities
covered thereunder. If at any time when the Company is required to re-evaluate
its WKSI status the Company determines that it is not a WKSI, the Company shall
use its commercially reasonable efforts to refile the shelf registration
statement on Form S-3 and keep such registration statement effective during the
period during which such registration statement is required to be kept
effective. Contemporaneously with the issuance of the Common Stock issuable upon
the conversion of the Series B Preferred Stock, if such Common Stock is not
included in a currently effective registration statement, the Company shall file
and as promptly as practicable thereafter have declared effective a shelf
registration statement on Form S-3 covering the newly issued Common Stock as if
a written request therefor had been made pursuant to this Section 1.12(a).

(b) The Company shall file the registration statements, qualifications or
compliance specified in this Section 1.12 unless (i) Form S-3 is not available
for any such offering, (ii) in the case of any request for registration, the
Requesting Holders, together with all other Holders requesting inclusion in such
registration, propose to sell Registrable Securities at an aggregate price to
the public of less than $20,000,000, (iii) the Company furnishes to the Holders
a certificate signed by the Chief Executive Officer of the Company stating that
in the good faith judgment of a majority of the Board of Directors, it would
require the disclosure of material nonpublic information concerning the Company,
its business or prospects and that such premature disclosure would be materially
adverse to the Company, and/or materially interfere with a pending transaction
involving the Company or a subsidiary or controlled Affiliate of the Company, in
which event the Company shall have the right to defer the filing of any such
Form S-3 registration statement for a period of not more than ninety (90) days
after receipt of the request of the Requesting Holder or Holders under this
Section 1.12; provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period, (iv) the Company has, within the
twelve (12) month period preceding the date of such request, already effected
two (2) registrations on Form S-3 for the Holders pursuant to this Section 1.12,
or (v) prohibited in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance; provided
that this Section 1.12(b) shall not apply to the registration required to be
filed pursuant to Section 1.12(a)(i).

(c) All expenses incurred in connection with a registration requested pursuant
to this Section 1.12 (other than underwriting discounts and commissions and fees
and disbursements of counsel for the Holders), including (without limitation)
all registration, filing, qualification, printer’s and accounting fees and
counsel for the Company, shall be borne by the Company. Registrations effected
pursuant to this Section 1.12 shall not be counted as demands for registration
or registrations effected pursuant to Sections 1.2 or 1.3 respectively.

(d) The Investor shall be entitled to request an aggregate of two
(2) Underwritten Offerings pursuant to the automatic shelf registration
statement; provided, however that the number of Underwritten Offerings permitted
under this Section 1.12 shall not exceed the number of registrations that the
Company is obligated to effect for the Investor under Section 1.2. There shall
be no limitation on the number of takedowns off any such shelf registration
statement.

1.13 Additional Rights. If the Company at any time grants to any Person with
respect to any security issued by the Company or any of its Affiliates any
rights to request the Company to effect the registration under the Act of any
such security (or any related or similar rights) on terms that are in any manner
more favorable to such Person than the terms granted hereunder (or if the
Company amends or waives any provision of any agreement providing registration
rights of others (or related or similar rights) or takes any other action
whatsoever to provide for terms that are more favorable to other holders than
the terms provided hereunder), then this Agreement shall immediately be deemed
amended to provide the Holders with any (or all) of such more favorable terms as
the Holders shall elect to include herein. The Company shall promptly give
notice to the Holders of the granting of any such registration rights to another
Person.

1.14 Delay of Registration. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.

1.15 Suspension Notice. Each Holder agrees that, upon notice from the Company of
the happening of any event as a result of which the prospectus included in any
registration statement required to be filed or maintained effective under this
Agreement contains an untrue statement of a material fact or omits any material
fact necessary to make the statements therein not misleading (a “Suspension
Notice”), each Holder will forthwith discontinue disposition of Registrable
Securities pursuant to such registration statement for a reasonable length of
time not to exceed 10 days (30 days in the case of an event described in
Section 1.2(c)) until such Holder is advised in writing by the Company that the
use of the prospectus may be resumed and is furnished with a supplemented or
amended prospectus as contemplated by Section      hereof; provided, however,
that such postponement of sales of Registrable Securities by such Holder shall
not exceed forty-five (45) days in the aggregate in any 12-month period.

1.16 No Free Writing Prospectus. Each Holder shall not, and shall not permit any
officer, manager, under-writer, broker or any other person acting on behalf of
such Holder to use any free-writing prospectus (as defined in Rule 405 under the
Act) in connection with any registration statement covering Registrable
Securities, without the prior written consent of the Company.

2. Corporate Governance.

(a) Investor Nominee. From and after the Closing, the Investor shall have the
right to nominate one (1) individual (herein referred to as the “Investor
Nominee”) to the Board of Directors. At the Closing, in accordance with the
terms of the Series B Preferred Stock, the number of directors constituting the
Board of Directors shall be increased by one (1) and the Investor Nominee shall
be appointed to fill such directorship. The Board of Directors shall cause the
Company to include the Investor Nominee in the slate of nominees recommended by
the Board of Directors to the holders of Common Stock for election at the first
annual meeting of stockholders of the Company following the date hereof and,
subject to Section 2(b) below, for reelection at every meeting thereafter and
shall use all commercially reasonable efforts to cause the election of the
Investor Nominee, including soliciting proxies in favor of his or her election.
In the event the Investor Nominee resigns, is unable to serve as a member of the
Board of Directors, is removed from the Board of Directors or fails to be
elected as a member of the Board of Directors at any annual stockholders
meeting, the Investor shall have the right to nominate another individual (a
“Substitute Nominee”) and the Board of Directors shall appoint such Substitute
Nominee to fill the vacancy created by the resignation or removal of the prior
Investor Nominee, at which point such Substitute Nominee shall be deemed to be
the Investor Nominee. For the avoidance of doubt, the Investor Nominee is the
“Preferred Nominee” referred to in the Certificate of Designation with respect
to the Series B Preferred Stock.

(b) Limitations. Notwithstanding the foregoing, at such time as the outstanding
            shares of Series B Preferred Stock (or Common Stock issued on
conversion of Series B Preferred Stock or a combination thereof) beneficially
owned by the Investor and its Affiliates are less than fifty percent (50%) of
the shares of Series B Preferred Stock issued to the Investor on the date of
original issuance (or Common Stock issuable upon conversion of such Series B
Preferred Stock (taking into account any adjustments under Section 5(d) of the
Certificate of Designation), as applicable), then, automatically and
immediately, without any further action on the part of the Company or the Board
of Directors, the Investor Nominee shall be removed from the Board of Directors
and the number of directors constituting the Board of Directors shall be
automatically decreased by one, and thereafter, the Investor’s right to nominate
the Investor Nominee under this Section 2 shall terminate and be of no further
force and effect.

3. Certain Covenants of the Company and the Investor.

3.1 Delivery of Financial Statements. From and after the date hereof, the
Company shall deliver to the Qualified Holder, if any:

(a) as soon as available, but in any event within 90 days after the end of each
fiscal year of the Company, an audited consolidated balance sheet of the Company
and its consolidated Subsidiaries as at the end of such fiscal year, and the
related consolidated statements of income or operations, stockholders’ equity,
comprehensive income (loss) and cash flows for such fiscal year, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles (“GAAP”), such consolidated statements to be audited and accompanied
by a report and opinion of an independent registered public accounting firm of
nationally recognized standing, which report and opinion shall be prepared in
accordance with the standards of the Public Company Accounting Oversight Board
or its successor;

(b) as soon as available, but in any event within 45 days after the end of each
of the first three fiscal quarters of each fiscal year of the Company, an
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such fiscal quarter, and the related unaudited
consolidated statements of income or operations for such fiscal quarter and for
the portion of the Company’s fiscal year then ended and cash flows for the
portion of the Company’s fiscal year then ended; and

(c) as soon as available, monthly management operating reports of the Company,
in such manner and form customarily provided to the Board of Directors or, if
not provided to the Board of Directors, in such manner and form customarily
provided to the Company’s senior management, and in any event including an
unaudited operations statement (or income statement) and statement of cash flows
for such month, and a balance sheet for and as of the end of such month, in
reasonable detail.

Documents required to be delivered pursuant to Sections 3.1(a) or (b) above may
be delivered electronically and if so delivered, shall be deemed to have been
delivered on the date on which the Company posts such documents or provides a
link thereto on the Company’s website on the Internet.

3.2 Inspection. The Company shall permit the Qualified Holder, if any, at such
party’s expense, to visit and inspect the Company’s properties, to examine its
books of account and records and to discuss and obtain information concerning
the Company’s affairs, finances and accounts with its officers, all during
regular business hours as may be reasonably requested by the Qualified Holder. 

3.3 Standstill. Until the fifth anniversary of the original date of issuance of
the Series B Preferred Stock and so long as the Investor and its Affiliates
beneficially own more than eleven percent (11%) of the combined voting power of
the Company, unless specifically invited in writing by the Company, the Investor
shall not, and shall cause each of its Affiliates not to, directly or
indirectly: (i) acquire any voting securities (or beneficial ownership thereof),
or rights or options to acquire any voting securities (or beneficial ownership
thereof) of the Company; (ii) make any offer or proposal to effect a Change of
Control (as defined in the Certificate of Designation with respect to the
Series B Preferred Stock) of the Company or (iii) make any public disclosure, or
take any action which could require the Company to make any public disclosure,
with respect to any of the matters set forth in this Section 3.3 Notwithstanding
anything to the contrary set forth herein (including the provisions of
Section 4.1), this Section 3.3 shall not be binding on any successor or assignee
of the Investor (other than any of its Affiliates) or any other Person (other
than any Affiliate of the Investor) who acquires shares of Series B Preferred
Stock (or any shares of Common Stock into which such Series B Preferred Stock
has converted) from the Investor or any of its Affiliates hereunder.

3.4 Trading in Company Securities. The Investor agrees that it shall not,
directly or indirectly, enter into any hedging, short sale, derivative, put or
call transaction or any similar transaction with respect to any equity
securities of the Company (the “Restrictions”), in each case for the six
(6) month period beginning September 29, 2008; provided that, notwithstanding
anything to the contrary, all Restrictions shall lapse upon the occurrence of a
Change of Control.

3.5 Treatment of the Series B Preferred Stock by the Company. The Company shall
not treat the Series B Preferred Stock (based on its terms) as “preferred stock”
as defined in Section 1.305-5(a) of the regulations promulgated under the Code,
unless required to do so pursuant to a “determination” (as defined in Section
1313(a) of the Code).

3.6 Management Assistance. The Company shall cause members of the Company’s
senior management team to cooperate in a reasonable manner with any reasonable
request made by the Requesting Holder to assist it in the sale of a substantial
portion of its Registrable Securities in a private transfer by making themselves
reasonably available to meet with potential transferees of such shares.

3.7 Confidentiality. The Investor and each other Holder acknowledges that, from
time to time, they may receive information from or regarding the Company, its
Affiliates and its customers in the nature of trade secrets or secret or
proprietary information or information that is otherwise confidential, the
release of which may be damaging to the Company or its Affiliates, as
applicable, or Persons with which they do business. The Investor and each other
Holder shall hold in strict confidence any such information it receives and may
not disclose such information to any Person, except for disclosures (i) to
comply with any Laws (including applicable stock exchange or quotation system
requirements), (ii) to Affiliates, employees, shareholders, directors, members,
managers, advisors (including attorneys and accountants), and other
representatives of the Holder, provided that the disclosing Holder shall be
responsible for the use and disclosure of any such information by any such
Person to which it discloses such information, (iii) of information that a
Holder also has received from a source independent of the Company and that such
Holder reasonably believes such source obtained without breach of any obligation
of confidentiality, (iv)  to Persons to which a Holder may assign any of its
Registrable Secrurities as permitted by this Agreement, but only if the
recipients of such information have agreed to be bound by the provisions of this
Section 3.7, (v) of public information, (vi) in connection with the proposed
sale of all or substantially all of the equity or assets of a Holder or its
direct or indirect parent, but only if the recipients of such information have
agreed in writing to be bound by confidentiality provisions substantially
similar to those set forth in this Section 3.7, or (vii) of information that has
been or becomes independently developed by the disclosing Holder without
violating this Agreement. Each Holder acknowledge that a breach of the
provisions of this Section 3.7 may cause irreparable injury to the Company and
its Affiliates for which monetary damages are inadequate, difficult to compute,
or both. Accordingly, each Holder agrees that the provisions of this Section 3.7
may be enforced by injunctive action or specific performance.

4. Miscellaneous.

4.1 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties (including transferees of
any shares of Registrable Securities); provided, however, that the Investor may
not transfer or assign its status as the “Investor” (including any of the rights
specifically pertaining thereto set forth in Section 2) under this Agreement.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.

4.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any disagreement, issue,
dispute, claim, demand or controversy arising out of or relating to this
Agreement (each, a “Dispute”) shall be brought in the United States District
Court for the Southern District of New York in New York, New York or any New
York State court sitting in New York, New York, so long as one of such courts
shall have subject matter jurisdiction over such Dispute. Each of the parties
hereby irrevocably consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such Dispute and irrevocably
waives, to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such Dispute in any such court
and that any such Dispute which is brought in any such court has been brought in
an inconvenient forum. Process in any such Dispute may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in 4.5 shall be deemed effective service of process on
such party.

EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 4.2.

4.3 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

4.4 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

4.5 Notices. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively given
upon personal delivery to the party to be notified or upon delivery by confirmed
facsimile transmission or nationally recognized overnight courier service or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days’ advance written notice to the
other parties.

4.6 Expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys’ fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.

4.7 Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of Registrable
Securities then outstanding, each future holder of all such Registrable
Securities and the Company.

4.8 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement, and the balance of the Agreement shall be interpreted as if such
provision were so excluded, and shall be enforceable in accordance with its
terms.

4.9 Aggregation of Stock. All shares of Registrable Securities of the Company
held or acquired by a stockholder and its affiliates (as defined in Rule 144 of
the Act) shall be aggregated together for the purpose of determining the
availability of any rights under this Agreement.

4.10 Confidentiality. All non-public information obtained pursuant to this
Agreement shall be governed by the Confidentiality Agreement, which shall be
deemed amended hereby to provide that the confidentiality obligations thereunder
shall survive until two years after termination of this Agreement.

4.11 Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof, and any and all
other written or oral agreements relating to the subject matter hereof existing
between the parties hereto are expressly canceled.

4.12 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

4.13 Publicity. Press releases with respect to the Investor’s investment in or
relationship with the Company may only be issued by either the Investor or the
Company in mutually agreeable form and with the prior written consent of either
the Company or the Investor, as applicable, except as may be required by
applicable Law or by obligations pursuant to any listing agreement with any
national securities exchange.

4.14 Termination. This Agreement shall terminate with respect to any Holder on
the the date when such Holder beneficially owns no Registrable Securities.

4.15 Specific Performance. Each of the parties hereto acknowledges and agrees
that, in the event of any breach of any covenant or agreement contained in this
Agreement by the other party, monetary damages may be inadequate with respect to
any such breach and the non-breaching party may have no adequate remedy at law.
It is accordingly agreed that each of the parties hereto shall be entitled, in
addition to any other remedy to which they may be entitled at law or in equity,
to seek injunctive relief and/or to compel specific performance to prevent
breaches by the other party hereto of any covenant or agreement of such other
party contained in this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

RELIANT ENERGY, INC.

By:      
Name:
Title:

FR RELIANT HOLDINGS LP

By:      
Name:
Title:

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