Exhibit 10.1B

 

Schedules and Exhibits to the
Credit Sleeve and Reimbursement Agreement
dated as of September 24, 2006,

as amended and restated as of August 1, 2007

 

(Portions of this Exhibit have been omitted
pursuant to a request for confidential treatment)

 

SCHEDULE 1.01(a)

—

Risk Management Policy Violations

SCHEDULE 1.01(b)

—

Calculations Relating to Exchange Traded Contracts

SCHEDULE 1.01(c)

—

Determination of K and VaR

SCHEDULE 1.01(e)

—

Trademarks

SCHEDULE 1.01(f)

—

Credit Limit Approval Guidelines

SCHEDULE 2.01(b)

—

C&I Customer Wholesale Purchase Provisions

SCHEDULE 2.02(a)

—

Counterparty Document Negotiation Provisions

SCHEDULE 2.04

—

C&I Contracts and Governmental Contracts receiving ML Guarantee

SCHEDULE 3.04

—

Calculation and Settlement of Monthly Sleeve Fee

SCHEDULE 3.05

—

Calculation of Make-whole Payment

SCHEDULE 3.07(a)

—

Merrill Account

SCHEDULE 5.13

—

List of Subsidiaries

SCHEDULE 7.14

—

List of Retail Services

SCHEDULE 12.13

—

List of Calculation Agents

 

 

 

EXHIBIT A1

—

Form of ML Guarantee for Accepted Counterparties

EXHIBIT A2

—

Form of ML Guarantee for C&I Customers

EXHIBIT B

—

List of Accepted Counterparties

EXHIBIT C1

—

Form of EEI Power Purchase and Hedging Contract

EXHIBIT C2

—

Form of ISDA Power Purchase and Hedging Contract

EXHIBIT C3

—

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

 

 

 

EXHIBIT C4

—

Form of RECs Purchase Contract for ERCOT

EXHIBIT D1

—

Form of EEI Collateral Annex

EXHIBIT D2

—

Form of ISDA Credit Support Annex

EXHIBIT E1

—

Reliant Energy — Retail Risk Policy

EXHIBIT E2

—

Hedge Limit Calculations

EXHIBIT F

—

ERCOT Asset List

EXHIBIT G

—

Form of Joinder Agreement

EXHIBIT H

—

Form of Compliance Certificate

EXHIBIT I1

—

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

 

 

 

EXHIBIT I2

—

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

 

 

 

 

 

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Schedule 1.01(a)

To Credit Sleeve and Reimbursement Agreement
Risk Management Policy Violations

[***]

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***

The content of this Schedule 1.01(a) (consisting of 3 pages) has been omitted
and filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

 

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Schedule 1.01(b)

To Credit Sleeve and Reimbursement Agreement

Calculations Relating to Exchange Traded Contracts

 

Adjusted Volume:

 

For Exchange Traded Contracts with the following delivery periods and volume
quantities,

 

Period (Month)

 

ETC Commodity
Quantities

 

0

 

Q0

 

1

 

Q1

 

2

 

Q2

 

3

 

Q3

 

…

 

…

 

…

 

…

 

N

 

QN

 

 

the “Adjusted Volume” of the Mirror OTC Contracts to be entered into between
REPS and the Sleeve Provider as part of the (EFS Transaction or ICE Block
Transaction) under the Credit Sleeve and Reimbursement Agreement will be
computed as follow:

 

Period (Month)

 

Adjusted Volume

 

0

 

Q0 / AZP0

 

1

 

Q1 / AZP1

 

2

 

Q2 / AZP2

 

3

 

Q3 / AZP3

 

…

 

…

 

…

 

…

 

N

 

QN / AZPN

 

 

“AZP” shall be the Adjusted Zero Prices that corresponds to the date on the
Adjusted Zero Curve which is defined below.

The Adjusted Volume will be rounded off to the nearest full unit (mmbtu or mwh).

 

Calculation of Adjusted Zero Curve:

 

The Credit Sleeve Provider will calculate an adjusted LIBOR forward curve (the
“Adjusted LIBOR Forward Curve”) each day by adding the marginal cost of capital
adder (the “MCC Adder”) to the inputs used to calculate the Merrill Lynch & Co.
standard LIBOR curve (the “Merrill LIBOR Curve”).

 

“MCC Adder” shall be:

 

(a) [***]; for purposes of calculating the Adjusted Volume of Mirror OTC
Contracts executed in connection with (EFS Transactions or ICE Block
Transactions) that are A & R Date Transactions described in Section 2.03(a) of
the Credit Sleeve Reimbursement Agreement; and

 

(b) the marginal cost of capital relative to LIBOR that all Merrill Lynch &
Co.’s trading desks are charged for the use of funds by Merrill Lynch & Co. (as
of the date of such EFS Transaction or ICE Block Transaction), which amount is
relative to LIBOR that is the

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***

Certain information on this page has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.

 

 

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average cost of capital for Merrill Lynch & Co. across all maturities (such MCC
Adder can be positive or negative); for purposes of calculating the Adjusted
Volume of Mirror OTC Contracts executed in connection with EFS Transactions or
ICE Block Transactions that are Ongoing Transactions described in Section
2.03(b) of the Credit Sleeve Reimbursement Agreement

 

As of the A & R Date, the MCC Adder described in subsection (b) above is [***];
however, such amount may change in accordance with changes to Merrill Lynch &
Co.’s marginal cost of capital as described above.

 

“Merrill LIBOR Curve” shall be the LIBOR curve used by Merrill Lynch & Co. and
its subsidiaries in their U.S. and world wide swap and futures operations and
business and used to mark its interest rate position to market.   It is
understood that Merrill Lynch & Co. may modify the inputs for how it determines
this curve; however, it will continue to use the same curve for the Merrill
LIBOR Curve as used in this Schedule and for its other operations as described
in the foregoing sentence.

 

Using the Adjusted LIBOR Forward Curve the Sleeve Provider will calculate a
corresponding zero curve (the “Adjusted Zero Curve”), and provide such Adjusted
Zero Curve to REPS on each Business Day, no later than 12:00 p.m. CPT, and such
curve shall be applicable to the (EFS Transactions and ICE Block Transactions)
that are executed on that day.  The Adjusted Zero Curve will be a strip of
monthly Adjusted Zero Prices, which represent the present value of $1.00 dollar
received on a specific date in the future, assuming the Adjusted LIBOR Forward
Curve for discounting purposes with discounting being computed utilizing the
continuously compounding methodology.  The Adjusted Zero Curve provided will
have 5 places after the decimal point.

 

The term of the Adjusted LIBOR Forward Curve and the corresponding Adjusted Zero
Curve will be 72 months, including the then current month; provided, however,
that to the extent REPS currently has or in the future obtains an Exchange
Traded Contract for a longer period, then the Sleeve Provider will extend the
Adjusted LIBOR Forward Curve and the Adjusted Zero Curve to match such longer
period.  Adjusted Zero Prices that correspond to dates that are between the
Monthly Dates in the table below will be calculated using linear interpolation. 
The format utilized by the Sleeve Provider in providing this information will
include at a minimum the following attributes:

 

Period (Month)

 

Monthly Date

 

Adjusted LIBOR
Forward Curve

 

Adjusted Zero
Curve

 

0

 

 

 

AL0 = 0

 

AZP0 = 1

 

1

 

 

 

AL1

 

AZP1

 

2

 

 

 

AL2

 

AZP2

 

3

 

 

 

AL3

 

AZP3

 

…

 

 

 

…

 

…

 

…

 

 

 

…

 

…

 

…

 

 

 

…

 

…

 

N

 

 

 

ALN

 

AZPN

 

 

Treatment for Options:

 

For purposes of clarification the Parties agree that no adjustment will be made
to the volumes of options transactions which are transferred pursuant to EOO
Transactions under the Credit Sleeve Reimbursement Agreement, or in other words
the Adjusted Volume of any Mirror OTC Contract that is an option will be the
exact same volume as the volume of the corresponding Exchange Traded Contract.

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***

Certain information on this page has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.

 

 

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Physical Exposure Management Fee:

 

For Exchange Traded Contracts that provide for physical delivery, (both futures
contracts and options that provide for physical delivery futures contracts) and
are transferred to the Sleeve Provider pursuant to an EFS or EOO Transaction,
the following will apply:  REPS agrees to pay to Sleeve Provider (or Sleeve
Provider agrees to pay to REPS) a fee (the “Physical Exposure Management Fee” or
“PhEM”) equal to: the actual premium paid or received by Sleeve Provider to
liquidate the physical exposure. Sleeve Provider will provide REPS notice of the
PhEM amount within 2 Business Days of liquidating the physical exposure with a
third party. REPS may request that the Sleeve Provider provide deal tickets as
evidence of the actual premium paid or received by Sleeve Provider.  PhEM shall
be due and payable by the applicable Party at the time of settlement of the
Mirror OTC Transaction associated with such EOO or EFS Transaction.

 

 

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Schedule 1.01(c)

To Credit Sleeve and Reimbursement Agreement
Determination of K and VaR

[***]

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***

The content of this Schedule 1.01(c) (consisting of 77 pages) has been omitted
and filed separately with the Securities and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

 

 

 

6

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Schedule 1.01(e)

To Credit Sleeve and Reimbursement Agreement

Trademarks

 

 

NAME

OWNER

GOODS/SERVICES

REG.

APPL. #

Energy Commander

RERH

Class 9. Systems comprised of computer hardware and integrated computer software
for communications, and for monitoring, controlling, and managing environmental
conditions and energy usage.

2764995

76/263578

Energy Commander

RERH

Class 42. Monitoring, controlling and managing of energy usage for commercial,
industrial and institutional customers; providing information regarding
environmental conditions and energy usage to commercial, industrial and
institutional customers.

2813513

76/263577

PowerZone

RERH

Class 35. Promoting events, sports competitions, contests and award programs.
Class 42. Sweepstake services.

 

78/762804

Your Houston Business

RERH

Class 16. Business magazines.
Class 41. Computer services, namely, providing an on-line magazine in the field
of business.

2865827

78/156502

Power Card and Design

RERH

Class 35. Promoting the services of public libraries through sponsorship of
library membership cards.
Class 42. Promoting public awareness of the availability of public library
facilities and services by sponsorship of library membership cards.

2428481

75/940944

Reliant

IP Trust

Class 36. Energy brokerage services; electricity brokerage, namely, the
brokerage of electric power and the sale of electric power, both generated
internally and purchased from electric utilities and from other electric power
producers, suppliers and sources, for sale and transfer to others.

3097811

78/622356

Reliant

IP Trust

Class 39. Distribution and delivery of energy.

2886710

78/311694

Reliant

IP Trust

Class 40. Production and generation of energy.

2886711

78/311695

 

 

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NAME

OWNER

GOODS/SERVICES

REG.

APPL. #

Reliant Arena

IP Trust

Class 35. Promoting the goods and services of others by arranging for sponsors
to affiliate their goods and services with professional football; rental of
advertising space; promoting sports competitions and/or events of others;
dissemination of advertising matter and providing facilities for trade shows and
conventions; promoting business and tourism in the area of the Reliant Stadium
in Houston, Texas.

2976601

76/195453

Reliant Arena

IP Trust

Class 41. Providing stadium facilities for sports and entertainment; arranging
and conducting athletic competitions; providing entertainment in the nature of
sporting events and competitions, exhibitions and expositions, public
performances, concerts, conventions and rodeos; information services, namely,
providing a wide range of information relating to sporting events and
competitions, exhibitions and expositions, public performances, concerts,
conventions and rodeos.

2896040

76/195451

Reliant Arena

IP Trust

Class 42. Restaurant and bar services; providing general purpose facilities for
exhibitions.

2943295

76/195450

Reliant Center

IP Trust

Class 35. Promoting the goods and services of others by arranging for sponsors
to affiliate their goods and services with professional football; rental of
advertising space; promoting sports competitions and/or events of others;
dissemination of advertising matter and providing facilities for trade shows and
conventions; promoting business and tourism in the area of the Reliant Stadium
in Houston, Texas.

2897602

76/195564

Reliant Center

IP Trust

Class 41. Providing stadium facilities for sports and entertainment; arranging
and conducting athletic competitions; providing entertainment in the nature of
sporting events and competitions, exhibitions and expositions, public
performances, concerts, conventions and rodeos; information services, namely,
providing a wide range of information relating to sporting events and related
activities by means of the Internet.

2875207

76/195562

Reliant Center

IP Trust

Class 42. Restaurant and bar services; providing general purpose facilities for
exhibitions.

2926480

75/981963

 

 

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NAME

OWNER

GOODS/SERVICES

REG.

APPL. #

Reliant Energy

IP Trust

Class 35. Billing services; energy generation logistics services, namely,
scheduling generation of energy for others, in International Class

3053512

78/451768

Reliant Energy

IP Trust

Class 36. Energy brokerage services; electricity brokerage, namely, the
brokerage of electric power and the sale of electric power, both generated
internally and purchased from electric utilities and from other electric power
producers, suppliers and sources, for sale and transfer to others.

3132302

78/622380

Reliant Energy

IP Trust

Class 39. Distribution and delivery of energy, in International Class 39.

3053513

78/451803

Reliant Energy

IP Trust

Class 40. Production and generation of energy, in International Class 40.

3045140

78/451815

Reliant Energy & Design

IP Trust

Class 35. Business consultation services for the energy industry; billing for
energy suppliers; business marketing consulting services in the energy industry;
business support services for energy suppliers, namely, providing billing
information to energy consumers; operation for others of facilities and
infrastructure for energy generation, gathering, transmission, storage and
distribution.

2747525

75/623509

Reliant Energy & Design

IP Trust

Class 36. Brokerage in the field of commodities, namely, buying, selling, and
trading of energy commodities; financial risk management services; financing of
energy services projects; telephone calling card services.

2681501

75/623512

Reliant Energy & Design

IP Trust

Class 39. Public utility services, namely, gathering, transmission,
distribution, transportation, and storage of energy commodities.

2895973

75/623308

Reliant Energy & Design

IP Trust

Class 42. Providing temporary use of online, non-downloadable software for use
in the field of energy information systems for tracking, monitoring, displaying,
storing, and reporting actual, projected, and historical energy storage,
transmission, distribution or consumption.

2983403

75/623514

 

 

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NAME

OWNER

GOODS/SERVICES

REG.

APPL. #

Reliant Energy & Design

IP Trust

Class 42. Engineering design services of energy generation facilities and
infrastructure; providing information regarding the energy industry and energy
commodities; promoting public awareness of the need for environmentally friendly
energy.

2666766

75/623309

Reliant Park

IP Trust

Class 18. Textile shopping bags, attaché cases, book bags, tote bags.

2897601

76/195468

Reliant Park

IP Trust

Class 25. Clothing, namely, caps, jackets, polo shirts, shirts, sport shirts,
sweaters, sweatshirts, t-shirts, rain-wear and visors.

2897600

76/195465

Reliant Park

IP Trust

Class 35. Promoting the goods and services of others by arranging for sponsors
to affiliate their goods and services with professional football; rental of
advertising space; promoting sports competitions and/or events of others;
dissemination of advertising matter and providing facilities for trade shows and
conventions; tourism in the area of the Reliant Stadium in Houston, Texas;
promoting business and tourism in the Reliant Stadium in Houston, Texas.

2884611

76/195473

Reliant Park

IP Trust

Class 41. Providing stadium facilities for sports and entertainment; arranging
and conducting athletic competitions; providing entertainment in the nature of
sporting events and related activities; information services, namely, providing
a wide range of information relating to sporting events and related activities
by means of the Internet.

2935264

76/195471

Reliant Park

IP Trust

Class 43. Restaurant and bar services; providing general purpose facilities for
exhibitions.

2933500

76/195470

Reliant Stadium

IP Trust

Class 16. Paper goods, paper materials and printed matter, namely, posters,
mounted photographs, postcards, pennants, books in the field of football and
related sporting events and activities; yearbooks, paper napkins, and banners.

2955241

76/195558

Reliant Stadium

IP Trust

Class 28. Toys, namely, action figures, balloons, promotional game materials.
sporting goods, namely, footballs and sports balls.

2929142

76/195448

 

 

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NAME

OWNER

GOODS/SERVICES

REG.

APPL. #

Reliant Stadium

IP Trust

Class 35. Promoting the goods and services of others by arranging for sponsors
to affiliate their goods and services with professional football; rental of
advertising space; promoting sports competitions and/or events of others;
dissemination of advertising matter and providing facilities for trade shows and
conventions; promoting business and tourism in the area of the Reliant Stadium
in Houston, Texas.

2929141

76/195445

Reliant Stadium

IP Trust

Class 41. Providing stadium facilities for sports and entertainment; arranging
and conducting athletic competitions; providing entertainment in the nature of
sporting events and competitions, exhibitions and expositions, public
performances, concerts, conventions and rodeos; information services, namely,
providing a wide range of information relating to sporting events and related
activities by means of the Internet.

2896039

76/195443

Reliant Stadium

IP Trust

Class 42. Restaurant and bar services; providing general purpose facilities for
exhibitions.

2729638

75/981391

 

 

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Schedule 1.01(f)
To Credit Sleeve and Reimbursement Agreement
Credit Limit Approval Guidelines

[***]

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***

The content of this Schedule 1.01(f) (consisting of 1 page) has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

 

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Schedule 2.01(b)

To Credit Sleeve and Reimbursement Agreement

C&I Customer Wholesale Purchase Provisions

 

[***]

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***

The content of this Schedule 2.01(b) (consisting of 5 pages) has been omitted
and filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

 

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

 

 

Schedule 2.02(a)

To Credit Sleeve and Reimbursement Agreement

Counterparty Document Negotiation Provisions

 

[***]

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***

The content of this Schedule 2.02(a) (consisting of 3 pages) has been omitted
and filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

 

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

 

 

Schedule 2.04

To Credit Sleeve and Reimbursement Agreement

C&I Contracts and Governmental Contracts Receiving ML Guarantee

 

[***]

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

***

The content of this Schedule 2.04 (consisting of 1 page) has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

 

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Schedule 3.04

To Credit Sleeve and Reimbursement Agreement

Calculation and Settlement of Monthly Sleeve Fee

 

 

(a)           For the period from the Effective Date through the Unwind Start
Date, on each Monthly Payment Date, REPS shall pay to the Sleeve Provider a
monthly fee in arrears equal to the Sleeve Fee Factor as in effect from time to
time for each MWh that the Reliant Retail Obligors deliver to their C&I
Customers, Residential Mass Customers and Business Services Mass Customers
(excluding any load provided to Equistar Chemicals, LP in connection with the
Channelview Services Agreement), in each case, in connection with the Retail
Energy Business during such period, as determined by the Sleeve Provider based
on (i) with respect to the ERCOT Market and the PJM Market, settled load data
provided from the applicable Approved ISO, and (ii), with respect to the PJM
Market only, billed sales volumes allocated to a flow month in accordance with
Section (b)(ii)(A)(2) of this Schedule 3.04 (such MWHs, the “ERCOT MWHs” or “PJM
MWHs”, as applicable, and collectively, the “MWHs”, and such monthly fee as
adjusted from time to time, the “Sleeve Fee”).  Payments of the Sleeve Fee will
be determined and made in accordance with the procedures set forth below.

 

As used in this Schedule 3.04, the term “Sleeve Fee Factor” means $0.40 per MWh
provided that such amount shall be adjusted from time to time as follows: (a)
under the circumstances, in the amount, at the times and for the periods set
forth in Annex A hereto and (b) in the event that the Merrill Parties receive an
indemnity contemplated by Section 9.03(a) of the CSRA, by an additional $0.40
per MWh during the period while such indemnity is in effect (cumulative with the
effect of any adjustment referred to in clause (a)(if any) from time to time),
commencing with first day of the month following the month during which such
indemnity was received and ending on the last day of the month during which such
indemnity is terminated or expires.

 

(b)           REPS shall deliver to the Sleeve Provider for each delivery month
the following information and associated data relating to the Sleeve Fee as
follows:

 

(i)            Monthly Initial Settlement Calculation:

 

(A)          The initial settlement MWHs for such month shall be based on the
applicable Approved ISO initial statements and the applicable PJM Line Loss
Estimate described below (collectively, the “Preliminary Statements”):

 

(1)           With respect to the ERCOT Market, the initial settlement ERCOT
MWHs for such month shall be based upon the ERCOT Initial Statement as defined
by Section 9.2.3 of the ERCOT protocols issued on or about the 10th calendar day
of the month following delivery;

 

(2)           With respect to the PJM Market, the initial settlement PJM MWHs
for such month shall be based upon the PJM initial statements issued on or about
the 7th calendar day of the month following delivery, reduced by the applicable
PJM Line Loss Estimate; and

 

(3)           With respect to the PJM Market, a “PJM Line Loss Estimate” of 3%
will be used for the period from August 1, 2007, through December 31, 2008.  On
December 31, 2008, and each December 31st thereafter, the PJM Line Loss Estimate
to be used for the succeeding 12 month period shall be calculated based on the
difference between the PJM published volumes and the actual billed sales volumes
to customers for the most recent preceding 12 month period for which information
to complete such calculation is then available.   Should known or expected
regulatory, operational, or other factors materially impact the reasonableness
of using such calculation methodology for application to future volumes, REPS or
Sleeve Provider may propose alternate calculation

 

 

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methodology expected to produce more accurate estimates by notice to Sleeve
Provider or REPS, as the case may be, after which both parties shall use
commercially reasonable efforts to mutually agree to an appropriate alternate
calculation methodology.  Until such alternate calculation methodology is
agreed, the prior calculation methodology shall be used to calculate the “PJM
Line Loss Rate”.  After such alternate calculation methodology is agreed, such
alternate calculation methodology shall be used to calculate the “PJM Line Loss
Rate”.

 

(B)           REPS shall provide to the Sleeve Provider a summary of the MWHs
for such month from the Preliminary Statements by the 15th calendar day of the
month following delivery or, if such date is not a Business Day, the immediately
succeeding Business Day.  In the event that data provided by the applicable
Approved ISO is omitted or incomplete for any day(s) of the subject month REPS
shall provide an “Omission Estimate” for each day to be used for settlement
calculation subject to review and approval by the Sleeve Provider.  The Sleeve
Provider shall be notified of any Omission Estimate as an explicit notation
included as part of the summary of volumes.

 

(C)           The “Initial Monthly Sleeve Fee Amount” for such month shall be
the MWHs per Schedule 3.04(b)(i)(B) for such month multiplied by the Sleeve Fee
Factor in effect for such month.

 

(D)          Payment of the Initial Monthly Sleeve Fee Amount for such month
under Schedule 3.04(b)(i)(C) shall be due on the next Monthly Payment Date.

 

(ii)           Monthly Final Settlement Calculation:

(A)          The settlement MWHs for such month shall be based on the following:

 

(1)           With respect to the ERCOT Market, the settlement ERCOT MWHs for
such month shall be based on the ERCOT Final Statement as defined by Section
9.2.4 of the ERCOT protocols issued on or about the 59th calendar day of the
month following delivery; and

 

(2)           With respect to the PJM Market, the settlement PJM MWHs for such
month shall be based on the actual billed sales volumes of PJM MWHs allocated to
such month by flow month, such information available on or about the 1st
calendar day of the 4th month following delivery.  The actual billed sales
volumes of PJM MWHs allocated to each month by flow month shall be calculated by
taking the volumes for each applicable cycle read covering all or a portion of
the flow month divided by the number of days in such cycle read to determine a
per day volume for such cycle read.  Such per day volume(s) for the applicable
cycle(s) shall be allocated to each day of the flow month covered by such
cycle(s).

 

(B)           REPS shall provide to the Sleeve Provider:

 

(1)           With respect to the ERCOT Market, a summary of ERCOT MWHs for such
month from the ERCOT Final Statement by the 15th calendar day of the third month
following delivery (i.e. January 2007 shall be due by April 15, 2007) or, if
such date is not a Business Day, the immediately succeeding Business Day.  In
the event that data provided by ERCOT is omitted or incomplete for any day(s) of
the subject month REPS shall provide an Omission Estimate for each day to be
used for settlement calculation subject to review and approval by the Sleeve
Provider.  The Sleeve Provider shall be notified of any Omission Estimate as an
explicit notation included as part of the summary of volumes; and

 

 

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(2)           With respect to the PJM Market Area, a summary of the actual
billed sales volumes of PJM MWHs for such month allocated to such month by flow
month by the 15th calendar day of the fourth month following delivery (i.e.
January 2007 shall be due by May 15, 2007) or, if such date is not a Business
Day, the immediately succeeding Business Day.

 

(C)           The “Monthly Sleeve Fee Amount” for such month shall be the
difference between (i) the MWHs per Schedule 3.04(b)(ii)(B) for such month
multiplied by the Sleeve Fee Factor in effect for such month less (ii) the
Initial Monthly Sleeve Amount for such month in accordance with Schedule
3.04(b)(i)(C).  If the difference is positive an amount equal to the difference
shall be due to the Sleeve Provider.  If the difference is negative an amount
equal to the absolute value of the difference shall be due to REPS.

 

(D)          Payment of the Monthly Sleeve Fee Amount for such month under
Schedule 3.04(b)(ii)(C) shall be due on the next Monthly Payment Date.

 

(iii)          Monthly True-Up Statement Calculation: Solely with respect to the
ERCOT Market, for such delivery month:

 

(A)          REPS shall provide to the Sleeve Provider a summary of the ERCOT
MWHs for such month from the ERCOT True-Up Statement as defined by Section 9.2.6
of the ERCOT protocols that have been received by REPS for such month by the
15th calendar day of the month during which such information is received or, if
such date is not a Business Day, the immediately succeeding Business Day;

 

(B)           The “True-Up Sleeve Fee Amount” for such month shall be equal to
the product of (i) the ERCOT MWHs per the ERCOT True-Up Statement provided per
Schedule 3.04(b)(iii)(A) for such month minus the ERCOT MWHs for such month per
the ERCOT Final Statement per Schedule 3.04(b)(ii)(B) for such month multiplied
by (ii) the Sleeve Fee Factor in effect for such month.  If the product is
positive an amount equal to the product shall be due to the Sleeve Provider.  If
the product is negative an amount equal to the absolute value of the product
shall be due to REPS; and

 

(C)           Payment of the True-Up Sleeve Fee Amount for such month under
Schedule 3.04(b)(iii)(B) shall be due on the next Monthly Payment Date.

 

(iv)          Monthly Invoice: The Sleeve Provider shall provide an invoice to
REPS within two Business Days of the receipt from REPS of the summary of MWhs in
accordance with Schedule 3.04(b)(i), (ii) and (iii) with respect to such month;
provided that if REPS does not furnish such information in a timely manner, such
invoice may be prepared on the basis of reasonable estimates of such information
prepared by the Sleeve Provider.  The invoice shall include the following with
respect to each Approved ISO, if applicable, for such month:  (A) the Initial
Monthly Sleeve Fee Amount per Schedule 3.04(b)(i), (B) the Monthly Sleeve Fee
Amount per Schedule 3.04(b)(ii) and (C) the True-Up Sleeve Fee Amount per
Schedule 3.04(b)(iii).  The Sleeve Provider will be the invoicing party
regardless of whether the invoice amount is a receivable or payable amount with
respect to the Sleeve Provider

 

(c)           During the Unwind Period, until the take-out of the Sleeve
Provider in accordance with Section 10.01(a)(i), (ii), (iv) or (v) of the CSRA
(the date of such take-out, the “Take-Out Date”) or the Unwind Conclusion Date,
REPS shall pay to the Sleeve Provider a monthly fee in arrears equal to the
Sleeve Fee Factor in effect from time to time for each  MWh that the Reliant
Retail Obligors:

 

                (i)            deliver to their C&I Customers starting on the
Unwind Start Date in connection with the Retail Energy Business during such
period, to the extent such deliveries are under

 

 

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

 

 

contractual delivery commitments in effect on the Unwind Start Date, as
determined and invoiced by the Sleeve Provider based on contracted load data
provided by REPS; and

 

                (ii)           are projected, with those projections being those
in effect on the Unwind Start Date, to deliver to their Residential Mass
Customers and Business Services Mass Customers starting on the Unwind Start Date
in connection with the Retail Energy Business during such period, to the extent
the supply for such MWHs was hedged under the CSRA on the Unwind Start Date, as
determined and invoiced by the Sleeve Provider based on monthly projected load
data provided by REPS consistent with the data provided in the daily reporting,
as adjusted by the following:

 

                                                                (A)          for
Residential Mass Customers, to the extent there is a greater than 10% migration
between current customer count and customer count as projected on the Unwind
Start Date for the current period (as determined by ESID count), the projected
load data (in effect on the Unwind Start Date) will be adjusted on a pro-rata
basis from the start of the month during which such migration threshold occurred
and going forward to reflect the customers that have migrated; and

 

                                                                (B)          
for Business Services Mass Customers load, to the extent there is a greater than
10% migration between Business Services Mass Customers load and Business
Services Mass Customers load as projected on the Unwind Start Date for the
current period (as determined by annualized volume (adjusted for seasonality)),
the projected load data (in effect on the Unwind Start Date) will be adjusted on
a pro-rata basis from the start of the month during which such migration
threshold occurred and going forward to reflect the customers that have
migrated;

 

(such monthly fee as adjusted from time to time, the “Unwind Sleeve Fee”).

 

(d)           REPS shall provide the Sleeve Provider a summary of volumes in
MWhs as defined in Schedule 3.04(c)(i) and (ii) and any other data and
computations including ESID counts and annualized load (adjusted for
seasonality) needed by the Sleeve Provider by the 15th calendar day of each
month following each delivery month or, if such day is not a Business Day, the
immediately succeeding Business Day.  The Sleeve Provider shall provide an
invoice with respect to the Unwind Sleeve Fee to REPS within two Business Days
of the receipt from REPS of the summary of volumes in accordance with Schedule
3.04(c) (i) and (ii); provided that if REPS does not furnish such information in
a timely manner, such invoice may be prepared on the basis of reasonable
estimates of such information prepared by the Sleeve Provider.  The Sleeve
Provider will be the invoicing party regardless of whether the invoice amount is
a receivable or payable amount with respect to the Sleeve Provider.  Payment
with respect to the Unwind Sleeve Fee shall be due and payable in arrears for
each delivery month on the next Monthly Payment Date after invoicing and on the
Take-Out Date and the Unwind Conclusion Date.

 

 

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

 

 

Annex A to Schedule 3.04

To Credit Sleeve and Reimbursement Agreement

 

 

 

Certain Adjustments to the Sleeve Fee Factor

 

 

Sleeve Fee Increase Zones

 

Zone 1. If there shall occur 1, but not more than 1, Level III Violation during
any 60 consecutive month period beginning after the Effective Date the Sleeve
Fee or Unwind Sleeve Fee, as applicable, shall be increased by $0.10 per MWh
beginning on the 1st day of the month following the month during which the Level
III Violation occurs through the earlier to occur of (a) the last day of the 6th
month during which no Level III Violations have occurred, (b) an increase in the
Sleeve Fee or Unwind Sleeve Fee under either Zone 2 or Zone 3 below applies, or
(c) the Credit Sleeve Termination Date.

Zone 2. If there shall occur 2, but not more than 2, Level III Violations during
any 60 consecutive month period beginning after the Effective Date the Sleeve
Fee or Unwind Sleeve Fee, as applicable, shall be increased by $0.20 per MWh
beginning on the 1st day of the month following the month during which the
second Level III Violation occurs through the earlier to occur of (a) the last
day of the 12th month during which no Level III Violations have occurred, (b) an
increase in the Sleeve Fee or Unwind Sleeve Fee under Zone 3 below applies, or
(c) the Credit Sleeve Termination Date.

Zone 3. If there shall occur 3 or more Level III Violations during any 60
consecutive month period beginning after the Effective Date the Sleeve Fee or
Unwind Sleeve Fee, as applicable, shall be increased by $0.30 per MWh beginning
on the 1st day of the month following the month during which the third Level III
Violation occurs through the Credit Sleeve Termination Date.

 

 

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

 

 

Schedule 3.05

To Credit Sleeve and Reimbursement Agreement

Calculation of Make-whole Payment

 

“Make-whole Payment” means, as of any date of determination, an amount equal to
the greater of (i) $50,000,000 less the sum of (A) the Structuring Fee (as
defined in Section 3.06 of the CSRA), (B) the PJM Structuring Fee (as defined in
Section 3.06 of the CSRA), and (C) the aggregate amounts of the Monthly Sleeve
Fees that have been paid to the Sleeve Provider as of such date since the
Initial Effective Date (i.e. $50,000,000 — (SF + PJM SF + MSFs)) and (ii) $0,
determined by the Sleeve Provider on such date.

 

 

 

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

 

 

Schedule 3.07(a)

To Credit Sleeve and Reimbursement Agreement

Merrill Account

 

JP Morgan Chase

ABA 021000021

Account Number# [***]

Account Name Merrill Lynch Commodities, Inc.

 

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

***

Certain information on this page has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to the omitted portions.

 

 

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

 

Schedule 5.13

To Credit Sleeve and Reimbursement Agreement

List of Subsidiaries

 

EQUITY INVESTMENT

 

1.               RERH Holdings, LLC’s ownership of 1,000 units of the membership
interest of Reliant Energy Retail Holdings, LLC

 

2.               Reliant Energy Retail Holdings, LLC’s ownership of

a.               1,000 units of the membership interest of Reliant Energy Retail
Services, LLC

b.              1,000 units of the membership interest of Reliant Energy Power
Supply, LLC

c.               1,000 units of the membership interest of Reliant Energy
Solutions East, LLC

 

3.               Reliant Energy Retail Services, LLC’s ownership of 1,000 units
of the membership interest of RE Retail Receivables, LLC

 

 

 

Jurisdiction of
Organization

 

Organizational/Taxpayer
Identification Number

 

RERH Holdings, LLC

 

Delaware

 

4191623/20-5222227

 

Reliant Energy Retail Holdings, LLC

 

Delaware

 

3279845/76-0655580

 

Reliant Energy Retail Services, LLC

 

Delaware

 

3279840/76-0655567

 

R E Retail Receivables, LLC

 

Delaware

 

3531400/41-2046596

 

Reliant Energy Power Supply, LLC

 

Delaware

 

4142914/20-4823108

 

Reliant Energy Solutions East, LLC

 

Delaware

 

3487883/46-0471983

 

 

Address of principal place of business for all of the above:

1000 Main Street
Houston, Texas  77002

 

 

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

 

Schedule 7.14

To Credit Sleeve and Reimbursement Agreement

List of Retail Services

 

 

[***]

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

***

The content of this Schedule 7.13 (consisting of 3 pages) has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

 

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

 

Schedule 12.13

To Credit Sleeve and Reimbursement Agreement

List of Calculation Agents

 

[***]

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

***

The content of this Schedule 12.13 (consisting of 1 page) has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

 

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

 

Exhibit A1

To Credit Sleeve and Reimbursement Agreement

Form of ML Guarantee for Accepted Counterparties

 

 

GUARANTEE OF MERRILL LYNCH & CO., INC.

WHEREAS, Reliant Energy Power Supply, LLC, a Delaware limited liability company
(“REPS”), and certain of its affiliates have entered into an agreement with
Merrill Lynch Commodities, Inc., a corporation duly organized and existing under
the laws of the State of Delaware (“MLCI”), and its parent, Merrill Lynch & Co.,
Inc., a corporation duly organized and existing under the laws of the State of
Delaware (“ML & CO.”), related to an enhanced credit structure for the retail
electric business of REPS and its affiliates;

WHEREAS, as part of the consideration for the above described agreement, ML &
Co. has agreed to issue this Guarantee, guarantying the obligations of REPS
under the Agreement described below, consistent with the terms and conditions
set forth below.

FOR VALUE RECEIVED, receipt of which is hereby acknowledged, ML & CO. hereby
unconditionally guarantees to [                  ] (the “Company”), the due and
punctual payment of any and all amounts payable by REPS, its successors and
permitted assigns, to the extent such successors or permitted assigns are direct
or indirect subsidiaries of RERH Holdings, LLC, a Delaware limited liability
company, under the terms of the [EEI/ISDA] Master Agreement between the Company
and REPS, dated as of [                 ], 2006 (the “Agreement”), including, in
case of default, interest on any amount due, when and as the same shall become
due and payable, whether on the scheduled payment dates, at maturity, upon
declaration of termination or otherwise, according to the terms thereof.  In
case of the failure of REPS punctually to make any such payment, ML & Co. hereby
agrees to make such payment, or cause such payment to be made, promptly upon
demand made by the Company to ML & Co.; provided, however that delay by the
Company in giving such demand shall in no event affect ML & Co.’s obligations
under this Guarantee.  This Guarantee shall remain in full force and effect or
shall be reinstated (as the case may be) if at any time any payment guaranteed
hereunder, in whole or in part, is rescinded or must otherwise be returned by
the Company upon the insolvency, bankruptcy or reorganization of REPS or
otherwise, all as though such payment had not been made.

ML & Co. hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Agreement; the
absence of any action to enforce the same; any waiver or consent by the Company
concerning any provisions thereof; the rendering of any judgment against REPS or
any action to enforce the same; or any other circumstances that might otherwise
constitute a legal or equitable discharge of a guarantor or a defense of a
guarantor.  ML & Co. covenants that this guarantee will not be discharged except
by complete payment of the amounts payable under the Agreement.  This Guarantee
shall continue to be effective if REPS merges or consolidates with or into
another entity, loses its separate legal identity or ceases to exist.

ML & Co. hereby waives diligence; presentment; protest; notice of protest,
acceleration, and dishonor; filing of claims with a court in the event of
insolvency or bankruptcy of REPS; all demands whatsoever, except as noted in the
first paragraph hereof; and any right to require a proceeding first against
REPS.

ML & Co. hereby certifies and warrants that this Guarantee constitutes the valid
obligation of ML & Co. and complies with all applicable laws.  This Guarantee
guarantees only payment obligations of REPS and does not guarantee the
performance of any other obligations of, including, but not limited to, physical
delivery or, to the extent applicable, reporting obligations of REPS.  This
Guarantee constitutes a guarantee of payment and not of collection.

This Guarantee shall be governed by, and construed in accordance with, the law
of the State of New York.

 

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

 

This Guarantee may be terminated at any time by notice by ML & Co. to the
Company given in accordance with the notice provisions of the Agreement,
effective upon receipt of such notice by the Company or such later date as may
be specified in such notice; provided, however, that this Guarantee shall
continue in full force and effect, and shall be irrevocable, with respect to any
payment obligation of REPS arising under any Transaction under and as defined in
the Agreement entered into prior to the effectiveness of such notice of
termination.

This Guarantee becomes effective upon written notice to such effect from ML &
Co., or MLCI on its behalf, to the Company given in accordance with the notice
provisions of the Agreement making specific reference to this Guarantee and the
Agreement.

IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in its
corporate name by its duly authorized representative.

 

 

MERRILL LYNCH & CO., INC.

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

Date:

 

 

 

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

 

Exhibit A2

To Credit Sleeve and Reimbursement Agreement

Form of ML Guarantee for C&I Customers

 

 

GUARANTEE OF MERRILL LYNCH & CO., INC.

WHEREAS, [Reliant Energy Retail Services, LLC][Reliant Energy Solutions East,
LLC], a Delaware limited liability company (“[RERS][RESE]”), and certain of its
affiliates have entered into an agreement with Merrill Lynch Commodities, Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (“MLCI”), and its parent, Merrill Lynch & Co., Inc., a corporation duly
organized and existing under the laws of the State of Delaware (“ML & CO.”),
related to an enhanced credit structure for the retail electric business of
[RERS][RESE] and its affiliates;

WHEREAS, as part of the consideration for the above described agreement, ML &
Co. has agreed to issue this Guarantee, guarantying the obligations of
[RERS][RESE] under the Agreement described below, consistent with the terms and
conditions set forth below.

FOR VALUE RECEIVED, receipt of which is hereby acknowledged, ML & CO. hereby
unconditionally guarantees to [                       ] (the “Company”), the due
and punctual payment of any and all amounts payable by [RERS][RESE], its
successors and permitted assigns, to the extent such successors or permitted
assigns are direct or indirect subsidiaries of RERH Holdings, LLC, a Delaware
limited liability company, under the terms of the [Contract] between the Company
and [RERS][RESE], dated as of [                 ] (the “Agreement”), including,
in case of default, interest on any amount due, when and as the same shall
become due and payable, whether on the scheduled payment dates, at maturity,
upon declaration of termination or otherwise, according to the terms thereof. 
In case of the failure of [RERS][RESE] punctually to make any such payment, ML &
Co. hereby agrees to make such payment, or cause such payment to be made,
promptly upon demand made by the Company to ML & Co.; provided, however that
delay by the Company in giving such demand shall in no event affect ML & Co.’s
obligations under this Guarantee.  This Guarantee shall remain in full force and
effect or shall be reinstated (as the case may be) if at any time any payment
guaranteed hereunder, in whole or in part, is rescinded or must otherwise be
returned by the Company upon the insolvency, bankruptcy or reorganization of
[RERS][RESE] or otherwise, all as though such payment had not been made.

ML & Co. hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Agreement; the
absence of any action to enforce the same; any waiver or consent by the Company
concerning any provisions thereof; the rendering of any judgment against
[RERS][RESE] or any action to enforce the same; or any other circumstances that
might otherwise constitute a legal or equitable discharge of a guarantor or a
defense of a guarantor.  ML & Co. covenants that this guarantee will not be
discharged except by complete payment of the amounts payable under the
Agreement.  This Guarantee shall continue to be effective if [RERS][RESE] merges
or consolidates with or into another entity, loses its separate legal identity
or ceases to exist.

ML & Co. hereby waives diligence; presentment; protest; notice of protest,
acceleration, and dishonor; filing of claims with a court in the event of
insolvency or bankruptcy of [RERS][RESE]; all demands whatsoever, except as
noted in the first paragraph hereof; and any right to require a proceeding first
against [RERS][RESE].

ML & Co. hereby certifies and warrants that this Guarantee constitutes the valid
obligation of ML & Co. and complies with all applicable laws.  This Guarantee
guarantees only payment obligations of [RERS][RESE] and does not guarantee the
performance of any other obligations of, including, but not limited to, physical
delivery or, to the extent applicable, reporting obligations of [RERS][RESE]. 
This Guarantee constitutes a guarantee of payment and not of collection.

This Guarantee shall be governed by, and construed in accordance with, the law
of the State of New York.

 

 

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

 

This Guarantee becomes effective upon written notice to such effect from ML &
Co., or MLCI on its behalf, to the Company (which notice may be given by e-mail)
making specific reference to this Guarantee and the Agreement.

IN WITNESS WHEREOF, ML & Co. has caused this Guarantee to be executed in its
corporate name by its duly authorized representative.

 

 

MERRILL LYNCH & CO., INC.

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

Date:

 

 

 

 

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

 

Exhibit B

To Credit Sleeve and Reimbursement Agreement

List of Accepted Counterparties

[***]

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

***

The content of this Exhibit B (consisting of 6 pages) has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

 

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

 

 

Exhibit C1

To Credit Sleeve and Reimbursement Agreement

Form of EEI Power Purchase and Hedging Contract

 

MASTER POWER PURCHASE AND SALE AGREEMENT

COVER SHEET

This Master Power Purchase and Sale Agreement (“Master Agreement”) is made of
the following date:                    (“Effective Date”).  The Master
Agreement, together with the exhibits, schedules and any written supplements
hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated
collateral, credit support or margin agreement or similar arrangement between
the Parties and all Transactions (including any confirmations accepted in
accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” 
The Parties to this Master Agreement are the following:

Name:  Reliant Energy Power Supply, LLC (“REPS” or “Party A”)

Name:  __________ (“_____” or “Party B”)

 

 

All Notices:

All Notices:

 

 

Street: 1000 Main St., Suite 1100, Houston, 77002

Street:                                                  

 

 

P. O. Box 4455

City:   Houston, TX               Zip: 77210-4455

 

City: _______________ Zip: _______________

 

 

Attn: Contract Administration
Phone:  (713) 497-5855
Facsimile:  (713) 497-9562
Duns:  623988644
Federal Tax ID Number:  204823108

With a copy to:

 

Merrill Lynch Commodities, Inc.

20 East Greenway Plaza, 7th Floor

Houston, Texas 77253-3327

Attn:  Legal

Phone: 713-544-4975

Facsimile:  713-544-5551

Attn: Contract Administration
Phone:                                                 
Facsimile:                                            
Duns:                                                   
Federal Tax ID Number:                    

 

 

Invoices:
Attn:  ERCOT Settlement Accounting, 11th Floor
Phone:  (713) 497-4402
Facsimile:  (713) 497-0098

Invoices:
Attn:                                             
Phone:                                          
Facsimile:                                     

 

 

Scheduling:
Attn:  ERCOT 24 Hour Scheduling
Phone:  (713) 497-1144
Facsimile:  (713) 497-0098

Scheduling:
Attn:                                             
Phone:                                          
Facsimile:                                     

 

 

Payments:
Attn:   ERCOT Settlement Accounting, 11th Floor
Phone:   (713) 497-4402
Facsimile:  (713) 497-0098

Payments:
Attn:                                             
Phone:                                          
Facsimile:                                     

 

 

Version 2.1 (modified 4/25/00)
©COPYRIGHT 2000 by the Edison Electric Institute and National Energy Marketers
Association

 

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

 

Wire Transfer:
BNK:     Mellon Bank — Pittsburgh, PA
ABA:     043 000 261
ACCT:   1194193

Wire Transfer:
BNK:                                             
ABA:                                            
ACCT:                                          

 

 

Credit and Collections:
Attn:  Credit Risk Management
Phone:  (713) 497-1052
Facsimile:  (713) 497-1058

Credit and Collections:
Attn:                                             
Phone:                                          
Facsimile:                                     

 

 

With additional Notices of an Event of Default or Potential Event of Default to:

Attn: Vice President and General Counsel —Trading, Suite 2100
Phone: (713) 497-7063
Facsimile: (713) 537-7063

 

With additional Notices of an Event of Default or Potential Event of Default to:

Attn:                                             
Phone:                                          
Facsimile:                                     

 

The Parties hereby agree that the General Terms and Conditions are incorporated
herein, and to the following provisions as provided for in the General Terms and
Conditions:

Party A Tariff:  FERC Electric Tariff, Original Volume No. 1 Dated:  September
19, 2006  Docket Number:  ER06-1272

Party B Tariff:   Tariff                                                      
     Dated                                        Docket Number
                              

Article Two

 

 

 

Transaction Terms and Conditions

x Optional provision in Section 2.4.   If not checked, inapplicable.

Article Four

 

 

 

Remedies for Failure
to Deliver or Receive

x Accelerated Payment of Damages. If not checked, inapplicable.

Article Five

x Cross Default for Party A:

 

 

Events of Default; Remedies

o Party A:                                       

Cross Default Amount $                   

 

 

 

 

 

 

x  Other Entity:  Merrill Lynch &  
      Co., Inc. (“ML& Co.”)

Cross Default Amount:  $100,000,000

 

 

 

 

 

 

x  Cross Default for Party B:

 

 

 

 

 

 

 

o  Party B:                                      

Cross Default Amount $                   

 

 

 

 

 

 

o  Other Entity:                              

Cross Default Amount $                   

 

 

 

 

 

 

5.6  Closeout Setoff

 

 

 

x   Option A (Applicable if no other selection is made.)  As amended in
Paragraph 10.

o    Option B — Affiliates shall have the meaning set forth in the Agreement
unless otherwise specified as follows:  With respect to Party A, _________; with
respect to Party B, ____________.

 

Version 2.1 (modified 4/25/00)
©COPYRIGHT 2000 by the Edison Electric Institute and National Energy Marketers
Association

 

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

 

 

o    Option C (No Setoff)

Article 8

8.1  Party A Credit Protection:

 

 

Credit and Collateral Requirements

(a)  Financial Information:

 

 

 

o    Option A
o    Option B   Specify: ________________
o    Option C   Specify:                                      

So long as such Financial Information is publicly available through the
Securities Exchange Commission’s EDGAR database or such similar database
maintained by the Securities Exchange Commission, Party B shall not be required
to deliver such Financial Information directly to Party A.

 

 

 

(b)  Credit Assurances:

 

 

 

x   Not Applicable
o    Applicable

 

 

 

(c)  Collateral Threshold:  If applicable, the provisions of Section 8.1 (c) of
the Master Agreement shall be replaced by the provisions of the Collateral Annex
attached hereto.

 

 

 

o    Not Applicable
x   Applicable

 

 

 

(d)  Downgrade Event:

 

 

 

x   Not Applicable
o    Applicable

 

 

 

(e)  Guarantor for Party
B:                                                                                      

 

 

 

Guarantee Amount:  The amount, if any, referenced in the

Guaranty provided by [CP Guarantor], which shall be in the form of Exhibit B,
attached hereto.

 

 

 

8.2  Party B Credit Protection:

 

 

 

(a)  Financial Information:

 

 

 

o    Option A
x   Option B   Specify:  ML&Co.                                          
o        Option C   Specify:                                      

So long as such Financial Information is publicly available through the
Securities Exchange Commission’s EDGAR database or such similar database
maintained by the Securities Exchange Commission, Party A shall not be required
to deliver such Financial Information directly to Party B.

 

 

Version 2.1 (modified 4/25/00)
©COPYRIGHT 2000 by the Edison Electric Institute and National Energy Marketers
Association

 

 

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

 

 

(b)  Credit Assurances:

 

 

 

x   Not Applicable
o    Applicable

 

 

 

(c)  Collateral Threshold:   If applicable, the provisions of Section 8.2 (c) of
the Master Agreement shall be replaced by the provisions of the Collateral Annex
attached hereto.

 

o    Not Applicable
x   Applicable

 

 

 

(d)  Downgrade Event:

 

 

 

x   Not Applicable
o    Applicable

 

 

 

(e)  Guarantor for Party A: ML&Co.

 

 

 

Guarantee Amount:  The amount, if any, referenced in the Guaranty issued by
ML&Co., which shall be in the form of Exhibit A attached hereto.

 

 

Article 10

 

 

 

Confidentiality

x  Confidentiality Applicable

If not checked, inapplicable.

 

 

 

Schedule M

 

 

 

 

o  Party A is a Governmental Entity or Public Power System

 

o  Party B is a Governmental Entity or Public Power System

 

o  Add Section 3.6.  If not checked, inapplicable

 

o  Add Section 8.6.  If not checked, inapplicable

 

Other Changes:   Yes

 

Article One:  General Definitions

SECTION 1.12, “CREDIT RATING” SHALL BE DELETED.  “CREDIT RATING” SHALL HAVE THE
MEANING GIVEN IN THE COLLATERAL ANNEX.

THE FOLLOWING DEFINITIONS ARE AMENDED AS SET FORTH BELOW:

1. Section 1.1 is revised to add the following at the end of such section:
“Notwithstanding the foregoing, “Affiliate” means, with respect to Party A, RERH
Holdings, LLC, and any subsidiary thereof, including Reliant Energy Retail
Holdings, LLC, and Reliant Energy Retail Services, LLC,  and with respect to
Party B,                           [if we know the Affiliates then fill in blank
and if not use “Affiliate”] shall have the meaning given in the first two
sentences of this definition..”

2.  Section 1.50 is amended to delete the reference to Section “2.4” and add
“2.5”.

3.  Section 1.51 is amended to add the phrase “for delivery” immediately before
the phrase “at the Delivery Point” in the second line.

4.  Section 1.53 is amended to (i) delete the phrase “at the Delivery Point”
from the second line and (ii) insert after the phrase “commercially reasonable
manner” in the sixth line, the following phrase “; provided, however if the
Seller is unable after using commercially reasonable efforts to resell all or a
portion of the Product not received by Buyer, the Sales Price with respect to
such unsold Product shall be deemed equal to zero (0)”.

The following shall be added as a new definition:

““1.62  Merger Event” means, with respect to a Party or its Guarantor, as
applicable, that such Party or its Guarantor consolidates or amalgamates with,
or merges with or into, or transfers all or substantially all its assets to, or
reorganizes, reincorporates or reconstitutes into or as, another entity and, at
the time of such consolidation,

 

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amalgamation, merger, transfer, reorganization, reincorporation or
reconstitution:

 

(l)            the resulting, surviving or transferee entity fails to assume all
the obligations of such Party or its Guarantor under this Agreement to which it
or its predecessor was a party; or

(2)           the benefits of any Guaranty fails to extend (without the consent
of the other party) to the performance by such resulting, surviving or
transferee entity of its obligations under this Agreement.”

Article Two:  Transaction Terms and Conditions

Section 2.4 is amended by deleting the words “either orally or” after the words
“agreed to” in line seven.

Section 2.5 is amended by adding the words “regarding any Transaction and the
terms thereof” after the word “Parties” in line three.

Article Four:  Remedies for Failure to Deliver/Receive

The following is added as a new Section 4.3:

“4.3   Suspension of Performance.  Notwithstanding, and in addition to the
remedies provided pursuant to Sections 4.1 and 4.2, if Seller or Buyer fails to
schedule and/or deliver/receive all or part of the Product pursuant to a
Transaction, and such failure is not excused under the terms of the Product or
by the other Party’s failure to perform, then upon one (1) Business Day prior
notice, and for so long as the non-performing Party fails to perform, the
performing Party shall have the right to suspend its performance under any or
all Transactions.”

Article Five:  Events of Default; Remedies

Section 5.1(e) is amended by deleting “hereof;” and replacing it with the
following: “and the Collateral Annex if such failure is not remedied within two
(2) Business Days after written notice”.

Section 5.1(f) is amended in its entirety as follows:  “a Merger Event occurs
with respect to such Party or its Guarantor;”.

Section 5.1(h)(ii) is amended to delete the following phrase from the third and
fourth line thereof:  “and such failure shall not be remedied within three (3)
Business Days after written notice”.

The following is added as an additional Event of Default under Section 5.1:

“Section 5.1(i) an event of default occurs (howsoever determined) with respect
to such Party under any agreement between Party A and Party B under any forward
contract, swap agreement or commodities contract (whether financially or
physically settled) (collectively a “Specified Transaction”), in each case as
defined in the United States Bankruptcy Code, and after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation of, an
acceleration of obligations under, or an early termination of that Specified
Transaction.”

Section 5.2 is amended to (i) reverse the placement of “(i) and “to” in line
three, and  (ii) delete the parenthetical beginning, (“or to the extent that in
the reasonable opinion” through the rest of Section 5.2 and replace with the
following:  “(it being understood, that to the extent in the reasonable opinion
of the Non-Defaulting Party any of the Terminated Transactions may not be
liquidated and terminated under applicable law on the Early Termination Date,
then such Terminated Transactions shall be liquidated and terminated as soon
thereafter as is reasonably practicable).   The Non-Defaulting Party (or its
agent) may determine its Gains and Losses by reference to information either
available to it internally or supplied by one or more third parties including,
without limitation, quotations (either firm or indicative) of relevant rates,
prices, yields, yield curves, volatilities, spreads or other relevant market
data in the relevant markets.  Third parties supplying such information may
include, without limitation, dealers in the relevant markets, information
vendors and other sources of market information.”

Article Seven:  Limitations

Section 7.1 shall be amended by: (a) deleting “Except as set forth herein” from
the first sentence and “Unless expressly herein provided” from the fifth
sentence, (b) adding “Notwithstanding anything in this Agreement to the
contrary” to the beginning of the fifth sentence, and “set forth in this
Agreement” after “indemnity provision” and before “or otherwise”, also in the
fifth sentence, and (c) adding the following language after the word “Equity” in
the

 

 

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fourth sentence: “(except for the remedies provided by the Uniform Commercial
Code for claims of anticipatory repudiation)”.

Article Ten:  Miscellaneous

Section 10.2 (vi) is amended to add the phrase “except as disclosed in each
parties’ or its Guarantor’s, as applicable, SEC filing” at the end of the
sentence in Section 10.2.

Section 10.2 (ix) is amended to read in its entirety as follows:

“(ix) it acknowledges and agrees that (A) Transaction(s) constitute “forward
contracts” within the meaning of title 11 of the United States Code (the
“Bankruptcy Code”); (B) each of Party A and Party B is a “forward contract
merchant” within the meaning of the Bankruptcy Code with respect to any
Transactions that constitute “forward contracts”; (C) all payments made or to be
made by one Party to the other Party pursuant to this Agreement constitute
“settlement payments” within the meaning of the Bankruptcy Code; (D) all
transfers of Performance Assurance by one Party to the other Party under this
Agreement constitute “margin payments” within the meaning of the Bankruptcy
Code; (E) each Party’s rights under Section 5.2, “Declaration of an Early
Termination Date and Calculation of Settlement Amounts”, of this Agreement
constitutes a “contractual right to liquidate” the Transactions within the
meaning of the Bankruptcy Code; and (F) the other party is not a “utility” as
such term is used in Section 366 of the Bankruptcy Code, and each party agrees
to waive and not to assert the applicability of the provisions of Section 366 in
any bankruptcy proceeding wherein such Party is a debtor. In any such
proceeding, each party further agrees to waive the right to assert that the
other party is a provider of last resort;”

 

Section 10.4 is amended to add the phrase “unless a Claim is due to such Party’s
gross negligence or willful misconduct” at the end of the first sentence of
Section 10.4.

Section 10.5 is amended to (i) add the words “shall not be unreasonably withheld
or delayed” after the words “which consent” in the second line; (ii) delete the
words “may be withheld in the exercise of its sole discretion” in the second and
third line; (iii) delete subparagraphs (i) and (ii) in their entirety from the
fourth through sixth lines; and (iv) delete “or (iii)” from the eighth line.”

Section 10.11 is amended to (i)add “Merrill Lynch Commodities, Inc. or” after
the word “than” in the third line;  (ii) add the following phrase after the word
“lenders”: “and their counsel and advisors”; (iii) add the following after the
word “accountants”: “Guarantor”; and (iv) add the following to the end of the
paragraph:  “The Parties hereby acknowledge that the disclosure of price data
only without counterparty name does not contravene this Section 10 so long as
the data is disclosed to an index publisher that publishes the data in
aggregated form and does not identify the Parties.”

 

The following shall be added as a new Section 10.12:

“10.12  With respect to any suit, action or proceedings relating to this
Agreement, each Party irrevocably submits to the non-exclusive jurisdiction of
the courts of the State of New York and the United States District Court located
in the borough of Manhattan in New York City and waives any objection it may
have at any time to the laying of venue of any such proceedings brought in any
such court, waives any claim that such proceedings have been brought in any
inconvenient forum and further waives the right to object, with respect to such
proceedings, that such court does not have any jurisdiction over such Party. 
EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT.”

The following shall be added as a new Section 10.13:

“10.13  From the date of entering into a Transaction under this Master Agreement
and throughout the term of such Transaction, the Parties each warrant and
covenant as follows:

(a)     Absent the agreement of all Parties to the proposed change, the standard
of review for changes to any section of this Master Agreement (including all
Transactions and/or Confirmations) specifying the rate(s) or other material
economic terms and conditions agreed to by the Parties herein, whether proposed
by a Party, a non-party or FERC acting sua sponte, shall be the “public
interest” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas
Service Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra
Pacific Power Co., 350 U.S. 348 (1956)( the “Mobile-Sierra” doctrine).

 

 

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(b)     The Parties, for themselves and their successors and assigns, (i) agree
that this “public interest” standard shall apply to any proposed changes in any
other documents, instruments or other agreements executed or entered into by the
Parties in connection with this Master Agreement and (ii) hereby expressly and
irrevocably waive any rights they can or may have to the application of any
other standard of review, including the “just and reasonable” standard.”

(c)     With respect to Transactions in ERCOT, absent the agreement of all
Parties to the proposed change, the standard of review for changes to any
portion of this Master Agreement or any Transaction entered into hereunder
proposed by a Party, a non-party, or the Public Utility Commission of Texas
acting sua sponte, shall be the “public interest” standard of review set forth
in High Plains Natural Gas Co. v. Railroad Commission, Tex. Cov. Appl. — Austin
1971, writ ref d n.r.e.)(the “High Plains” doctrine).”

 

THE FOLLOWING SHALL BE ADDED AS A NEW SECTION 10:14:

“10.14  CREDIT SLEEVE PROVISIONS:

(a)     Consent to Assignment.  Party B hereby consents to the assignment by
Party A to Merrill Lynch Commodities, Inc. and Merrill Lynch & Co., Inc
(together, the “Merrill Parties”) of all of Party A’s rights under this
Agreement, including all rights to receive payments from Party B under this
Agreement (any such payment, a “Receivable”), as collateral security for Party
A’s obligations to the Merrill Parties in connection with an enhanced credit
structure for Party A’s retail electric business provided by the Merrill Parties
(the “Collateral Assignment”).

 

(b)     Collateral Account.  Party A hereby unconditionally and irrevocably
authorizes and directs Party B to make, and, unless and until otherwise required
by law or this agreement is terminated, Party B hereby agrees to make, any and
all payments in respect of Receivables directly by wire transfer to the account
specified in this Cover Sheet (the “Collateral Account”).  All such payments by
Party B to the Collateral Account shall be free and clear of any deduction,
set-off, netting arrangements or counterclaim, except as expressly provided in
this Agreement.

 

(c)     Notice & Right to Cure Events of Default.  As set forth above, the
Merrill Parties shall be provided with all notices under this Agreement,
including notices of any Potential Event of Default or Event of Default
hereunder.  In the event of a Potential Event of Default or Event of Default in
which Party A is, or may become, the Defaulting Party, the Merrill Parties shall
be permitted, at their option, to cure such default, [(if such event of default
is capable of being cured by either Merrill Party [TO BE USED AS FALLBACK])]
within any grace period applicable to Party A for such Potential Event of
Default or Event of Default.”

Additional Provisions:

The following provisions shall be added to Schedule P: Products and Related
Definitions:

“1.  Other Products and Service Levels.

        If the Parties agree to a service level defined by a different agreement
(i.e., the WSPP agreement, the ERCOT agreement, etc.) for a particular
Transaction, then, unless the Parties expressly state and agree that all the
terms and conditions of such other agreement will apply, such reference to a
service level/product defined by such other agreement means that the service
level for that Transaction is subject to the applicable regional reliability
requirements and guidelines as well as the excuses for performance, Force
Majeure, Uncontrollable Forces, or other such excuses applicable to performance
under such other agreement, to the extent inconsistent with the terms of this
Agreement, but all other terms and conditions of this Agreement remain
applicable including, without limitation, Section 2.2.

 2.   Index Transactions. If the Contract Price for a Transaction is determined
by reference to a third-party information source, then the following provisions
shall be applicable to such Transaction.

(a)   Market Disruption. If a Market Disruption Event occurs during a
Determination Period, the Floating Price for the affected Trading Day(s) shall
be the fallback reference price specified by the Parties if the Parties have
specified such a fallback reference price.  If the Parties did not specify a
fallback reference price the Floating Price shall be determined by reference to
the Floating Price specified in the Transaction for the first Trading Day
thereafter on which no Market Disruption Event exists; provided, however, if the
Floating Price is not so determined within three (3) Business Days after the
first Trading Day on which the Market Disruption Event occurred or existed, then
the Parties shall negotiate in good faith to agree on a Floating Price (or a
method for determining a Floating Price), and if the Parties have not so agreed
on or before the twelfth Business Day following the first Trading Day on which
the Market Disruption Event occurred or existed, then the Floating Price shall
be determined in good faith by taking the average of two dealer quotes obtained
from Reference Market Makers as defined in the Collateral Annex.

 

 

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    “Determination Period” means each calendar month a part or all of which is
within the Delivery Period of a Transaction.

      “Exchange” means, in respect of a Transaction, the exchange or principal
trading market specified in the relevant Transaction.

        “Floating Price” means a Contract Price specified in a Transaction that
is based upon a Price Source.

       “Market Disruption Event” means, with respect to any Price Source, any of
the following events: (a) the failure of the Price Source to announce or publish
the specified Floating Price or information necessary for determining the
Floating price; (b) the failure of trading to commence or the permanent
discontinuation or material suspension of trading in the relevant options
contract or commodity on the Exchange or in the market specified for determining
a Floating Price; (c) the temporary or permanent discontinuance or
unavailability of the Price Source; (d) the temporary or permanent closing of
any Exchange specified for determining a Floating Price; or  (e) a material
change in the formula for or the method of determining the Floating Price.

        “Price Source” means, in respect of a Transaction, the publication (or
such other origin of reference, including an Exchange) containing (or reporting)
the specified price (or prices from which the specified price is calculated)
specified in the relevant Transaction.

      “Trading Day” means a day in respect of which the relevant Price Source
published the Floating Price.

(b)   Corrections to Published Prices.  For purposes of determining a Floating
Price for any day, if the price published or announced on a given day and used
or to be used to determine a relevant price is subsequently corrected and the
correction is published or announced by the person responsible for that
publication or announcement within two (2) years of the original publication or
announcement, either Party may notify the other Party of (i) that correction and
(ii) the amount (if any) that is payable as a result of that correction.  If,
not later than thirty (30) days after publication or announcement of that
correction, a Party gives notice that an amount is so payable, the Party that
originally either received or retained such amount will, not later than three
(3) Business Days after the effectiveness of that notice, pay, subject to any
applicable conditions precedent, to the other Party that amount, together with
interest at the Interest Rate for the period from and including the day on which
payment originally was (or was not) made to but excluding the day of payment of
the refund or payment resulting from that correction.

(c)   Calculation of Floating Price.  For the purposes of the calculation of a
Floating Price, all numbers shall be rounded to three (3) decimal places.  If
the fourth (4th) decimal number is five (5) or greater, then the third (3rd)
decimal number shall be increased by one (1), and if the fourth (4th) decimal
number is less than five (5), then the third (3rd) decimal number shall remain
unchanged.”

 

 

 

 

 

 

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IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly
executed as of the date first above written.

RELIANT ENERGY POWER SUPPLY, LLC

 

 

 

 

 

By:

 

By:

 

Name:

 

Name:

 

Title:

 

Title:

 

 

 

DISCLAIMER:  This Master Power Purchase and Sale Agreement was prepared by a
committee of representatives of Edison Electric Institute (“EEI”) and National
Energy Marketers Association (“NEM”) member companies to facilitate orderly
trading in and development of wholesale power markets.  Neither EEI nor NEM nor
any member company nor any of their agents, representatives or attorneys shall
be responsible for its use, or any damages resulting therefrom.  By providing
this Agreement EEI and NEM do not offer legal advice and all users are urged to
consult their own legal counsel to ensure that their commercial objectives will
be achieved and their legal interests are adequately protected.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit C2

To Credit Sleeve and Reimbursement Agreement

Form of ISDA Power Purchase and Hedging Contract

 

ISDA®

International Swaps and Derivatives Association, Inc.

 

SCHEDULE

 

to the

2002 Master Agreement

 

dated as of        T.B.D.              

 

between

 

RELIANT ENERGY POWER SUPPLY, LLC (“Party A”)

 

and

 

                                                                               
 (“Party B”)

 

 

Part 1

TERMINATION PROVISIONS

 

 

In this Agreement:

 

(a)           “Specified Entity” means in relation to Party A for the purpose
of:

 

                                                                               
SECTION 5(A)(V):     NOT APPLICABLE

                                                                               
SECTION 5(A)(VI):    NOT APPLICABLE

                                                                               
SECTION 5(A)(VII):   NOT APPLICABLE

                                                                               
SECTION 5(B)(V):     NOT APPLICABLE

 

                in relation to Party B for the purpose of:

 

                                                                               
SECTION 5(A)(V):     NOT APPLICABLE

                                                                               
SECTION 5(A)(VI):    NOT APPLICABLE

                                                                               
SECTION 5(A)(VII):   NOT APPLICABLE

                                                                               
SECTION 5(B)(V):     NOT APPLICABLE

 

(b)                                 The “Default Under Specified Transaction”
provision of Section 5(a)(v) of this Agreement and the definition of “Specified
Transaction” of this Agreement will apply only to each of Party A, Party B, and
Party B’s Credit Support Provider but will not apply to Party A’s Credit Support
Provider.

 

(c)                                  The “Cross Default” provisions of Section
5(a)(vi) of this Agreement will apply to both Party A and Party B provided,
however, that Section 5(a)(vi)(1) shall be amended as follows:

 

 

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The words “or other similar condition or event (however described)” in the
first  line of the provision are deleted and the comma in the second line is
replaced with “or”.

 

“Threshold Amount” means (i) with respect to Party A, $100,000,000 (or its
equivalent in another currency) and (ii) with respect to Party B,
$                  (or its equivalent in another currency).

 

(d)                                 The “Automatic Early Termination” provision
of Section 6(a) of this Agreement will not apply.

 

(e)           “Termination Currency” means United States Dollars.

 

(f)                                    “Additional Termination Event(s)” will
not apply.

 

 

Part 2

TAX REPRESENTATIONS

 

(a)                                  Payer Tax Representation.  For the purpose
of Section 3(e) of this Agreement, each of Party A and Party B will make the
following representation:

 

It is not required by any applicable law, as modified by the practice of any
relevant governmental revenue authority, of any Relevant Jurisdiction to make
any deduction or withholding for or on account of any Tax from any payment
(other than interest under Section 9(h) of this Agreement) to be made by it to
the other party under this Agreement.  In making this representation, it may
rely on (i) the accuracy of any representations made by the other party pursuant
to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement
contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and
effectiveness of any document provided by the other party pursuant to Section
4(a)(i) or 4(a)(iii) of this Agreement and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of this Agreement;
provided that it shall not be a breach of this representation where reliance is
placed on clause (ii) herein and the other party does not deliver a form or
document under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.

 

(b)                                 Payee Tax Representations.  For the purpose
of Section 3(f) of this Agreement, Party A and Party B make the
representation(s) specified below, if any:

 

Party A: Party A is a limited liability company organized under the laws of the
State of Delaware and is a resident of the United States of America for U.S. tax
purposes.  Party A’s Federal Tax I.D. number is 20-4823108.

 

Party B: Party B is a [corporation] organized under the laws of the State of
                  and is a resident of the United States of America for U.S. tax
purposes.  Party B’s Federal Tax I.D. number is                  .

 

 

 

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Part 3

AGREEMENT TO DELIVER DOCUMENTS

 

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents, as applicable:

 

Party Required to Deliver Document

 

Form/
Document/
Certificate

 

Date By Which
To Be
Delivered

 

Covered By Section 3(d) Representation

Each party and its Credit Support Provider, as applicable.

 

Copies of documents evidencing necessary corporate or equivalent authorizations
and approvals regarding execution, delivery and performance of this Agreement
and any Credit Support Document.

 

 

Upon request.

 

Yes.

Each party and its Credit Support Provider, as applicable.

 

Certificate of Authority and specimen signatures of individuals executing this
Agreement and any Credit Support Document.

 

 

Upon request.

 

Yes.

Each party.

 

Specimen signatures or other confirming evidence of individuals authorized to
execute Confirmations.

 

 

Upon request.

 

Yes.

Each party and its Credit Support Provider, as applicable.

 

A duly executed original of the Credit Support Annex, and, if specified in Part
4 below, a guarantee in the form specified below, executed by such party’s
Credit Support Provider specified below.

 

 

Upon execution.

 

Yes.

Each party and its Credit Support Provider, as applicable.

 

Audited annual financial statements of such party’s Credit Support Provider, or,
if no Credit Support Provider, such party for each fiscal year prepared in
accordance with generally accepted accounting principles in the country in which
such entity is organized and on a basis consistent with that of the audited
annual financial statements of such entity for its prior fiscal year.

 

As soon as practicable after demand but no later than 120 days after the end of
each fiscal year of a party’s Credit Support Provider if such financial
statement is not available on “EDGAR” or its home page on the World Wide Web at
http://www.ml.com/, with respect to Party A and [Insert Counterparty’s Web
Address], with respect to Party B.

 

Yes.

Each party and its Credit Support Provider, as applicable.

 

Unaudited financial statements of such party’s Credit Support Provider, or, if
no Credit Support Provider, such party for each quarter prepared in accordance
with generally accepted accounting principles in the country in which such
entity is organized and on a basis consistent with that of the annual financial
statements of such entity.

 

As soon as practicable after demand if such financial statement is not available
on “EDGAR” or its home page on the World Wide Web at http://www.ml.com/, with
respect to Party A and [Insert Counterparty’s Web Address], with respect to
Party B.

 

Yes.

 

 

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Part 4

MISCELLANEOUS

 

(a)           Address for Notices.  For the purpose of Section 12(a) of this
Agreement:

 

                Address for notices or communications to Party A:

 

STREET ADDRESS:

 

1000 MAIN, HOUSTON, TX 77002

MAILING ADDRESS:

 

P.O. BOX 4455, HOUSTON, TX 77210-4455

ATTENTION:

 

CONTRACT ADMINISTRATION

FACSIMILE NO.:

 

(713) 497-9561

TELEPHONE NO.:

 

(713) 497-5855

Confirmations:

 

(713) 497-9562 (Facsimile)

Invoices:

 

(713) 497-0098 (Facsimile)

 

With a copy to:

 

Merrill Lynch Commodities, Inc.

20 East Greenway Plaza

7th Floor

Houston, Texas 77253-3327

Attn:  Legal

Fax:  713-544-5551

Phone:  713-544-4975

 

With additional notices of an Event of Default or Potential Event of Default to:

Street Address:

 

1000 Main, Houston, TX 77002

Attention:

 

Vice President and General Counsel

Facsimile No.:

 

(713) 537-7063

Telephone No.:

 

(713) 497-7063

 

Address for notices or communications to Party B:

 

Address:

 

 

Attention:

 

 

Facsimile No.:

 

 

Telephone No.:

 

 

Confirmations:

 

(Facsimile)

 

(b)                                 Process Agent.  For the purpose of Section
13(c) of this Agreement:

 

                Party A appoints as its Process Agent: CT Corporation Systems,
111 Eighth Avenue, New York, New York 10011.

 

                Party B appoints as its Process Agent:                  

 

(c)                                  Offices.  The provisions of Section 10(a)
of this Agreement will apply to this Agreement.

 

(d)                                 Multibranch Party.  For the purpose of
Section 10(b) neither Party A nor Party B is a Multibranch Party.

 

(e)                                  Calculation Agent.  The Calculation Agent
is Party A unless otherwise specified in a Confirmation in relation to the
relevant Transaction.  If Party A is the Defaulting Party, the Calculation Agent
shall be Party B until such time as Party A is no longer a Defaulting Party. 
All determinations by the Calculation Agent are subject to agreement by Party A
and Party B.  If the Parties are unable to agree on a calculation made by a
particular Calculation Agent, then the parties shall appoint another mutually
acceptable Calculation Agent that is a recognized dealer in the relevant
market.  Each party agrees to submit invoices on a monthly basis for amounts due
from the other party.

 

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(f)            Credit Support Document.

 

(i)

With respect to Party A and Party B, the Credit Support Annex attached hereto,
which constitutes a Credit Support Document is incorporated by reference in, and
made part of this Agreement (unless provided otherwise in a Confirmation) as set
forth in full in this Agreement.

 

 

(ii)

With respect to Party A, a Guaranty executed by Party A’s Credit Support
Provider in the form of Exhibit A.

 

 

(iii)

With respect to Party B, a Guaranty executed by Party B’s Credit Support
Provider in form and substance reasonably satisfactory to Party A.

 

(g)                                 Credit Support Provider.

 

Credit Support Provider means in relation to Party A: Merrill Lynch & Co., Inc.
(“ML&Co.”)

 

                                                Credit Support Provider means in
relation to Party B:                 

 

(h)                                 Governing Law.  This Agreement will be
governed by and construed in accordance with the laws of the State of New York
(without reference to choice of law doctrine), as provided in Section 5-1401 of
the New York General Obligations Law.

 

(i)                                     Jurisdiction.  Section 13(b)(i) of this
Agreement is hereby deleted in its entirety and replaced with the following:

 

                                                “(b)         Jurisdiction.  With
respect to any suit, action or proceedings relating to this Agreement
(“Proceedings”), each party irrevocably:

 

submits to the non-exclusive jurisdiction of the courts of the State of New York
and the United States District Court located in the borough of Manhattan in New
York City in accordance with the provisions of Section 5-1402 of the New York
General Obligations Law.”

 

(j)                                     Waiver of Jury Trial.  Section 13 of
this Agreement is hereby amended to add the following as a new Section 13(e) of
this Agreement:

 

                                                “(e)         WAIVER OF JURY
TRIAL.  EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT AND
CLAIM OR RECOVER IN ANY SUCH SUIT, ACTION, CLAIM OR PROCEEDING ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. EACH PARTY (i) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY OR ANY CREDIT SUPPORT
PROVIDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF SUCH A SUIT, ACTION, CLAIM OR PROCEEDING, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND PROVIDE FOR ANY CREDIT SUPPORT
DOCUMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.”

 

(k)                                  Netting of Payments.  Subparagraph (ii) of
Section 2(c) of this Agreement will not apply and therefore, the Multiple
Transaction Payment Netting specified in Section 2(c) of this Agreement will
apply to all Transactions[, except Power Transactions and Gas Transactions.  
Power Transactions and Gas Transactions shall be netted together in accordance
with Parts 7 and 8 of the Schedule.] REVISE ACCORDINGLY, IF USING THE GAS AND/OR
POWER ANNEX

 

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

 

(l)                                     “Affiliate” with respect to Party A,
will mean RERH Holdings, LLC, and any subsidiary thereof, including Reliant
Energy Retail Holdings, LLC,  and Reliant Energy Retail Services, LLC, and with
respect to Party B, will mean                   or if none use [have the meaning
specified in Section 14 of this Agreement.

 

(m)                               No Agency.  The provisions of Section 3(g)
will apply to this Agreement.

 

 

Part 5

OTHER PROVISIONS

 

(a)                                  Absence of Litigation.  Section 3(c) of
this Agreement is hereby amended by: (i) adding in the third line thereof after
the word, “governmental” the words “or regulatory”; (ii) adding the words “in
any material respect except as disclosed in each parties’ or its Credit Support
Provider’s, as applicable, SEC filing” immediately prior to the end thereof; and
(iii) deleting “, to its knowledge,” after “or” in the first line and
reinserting such phrase before “pending” in the first line of such section.

 

(b)                                 Accuracy of Specified Information.  Section
3(d) of this Agreement is hereby deleted in its entirety and replaced with the
following:

 

                                                “All information that is
furnished in writing by or on behalf of it to any of the other parties hereto
is, as of the date of the information, true accurate and complete in every
material respect, or, in the case of audited or unaudited financial statements,
fairly present the financial condition of the relevant entity and have been
prepared in accordance with generally accepted accounting principles,
consistently applied, except as otherwise indicated in the notes of such
financial statements.”

 

(c)                                  Additional Representations.  Section 3 of
this Agreement is hereby further amended by adding at the end thereof the
following subsections (h), (i), and (j):

 

“(h)                           Eligible Contract Participant.  It constitutes an
“Eligible Commercial Entity” and an “Eligible Contract Participant” as such
terms are defined in Sections 1a(11) and 1a(12) (respectively) of the Commodity
Exchange Act, as amended (7 U.S.C. §§ 1a (11), 1a (12) (2000).

 

                (i)                                     Standardization,
Creditworthiness, and Transferability.  The economic terms of this Agreement,
any Credit Support Document to which it is a party and each Transaction have
been individually tailored and negotiated by it.  It has received and reviewed
financial information concerning the other party and has had a reasonable
opportunity to ask questions of and receive answers and information from the
other party concerning such other party, this Agreement, such Credit Support
Document, and such Transaction, and the creditworthiness of the other party was
a material consideration in its entering into or determining the terms of this
Agreement, such Credit Support Document, and such Transaction.  The
transferability of this Agreement, such Credit Support Document, and such
Transaction is restricted as provided herein and therein.

 

                                               
(j)                                     No Reliance.  In connection with the
negotiation of, the entering into, and the confirming of the execution of, this
Agreement, any Credit Support Document to which it is a party, and each
Transaction: (i) it is not relying upon any advice, statements, recommendations
or representations (whether written or oral) of the other party other than the
written representations expressly set forth in this Agreement, in such Credit
Support Document or in the Confirmation of such Transaction; (ii) the other
party has not given to it (directly or indirectly through any other person) any
advice, counsel, assurance, guarantee, or representation whatsoever as to the
expected or projected success, profitability, return, performance, result,
effect, consequence, or benefit (either legal, regulatory, tax, financial,
accounting, or otherwise) of this Agreement, such Credit Support Document, or
such Transaction; (iii) it has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary, and it has made its own investment, hedging, and trading
decisions based upon its own judgment and upon any advice from such advisors as
it has deemed necessary, and not upon any view expressed by

 

 

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

 

the other party; (iv) all trading decisions have been the result of arm’s length
negotiations between the parties and are not intended to preclude either Party
(or any of such party’s Affiliates) from undertaking proprietary trading
activities, including hedging and other transactions relating, directly or
indirectly, to generation capacity owned or controlled by such party or its
Affiliates; (v) it is entering into this Agreement, such Credit Support
Document, and such Transaction with a full understanding of all of the risks
hereof and thereof (economic and otherwise) and it is capable of assuming and
willing to assume (financially and otherwise) those risks and (vi) it has the
capacity to evaluate (internally or through independent professional advice)
this Agreement, any such Credit Support Document and each such Transaction
(including decisions regarding the appropriateness or suitability thereof) and
has made its own decision to enter into this Agreement, such Credit Support
Document and each such Transaction.”

 

(d)                               Provisions Relating to Bankruptcy Code.

 

(A)            Each Party acknowledges and agrees that (i) Power Transaction(s)
and Gas Transaction(s) constitute “forward contracts” within the meaning of
title 11 of the United States Code (the “Bankruptcy Code”); (ii) each of Party A
and Party B is a “forward contract merchant” within the meaning of the
Bankruptcy Code with respect to any Transactions that constitute “forward
contracts”; (iii) all payments made or to be made by one Party to the other
Party pursuant to this Agreement constitute “settlement payments” within the
meaning of the Bankruptcy Code; (iv) all transfers of Credit Support by one
Party to the other Party under this Agreement constitute “margin payments”
within the meaning of the Bankruptcy Code; and (v) each Party’s rights under
Section 6, “Early Termination”, of this Agreement constitutes a “contractual
right to liquidate” the Transactions within the meaning of the Bankruptcy Code.

 

(B)                                      Each Party acknowledges and agrees
that, for purposes of this Agreement, the other Party is not a “utility” as such
term is used in Section 366 of the Bankruptcy Code, and each Party agrees to
waive and not to assert the applicability of the provisions of Section 366 in
any bankruptcy proceeding wherein such Party is a debtor. In any such
proceeding, each Party further agrees to waive the right to assert that the
other Party is a provider of last resort.

 

 

(e)                                  Accounts.  Payments shall be made in United
States Dollars to the following accounts:

 

                                Party A

 

                                Pay:                        Reliant Energy Power
Supply, LLC

                                Bank:                      Mellon Bank —
Pittsburgh, PA

 

                                Fed. ABA No.:      043000261

                                Account No. :       1194193

 

                                Party B

 

                                Pay:       
                                                                                                               

                                Bank:     
                                                                                                               

                                Fed. ABA No.:
                                                                    
                               

                                Account No/

                                CHIPS UID:          
                                                                                               

 

 

(f)                                    Confirmations.  Section 9(e)(ii) is
hereby amended by deleting in its entirety and replacing with the following:

 

                                                “(ii) The parties intend that
they are legally bound by the terms of each Transaction from the moment they

 

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

 

                agree to those terms (whether orally or otherwise).   Party A
shall send to Party B within three (3) Local Business Days after the Transaction
is entered into a Confirmation setting forth the terms of such Transaction. 
Party B shall execute and return the Confirmation to Party A or request
correction in writing of any error within two (2) Local Business Days of
receipt.  Failure of Party B to respond within such period shall not affect the
validity or enforceability of such Transaction and shall be deemed to be an
affirmation of such terms sent.  If Party A fails to send a Confirmation within
three (3) Local Business Days after the Transaction is entered into, a
Confirmation may be forwarded by Party B to Party A.  If Party A objects to any
term(s) of such Confirmation, Party A shall notify Party B in writing of such
objections within two (2) Local Business Days of Party A’s receipt thereof,
failing which Party A shall be deemed to be an affirmation of such terms sent. 
If Party A and Party B each send a Confirmation and neither party objects to the
other party’s Confirmation within two (2) Local Business Days of receipt, Party
A’s Confirmation shall be deemed to be accepted and shall be the controlling
Confirmation, unless (i) Party A’s Confirmation was sent more than three (3)
Local Business Days after the Transaction was entered into and (ii) Party B’s
Confirmation was sent prior to Party A’s Confirmation, in which case Party B’s
Confirmation shall be deemed to be accepted and shall be the controlling
Confirmation.  Failure by either party to send or either party to return an
executed Confirmation or any objection by either party shall not invalidate the
Transaction agreed to by the parties.” However, notwithstanding the prior
paragraph, in the event that any Confirmation for any Transaction contains 
provisions not relating to the commercial terms of the Transaction, which modify
or supplement the general terms and conditions of this Agreement, such
provisions shall not be deemed accepted unless agreed to in writing by the
parties. Failure to send or to return an executed Confirmation or any objection
regarding a Confirmation by either party shall not invalidate the Transaction
agreed to by the parties.”

 

(g)           Illegality.  Section 5(b)(i) is hereby amended by adding in the
first line thereof after the word “provision” and before the comma the words
“(including Part 5(i) Severability of this Schedule).”

 

(h)           Tax Event.  For purposes of this Agreement, Section 5(b)(iii) is
hereby amended to delete the words, “or there is a substantial likelihood that
it will”, as they appear after the word “will” and before the word “on” in the
fourth line thereof.

 

(i)            Severability.  Any provision of this Agreement (including any
Transaction hereunder or any Credit Support Document) which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, such Transaction or such Credit Support
Document or affecting the validity or enforceability of such provision in any
other jurisdiction unless such severance shall substantially impair the benefits
of the remaining portions of this Agreement, such Transaction or such Credit
Support Document or changes the reciprocal obligations of the parties. The
parties hereto shall endeavor in good faith negotiations to replace the
prohibited or unenforceable provision with a valid provision, the economic
effect of which comes as close as possible to that of the prohibited or
unenforceable provision.

 

(j)            Telephone Recording.  Each party to this Agreement acknowledges
and agrees to the taping or electronic recording (“Recording”) of conversations
between the parties regarding any Transaction and the terms thereof to this
Agreement whether by one or the other or both parties, and that any such
Recordings will be retained in confidence, secured from improper access, and may
be submitted as evidence in any suit, action or proceedings relating to this
Agreement or any actual or potential Transaction hereunder.  In the event of any
dispute between the parties relating to an actual or potential Transaction, the
parties may use Recordings and any other “sufficient evidence” (as such term is
defined in Section 5-701(b)(3) of the New York General Obligations Law) that a
contract has been made between the parties as prima facie evidence of the terms
and conditions of such Transaction until such time (if any) as a written
Confirmation has been executed.  Each party waives any further notice of such
monitoring or Recording, and agrees to notify its personnel of such monitoring
or recording and to obtain any necessary consent of such personnel.

 

(k)           Confidentiality.  Unless otherwise agreed, the contents of this
Agreement,  the Confirmations, and all Transactions, hereunder,  as well as all
other documents relating thereto and any information pertaining thereto made
available by either party or its Credit Support Provider(s) to the other party
or its Credit Support Provider(s) is confidential and shall not be disclosed to
any third party (other than the Credit Support Providers), except for such
information (a) as is or may become generally available to the public, (b) as
may be required in response to any regulatory authority or any lawful summons,
subpoena, or otherwise in connection with any litigation or to comply with any
applicable law, order, regulation, ruling, or accounting

 

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

 

                disclosure rule or standard, (c) as may be obtained from a
non-confidential source that disclosed such information in a manner that did
not, to such party’s knowledge, violate its obligations to the non-disclosing
party or its Credit Support Provider(s) in making such disclosure, (d) as may be
furnished to Merrill Lynch Commodities, Inc. (“MLCI”) or the disclosing party’s
Affiliates, and to each of such Person’s auditors, attorneys, advisors, lenders
and their counsel and advisors, or prospective purchasers which are required to
keep the information that is disclosed in confidence or that is disclosed in
connection with communications between the parties under the terms of Section 7,
(e) regarding price, volume or delivery point(s) of a particular
Transaction(s),  as may be disclosed to an energy pricing information
aggregator, provided that the name or any other identifying information relating
to the other party, including unique attributes or requirements thereof, is
redacted and/or otherwise not disclosed, or (f) as may have been disclosed prior
to the effective date of this Agreement.

 

(l)            Transfer.  Section 7 shall be amended by adding “which consent
shall not be unreasonably withheld or delayed” between “of the Party” and
“,except that” in the first sentence of such Section.

 

(m)          Netting.  In the event that any Terminated Transaction cannot be
aggregated and netted against all other Terminated Transactions under Section
6(e) of the Agreement, such excluded Terminated Transactions shall be aggregated
and netted amongst themselves to the fullest extent permitted by law.

 

(n)           Limitation of Liability.  UNLESS EXPRESSLY HEREIN PROVIDED, NO
PARTY SHALL BE LIABLE UNDER THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, INCLUDING CONSEQUENTIAL LOST PROFITS OR
OTHER CONSEQUENTIAL BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR
CONTRACT OR OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS
HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE
CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER
SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE. TO THE EXTENT
ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT, AND THE DAMAGES
CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.

 

(o)           Method of Notice. Section 12(a)(ii) of the Agreement is deleted in
its entirety.

 

Part 6

ADDITIONAL PROVISIONS FOR

COMMODITY DERIVATIVE TRANSACTIONS

 

(a)                                  Amendments to ISDA Commodity Definitions

Definitions.  This Agreement and each Transaction are subject to the 2005 ISDA
Commodity Definitions (the “Definitions”), each as published by the
International Swaps and Derivatives Association, Inc. (“ISDA”), and will be
governed in all respects by the Definitions.  The Definitions are incorporated
herein by reference in and made a part of, this Agreement as if set forth in
full herein.  In the event of any inconsistency between the provisions of this
Master Agreement (including the Schedule) and the Definitions, this Master
Agreement (including the Schedule) will prevail.  In the event of any
inconsistency between the provisions of a Confirmation and this Master Agreement
(including the Schedule) or the Definitions, the Confirmation will prevail for
the purpose of such Transaction.

 

(b)           The “Market Disruption Events” specified in Section 7.4(d)(i) of
the Definitions shall apply, except as otherwise specifically provided herein or
specified in a Confirmation.

 

(c)           The “Disruption Fallbacks” specified in Section 7.5 of the
Definitions shall apply, except as otherwise specifically provided in a
Confirmation.

 

                “Additional Market Disruption Events” shall apply only if so
specified in the relevant Confirmation.

 

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

 

Part 7

PHYSICALLY SETTLED POWER TRANSACTIONS

 

Pursuant to ARTICLE XIV of the 2005 ISDA Commodity Definitions, Sub-Annex F
(“Power Annex”) is incorporated into, the Agreement as a new Part 7 to the
Agreement; provided, however, that the following elections set forth in “(j)
Elective Provisions” and “(k) Other Provisions” below shall be applicable to
such Part 7.  All references to “Part[6]” in Sub-Annex F shall be replaced with
“Part 7.”

 

(j)    Elective Provisions

1.               (a)(i)          Applicability of Part 7 to Outstanding Power
Transactions.  If not checked, not applicable.

2.               (a)(ii)          Applicability of Outstanding Credit Support
held by a party in connection with Outstanding Power Transactions.  If not
checked, not applicable.

3.               (c)    X     Accelerated Payment Damages.  If not checked, not
applicable.

4.               (d)(ii):  Timeliness of Payment

                                   Option A

                                   Option B[CHECK THIS BOX IF NOT USING GAS
ANNEX]

                           X     See Gas Annex[DELETE THIS BOX IF NOT USING GAS
ANNEX]

                        If neither is checked, Option B shall be deemed to
apply.

5.               (h)(i):   Wholesale Power Tariffs

                           X     Party A Electric Tariff.  FERC Electric Tariff,
Original Volume No. 1  Dated:  September 19, 2006   Docket Number:  ER06-1272

                                   Party B Electric Tariff. 
[Tariff/Date/Docket]

                        If not checked, not applicable.

6.     (h)(ii)     X     Applicability of Severability provision.  If not
checked, not applicable.

7.               (h)(iii)    X     Applicability of FERC Standard of Review and
Certain Covenants and Waivers.  If not checked, not applicable.

 

(k)                                  Other Provisions. Notwithstanding anything
in the Agreement to the contrary, including the Power Annex hereby incorporated
as Part 7 to the Agreement and the Schedule to the Master Agreement, the
following provisions shall be deemed to amend and/or supplement the provisions
of the ISDA Power Annex set forth as a new Part 7 to the Agreement:

 

(i)                                     Part 7(b)(iii) Force Majeure is amended
by deleting the last sentence of that provision and replacing it with the
following:

 

                                                                                                   
“If the pre-printed form portion of this Agreement is the 2002 ISDA Master
Agreement form, Section 5(b)(ii) of this Agreement and the concept of “Force
Majeure Event” as used elsewhere in this Agreement shall not apply to any Power
Transaction.”

 

(ii)                                  Part 7(c)(iii) Limitation on Condition
Precedent is amended by deleting the section in inverted commas and replacing it
with the following:

 

“(provided, however, that in relation to any Transaction that is a Power
Transaction, the Non-Defaulting Party may suspend performance of any or all
Power Transactions only after providing written notice to the Defaulting Party
and provided further that if an Event of Default or a Potential Event of Default
has occurred and is continuing for longer than ten (10) NERC Business Days
without an Early Termination Date being designated, then the condition specified
in this clause (1) shall cease to be a condition precedent to the obligations
under Section 2(a)(i)).”

 

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

 

(iii)                               Part 7(c)(iv) Suspension of Performance
shall be added as a new section as follows:

“(iv) Suspension of Performance.  Notwithstanding, and in addition to the
remedies provided pursuant to Part 7(c)(i) and 7(c)(ii), if Seller or Buyer
fails to schedule and/or deliver/receive all or part of the Product pursuant to
a Transaction, and such failure is not excused under the terms of the Product or
by the other party’s failure to perform, then upon one (1) Local Business Day
prior written notice, and for so long as the non-performing party fails to
perform, the performing party shall have the right to suspend its performance
under any or all Transactions.”

(iv)                              Part 7(d)(v) Disputes and Adjustments of
Invoices shall be added as a new section as follows:

“(v) Disputes and Adjustments of Invoices.  With respect to any Power
Transaction, a party may, in good faith, dispute the correctness of any invoice
or any adjustment to an invoice, rendered under this Agreement or adjust any
invoice for any arithmetic or computational error within twelve (12) months of
the date the invoice, or adjustment to an invoice, was rendered.  In the event
an invoice or portion thereof, or any other claim or adjustment arising
hereunder, is disputed, payment of the undisputed portion of the invoice shall
be required to be made when due, with notice of the objection given to the other
party.  Any invoice dispute or invoice adjustment shall be in writing and shall
state the basis for the dispute or adjustment.  Payment of the disputed amount
shall not be required until the dispute is resolved.  Upon resolution of the
dispute, any required payment shall be made within two (2) Business Days of such
resolution along with interest accrued at the Interest Rate from and including
the due date to but excluding the date paid.  Inadvertent overpayments shall be
returned upon request or deducted by the party receiving such overpayment from
subsequent payments, with interest accrued at the Interest Rate from and
including the date of such overpayment to but excluding the date repaid or
deducted by the party receiving such overpayment.  Any dispute with respect to
an invoice is waived unless the other party is notified in accordance with this
section within twelve (12) months after the invoice is rendered or any specific
adjustment to the invoice is made.  If an invoice is not rendered within twelve
(12) months after the close of the month during which performance of a
Transaction occurred, the right to payment for such performance is waived.”

 

(v)                                 Part 7(h)(iii) Miscellaneous to this
Agreement is amended by inserting the following as a new subparagraph:

“(E)  With respect to Transactions in ERCOT, absent the agreement of all Parties
to the proposed change, the standard of review for changes to any portion of
this Agreement or any Transaction entered into hereunder proposed by a Party, a
non-party, or the Public Utility Commission of Texas acting sua sponte, shall be
the “public interest” standard of review set forth in High Plains Natural Gas
Co. v. Railroad Commission, Tex. Cov. Appl. — Austin 1971, writ ref d
n.r.e.)(the “High Plains” doctrine).”

(vi)          Part 7(i)(ii)(B) shall be deleted and replaced with the following:

“(B) With respect to all Power Transactions, the words “(or to deliver or
receive the Product, the exclusive remedy for which is provided in clause (c) of
Part 7 of the Schedule)” are hereby added at the end of the parenthetical of
Section 5(a)(ii)(1) of this Agreement.”

(vii)                           Part 7(i)(iv) Definitions:

 “Sales Price” is amended to (i) delete the phrase “at the Delivery Point” from
the second line and (ii) insert after the phrase “commercially reasonable
manner” in the sixth line, the following phrase “; provided, however if the
Seller is unable after using commercially reasonable efforts to resell all or a
portion of the Product not received by Buyer, the Sales Price with respect to
such unsold Product shall be deemed equal to zero (0)”.

(viii)        Part 7(i)(iv) Definitions is amended by adding the following
definitions:

 “Claims” means all third party claims or actions, threatened or filed and,
whether groundless, false, fraudulent or otherwise, that directly or indirectly
relate to the subject matter of an indemnity, and the resulting losses, damages,

 

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

 

expenses, attorney’s fees and court costs whether incurred by settlement or
otherwise, and whether such claims or actions are threatened or filed prior to
or after the termination of this Agreement.

 

(ix)                                Part 7(i) Certain Modifications to this
Agreement is amended by inserting the following as new subparagraphs:

(v)           Tax Event:  Section 5(b)(iii).  With respect to any Power
Transaction, Section 5(b)(iii) is hereby deleted, and the concept of “Tax Event”
as used elsewhere in this Agreement shall not apply to any Power Transactions.

(vi)          Miscellaneous:  Section 9.  Section 9 of this Agreement is hereby
amended by adding the following as a new subsection:

“ (i)                 Other Products and Service Levels.

If the Parties agree to a service level defined by a different agreement (i.e.,
the ERCOT agreement, etc.) for a particular Transaction, then, unless the
Parties expressly state and agree that all the terms and conditions of such
other agreement will apply, such reference to a service level/product defined by
such other agreement means that the service level for that Transaction is
subject to the applicable regional reliability requirements and guidelines as
well as the excuses for performance, Force Majeure, Uncontrollable Forces, or
other such excuses applicable to performance under such other agreement, to the
extent inconsistent with the terms of this Agreement, but all other terms and
conditions of this Agreement remain applicable.”

 

[Delete if not using Gas Annex]Part 8

PHYSICALLY SETTLED NATURAL GAS TRANSACTIONS

 

Pursuant to ARTICLE XIII of the 2005 ISDA Commodity Definitions, Sub-Annex E
(“Gas Annex”) is hereby deemed to be part of, and incorporated into, the
Agreement as a new Part 8 to the Agreement; provided, however, that the
following elections set forth in “(l) Elective Provisions” “(m) Notices for Gas
Transactions” and “(n) “Other Provisions/Modifications to this Gas Annex”.  All
references to “Part [6]” in Sub-Annex E shall be replaced with “Part 8”.

 

(l)            Elective Provisions

 

1. (a)(ii) — Outstanding Gas Transactions. This Gas Annex shall apply to the
following pre-existing Gas Transactions pursuant to clause (a)(ii):

 

          Option A: All Gas Transactions outstanding between the parties as of
the date this Gas Annex becomes effective.

 

          Option B: The Gas Transactions listed in Schedule 1 to this Gas Annex.

 

          Option C: None of the Gas Transactions between the parties that were
executed prior to the date this Gas Annex becomes effective.

 

   X      Option D: Not applicable.

 

If none of the above options is selected, Option A shall apply.

 

2. (a)(iii) — Outstanding Gas Credit Support

 

          Outstanding Gas Credit Support held by a party in connection with
Outstanding Gas Transactions shall be deemed to have been delivered under and in
connection with this Agreement pursuant to clause (a)(iii).

 

If not checked, not applicable.

 

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

 

 

3. (b)(ii) — Performance Obligation (remedy for breach of Firm obligation)

 

   X     Option A: Cover Standard

 

          Option B: Spot Price Standard

 

If neither option is selected, Option A shall apply.

 

4. (e) — Taxes

 

   X     Option A: Buyer Pays At and After Delivery Point

 

          Option B: Seller Pays Before and At Deliver Point

 

If neither option is selected, Option A shall apply.

 

5. (f)(ii) — Payment Date

 

          Option A: the later of the 25th Day of Month following Month of
delivery or 10 Days after receipt of the invoice by Buyer (provided that if the
Payment Date is not a Local Business Day, payment is due on the next Local
Business Day following that date).

 

          Option B: the later of the          Day of Month following Month of
delivery or 10 Days after receipt of the invoice by Buyer (provided that if the
Payment Date is not a Local Business Day, payment is due on the next Local
Business Day following that date).

 

          Option C: Notwithstanding anything to the contrary in the Schedule,
payments with respect to both Gas Transactions and Power Transactions (as
defined separately in the Schedule) will be netted and payable on or before the
later of the 20th Day of Month following Month of delivery or 10 Days after
receipt of the invoice by Buyer (provided that if the Payment Date is not a
Local Business Day, payment is due on the next Local Business Day following that
date).

 

   X     Option D: Notwithstanding anything to the contrary in the Schedule,
payments with respect to both Gas Transactions and Power Transactions (as
defined separately in the Schedule) will be netted and payable on or before the
later of the 25th Day of Month following Month of delivery or 10 Days after
receipt of the invoice by Buyer (provided that if the Payment Date is not a
Local Business Day, payment is due on the next Local Business Day following that
date).

 

If none of the above options is selected, Option A shall apply.

 

6. (k)(xxii) — Alternative to Spot Price Index. The parties have selected the
following alternative index as the Spot Price Index:                 . If no
index is specified, the Spot Price Index specified in clause (l)(xxi) applies.

 

(m)          Notices for Gas Transactions

 

PARTY A

PARTY B

Invoices:

Invoices:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

Attn: Gas Accounting

Attn:

Phone: 713-497-4143

Phone:

Facsimile: 713-497-9663

Facsimile:

 

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

 

Nominations:

Nominations:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

Attn:

Attn:

Phone:

Phone:

Facsimile:

Facsimile:

 

 

Confirmations:

Confirmations:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

Attn: Contract Administration

Attn:

Phone: 713-497-3639

Phone:

FACSIMILE: 713-497-9562 

Facsimile:

 

 

Option Exercise:

Option Exercise:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

As set forth in Part 4 of the Schedule unless otherwise set forth below:

Attn:

Attn:

Phone:

Phone:

Facsimile:

Facsimile:

 

 

o Wire Transfer - or - o ACH (check one box):

o Wire Transfer - or - o ACH (check one box):

Bank:

 

   Bank:

 

ABA:

 

   ABA:

 

Account:

 

   Account:

 

Other Details:

 

   Other Details:

 

 

(n)                                 Other Provisions/Modifications to this Gas
Annex.

 

(i)                                     Part 8(b)(ii) Option A Cover Standard is
amended by adding the following phrase after the phrase   “and no such
replacement or sale is available”: “or the non-breaching party elects, at its
sole option not to replace Gas or sell Gas”.

 

(ii)           Part 8(b)(v) Limitation on Condition Precedent shall be added as
a new section.

 

“(iv)        Limitation on Condition Precedent.  Section 2(a)(iii) of this
Agreement is hereby amended by adding the following phrase at the end of clause
(1) immediately before the last comma of such phrase:

 

“(provided, however, that in relation to any Transaction that is a Gas
Transaction, the Non-Defaulting Party may suspend performance of any or all Gas
Transactions only after providing written notice to the Defaulting Party and
provided further that if an Event of Default or a Potential Event of Default has
occurred and is continuing for longer than ten (10) Business Days without an
Early Termination Date being designated, then the condition specified in this
clause (1) shall cease to be a condition precedent to the obligations under
Section 2(a)(i)).”

 

(iii)                               Part 8(f)(vi) shall be added as a new
section.

 

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

 

                                “(vi)  Notwithstanding, and in addition, to the
remedies provided pursuant to Part 8(b), if Seller or Buyer fails to schedule
and/or deliver/receive all or part of the Firm Gas pursuant to a Transaction,
and such failure is not excused by Force Majeure (or for any other reason which
excuses performance of a Firm obligation), then upon one (1) Business Day prior
written notice, and for so long as the non-performing party fails to perform,
the performing party shall have the right to suspend its performance under any
or all transactions between the parties for the purchase and sale of Gas.”

 

(iv)                              Part 8(g)(i) shall be amended by adding the
words “at and” after the word “Gas” in line three.

 

(v)                                 Part 8 (j) shall be amended by adding the
following as new provisions:

 

“(iv)  Tax Event: Section 5(b)(iii).  With respect to any Gas Transaction,
Section 5(b)(iii) is hereby deleted, and the concept of “Tax Event” as used
elsewhere in this Agreement shall not apply to any Gas Transactions.”

 

 

Part 9 [change to Part 8 if not using Gas Annex]

 

(a)                                  Consent to Assignment.  Party B hereby
consents to the assignment by Party A to Merrill Lynch Commodities, Inc. and
Merrill Lynch & Co., Inc (together, the “Merrill Parties”) of all of Party A’s
rights under this Agreement, including all rights to receive payments from Party
B under this Agreement (any such payment, including payments under Section 2 and
Section 6 of the Agreement, a “Receivable”), as collateral security for Party
A’s obligations to the Merrill Parties in connection with an enhanced credit
structure for Party A’s retail electric business provided by the Merrill Parties
(the “Collateral Assignment”).

 

(b)                                 Collateral Account.  Party A hereby
unconditionally and irrevocably authorizes and directs Party B to make, and,
unless and until otherwise required by law or this agreement is terminated,
Party B hereby agrees to make, any and all payments in respect of Receivables
directly by wire transfer to the account specified in Part 5(e) of this Schedule
(the “Collateral Account”).  All such payments by Party B to the Collateral
Account shall be free and clear of any deduction, set-off, netting arrangements
or counterclaim, except as expressly provided pursuant to this Agreement.

 

(c)                                  Notice & Right to Cure Events of Default. 
Pursuant to Part 4(a) of this Schedule, the Merrill Parties shall be provided
with all notices under this Agreement, including notices of any Potential Event
of Default, Event of Default or Termination Event hereunder.  In the event of a
Potential Event of Default or Event of Default in which Party A is, or may
become, the Defaulting Party, or a Termination Event in respect of which Party A
is the Affected Party, the Merrill Parties shall be permitted, at their option,
to cure such default or Termination Event, within any grace period applicable to
Party A for such Potential Event of Default, Event of Default or Termination
Event.

 

 

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

 

 

SIGNATURE PAGE

 

OF THE

 

SCHEDULE

 

TO THE

 

2002 MASTER AGREEMENT

 

BETWEEN

 

RELIANT ENERGY POWER SUPPLY, LLC (“PARTY A”)

 

AND

 

_____________________ (“PARTY B”)

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this document as of the
date specified on the first page hereof.

 

Reliant Energy Power Supply, LLC

 

 

 

By:

 

By:

 

 

 

 

 

Name:

 

Name:

 

 

 

 

 

Title:

 

Title:

 

 

 

 

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

 

Exhibit C3

To Credit Sleeve and Reimbursement Agreement

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

 

MASTER POWER PURCHASE AND SALE AGREEMENT

COVER SHEET

This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of
the following date:                      (“Effective Date”).  The Master
Agreement, together with the exhibits, schedules and any written supplements
hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated
collateral, credit support or margin agreement or similar arrangement between
the Parties and all Transactions (including any confirmations accepted in
accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” 
The Parties to this Master Agreement are the following:

Name:  Reliant Energy Power Supply, LLC (“REPS” or “Party A”)

Name:                                (“Party B”)

 

 

All Notices:

All Notices:

 

 

Street: 1000 Main St., Suite 1100, Houston, 77002

Street:                                                  

 

 

P. O. Box 4455

City:   Houston, TX               Zip: 77210-4455

 

City: _______________ Zip: _______________

 

 

Attn: Contract Administration
Phone:  (713) 497-5855
Facsimile:  (713) 497-9562
Duns:  623988644
Federal Tax ID Number:  20-4823108

Attn: Contract Administration
Phone:
Facsimile:
Duns:                                                   
Federal Tax ID Number:

 

 

Invoices:
Attn:  ERCOT Settlement Accounting, 11th Floor
Phone:  (713) 497-4402
Facsimile:  (713) 497-0098

Invoices:
Attn:
Phone:
Facsimile:

 

 

Scheduling:
Attn:  ERCOT 24 Hour Scheduling
Phone:  (713) 497-1144
Facsimile:  (713) 497-0098

Scheduling:
Attn:                                             
Phone:                                          
Facsimile:                                     

 

 

Payments:
Attn:   ERCOT Settlement Accounting, 11th Floor
Phone:   (713) 497-4402
Facsimile:  (713) 497-0098

Payments:
Attn:
Phone:
Facsimile:

 

 

Wire Transfer:
BNK:     Mellon Bank — Pittsburgh, PA
ABA:     043 000 261
ACCT:   119 4193

Wire Transfer:
BNK:
ABA:
ACCT:

 

 

 

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

 

Credit and Collections:
Attn:  Credit Risk Management, 11th Floor
Phone:  (713) 497-1052
Facsimile:  (713) 497-1058

Credit and Collections:
Attn:
Phone:
Facsimile:

 

 

With additional Notices of an Event of Default or Potential Event of Default to:

Attn: Vice President and General Counsel
Phone: (713) 497-7063
Facsimile: (713) 537-7063

 

With additional Notices of an Event of Default or Potential Event of Default to:

Attn:
Phone:
Facsimile:

 

The Parties hereby agree that the General Terms and Conditions are incorporated
herein, and to the following provisions as provided for in the General Terms and
Conditions:

Party A Tariff:   FERC Electric Tariff, Original Volume No. 1  Dated:  September
19, 2006  Docket Number: ER06-1272

Party B Tariff:   No Tariff

Article Two

 

 

 

 

Transaction Terms and Conditions

 

x Optional provision in Section 2.4.If not checked, inapplicable.

 

 

 

Article Four

 

 

 

 

Remedies for Failure
to Deliver or Receive

 

x Accelerated Payment of Damages. If not checked, inapplicable.

 

 

 

Article Five

 

o Cross Default for Party A: Not Applicable

 

 

 

 

 

 

 

Events of Default; Remedies

 

o Party A:

 

Cross Default Amount

 

 

 

 

 

 

 

o Other Entity:

 

Cross Default Amount

 

 

 

 

 

 

 

o Cross Default for Party B: Not Applicable

 

 

 

 

 

 

 

 

 

o Party B:

 

Cross Default Amount

 

 

 

 

 

 

 

o Other Entity:

 

Cross Default Amount

 

 

 

 

 

 

 

5.6 Closeout Setoff

 

 

 

 

 

 

 

 

 

x Option A (Applicable if no other selection is made.)

 

 

 

 

 

o Option B — Affiliates shall have the meaning set forth in the Agreement unless
otherwise specified as follows: 

 

 

 

 

 

 

 

 

 

o Option C (No Setoff)

 

 

 

 

 

 

 

Article 8

 

8.1 Party A Credit Protection:

 

 

Credit and Collateral Requirements

 

   (a) Financial Information:

 

 

 

 

x Option A
o Option B Specify:
o Option C Specify:

 

 

 

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

 

 

 

(b) Credit Assurances:

 

 

 

 

 

 

 

 

 

x Not Applicable
o Applicable

 

 

 

 

 

 

 

 

 

(c) Collateral Threshold:

 

 

 

 

 

 

 

 

 

x Not Applicable
o Applicable

 

 

 

 

 

 

 

 

 

(d) Downgrade Event:

 

 

 

 

x Not Applicable
o Applicable

 

 

 

 

 

 

 

 

 

(e) Guarantor for Party B: Not Applicable

 

 

 

 

 

 

 

 

 

Guarantee Amount: Not Applicable

 

 

 

 

 

 

 

 

 

8.2 Party B Credit Protection:

 

 

 

 

 

 

 

 

 

(a) Financial Information:

 

 

 

 

 

 

 

 

 

o Option A
x Option B Specify: RERH Holdings, LLC
o Option C Specify:

So long as such Financial Information is publicly available through the
Securities Exchange Commission’s EDGAR database or such similar database
maintained by the Securities Exchange Commission, Party B shall not be required
to deliver such Financial Information directly to Party B.

 

 

 

 

 

 

 

 

 

(b) Credit Assurances:

 

 

 

 

 

 

 

 

 

x Not Applicable
o Applicable

 

 

 

 

 

 

 

 

 

(c) Collateral Threshold:

 

 

 

 

 

 

 

 

 

x Not Applicable
o Applicable

 

 

 

 

 

 

 

 

 

(d) Downgrade Event:

 

 

 

 

 

 

 

 

 

x Not Applicable
o Applicable

 

 

 

 

 

 

 

 

 

(e) Guarantor for Party A: Not Applicable

 

 

 

 

 

 

 

 

 

Guarantee Amount: Not Applicable

 

 

 

 

 

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

 

Article 10

 

 

 

 

Confidentiality

 

x Confidentiality Applicable

 

If not checked, inapplicable.

Schedule M

 

 

 

 

 

 

o Party A is a Governmental Entity or Public Power System

 

 

 

 

o Party B is a Governmental Entity or Public Power System

 

 

 

 

o Add Section 3.6. If not checked, inapplicable

 

 

 

 

o Add Section 8.6. If not checked, inapplicable

 

 

 

Other Changes:   Yes

 

Article One:  General Definitions

THE FOLLOWING DEFINITIONS ARE AMENDED AS SET FORTH BELOW:

Section 1.1 is revised to add the following at the end of such section:
“Notwithstanding the foregoing, “Affiliate” means, with respect to Party A, RERH
Holdings, LLC, and any subsidiary thereof, including Reliant Energy Retail
Holdings, LLC, and Reliant Energy Retail Services, LLC, and with respect to
Party B, shall have the meaning given in the first two sentences of this
definition.”

1.  Section 1.50 is amended to delete the reference to Section “2.4” and add
“2.5”.

2.  Section 1.51 is amended to add the phrase “for delivery” immediately before
the phrase “at the Delivery Point” in the second line.

3.  Section 1.53 is amended to delete the phrase “at the Delivery Point” from
the second line and (ii) insert after the phrase “commercially reasonable
manner” in the sixth line, the following phrase “; provided, however if the
Seller is unable after using commercially reasonable efforts to resell all or a
portion of the Product not received by Buyer, the Sales Price with respect to
such unsold Product shall be deemed equal to zero (0)”.

The following shall be added as a new definition:

“1.62  “Merger Event” means, with respect to a Party, such Party consolidates or
amalgamates with, or merges into or with, or transfers all or substantially all
of its assets to, or reorganizes, reincorporates or reconstitutes into or as,
another entity and at the time of such consolidation, amalgamation, merger,
transfer, reoganization, reincorporation or reconstitution the resulting,
surviving or transferee entity fails to assume all the obligations of such
Party.

Article Two: Transaction Terms and Conditions

Section 2.4 is amended by deleting the words “either orally or” after the words
“agreed to” in line seven.

Section 2.5 is amended by adding the words “regarding any Transaction and the
terms thereof” after the word “Parties” in line three.

Article Four:  Remedies for Failure to Deliver/Receive

The following is added as a new Section 4.3:

“4.3   Suspension of Performance.  Notwithstanding, and in addition to the
remedies provided pursuant to Sections 4.1 and 4.2, if Seller or Buyer fails to
schedule and/or deliver/receive all or part of the Product pursuant to a
Transaction, and such failure is not excused under the terms of the Product or
by the other Party’s failure to perform, then upon one (1) Business Day prior
notice, and for so long as the non-performing Party fails to perform, the
performing Party shall have the right to suspend its performance under any or
all Transactions.”

Article Five:  Events of Default; Remedies

5.1  Section 5.1(f) is amended in its entirety as follows:  “a Merger Event
occurs with respect to such Party;”.

5.2          Section 5.2 is amended to (i) reverse the placement of “(i)” and
“to” in line three, and (ii) delete the parenthetical beginning, “(or, to the
extent that in the reasonable opinion” through the rest of Section 5.2 and
replace with the

 

 

 

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

 

 

 

                         following: “(it being understood, that to the extent in
the reasonable opinion of the Non-Defaulting Party any of the Terminated
Transactions may not be liquidated and terminated under applicable law on the
Early Termination Date, then such Terminated Transactions shall be liquidated
and terminated as soon thereafter as is reasonably practicable.    The Non-
Defaulting Party (or its agent) may determine its Gains and Losses by reference
to information either available to it internally or supplied by one or more
third parties including, without limitation, quotations (either firm or
indicative) of relevant rates, prices, yields, yield curves, volatilities,
spreads or other relevant market data in the relevant markets.  Third parties
supplying such information may include, without limitation, dealers in the
relevant markets, information vendors and other sources of market information.”

Section 5.6(A) shall be deleted in its entirety and replaced with the
following:  “Party B shall make each payment due under this Agreement without
deduction, set-off or counterclaim, except (A) as specifically provided in
Article 6, and (B) that Party B, if it is the Non-defaulting Party shall be
entitled to set off the Termination Payment owed by Party B to Party A under
this Agreement (whether pursuant to Article 6 or under any other provision under
this Agreement) against amounts owed by Party A to Party B under this Agreement
(whether pursuant to Article 6 or under any other provision under this
Agreement).  Party A shall make each payment due under this Agreement without
deduction, set-off counterclaim, except (A) as specifically provided in Article
6 , and (B) that Party A, if Party A is the Non-defaulting Party shall be
entitled to set off the Termination Payment owed by Party A to Party B under
this Agreement (whether pursuant to Article 6 or under any other provision under
this Agreement) against amounts owed by Party B to Party A under this Agreement
(whether pursuant to Article 6 or under any other provision under this
Agreement).  For the avoidance of doubt:

(A)      the term “Party A” means Reliant Energy Power Supply, LLC (and any
other Person that succeeds to all of the rights and obligations of Reliant
Energy Power Supply, LLC under this Agreement in accordance with its terms), and
‘Party A’ shall in no event include any of its affiliates or any other Person
except as stated above; and

(B)        the term “Party B” means [insert name of Party B] (and any other
Person that succeeds to all of the rights and obligations of [insert name of
Part B] under this Agreement in accordance with its terms), and ‘Party B’ shall
in no event include any of its affiliates or any other Person except as stated
above.

Article Seven:  Limitations

7.1   Section 7.1 shall be amended by: (a) deleting “Except as set forth herein”
from the first sentence and “Unless expressly herein provided” from the fifth
sentence, (b) adding  “Notwithstanding anything in this Agreement to the
contrary” to the beginning of the fifth sentence, and “set forth in this
Agreement’ after “indemnity provisions” and before “or otherwise”, also in the
fifth sentence, and (c) adding the following language after the word “Equity” in
the fourth sentence: “except for the remedies provided by the Uniform Commercial
Code for claims of anticipatory repudiation”.

 

Article Ten:  Miscellaneous

Section 10.2(vi) is amended to add the phrase “except as disclosed in each
parties’ or its Guarantor’s, as applicable, SEC filing” at the end the of
sentence in Section 10.2

Section 10.2 (ix) is amended to read in its entirety as follows:

“(ix) it acknowledges and agrees that (A) Transaction(s) constitute “forward
contracts” within the meaning of title 11 of the United States Code (the
“Bankruptcy Code”); (B) each of Party A and Party B is a “forward contract
merchant” within the meaning of the Bankruptcy Code with respect to any
Transactions that constitute “forward contracts”; (C) all payments made or to be
made by one Party to the other Party pursuant to this Agreement constitute
“settlement payments” within the meaning of the Bankruptcy Code; (D) all
transfers of Performance Assurance by one Party to the other Party under this
Agreement constitute “margin payments” within the meaning of the Bankruptcy
Code; (E) each Party’s rights under Section 5.2, “Declaration of an Early
Termination Date and Calculation of Settlement Amounts”, of this Agreement
constitutes a “contractual right to liquidate” the Transactions within the
meaning of the Bankruptcy Code; and (F) the other party is not a “utility” as
such term is used in Section 366 of the Bankruptcy Code, and each party agrees
to waive and not to assert the applicability of the provisions of Section 366 in
any bankruptcy proceeding wherein such Party is a debtor. In any such
proceeding, each party further agrees to waive the right to assert that the
other party is a provider of last resort;”

 

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

 

Section 10.4 is amended to add the phrase “unless a Claim is due to such Party’s
gross negligence or willful misconduct” at the end of the first sentence of
Section 10.4.

Section 10.5 is amended to (i) add the words “shall not be unreasonably withheld
or delayed” after the words “which consent” in the second line; (ii) delete the
words “may be withheld in the exercise of its sole discretion” in the second and
third line; (iii) delete subparagraphs (i) and (ii) in their entirety from the
fourth through sixth lines; and iv) delete “or (iii)” from the eighth line.

Section 10.10 is hereby amended to add the following phrase at the end of the
sentence after the words “United States Bankruptcy Code”, “, except such
Transactions that provide for maturity within two (2) days after the Transaction
has been agreed to by the Parties.

“Section 10.11 is amended (i) to add “Merrill Lynch Commodities, Inc. or “ after
the word “than” in the third line, (ii) to add the following phrase after the
word “lenders”:  “and their counsel and advisors”; and (iii) to add the
following after the word “accountants”: “Guarantor”.

The following language shall be added to the end of Section 10.11:

“The Parties hereby acknowledge that the disclosure of price data only without
counterparty name does not contravene this Section 10 so long as the data is
disclosed to an index publisher that publishes the data in aggregated form and
does not identify the Parties.

Notwithstanding anything in this Section to the contrary, the terms and
conditions of this Master Agreement and any and all Confirmations may be
disclosed to customers of Party A and its affiliates without restriction or
limitation on the use of such information, or subsequent disclosure, by such
customers, and as is necessary to comply with the requirements of electricity
purchase and sale agreements.  Further, the particulars of any dispute between
Party A and Party B may be disclosed to the City of Houston in order to comply
with Section 10.12 of this Master Agreement.

To the extent it is necessary for Party B to disclose the terms of any
Transaction to a supplier of Energy to Party B (“Supplier”), Party B may,
provided that it receives prior written approval from Party A (which shall not
be unreasonably withheld), disclose the terms of such Transaction. Party B shall
(a) disclose the terms of such Transaction only to those representatives of
Supplier who need to know, solely for the purposes of evaluating Party B’s
credit and/or payment rights or requirements; (b) inform the Supplier and its
representatives of the confidential nature of the terms of such Transaction; and
(c) be responsible for any breach of the confidentiality provisions pertaining
to such disclosed Transaction by the Supplier or any of its representatives.”

 The following is added as a new Section 10.12:

“10.12     Dispute Resolution.  Any controversy between the Parties involving
the construction or application of any of the terms, covenants or conditions of
this Master Agreement or any Transaction shall, on the written request of one
Party served upon the other or upon notice by the City of Houston’s Affirmative
Action Director (the “Affirmative Action Director”) served on both Parties, be
submitted to binding arbitration, under the Texas General Arbitration Act (Tex.
Civ. Prac. & Rem. Code Ann., Ch. 171 --- the “Act”).  Arbitration shall be
conducted according to the following procedures:

(a)                                  Upon the decision of the Affirmative Action
Director or upon written notice to the Affirmative Action Director from either
Party that a dispute has arisen, the Affirmative Action Director shall notify
both Parties that they must resolve the dispute within thirty (30) days or the
matter may be referred to arbitration.

(b)                                 If the dispute is not resolved within the
time specified, either Party or the Affirmative Action Director may submit the
matter to arbitration conducted by the American Arbitration Association under
the rules of the American Arbitration Association on file in the Office of the
City of Houston’s Affirmative Action Division.

(c)                                  Each Party shall pay all fees required of
it by the American Arbitration Association and sign a form releasing the
American Arbitration Association and its arbitrators from liability for
decisions reached in the arbitration.

(d)                                 If the American Arbitration Association no
longer administers Affirmative Action arbitration for the City of Houston, the
Affirmative Action Director shall prescribe alternate procedures as necessary to
provide

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

 

arbitration by neutrals in accordance with the requirements of Chapter 15 of the
Houston City Code of Ordinances.

(e)                                  All arbitrations shall be conducted in
Houston, Texas unless the Parties agree to another location in writing.

The following is added as a new Section 10.13:

“10.13 With respect to any suit, action or proceeding relating to this
Agreement, each Party irrevocably submits to the non-exclusive jurisdiction of
the courts of the State of New York and the United States District Court located
in the borough of Manhattan in New York City and waives any objection it may
have at any time to the laying of venue of any such proceedings brought in any
such court, waives any claim that such proceedings have been brought in any
inconvenient forum and further waives the right to object, with respect to such
proceedings, that such court does not have jurisdiction over such Party.  EACH
PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR PROCEEDING
RELATING TO THIS AGREEMENT OR CREDIT SUPPORT DOCUMENT.

The following is added as a new Section 10.14

“10.14     Additional Warranties and Covenants.   From the date of entering into
a Transaction under this Agreement and throughout the term of such Transaction,
the Parties each warrant and covenant as follows:

(a)                                  such Transaction has been negotiated at
arms length between Parties of equal sophistication and represents a
bargained-for exchange;

(b)                                 neither Party will directly or indirectly
challenge the equity, fairness or reasonableness of any terms or conditions set
forth in or established according to such Transaction, as those terms or
conditions may be at issue before any Governmental Authority or court, if the
successful result of such challenge would be to preclude or excuse all, or any
portion of, the performance of such Transaction by either Party;

(c)                                  each Party shall agree that the prices
agreed upon in such Transaction are just and reasonable and waives any right it
may have (now or in the future) to refunds related thereto; and

(d)                                 without limiting the foregoing, neither
Party shall exercise any of its respective rights under Section 205 or 206 of
the Federal Power Act to challenge or seek to modify any of the rates or other
terms and conditions of such Transaction.

For the purposes of such Transaction, “Governmental Authority” means the
government of the United States or any state or territory thereof including the
executive branches and offices, a municipality, county, governmental board, air
quality management districts, public power authority, public utility district,
joint action agency, or other political subdivision, public entity, agency or
instrumentality of the United States, one or more states or territories of the
United States or any combination thereof or any regional reliability counsel,
independent systems operator, regional transmission authority, power exchange or
similar body or utility or other entity with power or control over emissions,
air quality, energy, electric or gas transmission, transportation, or
distribution.”

The following is added as a new Section 10.15:

“10.15     MWBE Covenants.

(a)                                  Party B shall not delegate or subcontract
more than 50% of the work under this Master Agreement or any Transaction to any
other subcontractor or supplier without the express written consent the
Affirmative Action Director.

(b)                                 Party B shall permit representatives of the
City of Houston, at all reasonable times, to perform (1) audits of the books and
records of Party B, and (2) inspections of all places where work is to be
undertaken in connection with this Agreement and/or any and all Transactions. 
Party B shall keep such books and records available for inspection for at least
four (4) years after the end of its performance under this Master Agreement
and/or any and all Transactions.  Nothing in this provision shall change the
time for bringing a cause of action.

(c)                                  Within five (5) Business Days of the full
execution of this Master Agreement, Party A and Party B shall

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

 

designate in writing to the Affirmative Action Director its respective agent for
receiving any notice required or permitted to be given pursuant to Chapter 15 of
the Houston City Code of Ordinances, along with the street and mailing address
and phone number of such agent.”

The following is added as a new Section 10.16:

“10.16     Standard of Review.   From the date of entering into a Transaction
under this Master Agreement and throughout the term of such Transaction, the
Parties each warrant and covenant as follows:

(d)                                 Absent the agreement of all Parties to the
proposed change, the standard of review for changes to any section of this
Master Agreement (including all Transactions and/or Confirmations) specifying
the rate(s) or other material economic terms and conditions agreed to by the
Parties herein, whether proposed by a Party, a non-party or FERC acting sua
sponte, shall be the “public interest” standard of review set forth in United
Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal
Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956)( the
“Mobile-Sierra” doctrine).

(e)                                  The Parties, for themselves and their
successors and assigns, (i) agree that this “public interest” standard shall
apply to any proposed changes in any other documents, instruments or other
agreements executed or entered into by the Parties in connection with this
Master Agreement and (ii) hereby expressly and irrevocably waive any rights they
can or may have to the application of any other standard of review, including
the “just and reasonable” standard.”

(f)                                    With respect to Transactions in ERCOT,
absent the agreement of all Parties to the proposed change, the standard of
review for changes to any portion of this Master Agreement or any Transaction
entered into hereunder proposed by a Party, a non-party, or the Public Utility
Commission of Texas acting sua sponte, shall be the “public interest” standard
of review set forth in High Plains Natural Gas Co. v. Railroad Commission, Tex.
Cov. Appl. — Austin 1971, writ ref d n.r.e.)(the “High Plains” doctrine).”

The following is added as a new Section 10.17:

(a)                                  Consent to Assignment.  Party B hereby
consents to the assignment by Party A to Merrill Lynch Commodities, Inc. and
Merrill Lynch & Co., Inc. (together, the “Merrill Parties”) of all of Party A’s
rights under this Agreement, including all rights to receive payments from Party
B under this Agreement (any such payment, a “Receivable”), as collateral
security for Party A’s obligations to the Merrill Parties in connection with an
enhanced credit structure for Party A’s retail electric business provided by the
Merrill Parties (the “Collateral Assignment”).

(b)                                 Collateral Account.  Party A hereby
unconditionally and irrevocably authorizes and directs Party B to make, and,
unless and until otherwise required by law or this agreement is terminated,
Party B hereby agrees to make, any and all payments in respect of Receivables
directly by wire transfer to the account specified in the Cover Sheet (the
“Collateral Account”).  All such payments by Party B to the Collateral Account
shall be free and clear of any deduction, set-off, netting arrangements or
counterclaim, except as expressly provided in this Agreement.

(c)           Notice & Right to Cure Events of Default.  As set forth above, the
Merrill Parties shall be provided with all notices under this Agreement,
including notices of any Potential Event of Default or Event of Default
hereunder.  In the event of a Potential Event of Default or Event of Default in
which Party A is, or may become, the Defaulting Party, the Merrill Parties shall
be permitted, at their option, to cure such default , [(if such event of default
is capable of being cured by either Merrill Party) TO BE USED AS FALLBACK]
within any grace period applicable to Party A for such Potential Event of
Default or Event of Default.”

 

Additional Provisions:

The following provisions shall be added to Schedule P: Products and Related
Definitions:

“Index Transactions. If the Contract Price for a Transaction is determined by
reference to a third-party information source, then the following provisions
shall be applicable to such Transaction.

(b)           Market Disruption. If a Market Disruption Event occurs during a
Determination Period, the Floating Price for the affected Trading Day(s) shall
be the fallback reference price specified by the Parties if the Parties have
specified such a fallback reference price.  If the Parties did not specify a
fallback reference price the Floating Price shall be determined by

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

 

reference to the Floating Price specified in the Transaction for the first
Trading Day thereafter on which no Market Disruption Event exists; provided,
however, if the Floating Price is not so determined within three (3) Business
Days after the first Trading Day on which the Market Disruption Event occurred
or existed, then the Parties shall negotiate in good faith to agree on a
Floating Price (or a method for determining a Floating Price), and if the
Parties have not so agreed on or before the twelfth Business Day following the
first Trading Day on which the Market Disruption Event occurred or existed, then
the Floating Price shall be determined in good faith by taking the average of
two dealer quotes obtained from dealers of the highest credit standing which
satisfy all the criteria that the Seller applies generally at the time in
deciding to offer or to make an extension of credit.

“Determination Period” means each calendar month a part or all of which is
within the Delivery Period of a Transaction.

 “Exchange” means, in respect of a Transaction, the exchange or principal
trading market specified in the relevant Transaction.

“Floating Price” means a Contract Price specified in a Transaction that is based
upon a Price Source.

“Market Disruption Event” means, with respect to any Price Source, any of the
following events: (a) the failure of the Price Source to announce or publish the
specified Floating Price or information necessary for determining the Floating
price; (b) the failure of trading to commence or the permanent discontinuation
or material suspension of trading in the relevant options contract or commodity
on the Exchange or in the market specified for determining a Floating Price; (c)
the temporary or permanent discontinuance or unavailability of the Price Source;
(d) the temporary or permanent closing of any Exchange specified for determining
a Floating Price; or  (e) a material change in the formula for or the method of
determining the Floating Price.

“Price Source” means, in respect of a Transaction, the publication (or such
other origin of reference, including an Exchange) containing (or reporting) the
specified price (or prices from which the specified price is calculated)
specified in the relevant Transaction.

“Trading Day” means a day in respect of which the relevant Price Source
published the  Floating Price.

(b)           Corrections to Published Prices.  For purposes of determining a
Floating Price for any day, if the price published or announced on a given day
and used or to be used to determine a relevant price is subsequently corrected
and the correction is published or announced by the person responsible for that
publication or announcement within two (2) years of the original publication or
announcement, either Party may notify the other Party of (i) that correction and
(ii) the amount (if any) that is payable as a result of that correction.  If,
not later than thirty (30) days after publication or announcement of that
correction, a Party gives notice that an amount is so payable, the Party that
originally either received or retained such amount will, not later than three
(3) Business Days after the effectiveness of that notice, pay, subject to any
applicable conditions precedent, to the other Party that amount, together with
interest at the Interest Rate for the period from and including the day on which
payment originally was (or was not) made to but excluding the day of payment of
the refund or payment resulting from that correction.

(c)           Calculation of Floating Price.  For the purposes of the
calculation of a Floating Price, all numbers shall be rounded to three (3)
decimal places.  If the fourth (4th) decimal number is five (5) or greater, then
the third (3rd) decimal number shall be increased by one (1), and if the fourth
(4th) decimal number is less than five (5), then the third (3rd) decimal number
shall remain unchanged.”

 

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

 

IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly
executed as of the date first above written.

RELIANT ENERGY POWER SUPPLY, LLC

[CounterParty]

 

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

 

Title:

 

 

Title:

 

 

 

DISCLAIMER:  This Master Power Purchase and Sale Agreement was prepared by a
committee of representatives of Edison Electric Institute (“EEI”) and National
Energy Marketers Association (“NEM”) member companies to facilitate orderly
trading in and development of wholesale power markets.  Neither EEI nor NEM nor
any member company nor any of their agents, representatives or attorneys shall
be responsible for its use, or any damages resulting therefrom.  By providing
this Agreement EEI and NEM do not offer legal advice and all users are urged to
consult their own legal counsel to ensure that their commercial objectives will
be achieved and their legal interests are adequately protected.

 

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Exhibit C4

To Credit Sleeve and Reimbursement Agreement

Form of RECs Purchase Contract for ERCOT

Transaction Confirmation

 

Date:                       , 200    

 

Re:          Renewable Energy Credits

 

This Transaction Confirmation, together with the attached General Terms and
Conditions, constitute the Purchase and Sale Contract (“Contract”) between
                               (“Counterparty”) and Reliant Energy Power Supply,
LLC (“REPS”)  (together, the “Parties”) based on the terms set forth herein. 
Terms used but not defined herein will have the meanings ascribed thereto in the
Public Utility Commission of Texas (“PUCT”) Substantive Rule Section 25.173, or
any successor thereto (the “Texas Rules”).  “Business Day” means any day, other
than Saturday and Sunday, on which commercial banks are open for business in
Texas.

 

Seller:

 

Counterparty

 

 

 

Buyer:

 

REPS, at 1000 Main Street, Houston, Texas 77002.

 

 

 

Product:

 

Renewable energy credits (“RECs”) for Texas, as provided for in the Texas Rules.
Each REC represents one megawatt hour of electricity generated by renewable
energy technology in Texas, certified by the PUCT and tracked by the Program
administrator, in each case as provided for in the Texas Rules.

 

 

 

Quantity:

 

_________________ RECs

 

 

 

Price:

 

Total U.S. $          (U.S.$ /REC)

 

 

 

Vintage Year:

 

200    . All RECs sold and delivered hereunder will be produced during the
period between January 1, 200     and December 31, 200    .

 

 

 

Delivery and Payment:

 

The Product will be delivered and paid for under the following terms: [OPTION A
OR OPTION B TO BE DETERMINED BY RELIANT]

 

 

 

 

 

Delivery will be effectuated through the “Renewable energy credits trading
program” (as defined in the Texas Rules). Title to the Product will transfer at
such time as the “Program administrator” (as defined in the Texas Rules)
recognizes the transfer by Seller of the Product from Seller’s “Renewable energy
credit account” (as defined in the Texas Rules) to Buyer’s Renewable energy
credit account. Unless Buyer notifies Seller otherwise, Buyer’s Renewable energy
credit account will be: “Reliant Energy Power Supply, LLC.” Buyer will promptly
confirm, in accordance with the requirements of the Program administrator, such
transfer by Seller to Buyer of the Product. Each Party shall provide to the
other any information or documentation required by the Program administrator to
effectuate delivery hereunder and will comply with, and will assist the other
Party to comply with any and all regulatory obligations relating to recording,
the transfer of, and tracking the transfer of the RECs sold hereunder. With
regard to the performance of their obligations hereunder, the Parties will abide
by the provisions set forth in Section 14 of the ERCOT Protocols and the Texas
Rules.

 

 

 

 

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

 

OPTION A:

By 9:30 a.m. Central Prevailing Time on [insert date], Seller will deliver to
Buyer (i) the full Quantity of RECs, and (ii) an invoice for the amount to be
paid by Buyer hereunder for such RECs.  With regard to (ii) above, Buyer will
pay Seller as provided for herein within five (5) Business Days of Buyer’s
receipt of both the Product and invoice.  All funds to be paid to Seller shall
be made in immediately available funds (U.S. Dollars) by wire transfer.  If
either Party fails to remit any amount payable by it when due, interest on such
unpaid portion shall accrue at a rate equal to the prime interest rate in effect
at the time as published by Citibank, N.A. plus two percent (2%) (the “Interest
Rate”) from the date payment is due to the date of payment.

 

OPTION B:

By [insert date], Seller will deliver to Buyer an invoice for the amount to be
paid by Buyer hereunder for delivery of the Product.  Within three (3) Business
Days of Buyer’s receipt of such invoice, Buyer will pay to Seller an amount
equal to the Price.  By no later than 9:30 a.m. Central Prevailing Time on the
second Business Day following Seller’s receipt of the payment provided for
herein, Seller will deliver to Buyer the full Quantity of RECs.  All funds to be
paid to Seller shall be made in immediately available funds (U.S. Dollars) by
wire transfer.  If either Party fails to remit any amount payable by it when
due, interest on such unpaid portion shall accrue at a rate equal to the prime
interest rate in effect at the time as published by Citibank, N.A. plus two
percent (2%) (the “Interest Rate”) from the date payment is due to the date of
payment.

 

Payment:                                                                                            
The invoice from Seller to Buyer will be sent to the following:

 

Reliant Energy Power Supply, LLC

Attn:       ERCOT Settlements

P.O. Box 148

                                                                                                                                               
Houston, TX  77001-0148

                                                                                                                                               
Phone:    713-497-2792

                                                                                                                                               
Fax:         713-497-0098

 

Payment by Buyer to Seller shall be made to the following account:

 

                                                                                                                                               
Bank:

For the Account of:

                                                                                                                                               
ABA No.:

                                                                                                                                               
Account No.:

 

                                                                                                                                               
With respect to the payment of Receivables (as defined herein) by Seller to
Buyer, as set forth in Section 6 of this Contract, Seller shall make all such
payments to the Buyer’s Collateral Account (as defined herein), as more
specifically described in Section 6 hereof.

 

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

 

 

Term:                                                                                                             
This Contract will terminate after the full Quantity of the Product has been
delivered and paid for under the terms hereof (the “Term”).  Provided, that,
Section 1 of the Special Conditions, and Sections 1 and 10 of the General Terms
and Conditions will each survive termination.

 

Special Conditions:                                     
1.                                       Seller covenants, represents and
warrants the following to Buyer:

 

a)     The RECs sold by Seller to Buyer hereunder comply with the technical
specifications as set forth in this Confirmation and have not been sold,
retired, claimed or represented as part of electricity output, usage or sales,
or used to satisfy renewable energy or other obligations in any state or
jurisdiction, nor will Seller take any such action with respect to such RECs
subsequent to the transfer thereof to Buyer.

 

b)    With regard to the RECs sold by Seller to Buyer hereunder, Seller has, and
conveys to Buyer sole and exclusive title (free of any liens, claims, security
interests, encumbrances and other defects of title).

 

                                                                                                                                               
2.                                       Each Party covenants that upon its
receipt of notice from the Program administrator that the transfer of RECs
pursuant to a transaction will not be recognized or Delivery of Product was not
made as required pursuant to the terms of a transaction, it will immediately so
notify the other Party, providing a copy of such notice, and both Parties will
cooperate in taking such action as are necessary and commercially reasonable to
cause such transfer to be recognized and such Product Delivered.

 

3.                                       gThe General Terms and Conditions
attached hereto are included herein for all purposes and are an integral part of
this Contract.  Provided, that, to the extent there is any conflict between a
provision in the General Terms and Conditions and this Transaction Confirmation,
the terms of the Transaction Confirmation shall control.  This Contract sets
forth the entire agreement between the Parties with respect to the REC purchase
identified in this document superseding any and all contemporaneous or prior
conversations, memoranda, agreements (oral or written) or other communication
with respect to its subject matter between the Parties or any of their
respective agents. This Contract may not be terminated (other than as provided
in this Contract) or changed except by a writing signed by both Parties.  No
right, obligation or provision of this Contract shall be deemed waived unless
such waiver is evidenced by a writing signed by the Party charged with the
waiver and any such waiver shall be strictly limited to the express terms of
such writing.  No representations or warranties have been given other than those
expressly stated in this Contract to induce either Party to enter into this
Contract.

 

[Remainder of Page Intentionally Left Blank]

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

 

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed
this Contract by the undersigned duly authorized representatives as of the date
of this Contract.

 

 

Counterparty

Reliant Energy Power Supply, LLC

 

 

 

 

 

 

 

Signature

 

 

Signature

 

 

 

 

 

 

 

 

Name

 

 

Name

 

 

 

 

 

 

 

 

Title

 

 

Title

 

 

 

 

 

 

 

 

DATE

 

 

DATE

 

 

 

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

 

GENERAL TERMS AND CONDITIONS

 

1.             Events of Default and Remedies.

1.1       AN “EVENT OF DEFAULT” SHALL MEAN, WITH RESPECT TO A PARTY (A
“DEFAULTING PARTY”), THE OCCURRENCE OF ANY OF THE FOLLOWING:

(A)                THE FAILURE TO MAKE, WHEN DUE, ANY PAYMENT REQUIRED PURSUANT
TO THIS CONTRACT IF SUCH FAILURE IS NOT REMEDIED WITHIN THREE (3) BUSINESS DAYS
AFTER WRITTEN NOTICE;

(b)               the failure by Seller to deliver to Buyer, when required
pursuant to this Contract, the RECs if such failure is not remedied within three
(3) business days after written notice;

 

(c)                any representation or warranty made by such Party herein is
false or misleading in any material respect when made or when deemed made or
repeated;

 

(d)               a material breach of a covenant or obligation (other than as
separately provided for in this Section 1.1) set forth in this Contract not
cured within five (5) days following written notice thereof

 

(e)                such Party (i) files a petition or otherwise commences,
authorizes or acquiesces in the commencement of a proceeding or cause of action
under any bankruptcy, insolvency, reorganization or similar law, or has any such
petition filed or commenced against it and not discharged within thirty (30)
days, (ii) makes an assignment or any general arrangement for the benefit of
creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced),
(iv) has a liquidator, administrator, receiver, trustee, conservator or similar
official appointed with respect to it or any substantial portion of its property
or assets, or (v) is generally unable to pay its debts as they fall due.

 

(f)                  such Party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all of its assets to, another entity
and, at the time of such consolidation, amalgamation, merger or transfer, the
resulting, surviving or transferee entity fails to assume all the obligations of
such Party under this Contract to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably satisfactory to the
other Party.

 

1.2         If an Event of Default with respect to a Defaulting Party shall have
occurred and be continuing, the other Party shall have the right to (i) suspend
performance, (ii) withhold any payments due to the Defaulting Party under this
Contract, and (iii) terminate this Contract on two (2) business days prior
notice to accelerate all amounts owing between the Parties and to liquidate and
recover its damages resulting from such Event of Default in accordance with the
methodology set forth in Section 1.3 below.

 

1.3         If Seller fails to deliver all or part of the Quantity of the
Product in accordance with the terms of this Contract or if there is an Event of
Default hereunder in respect of Seller, Seller shall pay Buyer, within ten (10)
days of receipt of an invoice from Buyer an amount equal to the product of (i)
the deficiency in the Quantity of Product delivered and (ii) the positive
difference, if any, obtained by subtracting the per unit Price from the per unit
Replacement Price. “Replacement Price” means the price at which Buyer, acting in
a commercially reasonable manner, purchases (if at all) substitute or
replacement Product, having the same or a subsequent Vintage Date as the
Product, for the Product not delivered by Seller, plus any commercially
reasonable costs of Buyer to obtain replacement Product, less any costs Buyer
avoids as a consequence of Seller’s failure to perform; or, absent any such
purchase, the market price for such quantity of substitute or replacement
Product having the same or a subsequent Vintage Date as the Product; provided,
however, in no event shall the Replacement Price include any penalties, or
similar charges or any stranded costs.  For amounts of Product for which Seller
breaches its obligations pursuant to Section 1 of the Special Conditions in the
Transaction Confirmation, Seller will be deemed

 

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

 

not to have delivered such Product to Buyer and, as such, notwithstanding
anything to the contrary, Buyer will be entitled to the remedies set forth in
this Section 1.3.

 

IF BUYER FAILS TO RECEIVE ALL OR PART OF THE QUANTITY OF THE PRODUCT IN
ACCORDANCE WITH THE TERMS OF THIS CONTRACT OR IF THERE IS AN EVENT OF DEFAULT
HEREUNDER IN RESPECT OF BUYER, BUYER SHALL PAY SELLER, WITHIN TEN (10) DAYS OF
RECEIPT OF AN INVOICE FROM SELLER, AN AMOUNT EQUAL TO THE PRODUCT OF (I) THE
DEFICIENCY IN THE QUANTITY OF PRODUCT RECEIVED AND (II) THE POSITIVE DIFFERENCE,
IF ANY, OBTAINED BY SUBTRACTING THE PER UNIT SALES PRICE FROM THE PER UNIT
PRICE. “SALES PRICE” MEANS THE PRICE AT WHICH SELLER, ACTING IN A COMMERCIALLY
REASONABLE MANNER, RESELLS (IF AT ALL) THE PRODUCT NOT RECEIVED BY BUYER, LESS
ANY COSTS SELLER AVOIDS AS A CONSEQUENCE OF BUYER’S FAILURE TO PERFORM; OR,
ABSENT ANY SUCH SALE, THE MARKET PRICE FOR SUCH QUANTITY OF SUBSTITUTE OR
REPLACEMENT PRODUCT; PROVIDED, HOWEVER, IN NO EVENT SHALL THE SALES PRICE
INCLUDE ANY PENALTIES, OR SIMILAR CHARGES OR ANY STRANDED COSTS.

1.4         THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF
DAMAGES PROVIDED IN THIS CONTRACT SATISFY THE ESSENTIAL PURPOSES HEREOF, THAT
SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE PARTY’S SOLE AND
EXCLUSIVE REMEDY FOR FAILURE OF THE OTHER TO MAKE OR TAKE DELIVERY HEREUNDER,
THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH AND ALL OTHER REMEDIES OR
DAMAGES AT LAW OR IN EQUITY ARE WAIVED. FOR BREACH OF ANY OTHER OBLIGATION
IMPOSED IN THIS CONTRACT, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT
ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE
REMEDY AVAILABLE TO IT AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED. NEITHER PARTY SHALL BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, SPECIAL, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS
INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY
PROVISION IN THIS CONTRACT OR OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT
THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT
REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY
PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR
PASSIVE.  TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE DEEMED TO
BE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT
AND THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE
ESTIMATED HARM OR LOSS ATTRIBUTABLE TO A BREACH.

2.             No Waiver.  No waiver at any time by any Party hereto of its
rights with respect to the other Party or with respect to any matter arising in
connection with the Contract shall be considered a waiver with respect to any
subsequent default or matter.

3.             Assignment.  Neither Party shall assign this Contract without the
prior written consent of the other Party, which consent may not be unreasonably
withheld; provided that, Seller expressly consents to the Collateral Assignment
(as defined herein, and as more specifically set forth in Section 6 of this
Contract), by Buyer to Merrill Lynch Commodities, Inc., and Merrill Lynch & Co.,
Inc., (together, the “Merrill Parties”).  Additionally, either Party may,
without the consent of the other Party (and without relieving itself from
liability hereunder), (i) transfer or assign this Contract to an affiliate of
such Party which affiliate’s creditworthiness is equal to or higher than that of
such Party, or (ii) transfer or assign this Contract to any person or entity
succeeding to all or substantially all of the assets whose creditworthiness is
equal to or higher than that of such Party; provided, however, that in each such
case, any such assignee shall agree in writing to be bound by the terms and
conditions hereof and so long as the transferring Party delivers such tax and
enforceability assurance as the non-transferring Party may reasonably request.

4.             TAXES AND INDEMNITY.  SELLER WILL BE RESPONSIBLE FOR ANY TAXES
IMPOSED BY ANY GOVERNMENT AUTHORITY ON THE CREATION, OWNERSHIP, OR TRANSFER OF
THE PRODUCT UNDER THIS CONTRACT UP TO AND INCLUDING THE TIME AND PLACE AT WHICH
TITLE TRANSFERS.  BUYER WILL BE RESPONSIBLE FOR ANY TAXES IMPOSED BY ANY
GOVERNMENT AUTHORITY ON THE RECEIPT OR OWNERSHIP OF THE PRODUCT AFTER THE TIME
AND PLACE AT WHICH TITLE TRANSFERS.  EACH PARTY WILL INDEMNIFY, DEFEND AND HOLD
HARMLESS THE OTHER PARTY FROM AND AGAINST ANY CLAIMS OR DEMANDS MADE BY OTHERS
ARISING FROM OR OUT OF ANY EVENT, CIRCUMSTANCE, ACT OR INCIDENT FIRST OCCURRING
OR EXISTING DURING THE PERIOD WHEN TITLE TO THE PRODUCT IS VESTED IN SUCH PARTY
AS PROVIDED HEREIN, EXCEPT TO THE EXTENT ARISING FROM SUCH PARTY’S OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.  EACH PARTY WILL

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INDEMNIFY, DEFEND AND HOLD HARMLESS THE OTHER PARTY AGAINST ANY TAXES FOR WHICH
SUCH PARTY IS RESPONSIBLE AS PROVIDED HEREIN.

5.             Representations.

5.1           From the date of entering into this Contract and throughout the
Term of this Contract, the Parties each warrant and covenant as follows:

a)              it is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation;

b)             it has all regulatory authorizations necessary for it to legally
perform its obligations under this Contract;

c)              it has the requisite authority to enter into and perform its
respective obligations under the Contract;

d)             the obligations hereunder are binding on it;

e)              it is not the subject of any bankruptcy proceeding or involved
in litigation that would materially affect its ability to perform hereunder,
except as provided for in any SEC Filing by it or any of its affiliates;

f)                the Contract has been negotiated in the ordinary course of 
business, in good faith, for fair consideration on an arms length basis between
Parties of equal sophistication and represents a bargained for exchange; and

g)             it has entered into this Contract in connection with the conduct
of its business and it has the capacity and ability to perform its obligations
hereunder.

6.                                       Credit Sleeve Provisions

 

(a)                                  Consent to Assignment.  Seller hereby
consents to the assignment by Buyer to the Merrill Parties of all of Buyer’s
rights under this Contract, including all rights to receive payments from Seller
under this Contract (any such payment, a “Receivable”), as collateral security
for Buyer’s obligations to the Merrill Parties in connection with an enhanced
credit structure for Buyer’s retail electric business provided by the Merrill
Parties (the “Collateral Assignment”).

 

(b)                                 Collateral Account.  Buyer hereby
unconditionally and irrevocably authorizes and directs Seller to make, and,
unless and until otherwise required by law, or this Contract is terminated,
Seller hereby agrees to make, any and all payments in respect of Receivables
directly by wire transfer to the account specified below (the “Collateral
Account”).  All such payments by Seller to the Collateral Account shall be free
and clear of any deduction, set-off, netting arrangements or counterclaim,
except as expressly provided pursuant to this Contract.

 

                                                Collateral Account

 

 

 

 

 

(c)                                  Notice & Right to Cure Events of Default. 
Pursuant to Section 7 of these General Terms and Conditions, the Merrill Parties
shall be provided with all notices under this Contract, including notices of any
Event of Default, or any event that with notice of lapse of time would be an
Event of Default (a “Potential Event of Default”) hereunder.  In the event of a
Potential Event of Default or Event of Default in which Buyer is, or may become,
the Defaulting Party, the Merrill Parties shall be permitted, at their option,
to cure such default, if such Event of Default or Termination Event is capable
of being cured by either Merrill Party, within any grace period applicable to
Buyer for such Potential Event of Default or Event of Default.

 

7.             NOTICES.  ALL NOTICES TO REPS UNDER THE CONTRACT SHALL BE GIVEN
TO:

 

Reliant Energy Power Supply, LLC
Attn: Contract Administration
P. O. Box 4455
Houston, TX77210-4455
Phone: (713) 497-5855
Facsimile: (713) 497-9561

 

 

All notices to          under the Contract shall be given to:

 

With additional Notices of an Event of Default or Potential
Event of Default to:
Attn: Dave Sladic, Vice President and Deputy General Counsel
Phone: (713) 497-7063
Facsimile: (713) 537-7063

 

With additional Notices of an Event of Default or
Potential Event of Default to:

 

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

 

With a copy to:

 

Merrill Lynch Commodities, Inc.

20 East Greenway Plaza

7th Floor

Houston, Texas 77253-3327

Attn:                                            Legal

Fax:   713-544-5551

Phone:                                   713-544-4975

 

 

Except as otherwise expressly provided herein, all notices to the other Party
under the Contract shall be in writing and shall be deemed effective upon
receipt if received prior to 5:00 p.m., local time, on a business day, or on the
next succeeding business day if otherwise.

 

8.             Choice of Law.  This Contract will be governed by the laws of the
state of [New York/Texas], without regard to choice of law doctrine.

 

9.             Waiver of Jury Trial.  Each Party waives its respective right to
any jury trial with respect to any litigation arising under, or in connection
with this Contract.

 

10.           Confidentiality.  Except to the extent required by any
governmental or judicial authority or process, including without limitation as
may be necessary for Buyer to demonstrate compliance with any renewable energy
requirements imposed by the state of Texas and the Electric Reliability Council
of Texas, the Parties will not disclose the provisions of this Contract to any
party, except as hereinafter provided:  A Party may disclose the provisions of
this Contract to its officers, directors, employees, agents, accountants and
attorneys (collectively, “Representatives”) and to its affiliates and its
affiliates’ Representatives.  Additionally, REPS will have the right to disclose
the provisions of this Contract to Merrill Lynch Commodities, Inc. and Merrill
Lynch & Co., Inc.

 

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

Exhibit D1

To Credit Sleeve and Reimbursement Agreement

Form of EEI Collateral Annex

 

PARAGRAPH 10

to the

COLLATERAL ANNEX

to the

EEI MASTER POWER PURCHASE AND SALE AGREEMENT

 

CREDIT ELECTIONS COVER SHEET

 

DATED AS OF

 

[   T.B.D.     ]

 

 

BETWEEN

 

RELIANT ENERGY POWER SUPPLY, LLC (“Party A”)

 

AND

 

_________________________________________ (“Party B”)

 

AND

 

MERRILL LYNCH COMMODITIES, INC. (“MLCI”)

 

 

Paragraph 10.    Elections and Variables

 

I.              Collateral Threshold.

 

A.                                    Party A Collateral Threshold.

 

o           $                              (the “Threshold Amount”). [DELETE the
following language if we use this option & the amount is Zero (0)    The amount
(the “Threshold Amount”) equal to the lower of (i) the maximum amount payable
under guaranty provided by [Party B][Party B’s Guarantor] guaranteeing Party B’s
payment obligations hereunder, if any, and (ii) $                             ;
provided, however, that the Collateral Threshold for Party A shall be zero
[remove the following if no Guaranty provided - if (i) no Guaranty has been
provided or (ii) upon the occurrence and during the continuance of an Event of
Default or a Potential Event of Default with respect to Party A; and provided
further that, in the event that, and on the date that, Party A cures the
Potential Event of Default on or prior to the date that Party A is required to
post Performance Assurance to Party B pursuant to a demand made by Party B
pursuant to the provisions of the Collateral Annex on or after the occurrence of
such Potential Event of Default, (i) the Collateral Threshold for Party A shall
automatically increase from zero to the Threshold Amount and (ii) Party A shall
be relieved of its obligation to post Performance Assurance pursuant to such
demand.]

 

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

 

 

o           The amount (the “Threshold Amount”) equal to the amount set forth
below under the heading “Party A Collateral Threshold” opposite the Credit
Rating for Party A’s Guarantor on the relevant date of determination, and if
Party A’s Guarantor’s Credit Ratings shall not be equivalent, the [lower/higher]
Credit Rating shall govern; provided, however, that the Collateral Threshold for
Party A shall be zero if (i) no Guaranty has been provided, (ii) on the relevant
date of determination Party A’s Guarantor does not have a Credit Rating from any
rating agency specified below or (iii) an Event of Default or a Potential Event
of Default with respect to Party A has occurred and is continuing; and provided
further that, in the event that, and on the date that, Party A cures the
Potential Event of Default on or prior to the date that Party A is required to
post Performance Assurance to Party B pursuant to a demand made by Party B
pursuant to the provisions of the Collateral Annex on or after the occurrence of
such Potential Event of Default, (i) the Collateral Threshold for Party A shall
automatically increase from zero to the Threshold Amount and (ii) Party A shall
be relieved of its obligation to post Performance Assurance pursuant to such
demand.

 

Party A
Collateral Threshold

 

S&P Credit Rating

 

Moody’s Credit Rating

 

 

 

 

 

$                  

 

AA- (or above)

 

Aa3 (or above)

$                  

 

A+ thru A-

 

A1 thru A3

$                  

 

BBB+

 

Baa1

$                  

 

BBB

 

Baa2

$                  

 

BBB-

 

Baa3

$                  

 

BB+

 

Ba1

$                  

 

BB

 

Ba2

$                  

 

BB-

 

Ba3

$                  

 

B+

 

B1

$                  

 

B

 

B2

$                  

 

Below B

 

Below B2

$                  

 

Unrated

 

Unrated

 

o           The amount (the “Threshold Amount”)  set forth below under the
heading “Party A Collateral Threshold” opposite the Credit Rating for [Party
A][Party A’s Guarantor] on the relevant date of determination, and if [Party
A’s][Party A’s Guarantor’s] Credit Ratings shall not be equivalent, the lower
Credit Rating shall govern or (b) zero if on the relevant date of determination
[Party A][its Guarantor] does not have a Credit Rating from the rating
agency(ies) specified below or an Event of Default or a Potential Event of
Default with respect to Party A has occurred and is continuing; provided,
however, in the event that, and on the date that, Party A cures the Potential
Event of Default on or prior to the date that Party A is required to post
Performance Assurance to Party B pursuant to a demand made by Party B pursuant
to the provisions of the Collateral Annex on or after the occurrence of such
Potential Event of Default, (i) the Collateral Threshold for Party A shall
automatically increase from zero to the Threshold Amount and (ii) Party A shall
be relieved of its obligation to post Performance Assurance pursuant to such
demand.

 

Party A
Collateral Threshold

 

Credit Rating

 

Credit Rating

 

 

 

 

 

$                  

 

              (or above)

 

              (or above)

$                  

 

 

 

 

$                  

 

 

 

 

$                  

 

 

 

 

$                  

 

Below

 

Below

 

o            The amount of the Guaranty Agreement dated             from
           , as amended from time to time but in no event shall Party A’s
Collateral Threshold be greater than $           .

 

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

 

o            Other — see attached threshold terms

 

 

B.                                    Party B Collateral Threshold.

 

o            $                              (the “Threshold Amount”).  [DELETE
the following language only if   we use this option & the amount is Zero (0)   
The amount (the “Threshold Amount”) equal to the lower of (i) the maximum amount
payable under guaranty provided by [Party B][Party B’s Guarantor] guaranteeing
Party B’s payment obligations hereunder, if any, and (ii)
$                             ;; provided, however, that the Collateral
Threshold for Party B shall be zero [remove the following if no Guaranty
provided - if (i) no Guaranty has been provided or (ii) upon the occurrence and
during the continuance of an Event of Default or a Potential Event of Default
with respect to Party B; and provided further that, in the event that, and on
the date that, Party B cures the Potential Event of Default on or prior to the
date that Party B is required to post Performance Assurance to Party A pursuant
to a demand made by Party A pursuant to the provisions of the Collateral Annex
on or after the occurrence of such Potential Event of Default, (i) the
Collateral Threshold for Party B shall automatically increase from zero to the
Threshold Amount and (ii) Party B shall be relieved of its obligation to post
Performance Assurance pursuant to such demand.]

 

o            The amount (the “Threshold Amount”) equal to the [delete
highlighted language if Guaranty is uncapped or no Guarantor at all] lower of
(i) the maximum amount payable under the guaranty provided by Party B’s
Guarantor guaranteeing Party B’s payment obligations hereunder, if any and (ii)
the] amount set forth below under the heading “Party B Collateral Threshold”
opposite the Credit Rating for Party B[‘s Guarantor] on the relevant date of
determination, and if Party B’s [Guarantor’s] Credit Ratings shall not be
equivalent, the [lower/higher] Credit Rating shall govern provided, however,
that the Collateral Threshold for Party B shall be zero if [(i) no Guaranty has
been provided, delete if Party B has no Guarantor] (ii) on the relevant date of
determination Party B[‘s Guarantor] does not have a Credit Rating from any
rating agency specified below or (iii) an Event of Default or a Potential Event
of Default with respect to Party B has occurred and is continuing; and provided,
further that, in the event that, and on the date that, Party B cures the
Potential Event of Default on or prior to the date that Party B is required to
post Performance Assurance to Party A pursuant to a demand made by Party A
pursuant to the provisions of the Collateral Annex on or after the occurrence of
such Potential Event of Default, (i) the Collateral Threshold for Party B shall
automatically increase from zero to the Threshold Amount and (ii) Party B shall
be relieved of its obligation to post Performance Assurance pursuant to such
demand.

 

Party B
Collateral Threshold

 

Credit Rating

 

Credit Rating

 

 

 

 

 

$                  

 

AA- (or above)

 

Aa3 (or above)

$                  

 

A+ thru A-

 

A1 thru A3

$                  

 

BBB+

 

Baa1

$                  

 

BBB

 

Baa2

$                  

 

BBB-

 

Baa3

$                  

 

BB+

 

Ba1

$                  

 

BB

 

Ba2

$                  

 

BB-

 

Ba3

$                  

 

B+

 

B1

$                  

 

B

 

B2

$                  

 

Below B

 

Below B2

$                  

 

Unrated

 

Unrated

 

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

 

 

o            The amount (the “Threshold Amount”) set forth below under the
heading “Party B Collateral Threshold” opposite the Credit Rating for [Party
B][Party B’s Guarantor] on the relevant date of determination, and if [Party
B’s][Party B’s Guarantor’s] Credit Ratings shall not be equivalent, the lower
Credit Rating shall govern or (b) zero if on the relevant date of determination
[Party B][its Guarantor] does not have a Credit Rating from the rating
agency(ies) specified below or an Event of Default or a Potential Event of
Default with respect to Party B has occurred and is continuing; provided,
however, in the event that, and on the date that, Party B cures the Potential
Event of Default on or prior to the date that Party B is required to post
Performance Assurance to Party A pursuant to a demand made by Party A pursuant
to the provisions of the Collateral Annex on or after the occurrence of such
Potential Event of Default, (i) the Collateral Threshold for Party B shall
automatically increase from zero to the Threshold Amount and (ii) Party B shall
be relieved of its obligation to post Performance Assurance pursuant to such
demand:

 

Party B
Collateral Threshold

 

Credit Rating

 

Credit Rating

 

 

              (or above)

 

              (or above)

$                  

 

 

 

 

$                  

 

 

 

 

$                  

 

 

 

 

$                  

 

Below

 

Below

 

 

o            The amount of the Guaranty Agreement dated             from
           , as amended from time to time but in no event shall Party B’s
Collateral Threshold be greater than $           .

 

o            Other — see attached threshold terms.

 

 

II.            Eligible Collateral and Valuation Percentage.

 

The following items will qualify as “Eligible Collateral” for the Party
specified:

 

 

MLCI
(on behalf of Party
A and itself)

 

Party B

 

Valuation %

(A) Cash

 

[X]

 

[X]

 

100%

(B) Letters of Credit.  100% of the undrawn portion of such Letter of Credit
unless either (i) a Letter of Credit Default shall have occurred and be
continuing with respect to such Letter of Credit, or (ii) twenty (20) or fewer
Business Days remain prior to the expiration of such Letter of Credit, in which
cases the Valuation Percentage shall be zero (0).

 

[X]

 

[X]

 

100%

(C) Negotiable debt obligations issued by the U.S. Treasury Department having an
original maturity at issuance of not more than one year (“Treasury Bills”)

 

[X]

 

[X]

 

99%

(D) Negotiable debt obligations issued by the U.S. Treasury Department having an
original maturity at issuance of more than one year but not more than ten years
(“Treasury Notes”)

 

[X]

 

[X]

 

98%

(E) Negotiable debt obligations issued by the U.S. Treasury Department having an
original maturity at issuance of more than ten years (“Treasury Bonds”)

 

[X]

 

[X]

 

95%

 

 

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

 

III.           Independent Amount.       (NOT APPLICABLE)

 

A.                                    Party A Independent Amount.     (NOT
APPLICABLE)

 

o                                   Party A shall have a Fixed Independent
Amount of $                   .   If the Fixed Independent Amount option is
selected for Party A, then Party A (which shall be a Pledging Party with respect
to the Fixed IA Performance Assurance) will be required to Transfer or cause to
be Transferred to Party B (which shall be a Secured Party with respect to the
Fixed IA Performance Assurance) Performance Assurance with a Collateral Value
equal to the amount of such Independent Amount (the “Fixed IA Performance
Assurance”).   The Fixed IA Performance Assurance shall not be reduced for so
long as there are any outstanding obligations between the Parties as a result of
the Agreement, and shall not be taken into account when calculating Party A’s
Collateral Requirement pursuant to the Collateral Annex.  Except as expressly
set forth above, the Fixed IA Performance Assurance shall be held and maintained
in accordance with, and otherwise be subject to, Paragraphs 2, 5(b), 5(c), 6, 7
and 9 of the Collateral Annex.

 

o                                   Party A shall have a Full Floating
Independent Amount of $                   .    If the Full Floating Independent
Amount option is selected for Party A, then for purposes of calculating Party
A’s Collateral Requirement pursuant to Paragraph 3 of the Collateral Annex, such
Full Floating Independent Amount for Party A shall be added by Party B to its
Exposure Amount for purposes of determining Net Exposure pursuant to Paragraph
3(a) of the Collateral Annex.

 

o                                   Party A shall have a Partial Floating
Independent Amount of $                   .   If the Partial Floating
Independent Amount option is selected for Party A, then Party A will be required
to Transfer or cause to be Transferred to Party B Performance Assurance with a
Collateral Value equal to the amount of such Independent Amount (the “Partial
Floating IA Performance Assurance”) if at any time Party A otherwise has a
Collateral Requirement (not taking into consideration the Partial Floating
Independent Amount) pursuant to Paragraph 3 of the Collateral Annex.   The
Partial Floating IA Performance Assurance shall not be reduced so long as Party
A has a Collateral Requirement (not taking into consideration the Partial
Floating Independent Amount).   The Partial Floating Independent Amount shall
not be taken into account when calculating a Party’s Collateral Requirements
pursuant to the Collateral Annex.  Except as expressly set forth above, the
Partial Floating Independent Amount shall be held and maintained in accordance
with, and otherwise be subject to, the Collateral Annex.

 

B.                                    Party B Independent Amount.       [ (NOT
APPLICABLE)  ]

 

o                                   Party B shall have a Fixed Independent
Amount of $                   .    If the Fixed Independent Amount Option is
selected for Party B, then Party B (which shall be a Pledging Party with respect
to the Fixed IA Performance Assurance) will be required to Transfer or cause to
be Transferred to Party A (which shall be a Secured Party with respect to the
Fixed IA Performance Assurance) Performance Assurance with a Collateral Value
equal to the amount of such Independent Amount (the “Fixed IA Performance
Assurance”).   The Fixed IA Performance Assurance shall not be reduced for so
long as there are any outstanding obligations between the Parties as a result of
the Agreement, and shall not be

 

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

 

taken into account when calculating Party B’s Collateral Requirement pursuant to
the Collateral Annex.  Except as expressly set forth above, the Fixed IA
Performance Assurance shall be held and maintained in accordance with, and
otherwise be subject to, Paragraphs 2, 5(b), 5(c), 6, 7 and 9 of the Collateral
Annex.

 

o                                   Party B shall have a Full Floating
Independent Amount of $                   .     If the Full Floating Independent
Amount Option is selected for Party B then for purposes of calculating Party B’s
Collateral Requirement pursuant to Paragraph 3 of the Collateral Annex, such
Full Floating Independent Amount for Party B shall be added by Party A to its
Exposure Amount for purposes of determining Net Exposure pursuant to Paragraph
3(a) of the Collateral Annex.

 

o                                   Party B shall have a Partial Floating
Independent Amount of $                   .     If the Partial Floating
Independent Amount option is selected for Party B, then Party B will be required
to Transfer or cause to be Transferred to Party A Performance Assurance with a
Collateral Value equal to the amount of such Independent Amount (the “Partial
Floating IA Performance Assurance”) if at any time Party B otherwise has a
Collateral Requirement (not taking into consideration the Partial Floating
Independent Amount) pursuant to Paragraph 3 of the Collateral Annex.   The
Partial Floating IA Performance Assurance shall not be reduced for so long as
Party B has a Collateral Requirement (not taking into consideration the Partial
Floating Independent Amount).   The Partial Floating Independent Amount shall
not be taken into account when calculating a Party’s Collateral Requirements
pursuant to the Collateral Annex.   Except as expressly set forth above, the
Partial Floating Independent Amount shall be held and maintained in accordance
with, and otherwise be subject to, the Collateral Annex.

 

 

IV.           Minimum Transfer Amount.

 

A.            Party A Minimum Transfer Amount:             $1

 

B.            Party B Minimum Transfer Amount:             $1

 

 

V.            Rounding Amount.

 

A.            Party A Rounding Amount:               $250,000

 

B.            Party B Rounding Amount:               $250,000

 

 

VI.           Administration of Cash Collateral.

 

A.            Party A Eligibility to Hold Cash.

 

o                                   Party A shall not be entitled to hold
Performance Assurance in the form of Cash.   Performance Assurance in the form
of Cash shall be held in a Qualified Institution in accordance with the
provisions of Paragraph 6(a)(ii)(B) of the Collateral Annex.  Party A shall pay
to Party B in accordance with the terms of the Collateral Annex the amount of
interest it receives from the Qualified Institution on any Performance Assurance
in the form of Cash posted by Party B.

 

x                                  MLCI and its Custodian shall be entitled to
hold (and, for the avoidance of doubt, use in accordance with Paragraph
6(a)(ii)) Performance Assurance in the form of Cash on behalf of Party A and the
Merrill Parties provided that the following conditions are satisfied:  (1) it is
not a Defaulting Party and (2) Cash shall be held only in any jurisdiction
within the

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

 

United States.    To the extent Party A is entitled to hold Cash, the Interest
Rate payable to Party B on Cash shall be as selected below:

 

 

Party A Interest Rate.

 

x          The “Interest Rate” will be at a rate per annum equal to the one
month London Interbank Offered Rate for Dollar deposits as may from time to time
be in effect as reported in The Wall Street Journal.  Such interest shall be
calculated on the basis of the actual number of days elapsed and on the basis of
a year of 360 days.

 

o    Other -

 

B.            Party B Eligibility to Hold Cash.

 

o                                   Party B shall not be entitled to hold
Performance Assurance in the form of Cash.  Performance Assurance in the form of
Cash shall be held in a Qualified Institution in accordance with the provisions
of Paragraph 6(a)(ii)(B) of the Collateral Annex.  Party B shall pay to Party A
in accordance with the terms of the Collateral Annex the amount of interest it
receives from the Qualified Institution on any Performance Assurance in the form
of Cash posted by Party A.

 

x                                  Party B shall be entitled to hold Performance
Assurance in the form of Cash provided that the following conditions are
satisfied:  (1) it is not a Defaulting Party and (2) Cash shall be held only in
any jurisdiction within the United States.    To the extent Party B is entitled
to hold Cash, the Interest Rate payable to Party A on Cash shall be as selected
below:

 

Party B Interest Rate.

 

x                                  The “Interest Rate” will be at a rate per
annum equal to the one month London Interbank Offered Rate for Dollar deposits
as may from time to time be in effect as reported in The Wall Street Journal. 
Such interest shall be calculated on the basis of the actual number of days
elapsed and on the basis of a year of 360 days.

 

o            Other -

 

C.                                    Notwithstanding the foregoing Party A
Eligibility to Hold Cash or Party B Eligibility to Hold Cash, MLCI, Party A and
Party B hereby covenant and agree that, except at such times as, in the case of
Party A, ML&Co., or, in the case of Party B, it or its Guarantor, as the case
may be, has a Credit Rating of at least Baa2 (Moody’s) or BBB (S&P), in the case
of Party A, MLCI, and in the case of Party B, Party B will cause all Performance
Assurance received from the other Party to be entered in one or more accounts
(each, a “CA Collateral Account”) with a Qualified Institution, each of which
accounts may include property of other parties, but will bear a title indicating
the Pledging Party’s interest in said account and the Performance Assurance in
said account.  In the event the Credit Ratings shall not be equivalent, the
lower Credit Rating shall govern.  In addition, the Secured Party may direct the
Pledging Party to deliver Eligible Collateral directly into the Secured Party’s
CA Collateral Account(s).  The Secured Party may move the CA Collateral Accounts
from one Qualified Institution to another upon reasonable notice to the Pledging
Party.  The Secured Party shall cause statements concerning the Performance
Assurance to be sent to the Pledging Party on request, which may not be made
more frequently than once in each calendar month.

 

VII.         Notification Time.

 

o            Other — 12:00 p.m. Central Standard Time

 

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

 

 

VIII.        General.

 

With respect to the Collateral Threshold, Independent Amount, Minimum Transfer
Amount and Rounding Amount, if no selection is made in this Cover Sheet with
respect to a Party, then the applicable amount in each case for such Party shall
be zero (0).  In addition, with respect to the “Administration of Cash
Collateral” section of this Paragraph 10, if no selection is made with respect
to a Party, then such Party shall not be entitled to hold Performance Assurance
in the form of Cash and such Cash, if any, shall be held in a Qualified
Institution pursuant to Paragraph 6(a)(ii)(B) of the Collateral Annex.    If a
Party is eligible to hold Cash pursuant to a selection in this Paragraph 10 but
no Interest Rate is selected, then the Interest Rate for such Party shall be the
Federal Funds Effective Rate as defined in Section VI of this Paragraph 10.

 

 

IX.           Additional Amendments to Collateral Annex.

 

Introductory Paragraph.

 

                                                Delete “Paragraph 10 Elections”
in the first introductory paragraph and replace it with “Paragraph 10 Cover
Sheet”.

 

Paragraph 1.   Definitions.

 

The following definitions are amended as set forth below:

 

The definition of “Letter of Credit” is deleted in its entirety and replaced
with the following:

 

“Letter of Credit” shall mean an irrevocable, transferable, standby Letter of
Credit, issued by a Qualified Institution, in a form as the issuing bank may
require and which is reasonably acceptable to the Party in whose favor the
Letter of Credit is issued.

 

The definition of “Notification Time” is amended to  “12:00 p.m. Central
Standard Time”.

 

The definition of “Performance Assurance” is amended by replacing “6(a)(iv)”
with 6(a)(iii)”.

 

The definition of “Qualified Institution” is deleted in its entirety and
replaced with the following:

 

“Qualified Institution” means a major U.S. commercial bank or a foreign bank
that is not an affiliate of any Party to this Agreement with a U.S. branch
office which is not the Pledgor (or a subsidiary or Affiliate of the Pledgor)
and with a Credit Rating of at least “A-” by S&P and “A3” by Moody’s.

 

The definition of “Reference Market-maker” is deleted in its entirety and
replaced with the following:

 

“Reference Market-maker” means a leading broker, dealer or published index in
the relevant market selected by a Party determining its Exposure in a
commercially reasonable manner.  Such leading dealers shall not be parties to
this Agreement or Affiliates of a Party to this Agreement.

 

The definition of “Secured Party” is amended by replacing “3(b)” with “3(a)”.

 

Paragraph 5.  Reduction and Substitution of Performance Assurance.

 

Subparagraph 5(a) shall be amended by adding the word “Local” before the words
“Business Day in line eighteen.

 

Paragraph 6.   Administration of Performance Assurance.

 

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

 

[The following subparagraph 6(a)(iv) shall be added following subparagraph
6(a)(iii):

 

(iv)          Distributions.  So long as no Event of Default or  Potential Event
of Default with respect to the Pledging Party has occurred and is continuing,
and no Early Termination Date for which any unsatisfied payment Obligations of
the Pledging Party exist has occurred or been designated as the result of an
Event of Default with respect to the Pledging Party, and to the extent that an
obligation to Transfer Performance Assurance would not be created or increased
by the Transfer, in the event that the Secured Party or its Custodian is holding
Treasury Bills, Treasury Notes, or Treasury Bonds (“Treasury PA”) and Secured
Party receives or is deemed to receive Distributions on a Local Business Day,
the Secured Party will Transfer (or caused to be Transferred) to the Pledging
Party such Distributions not later than the following Local Business Day.  On or
after the occurrence of a Potential Event of Default or an Event of Default with
respect to the Pledging Party or an Early Termination Date as a result of an
Event of Default with respect to the Pledging Party, the Secured Party or its
Custodian shall retain any such Distributions as additional Performance
Assurance hereunder until the obligations of the Pledging Party under the
Agreement have been satisfied in the case of an Early Termination Date or for so
long as such Event of Default is continuing in the case of an Event of Default.
For purposes of this paragraph, “Distributions” means with respect to Treasury
PA, all principal, interest and other payments and distributions of cash or
other property with respect thereto, regardless of whether the Secured Party has
disposed of that Treasury PA under Paragraph 6(ii).  Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Treasury PA.] [Remove if deleting negotiable debt obligations
from Section II]

 

Subparagraph 6(b)(iii) is amended by deleting the words “occurrence thereof” and
replacing them with the words “Pledging Party’s receipt of notice hereunder” in
the fourth line.

 

                                                Subparagraph 6(c) shall be
deleted in its entirety and replaced with the following:

 

“SCHEDULE 1 to Collateral Annex” shall be deleted in its entirety.

 

Demands and Notices.  All demands, specifications and notices under this Annex
will be made pursuant to the Notices Section of this Agreement, unless otherwise
specified here:

 

Party A:

 

Attn:  Credit Risk Management

Street Address:
1000 Main St., 11th Floor
Houston, TX  77002

Mailing Address:
P O Box 4455
Houston, TX 77210-4455

With a copy to (other than copies of notices in respect of demands under
Paragraphs 4 and 5):

 

Telephone:
Facsimile:

Telephone:
Facsimile:

 

(713) 497-1052
(713) 497-1058

(713) 544-4975
(713) 544-5551

 

 

 

Merrill Lynch Commodities, Inc.
20 East Greenway Plaza, 7th Floor
Houston, Texas 77253-3327
Attn:Legal

 

 

 

 

 

 

 

 

 

 

 

 

Party B:

 

 

 

Telephone:
Facsimile:

 

 

 

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

 

Addresses for Transfers.

 

Party A:
U. S. Dollars

 

Payment to:

For Account of:
Account #:
Federal ABA#:

 

JP Morgan Chase Bank,
New York, NY
Merrill Lynch Commodities, Inc.
066657474
021000021

Party B:
U.S. Dollars

 

Payment to:
For Account of:
Account #:
Federal ABA#:

 

 

 

Other Provisions.

UCC.                    Each Party agrees that the provisions of this Agreement
supersede and replace in their entirety any requirements of law relating to
adequate assurance of future performance, including without limitation Article 2
of the Uniform Commercial Code.  This Collateral Annex is a Security Agreement
under the provisions of the Uniform Commercial Code of the State of New York.

 

Credit Sleeve Provisions.

 

(i)                                     In connection with the Collateral
Assignment described in “Credit Sleeve Provisions” on the Cover Sheet, Party A,
Party B and MLCI agree that:

 

(A)                              Party B shall Transfer all Eligible Collateral
required to be Transferred hereunder by Party B directly to the account provided
above (“Addresses for Transfer”) for Party A and, any such Transfer, to the
extent thereof, shall satisfy Party B’s obligations to make Transfers to Party A
hereunder;

 

(B)                                MLCI shall Transfer all Eligible Collateral
required to be Transferred hereunder by Party A directly to the account provided
above (“Addresses for Transfer”) for Party B and, any such Transfer, to the
extent thereof, shall satisfy Party A’s obligations to make Transfers to Party B
hereunder;

 

(C)                                Party A hereby unconditionally and
irrevocably authorizes and directs MLCI to make and receive, on behalf of Party
A and the Merrill Parties, and MLCI hereby unconditionally agrees to make and
receive, on behalf of Party A and the Merrill Parties, the Transfers described
in clauses (A) and (B) above;

 

(D)                               Party A has pledged and assigned to the
Merrill Parties its rights under this Collateral Annex to receive, hold and use
the Eligible Collateral transferred to MLCI hereunder in accordance with the
terms of this Collateral Annex on behalf of Party A and on behalf of the Merrill
Parties in connection with the Collateral Assignment;

 

(E)                                 Party A and Party B consent to the
Collateral Assignment, and agree to perform their obligations, under the Cover
Sheet, “Credit Sleeve Provisions”, for the benefit of the Merrill Parties; and

 

(F)                                 Any amendment, supplement, waiver or other
modification of, or any forbearance from exercising any rights with respect to
the terms or provisions contained in this Collateral Annex requires the express
written consent of Party A, Party B and MLCI.

 

(ii)                                  MLCI agrees to comply with the
confidentiality obligations set forth in Section 10.11, as amended.

 

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

 

(iii)                               All information that is furnished in writing
by or on behalf of it to any of the other Parties hereto is, as of the date of
the information, true, accurate and complete in every material respect, or, in
the case of audited or unaudited financial statements, fairly present the
financial condition of the relevant entity and have been prepared in accordance
with generally accepted accounting principles, consistently applied, except as
otherwise indicated in the notes of such financial statements.

 

(iv)                              Paragraph 5.6 of the Agreement shall be
deleted in its entirety and replaced with the following:  “Party B shall make
each payment due under this Agreement without deduction, set-off or
counterclaim, except (A) as specifically provided in Article 6 of the Agreement,
and (B) that Party B, if it is the Non-defaulting Party shall be entitled to set
off the Termination Payment owed by Party B to Party A under this Agreement
(whether pursuant to Article 6 or under any other provision under this
Agreement) against amounts owed by Party A to Party B under this Agreement
(whether pursuant to Article 6 or under any other provision under this
Agreement).  Party A, or MLCI on its behalf, shall make each payment due under
this Agreement without deduction, set-off counterclaim, except (A) as
specifically provided in Article 6 of the Agreement, and (B) that Party A, or
MLCI on its behalf, if Party A is the Non-defaulting Party shall be entitled to
set off the Termination Payment owed by Party A to Party B under this Agreement
(whether pursuant to Article 6 or under any other provision under this
Agreement) against amounts owed by Party B to Party A under this Agreement
(whether pursuant to Article 6 or under any other provision under this
Agreement).  For the avoidance of doubt:

 

                                                                                               
(A)                              the term “Party A” means Reliant Energy Power
Supply, LLC (and any other Person that succeeds to all of the rights and
obligations of Reliant Energy Power Supply, LLC under this Agreement in
accordance with its terms), and Party A shall in no event include any of its
affiliates or any other Person except as stated above; and

 

                                                                                               
(B)                                the term “Party B” means [insert legal name
of Party B] (and any other Person that succeeds to all of the rights and
obligations of [insert legal name of Party B] under this Agreement in accordance
with its terms), and Party B shall in no event include any of its affiliates or
any other Person except as stated above.

 

(v)                                 Except as provided in the Cover Sheet under
“Credit Sleeve Provisions”, the only rights, covenants and obligations in the
Agreement that shall be applicable to MLCI are those that are set forth in
provisions that either specifically refer to MLCI by name, or that specifically
refer to “each of the three parties”.  All of the other provisions in the
Agreement that refer to: “Pledging Party”, “Secured Party”, “Defaulting Party”,
“Affected Party”, “a Party”, “appropriate party”, “other party”, “the parties”,
“both parties”, “each Party”, “either Party” or “neither Party” shall not be
interpreted as references to MLCI, but shall be interpreted as references to:
Party A; Party B; both Party A and Party B; each of Party A and Party B; either
Party A or Party B; or neither Party A nor Party B as is indicated by the
context.

 

(vi)                              MLCI Termination Right.  Each of MLCI’s rights
and obligations hereunder, including its rights and obligations to Transfer and
receive Performance Assurance, may be terminated at any time by notice by MLCI
to Party A and Party B given in accordance with the notice provisions of the
Agreement, effective upon receipt of such notice by Party A and Party B or such
later date as may be specified in such notice; provided that MLCI’s rights and
obligations hereunder shall continue in full force and effect, and shall be
irrevocable, with respect to any obligation, including its rights and
obligations to Transfer and receive Performance Assurance, arising under any
Transaction under and as defined in the Agreement entered into prior to the
effectiveness of such notice of termination.

 

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

 

IN WITNESS WHEREOF, the parties hereto have executed this document as of the
date specified on the first page hereof.

 

RELIANT ENERGY POWER SUPPLY, LLC

 

 

 

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name:

 

 

Name:

 

 

 

 

 

 

Title:

 

 

Title:

 

 

 

 

 

 

MERRILL LYNCH COMMODITIES, INC.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

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

 

 

Exhibit D2

To Credit Sleeve and Reimbursement Agreement

Form of ISDA Collateral Annex

PARAGRAPH 13

 

OF THE

 

CREDIT SUPPORT ANNEX

 

DATED AS OF

 

[   T.B.D.     ]

 

BETWEEN

 

RELIANT ENERGY POWER SUPPLY, LLC (“Party A”)

 

AND

 

                                                     (“Party B”)

 

AND

 

MERRILL LYNCH COMMODITIES, INC. (“MLCI”)

 

 

Paragraph 13.  Elections and Variables

 

(a)                                 Security Interest.  The term “Obligations”
as used in this Annex includes the following additional obligations:

 

With respect to Party A:  None

With respect to Party B:  None

 

(b)           Credit Support Obligations.

 

(i)            Delivery Amount, Return Amount and Credit Support Amount.

 

(A)          “Delivery Amount” has the meaning specified in Paragraph 3(a).

 

(B)                                “Return Amount” has the meaning specified in
Paragraph 3(b).

 

(C)                                “Credit Support Amount” has the meaning
specified in Paragraph 3.

 

(ii)                                  Eligible Collateral. The following items
will qualify as “Eligible Collateral” for the party specified:

 

 

 

 

MLCI
(on behalf of Party A
and itself)

 

Party B

 

Valuation
%

(A) Cash

 

[X]

 

[X]

 

100%

(B) Negotiable debt obligations issued by the U.S. Treasury Department having an
original maturity at issuance of not more than one year (“Treasury Bills”)

 

[X]

 

[X]

 

99%

(C) Negotiable debt obligations issued by the U.S. Treasury Department having an
original maturity at issuance of more than one year but not more than ten years
(“Treasury Notes”)

 

[X]

 

[X]

 

98%

(D) Negotiable debt obligations issued by the U.S. Treasury Department having an
original maturity at issuance of more than ten years (“Treasury Bonds”)

 

[X]

 

[X]

 

95%

 

 

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

 

(iii)                               Other Eligible Support. The following items
will qualify as “Other Eligible Support” for the party specified:

 

Party A  Party B

Letter of Credit (as defined in Paragraph 13(j))                   [X]     
                   [X]

 

The Valuation Percentage shall be 100% unless (i) a Letter of Credit Default
shall apply with respect to such Letter of Credit, or (ii) twenty (20) or fewer
Business Days remain prior to the expiration of such Letter of Credit, in either
of which case the Valuation Percentage shall be zero (0).

 

(iv)          Thresholds.

 

(A)                              “Independent Amount” means with respect to
Party A:             None

“Independent Amount” means with respect to Party B:              None

 

(B)           “Threshold”

 

For Party A, “Threshold” shall mean the amount (the “Credit Amount”) [delete
highlighted language if Guaranty is uncapped or no Guarantor equal to the lower
of (i) the maximum amount payable under guaranty provided by Party A’s Credit
Support Provider guaranteeing Party A’s payment obligations hereunder, if any,
and (ii) the amount] set forth below under the heading “Party A Threshold”
opposite the Credit Rating for Party A’s Credit Support Provider on the relevant
date of determination, and if Party A’s Credit Support Provider’s Credit Ratings
shall not be equivalent, the [lower/higher] Credit Rating shall govern;
provided, however, that the Threshold for Party A shall be zero if (i) [delete
the following highlighted language if no Guaranty provided for Party A  no
Guaranty has been provided,] (ii) on the relevant date of determination Party
A’s Credit Support Provider does not have a Credit Rating from any rating agency
specified below or (iii) an Event of Default or Potential Event of Default with
respect to Party A has occurred and is continuing; and provided further that, in
the event that, and on the date that, Party A cures the Potential Event of
Default on or prior to the date that Party A is required to post a Credit
Support Amount to Party B pursuant to a demand made by Party B pursuant to the
provisions of the Credit Support Annex on or after the occurrence of such
Potential Event of Default, (i) the Threshold for Party A shall automatically
increase from zero to the Credit Amount and (ii) Party A shall be relieved of
its obligation to post the Credit Support Amount pursuant to such demand.

 

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

 

 

Party A
Threshold

 

S&P Credit Rating

 

Moody’s Credit Rating

 

 

 

 

 

 

 

AA- (or above)

 

Aa3 (or above)

 

 

A+ thru A-

 

A1 thru A3

 

 

BBB+

 

Baa1

 

 

BBB

 

Baa2

 

 

BBB-

 

Baa3

 

 

BB+

 

Ba1

 

 

BB

 

Ba2

 

 

BB-

 

Ba3

 

 

B+

 

B1

 

 

B

 

B2

 

 

Below B

 

Below B2

 

 

Unrated

 

Unrated

 

 

For Party B, “Threshold” shall mean the amount (the “Credit Amount”) [Remove the
following highlighted language if CP Guaranty is uncapped or no Guarantor equal
to the lower of (i) the maximum amount payable under guaranty provided by Party
B’s Credit Support Provider guaranteeing Party B’s payment obligations
hereunder, if any, and (ii) the amount] set forth below under the heading “Party
B Threshold” opposite the Credit Rating for Party B’s Credit Support Provider on
the relevant date of determination, and if Party B’s Credit Support Provider’s
Credit Ratings shall not be equivalent, the [lower/higher] Credit Rating shall
govern; provided, however, that the Threshold for Party B shall be zero if (i)
[delete the following highlighted language if no Guaranty provided for Party B  
no Guaranty has been provided,] (ii) on the relevant date of determination Party
B’s Credit Support Provider does not have a Credit Rating from any rating agency
specified below or (iii) an Event of Default or Potential Event of Default with
respect to Party B has occurred and is continuing; and provided further that, in
the event that, and on the date that, Party B cures the Potential Event of
Default on or prior to the date that Party B is required to post a Credit
Support Amount to Party A pursuant to a demand made by Party A pursuant to the
provisions of the Credit Support Annex on or after the occurrence of such
Potential Event of Default, (i) the Threshold for Party B shall automatically
increase from zero to the Credit Amount and (ii) Party B shall be relieved of
its obligation to post the Credit Support Amount pursuant to such demand.

 

Party B
Threshold

 

S&P Credit Rating

 

Moody’s Credit Rating

 

 

 

 

 

 

 

AA- (or above)

 

Aa3 (or above)

 

 

A+ thru A-

 

A1 thru A3

 

 

BBB+

 

Baa1

 

 

BBB

 

Baa2

 

 

BBB-

 

Baa3

 

 

BB+

 

Ba1

 

 

BB

 

Ba2

 

 

BB-

 

Ba3

 

 

B+

 

B1

 

 

B

 

B2

 

 

Below B

 

Below B2

 

 

Unrated

 

Unrated

 

(C)           “Minimum Transfer Amount” means with respect to Party A: $1

                “Minimum Transfer Amount” means with respect to Party B: $1

 

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

 

(D)                               “Rounding”. The Delivery Amount will be
rounded up, and the Return Amount will be rounded down, in each case to the
nearest integral multiple of $250,000.

 

(c)           Valuation and Timing.

 

(i)                                     “Valuation Agent” means , for purposes
of Paragraphs 3 and 5, the party making the demand under Paragraph 3; for
purposes of Paragraph 4(d), the Secured Party for purposes of calculating the
Value of the Substitute Credit Support and Posted Credit Support involved in the
substitution; and for purposes of Paragraph 6(d), the Secured Party receiving or
deemed to receive the Distributions or the Interest Amount, as applicable;
provided that in all cases, if an Event of Default or Potential Event of Default
has occurred and is continuing with respect to the party designated as the
Valuation Agent, then in such case, and for so long as the Event of Default or
Potential Event of Default continues, the other party shall be the Valuation
Agent

 

(ii)                                  “Valuation Date” means each day which is a
Local Business Day for Party A, Party B and MLCI.

 

(iii)                               “Valuation Time” means the close of business
on the Local Business Day before the Valuation Date or date of calculation, as
applicable; provided that the calculations of Value and Exposure will be made as
of approximately the same time on the same date.

 

(iv)                              “Notification Time” means 12:00 p.m., Central
time, on a Local Business Day.

 

(d)                                 Conditions Precedent and Secured Party’s
Rights and Remedies. There shall be no “Specified Condition” with respect to
Party A or Party B.

 

(e)           Dispute Resolution.

 

(i)                                     “Resolution Time” means 12:00 p.m.,
Central time, on second Local Business Day following the date on which the
notice is given that gives rise to a dispute under Paragraph 5.

 

(ii)                                  “Alternative”.  The provisions of
Paragraph 5 will apply, except that (i)(B) shall be deleted and the following
substituted therefor:

 

                                                            (B) calculating the
Exposure for the Transaction(s) in dispute by each party seeking quotations at
mid-market from four Reference Market-makers.  Each party shall disregard the
“highest” and the “lowest” quotations obtained and take the arithmetic average
of the remaining two, to come up with an average “Market Price” for the disputed
Transaction(s). Each party’s average Market Price shall then be averaged to
obtain an “Average Market Price” which shall be the price used to calculate the
Exposure related to the disputed Transaction(s). If less than four (but at least
one) quotations are available to a party with respect to a disputed
Transaction(s), then such party shall take the arithmetic average of the
obtained quotations to calculate such party’s average Market Price. If no
quotations are available for a particular Transaction(s), then the Valuation
Agent’s original calculations will be used for such Transaction(s);

 

(f)            Holding and Using Posted Collateral.

 

(i)                                     “Eligibility to Hold Posted Collateral;
Custodians”.

 

                                                            MLCI and its
Custodian (if any) will be entitled to hold Posted Collateral pursuant to
Paragraph 6(b) on behalf of Party A and the Merrill Parties; provided that the
following conditions applicable to it are satisfied:

 

(A)          Party A is not a Defaulting Party.

 

(B)                                Posted Collateral may be held only in the
United States.

 

Party B and its Custodian (if any) will be entitled to hold Posted Collateral
pursuant to Paragraph 6(b); provided that the following conditions applicable to
it are satisfied:

 

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

 

(A)          Party B is not a Defaulting Party.

 

(B)           Posted Collateral may be held only in the United States.

 

Notwithstanding the foregoing, MLCI, Party A and Party B hereby covenant and
agree that, except at such times as, in the case of Party A, ML&Co., or, in the
case of Party B, it or its Credit Support Provider, as the case may be, has a
Credit Rating of at least Baa2 (Moody’s) or BBB (S&P), in the case of Party A,
MLCI, and in the case of Party B, Party B will cause all Posted Collateral
received from the other party to be entered in one or more accounts (each, a
“CSA Collateral Account”) with a Qualified Institution, each of which accounts
may include property of other parties, but will bear a title indicating the
Pledgor’s interest in said account and the Posted Collateral in said account. 
In the event the Credit Ratings shall not be equivalent, the lower Credit Rating
shall govern.  In addition, the Secured Party may direct the Pledgor to deliver
Eligible Collateral directly into the Secured Party’s CSA Collateral
Account(s).  The Secured Party may move the CSA Collateral Accounts from one
Qualified Institution to another upon reasonable notice to the Pledgor.  The
Secured Party shall cause statements concerning the Posted Collateral to be sent
to the Pledgor on request, which may not be made more frequently than once in
each calendar month.

 

(ii)                                  “Use of Posted Collateral”. Unless Posted
Collateral is required to be held in a CSA Collateral Account pursuant to clause
(i) above, the provisions of Paragraph 6(c) will apply to (A) MLCI as “Secured
Party” on behalf of Party A and the Merrill Parties and (B) Party B.

 

(g)           Distributions and Interest Amount.

 

(i)                                     “Interest Rate”.  The “Interest Rate”
will be at a rate per annum equal to the one month London Interbank Offered Rate
for Dollar deposits as may from time to time be in effect as reported in The
Wall Street Journal.  Such interest shall be calculated on the basis of the
actual number of days elapsed and on the basis of a year of 360 days.

 

(ii)                                  “Transfer of Interest Amount”. The
Transfer of the Interest Amount will be made on the second Local Business Day
following each calendar month, and on any Local Business Day that Posted
Collateral in the form of Cash is transferred to the Pledgor pursuant to
Paragraph 3(b), in either event upon receipt of an invoice prior to such date,
and, if no invoice is received before such date, within one Local Business Day
of receipt of such invoice.

 

(iii)          Alternative to Interest Amount.  The provisions of Paragraph
6(d)(ii) will apply.

 

 

 (h)                              Other Eligible Support and Other Posted
Support.

 

 

(i)            “Transfer” with respect to Other Eligible Support and Other
Posted Support means:

 

(A)                              For purposes of Paragraph 3(a), delivery of the
Letter of Credit by the Pledgor or issuer of the Letter of Credit to the Secured
Party at the address of the Secured Party specified in the Notices Section of
this Agreement, or delivery of an executed amendment to such Letter of Credit
(extending the term or increasing the amount available to the Secured Party
thereunder) by the Pledgor or the issuer of the Letter of Credit to the Secured
Party at the address of the Secured Party specified in the Notices Section of
this Agreement; and,

 

                (B)           For purposes of Paragraph 3(b), by the return of
an outstanding Letter of Credit by the Secured Party to the issuing bank, at the
address of the issuing bank specified in the Letter of Credit or delivery to the
issuing bank at such address of an amendment to the Letter of Credit executed by
the Secured Party (reducing the amount available to the Secured Party
thereunder).

 

 

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

 

 

(ii)   “Letter of Credit Provisions”.

 

Other Eligible Support and Other Posted Support in the form of a Letter of
Credit shall be subject to the following provisions:

 

(A)                              Unless otherwise agreed in writing by the
parties, each Letter of Credit shall be Transferred in accordance with the
provisions of this Annex, and the Secured Party shall be the named beneficiary
under each Letter of Credit.  The Pledgor shall (i)  if the issuer of a Letter
of Credit previously Transferred to the Secured Party has indicated its intent
not to renew such Letter of Credit, Transfer a substitute Letter of Credit or
other Eligible Collateral having the same Value, and (ii) if the issuer of a
Letter of Credit shall commit a Letter of Credit Default of the type specified
in clause (i) or (ii) of the definition thereof (including but not limited to
such issuer’s failure to honor the Secured Party’s properly documented request
to draw thereon), Transfer for the benefit of the Secured Party Eligible
Collateral within one (1) Local Business Day after the Pledgor receives notice
of such dishonor, provided that, at the time the Pledgor is required to perform
in accordance with (i) or (ii) above, the Delivery Amount applicable to the
Pledgor equals or exceeds the Pledgor’s Minimum Transfer Amount.

 

(B)                                The Pledgor may, at its option, Transfer a
Letter of Credit by (A) causing the issuing bank to execute an amendment
increasing the outstanding amount available for drawing under a previously
Transferred Letter of Credit or (B) establishing one or more additional Letters
of Credit.  If (i) the Pledgor shall fail to cause the issuing bank to renew,
substitute, or sufficiently increase the amount of a Transferred Letter of
Credit, Transfer one or more additional Letters of Credit, or otherwise Transfer
sufficient Eligible Credit Support and (ii) the Delivery Amount applicable to
the Pledgor equals or exceeds the Pledgor’s Minimum Transfer Amount as a result
of such failure, then the Secured Party may draw on the entire, undrawn portion
of any Transferred Letter of Credit upon submission to the bank issuing such
Letter of Credit an Letter of Credit certificate specifying the amounts due and
owing to the Secured Party in accordance with the stated requirements of the
Letter of Credit. The Pledgor shall remain liable for any amounts due and owing
to the Secured Party and remaining unpaid after the application of the amounts
so drawn by the Secured Party.

 

(C)                                Upon the occurrence of a Letter of Credit
Default solely of the type specified in clause (i) of the definition thereof,
the Pledgor agrees to deliver a substitute Letter of Credit or other Eligible
Credit Support to the Secured Party in an amount at least equal to that of the
Letter of Credit to be substituted on or before the first (1st) Business Day
after written demand by the Secured Party.

 

(D)                               Notwithstanding Paragraph 10, in all cases,
the costs and expenses (including but not limited to the reasonable costs,
expenses, and external attorney’s fees of the Secured Party) of causing an
issuing bank to establish, renew, substitute, cancel, increase or reduce the
amount available for drawing under (as the case may be) one or more Letters of
Credit shall be borne by the Pledgor.

 

(iv)          “Certain Rights and Remedies”.

 

Secured Party’s Rights and Remedies. For purposes of Paragraph 8(a)(ii), the
Secured Party may draw on any Transferred Letter of Credit in an aggregate
amount equal to any amounts payable by the Pledgor with respect to any
Obligations and hold or apply the proceeds thereof in accordance with the
Agreement.

 

(v)                                 “Additional Definitions”.  As used in this
Annex:

 

“Credit Rating” shall mean, with respect to a party or entity on any date of
determination, the respective rating then assigned to such party’s or entity’s
unsecured, senior long-term debt or deposit obligations (not supported by
third-party credit enhancement) by S&P or Moody’s, as applicable; and if no
rating is assigned to such party’s or entity’s unsecured, senior, long-term debt
or deposit

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

 

 

obligations by any of S&P or Moody’s, the general issuer credit rating or
long-term issuer rating, as applicable, assigned by such rating agencies to such
party or entity.

 

“Letter of Credit” shall mean an irrevocable, transferable, standby Letter of
Credit, issued by a Qualified Institution,  in a form as the issuing bank may
require and which is reasonably acceptable to the party in whose favor the
Letter of Credit is issued.

 

“Letter of Credit Default” shall mean with respect to an outstanding Letter of
Credit, the occurrence of any of the following events: (i) the issuer of such
Letter of Credit shall fail to maintain a Credit Rating of at least “A-” by S&P
or “A3” by Moody’s; (ii) the issuer of the Letter of Credit shall fail to comply
with or perform its obligations under such Letter of Credit if such failure
shall be continuing after the lapse of any applicable grace period; (iii) the
issuer of such Letter of Credit shall disaffirm, disclaim, repudiate or reject,
in whole or in part, or challenge the validity of, such Letter of Credit; (iv)
such Letter of Credit shall expire or terminate, or shall fail or cease to be in
full force and effect, prior to the stated expiration date on the Letter of
Credit; or (v) any event analogous to an event specified in Section 5(a)(vii) of
this Agreement shall occur with respect to the issuer of such Letter of Credit
provided, however, that no Letter of Credit Default shall occur in any event
with respect to a Letter of Credit after the time such Letter of Credit is
required to be canceled or returned to the Pledgor in accordance with the terms
of this Annex.

 

“Moody’s” means Moody’s Investors Services, Inc. or its successor.

 

“Qualified Institution” means a major U.S. commercial bank or a foreign bank
that is not an affiliate of any party to this Agreement with a U.S. branch
office which is not the Pledgor (or a subsidiary or Affiliate of the Pledgor)
and with a Credit Rating of at least “A-” by S&P or “A3” by Moody’s.

 

“Reference Market-maker” means a leading broker, dealer or published index in
the relevant market selected by a party determining its Exposure in a
commercially reasonable manner.  Such leading dealers shall not be parties to
this Agreement or Affiliates of a party to this Agreement.

 

“Security Agreement” shall mean an agreement which creates or provides for a
security interest.

 

“S&P” means the Standard & Poor’s Rating Services, a Division of The McGraw-Hill
Companies, Inc., or its successor.

 

“Value” with respect to Other Eligible Support and Other Posted Support means
the undrawn currently available amount of any Letter of Credit maintained by the
Pledgor (or its Credit Support Provider) for the benefit of the Secured Party,
multiplied by the then applicable Valuation Percentage.

 

 

(j)                                  Demands and Notices. All demands,
specifications and notices under this Annex will be made pursuant to the Notices
Section of this Agreement, unless otherwise specified here:

 

Party A:

 

Attn: Credit Risk Management

Street Address:

1000 Main St., 11th Floor

Houston, TX 77002

 

Telephone:
Facsimile:

 

(713) 497-1052
(713) 497-1058

 

 

 

 

 

 

 

 

 

Mailing Address:

P O Box 4455
Houston, TX 77210-4455

With a copy to (other than copies of notices in respect of demands under
Paragraph 3):

Merrill Lynch Commodities, Inc.
20 East Greenway Plaza, 7th Floor
Houston, Texas 77253-3327
Attn: Legal

 

 

Telephone:
Facsimile:

 

 

(713) 544-4975
(713) 544-5551

 

 

 

 

 

 

 

Party B:

 

 

 

Telephone:
Facsimile:

 

 

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

 

(k)           Addresses for Transfers.

 

 

 

 

 

Party A:
U. S. Dollars

 

Payment to:

For Account of:
Account #:
Federal ABA#:

 

JP Morgan Chase Bank,
New York, NY
Merrill Lynch Commodities, Inc.
066657474
021000021

Party B:
U.S. Dollars

 

Payment to:
For Account of:
Account #:
Federal ABA#:

 

 

 

(l)            Other Provisions.

 

(i)                                  Paragraph 6(d)(i)is hereby amended by
adding the following sentence:

 

“Subject to Paragraph 4(a) and only to the extent contemplated in the previous
sentence, if a Secured Party receives or is deemed to receive Distributions on a
day that is not a Local Business Day, or after its close of business on a Local
Business Day, it will Transfer Distributions to the Pledgor on the second
following Local Business Day.”

 

(ii)                              Paragraph 7 is amended as follows: In clause
(i), the words “and/or Other Eligible Support” are inserted on line 1 after the
words “of Eligible Collateral”.

 

(iii)                          UCC. Each party agrees that the provisions of
this Agreement supersede and replace in their entirety any requirements of law
relating to adequate assurance of future performance, including without
limitation Article 2 of the Uniform Commercial Code.

 

(iv)                            References throughout this Credit Support Annex
to “Swap Transactions” are deleted.

 

 (m)         Credit Sleeve Provisions.

 

(v)                                 In connection with the enhanced credit
structure provided by MLCI and Merrill Lynch & Co., Inc (together with MLCI, the
“Merrill Parties”) to Party A described in Part 9 of the Schedule, Party A,
Party B and MLCI agree that:

 

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

 

(A)                              Party B shall Transfer all Eligible Credit
Support required to be Transferred hereunder by Party B directly to the account
provided in paragraph 13(l) for Party A and, any such Transfer, to the extent
thereof, shall satisfy Party B’s obligations to make Transfers to Party A
hereunder;

 

(B)                                MLCI shall Transfer all Eligible Credit
Support required to be Transferred hereunder by Party A directly to the account
provided in paragraph 13(l) for Party B and, any such Transfer, to the extent
thereof, shall satisfy Party A’s obligations to make Transfers to Party B
hereunder;

 

(C)                                Party A hereby unconditionally and
irrevocably authorizes and directs MLCI to make and receive, on behalf of Party
A and the Merrill Parties, and MLCI hereby unconditionally agrees to make and
receive, on behalf of Party A and the Merrill Parties, the Transfers described
in clauses (A) and (B) above;

 

(D)                               Party A has pledged and assigned to the
Merrill Parties its rights under this Credit Support Annex to receive, hold and
use the Eligible Credit Support transferred to MLCI hereunder in accordance with
the terms of this Credit Support Annex on behalf of Party A and on behalf of the
Merrill Parties in connection with the Collateral Assignment;

 

(E)                                 Party A and Party B consent to the
Collateral Assignment, and agree to perform their obligations, under Part 9 of
the Schedule for the benefit of the Merrill Parties;

 

(F)                                 Any amendment, supplement, waiver or other
modification of, or any forbearance from exercising any rights with respect to
the terms or provisions contained in this Credit Support Annex requires the
express written consent of Party A, Party B and MLCI; and

 

(G)                                Each of MLCI and Party B makes the
representations to the other party set forth in Paragraph 9 of this Credit
Support Annex.

 

(vi)                              MLCI agrees to comply with the confidentiality
obligations described in Part 5(j) of the Schedule.

 

(vii)                           All information that is furnished in writing by
or on behalf of it to any of the other parties hereto is, as of the date of the
information, true, accurate and complete in every material respect, or, in the
case of audited or unaudited financial statements, fairly present the financial
condition of the relevant entity and have been prepared in accordance with
generally accepted accounting principles, consistently applied, except as
otherwise indicated in the notes of such financial statements. [Note: This
provision should be consistent with Section 3(d) of the ISDA Master Agreement as
modified by the Schedule.]

 

(viii)                        Set-off. Paragraph 6(f) of the Agreement shall be
deleted in its entirety and replaced with the following: “Party B shall make
each payment due under this Agreement without deduction, set-off or
counterclaim, except (A) as specifically provided in Section 2 of the Agreement,
and (B) that Party B, if it is the Non-defaulting or Non-affected Party, shall
be entitled to set off the Early Termination Amount owed by Party B to Party A
under this Agreement (whether pursuant to Section 6 or under any other provision
under this Agreement) against amounts owed by Party A to Party B under this
Agreement (whether pursuant to Section 6 or under any other provision under this
Agreement). Party A, or MLCI on its behalf, shall make each payment due under
this Agreement without deduction, set-off or counterclaim, except (A) as
specifically provided in Section 2 of the Agreement, and (B) that Party A, or
MLCI on its behalf, if Party A is the Non-defaulting or Non-affected Party,
shall be entitled to set off the Early Termination Amount owed by Party A to
Party B under this Agreement (whether pursuant Section 6 or under any other
provision under this Agreement) against amounts owed by Party B to Party A under
this Agreement (whether pursuant to Section 6 or under any other provision under
this Agreement). For the avoidance of doubt:

 

(A)                              the term “Party A” means Reliant Energy Power
Supply, LLC (and any other Person that succeeds to all of the rights and
obligations of Reliant Energy Power Supply, LLC under

 

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

 

this Agreement in accordance with its terms), and ‘Party A’ and shall in no
event include any of its affiliates or any other Person except as stated above;
and

 

(B)                                the term “Party B” means [insert legal name
of Party B] (and any other Person that succeeds to all of the rights and
obligations of [insert legal name of Party B] under this Agreement in accordance
with its terms), and ‘Party B’ and shall in no event include any of its
affiliates or any other Person except as stated above.

 

(ix)                                Except as provided in Part 9(a) of the
Schedule, the only rights, covenants and obligations in the Agreement that shall
be applicable to MLCI are those that are set forth in provisions that either
specifically refer to MLCI by name, or that specifically refer to “each of the
three parties”. All of the other provisions in the Agreement that refer to:
“Pledgor”, “Secured Party”, “Valuation Agent”, “Defaulting Party”, “Affected
Party”, “Disputing Party”, “a party”, “appropriate party”, “other party”, “the
parties”, “both parties”, “each party”, “either party” or “neither party” shall
not be interpreted as references to MLCI, but shall be interpreted as references
to: Party A; Party B; both Party A and Party B; each of Party A and Party B;
either Party A or Party B; or neither Party A nor Party B as is indicated by the
context.

 

(x)                                   MLCI Termination Right. Each of MLCI’s
rights and obligations hereunder, including its rights and obligations to
Transfer and receive Eligible Credit Support, may be terminated at any time by
notice by MLCI to Party A and Party B given in accordance with the notice
provisions of the Agreement, effective upon receipt of such notice Party A and
Party B or such later date as may be specified in such notice; provided that
MLCI’s rights and obligations hereunder shall continue in full force and effect,
and shall be irrevocable, with respect to any obligation, including its rights
and obligations to Transfer and receive Eligible Credit Support, arising under
any Transaction under and as defined in the Agreement entered into prior to the
effectiveness of such notice of termination.

 

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

 

 

SIGNATURE PAGE

 

TO

 

PARAGRAPH 13

 

OF THE

 

CREDIT SUPPORT ANNEX

 

AMONG

 

RELIANT ENERGY POWER SUPPLY, LLC (PARTY “A”)

 

AND

 

                                                                              (PARTY
“B”)

 

AND

 

MERRILL LYNCH COMMODITIES, INC. (“Merrill”)

 

IN WITNESS WHEREOF, the parties hereto have executed this document as of the
date specified on the first page hereof.

 

RELIANT ENERGY POWER SUPPLY, LLC

 

 

 

 

 

By:

 

 

By:

 

 

 

 

 

 

Name:

 

 

Name:

 

 

 

 

 

 

Title:

 

 

Title:

 

 

 

 

 

 

MERRILL LYNCH COMMODITIES, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

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

 

 

Exhibit E1

To Credit Sleeve and Reimbursement Agreement

Reliant Energy — Retail Risk Policy

[***]

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

***    The content of this Exhibit E1 (consisting of 22 pages) has been omitted
and filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

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

 

Exhibit E2

To Credit Sleeve and Reimbursement Agreement

Hedge Limit Calculations

[***]

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

***    The content of this Exhibit E2 (consisting of 2 pages) has been omitted
and filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

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

 

Exhibit F

To Credit Sleeve and Reimbursement Agreement

ERCOT Asset List

[***]

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

***    The content of this Exhibit F (consisting of 1 page) has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

 

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

 

 

Exhibit G

To Credit Sleeve and Reimbursement Agreement

Joinder Agreement

 

FORM OF JOINDER AGREEMENT

([Subsidiary])

 

This JOINDER AGREEMENT dated as of [date] (this “Agreement”), is among the
undersigned and the other parties to each of the agreements listed on Schedule A
attached hereto (each a “Joined Agreement” and together the “Joined
Agreements”). With respect to each Joined Agreement, the undersigned hereby
agrees with the parties hereto as follows:

Effective as of the date hereof, the undersigned by its signature below hereby
becomes a party to each Joined Agreement in the capacity indicated on Schedule A
attached hereto, in each case in accordance with the applicable provisions of
such Joined Agreement for parties joining such Joined Agreement, if any, and,
without limiting the joinder requirements of any Joined Agreement, the
undersigned hereby (a) assumes all the obligations under each Joined Agreement
applicable to the undersigned in the capacity in which it is joining thereunder,
(b) agrees to be bound by the provisions of each Joined Agreement applicable to
the undersigned in the capacity in which it is joining thereunder as if the
undersigned had been an original party thereto, and (c) confirms that, after
joining each Joined Agreement as set forth above, the representations and
warranties set forth in each Joined Agreement applicable to the undersigned in
the capacity in which it is joining thereunder are true and correct in all
material respects as of the date hereof; provided however, that the undersigned
shall have no liability for the observance and performance of the terms,
conditions, and obligations under any Joined Agreement applicable to the
undersigned in its capacity thereunder which accrue prior to the date hereof to
the extent the same is expressly set forth on Schedule A attached hereto with
respect to such Joined Agreement.

To the extent required by the terms of each Joined Agreement, the joinder of the
undersigned to such Joined Agreement as provided herein is acknowledged and
agreed below by the applicable parties hereto. This Agreement shall be construed
as a separate agreement with the parties to each Joined Agreement, and no party
to this Agreement that is not a party to such Joined Agreement shall have any
rights with respect to such Joined Agreement by virtue of this Agreement.

This Agreement may be executed by one or more of the parties hereto on any
number of separate counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument. As expressly
supplemented hereby, each Joined Agreement shall remain in full force and
effect.

THIS JOINDER AGREEMENT AND THE JOINED AGREEMENTS REPRESENT THE FINAL AGREEMENT
AMONG THE APPLICABLE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES TO ANY JOINED AGREEMENT.

[signatures follow]

 

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

 

IN WITNESS WHEREOF this Joinder Agreement is executed and delivered as of the
         day of                    ,              .

[SUBSIDIARY]

 

By:

 

Name:

 

Title:

 

 

Acknowledged and Agreed:

 

[                                     ]

 

 

By:

 

Name:

 

Title:

 

 

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

 

 

Schedule A

 

Joined Agreements

 

Counterparties

 

Agreement

 

Capacity Joined

 

Liability

Merrill Lynch & Co., Inc. (“ML&Co”), a Delaware corporation, and Merrill Lynch
Commodities, Inc. (“MLCI”), a Delaware corporation.

 

Credit Sleeve and Reimbursement Agreement dated as of September 24, 2006 (the
“CSRA”), among Reliant Energy Power Supply, LLC, and the Other Reliant Retail
Obligors listed on the signature pages thereto, on one hand, and ML&Co and MLCI,
on the other hand, as the same may be amended, supplemented, restated, renewed,
replaced, waived or otherwise modified from time to time .

 

Other Reliant Retail Obligor

 

The undersigned shall have no liability for the observance and performance of
the terms, conditions, and obligations under applicable to the undersigned in
its capacity under the CSRA which accrue prior to the date hereof.

 

 

 

 

 

 

 

Merrill Lynch Capital Corporation, a Delaware corporation (“MLCC”).

 

Working Capital Facility dated as of September 24, 2006 (the “WCF”), among MLCC,
as Lender, REPS, as Borrower, and the Other Reliant Retail Obligors, as
Guarantors, as the same may be amended, supplemented, restated, renewed,
replaced, waived or otherwise modified from time to time.

 

Additional Guarantor

 

The undersigned shall have no liability for the observance and performance of
the terms, conditions, and obligations under applicable to the undersigned in
its capacity under the WCF which accrue prior to the date hereof.

 

 

 

 

 

 

 

Reliant Energy, Inc., a Delaware corporation (“REI”), Reliant Energy Corporate
Services, LLC, a Delaware limited liability company) (“RECS”), Reliant Energy
Solutions East, LLC, a Delaware limited liability company (“RESE” and together
with REI and RECS, the “Reliant Counterparties”),

 

Master Services Agreement dated as of September 24, 2006 (the “MSA”), among the
Reliant Counterparties and the Retail Companies listed on the signature pages
thereto, as the same may be amended, supplemented, restated, renewed, replaced,
waived or otherwise modified from time to time.

 

Retail Company

 

The undersigned shall have no liability for the observance and performance of
the terms, conditions, and obligations under applicable to the undersigned in
its capacity under the MSA which accrue prior to the date hereof.

 

 

 

 

 

 

 

Reliant Counterparties

 

Transition Agreement dated as of December 1, 2006 (the “Transition Agreement”),
among the Reliant Counterparties and the Retail Companies listed on the
signature pages thereto, as the same may be amended, supplemented, restated,
renewed, replaced, waived or otherwise modified from time to time.

 

Retail Company

 

The undersigned shall have no liability for the observance and performance of
the terms, conditions, and obligations under applicable to the undersigned in
its capacity under the Transition Agreement which accrue prior to the date
hereof.

 

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

 

Exhibit H

To Credit Sleeve and Reimbursement Agreement

Form of Compliance Certificate

 

 

FORM OF COMPLIANCE CERTIFICATE

 

To:          Merrill Lynch Commodities, Inc., a Delaware corporation, as Sleeve
Provider

 

                This Compliance Certificate is furnished pursuant to that
certain Credit Sleeve and Reimbursement Agreement, dated as of September 24,
2006, as amended and restated in connection with the occurrence of the Effective
Date as of December 1, 2006 (as the same may be further amended or otherwise
modified from time to time, the “Agreement”), among Reliant Energy Power Supply,
LLC, a Delaware limited liability company (“REPS”), the Other Reliant Retail
Obligors specified therein (together with REPS, the “Reliant Retail Obligors”),
Merrill Lynch Commodities Inc., a Delaware corporation, as Sleeve Provider, and
Merrill Lynch & Co., Inc., a Delaware corporation (“ML&Co.”, and together with
the Sleeve Provider, the “Merrill Parties”).  Capitalized terms used herein but
not otherwise defined shall have the meanings given to such terms in the
Agreement.

 

                THE UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.                                       I am the duly elected                
of RERH Holdings, LLC.

 

2.             I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Reliant Retail Obligors during the accounting
period covered by the attached financial statements.

 

3.             The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event constituting a
Default with respect to a Reliant Event of Default, as such term is defined
under the Agreement.

 

4.             Exhibit A attached hereto includes certain financial statements
required under the terms of the Agreement, all of which financial statements are
true, complete and correct in all material respects.

 

5.             The aggregate amount of all individual asset sales with gross
cash proceeds in an amount greater than $500,000, but less than $5,000,000, is $
                           for the quarter ending                           .
The aggregate amount of all such individual asset sales since December 1, 2006,
is $                                 .

 

        The foregoing certifications, together with the financial statements
attached as Exhibit A hereto, are made and delivered this                    
day of                  , 20     .

 

 

RERH Holdings, LLC

 

 

 

 

 

 

Name:

 

 

Title:

 

 

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

Exhibit I1

To Credit Sleeve and Reimbursement Agreement

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

 

 [***]

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

***  The content of this Exhibit I1 (consisting of 2 pages) has been omitted and
filed separately with the Securities and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

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

Exhibit I2
To Credit Sleeve and Reimbursement Agreement
Reliant Retail Obligor’s Employees with Access to Certain Merrill Party
Information

[***]

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

***  The content of this Exhibit I2 (consisting of 7 pages) has been omitted and
filed separately with the Securities and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

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