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  TABLE OF CONTENTS

 
 

Exhibit 10.8    
    

 
 

Confidential Treatment Requested    
    

 
 

ENERGY MARKETING SUPPORT AGREEMENT
  
    Dated the 8th day of April, 2003
  
    by and between
  
    TXU PORTFOLIO MANAGEMENT COMPANY LP
  
    AND
  
    GEXA CORPORATION, DB/A
GEXA ENERGY CORPORATION,    
    

  

 

TABLE OF CONTENTS    
    

 

	Article 1        Definitions
	Article 2        Nature of Relationship
	Article 3        Purchase Contracts
	Article 4        Sale Contracts
	Article 5        Lockbox Agreement and Lockbox Account
	Article 6        Reporting Obligations
	Article 7        Fees
	              7.1 Monthly Credit Fee
	              7.2 Guarantee Fee
	              7.3 Administrative Fee
	Article 8        Deferral of Accounts Payable
	Article 9        Security Interest
	Article 10      New Opportunities and Non-Solicitation
	Article 11      Representations and Warranties
	Article 12      Indemnification
	Article 13      Limitation of Liability
	Article 14      Events of Default; Remedies
	Article 15      Conditions Precedent
	Article 16      Miscellaneous
	              16.1 Term
	              16.2 Return of Documents and Information
	              16.3 Notices
	              16.4 Assignment
	              16.5 Entire Agreement; Amendments
	              16.6 Waiver
	              16.7 Governing Law
	              16.8 Severability
	              16.9 Confidentiality
	              16.10 Inspection of Records
	              16.11 Further Assurances
	              16.12 Imaged Agreement

i

  

        THIS ENERGY MARKETING SUPPORT AGREEMENT together with all exhibits and any written supplements hereto) (the "Agreement") is made and entered into as of
this            day of
                        , 2003 (the "Effective Date"), by and between TXU Portfolio Management Company LP, a Texas Limited
partnership ("TXUPM"), and Gexa Corporation, D/B/A Gexa Energy Corporation, a Texas
Corporation ("Gexa"). Each of TXUPM and Gexa may be referred to herein individually as a "Party" or collectively as "Parties". 

        WHEREAS,
TXUPM is engaged in the business of purchasing, and selling electric power; and 

        WHEREAS,
Gexa is engaged in the business of purchasing and selling electric power, and marketing electric power to residential and Small Commercial Customers; and 

        WHEREAS,
because of recent credit events in the power marketing industry, Gexa is unable to meet the credit support requirements of` suppliers without the assistance of a larger and more
established entity such as TXUPM in enabling their obligations; and 

        WHEREAS,
the Parties desire to enter into all arrangement whereby TXUPM will purchase and resell to Gexa electric capacity and energy and will provide Gexa with various services as set
forth herein to support Gexa's growth strategy, and Gexa will pay fees to TXUPM for such services, and grant TXUPM a first priority security interest in certain of Gexa's assets; provided, however,
that TXUPM shall not act as an investment advisor or partner of Gexa. 

        NOW,
THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows: 

 
 

Article 1 Definitions    
    

        1.1   "Affiliate"
means, with respect to a Party, any entity that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Party. For this purpose, "control" means the direct or indirect ownership of fifty percent (50%) or more of the outstanding capital stock or other equity interests having
ordinary voting power. 

        1.2   "Approved
Third-Party Seller" shall have the meaning set forth in Section 3.2. 

        1.3   "Assumed
Contract(s)" has the meaning set forth in Section 3.1. 

        1.4   "Bankrupt"
means with respect to any entity, such entity (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, (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. 

        1.5   "Billing
Services Agreement" shall have the meaning set forth in Section 4.1. 

        1.6   "Business
Day" means any day except a Saturday, Sunday, or a Federal Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m.
local time for the relevant Party's principal place of business. The relevant Party, in each instance unless otherwise specified, shall be the Party to whom the notice, payment or delivery is being
sent and by whom the notice or payment or delivery is to be received. 

        1.7   "Credit
Guarantee" means a guarantee of payment, not of collection, which guarantees the obligations incurred by Gexa and which is issued by TXUPM or one its Affiliates
for the benefit of a Customer, Third-Party Purchaser, Third-Party Seller, or any other entity. 

1

 

        1.8   "Customer"
means (1) any residential purchaser of electric power who resides in the Specified Geographic Region and who agrees to purchase electric power from
Gexa; or (2) any Small Commercial Customer. 

        1.9   "Deferred
Payment Date" shall have the meaning set forth in Article 8. 

        1.10 "Effective
Date" is defined in the first paragraph of this Agreement. 

        1.11 "Event
of Default" has the meaning set forth in Section 14.1. 

        1.12 "Imaged
Agreement" shall have the meaning set forth in Section 15.12. 

        1.13 "Information"
shall have the meaning set forth in Section 15.9. 

        1.14 "Interest
Rate" means the lesser of (i) prime rate of interest in effect from time to time for large U.S. money center commercial banks as published under "Money
Rates" by the Wall Street Journal (or any equivalent publication selected by TXUPM) plus three percent (3%) or (ii) the maximum lawful rate. 

        1.15 "Investor
Owned Utility" ("IOU") means any of the approved local electric power utilities listed in Exhibit 3. 

        1.16 "Large
Contracts" shall have the meaning set forth in Section 4.1(b). 

        1.17 "Large
Contract Threshold" shall have the meaning ser forth in Section 4.1(b). 

        1.18 "Master
Power Purchase and Sale Agreement" shall mean that certain Edison Electric Institute form of Master Power Purchase and Sale Agreement dated January 8,
2002 by and between Gexa and TXUPM. 

        1.19 "Matching
Confirmation" shall have the meaning set forth in Section 3.2. 

        1.20 "Monthly
Credit Fee" shall have the meaning set forth in Section 7.1. 

        1.21 "Monthly
Purchase Limit" shall have the meaning set forth in Section 3.8. 

        1.22 "Monthly
Purchase Obligations" means, with respect to a specified calendar month, the aggregate Purchase Obligations incurred for such month. 

        1.23 "Monthly
Sale Obligations" means, with respect to a specified calendar month, the aggregate Sale Obligations incurred for such month. 

        1.24 "Payment
Provision" shall have the meaning set forth in Section 4.1. 

        1.25 "Purchase
Contract" means an agreement for the purchase of electric power and/or transmission capacity by Gexa from either (1) TXUPM, under the Master Power
Purchase and Sale Agreement, or such other power purchase and sale agreements as may be entered into by and between the Parties from time to time; or (2) an Unapproved Third-Party Seller, which
such agreement has been entered into with the written consent of TXUPM pursuant to and is governed by a contract in form and substance acceptable to TXUPM. 

        1.26 "Purchase
Obligation" means an obligation to purchase electric power and/or associated transmission capacity incurred by Gexa pursuant to a Purchase Contract. Such
obligations may be expressed in MWh's or in dollars. 

        1.27 "Sale
Contract" means either (1) an agreement for the sale of electric power by Gexa to a Customer which has been entered into pursuant to and is governed by a
contract substantially similar to Exhibit 1; or (2) an agreement for the sale of electric power and/or transmission capacity by Gexa to a
Third-Party Purchaser which has been entered into pursuant to and is governed by a contract substantially similar to Exhibit 2. 

2

 

        1.28 "Sale
Obligation" means an obligation to sell electric power incurred by Gexa pursuant to a Sale Contract. Such obligations may be expressed in MWh's or in dollars. 

        1.29 "Small
Commercial Customer" means an entity that is a non-residential user of electric power up to a total aggregate amount of 200 MWh per month or 1,100
MWh per year which has one or more commercial operations located within the Specified Geographic Region and which agrees to purchase electric power from Gexa. 

        1.30 "Specified
Geographic Region" means the geographic area that encompasses the service territories of the utilities listed in  Exhibit 3 and approved by TXUPM. 

        1.31 "Third-Party
Purchase Contract" has the meaning set forth in Section 3.1. 

        1.32 "Third-Party
Purchaser" means an entity that is not a Customer and that agrees to purchase electric power and/or transmission capacity from Gexa. 

        1.33 "Third-Party
Seller" means an entity other than TXUPM identified by Gexa as a Third-Party Seller and that agrees to sell electric power and/or transmission capacity to
TXUPM for resale to Gexa. 

        1.34 "Unapproved
Third-Party Seller" shall have the meaning set forth in Section 3.2. 

 
 

Article 2 Nature of Relationship    
    

        The purpose of this Agreement is to establish a relationship between the Parties whereby TXUPM will provide various forms of support and related services to Gexa
to assist Gexa in acquiring supplies of electric energy and capacity to serve its requirements under its Sale Contracts, all as described more fully herein, and, in exchange, Gexa will (1) pay
TXUPM fees for such services; (2) grant TXUPM a first priority security interest in certain of Gexa's assets to secure Gexa's obligations hereunder; and (3) provide TXUPM with the
information necessary to provide such support. With respect to the relationship between the Parties: 

        2.1   It
is expressly understood and agreed that the relationship between TXUPM and Gexa described herein or established hereby is not a joint venture or a partnership. 

        2.2   Except
with respect to those business activities with which TXUPM's involvement is required under the terms of this Agreement, Gexa agrees that it will be solely
responsible for conducting and managing its day-to-day business activities. 

        2.3   Gexa
shall be named as the contracting party in all Sale Contracts and Gexa shall be solely responsible for the performance of its obligations under such contracts. 

        2.4   Gexa
and TXUPM have entered into or will enter into arrangements wherein TXUPM will agree to provide to Gexa energy and capacity to serve its Customers and Small
Commercial Customers. 

        2.5   Gexa
agrees not to misrepresent to third parties its relationship with TXUPM, as such relationship is described in this Agreement. To the extent Gexa has a need to
describe its relationship with TXUPM to third parties, Gexa shall limit such description to the information contained in Exhibit 4. If Gexa
provides such a description in written form, Gexa shall use the form of letter depicted in Exhibit 4; provided, however, that Gexa shall not
change the language of Exhibit 4. In the event that TXUPM determines in its sole, reasonably exercised discretion that Gexa has represented its
relationship with TXUPM in any manner other than as permitted in this Section 2.5 and Exhibit 4, such action shall be an Event of` Default hereunder. 

3

 

 
 

Article 3 Purchase Contracts    
    

        In order to obtain supplies of electric power, Gexa has and may enter into Purchase Contracts with TXUPM subject to the following terms and conditions: 

        3.1   To
provide electric power and capacity needed by Gexa to serve its purchasers, TXUPM and Gexa have entered into the Master Power Purchase and Sale Agreement, and Gexa
has heretofore entered into certain Purchase Contracts with Third-Party Sellers ("Third-Party Purchase Contracts"). Subject to the last sentence of this Section 3.1, effective on the Effective
Date, Gexa shall assign to TXUPM all Third-Party Purchase Contracts entered into by Gexa prior to the date of this Agreement (the "Assigned Contracts"). Such assignment shall be for a term ending upon
the earlier of the termination of the respective Purchase Contract or the termination date of this Agreement. All electric energy and capacity, purchased by TXUPM under the Assigned Contracts shall be
resold to Gexa under the Master Power Purchase and Sale Agreement. To the extent any existing Third-Party Purchase Contract cannot be assigned because of restrictions in such contract or lack of
required consent by the seller thereunder, Gexa may continue to perform its obligations thereunder, and TXUPM shall incur no liability or responsibility with respect to such contract unless the
Parties expressly agree otherwise in writing. Notwithstanding provisions of this Section 3.1 to the contrary, TXUPM shall not be obligated to accept assignment of any Third-Party Purchase
Contract unless the seller under such contract meets the credit and other requirements of TXUPM. In the event TXUPM declines to accept assignment of a Third-Party Purchase Contract, Gexa may continue
to perform its obligations thereunder, and TXUPM shall have no obligation or liability with respect to such contract or purchases thereunder. 

        3.2   In
the event Gexa desires that TXUPM enter into a contract for the purchase of electric power for resale to Gexa under the Master Power Purchase and Sale Agreement after
the effective date of this Agreement, Gexa shall provide to TXUPM the name of such Third-Party Seller, the quantity of energy and capacity which Gexa desires TXUPM to purchase, pricing information and
such other information as may be reasonably required by TXUPM to evaluate the proposal and the seller's ability to perform. TXUPM shall investigate the creditworthiness of each such Third-Party Seller
and shall notify Gexa in writing of those Third-Party Sellers that satisfy TXUPM's credit and other requirements and which TXUPM is otherwise agreeable to having serve as a supplier (the "Approved
Third-Party Sellers") and those with which TXUPM will not enter into a Third-Party Purchase Contract (the "Unapproved Third-Party Sellers"). TXUPM shall have the right to change its requirements at
any time, and such right shall be exercisable by TXUPM in its sole discretion and without prior notice to Gexa. 

        3.3   TXUPM
shall use reasonable efforts to notify Gexa of the Approved or Unapproved status of any Third-Party Seller within five (5) Business Days of Gexa first
providing the name of such Third-Party Seller and relevant information regarding the proposed transaction to TXUPM; provided, however, that failure of TXUPM to notify Gexa within such period shall not
constitute or be construed as a designation of such Third-Party Seller as an approved Third-Party Seller. 

        3.4   In
the case of any Approved Third Party Seller, TXUPM shall agree to purchase Gexa's desired quantities of` electric power and capacity and resell the same to Gexa, both
under terms and conditions satisfactory and approved in advance by the Parties, with such sale to Gexa being in the form of a written confirmation (the "Matching Confirmation") under the Master Power
Purchase and Sale Agreement. In the event any Approved Third Party Seller defaults under a contract with TXUPM that results in declaration of all early termination by TXUPM, TXUPM may upon written
notice to Gexa terminate the Matching Confirmation and the transaction thereunder. 

4

 

        3.5   If
TXUPM fails to approve any Third-Party Seller proposed by Gexa, Gexa may request TXUPM's consent to enter into a contract with such Unapproved Third-Party Seller for
the purchase of` such electric power directly from such seller. TXUPM shall advise Gexa within ten (10) days of receipt of request whether TXUPM, in its sole discretion, approves such purchase
by Gexa. If Gexa at any time enters into a Purchase Contract with an Unapproved Third-Party Seller without the prior written consent of TXUPM, such occurrence shall be deemed to be an Event of Default
under this Agreement. 

        3.6   If
Gexa, with the consent of TXUPM, enters into a Purchase Contract with an Unapproved Third-Party Seller, Gexa shall use the form of agreement depicted in  Exhibit 2. TXUPM shall have no
responsibility or liability with respect to such contract or any purchases thereunder, and Gexa shall bear all
risks associated with any such contract, unless otherwise agreed in writing between the Parties hereto. If Gexa and the Unapproved Third-Party Seller desire to add special provisions to  Exhibit 2
or otherwise enter into a contract form that is not substantially similar to  Exhibit 2, then TXUPM must approve such contract form before Gexa may execute same. If Gexa executes a Purchase Contract
form that has not been
previously approved by TXUPM, such occurrence shall be deemed to be an Event of Default. 

        3.7   Gexa
shall provide TXUPM with a copy of each executed Third-Party Purchase Contract, including any schedules, exhibits, or written amendments thereto, at least
forty-eight (48) hours prior to the energy delivery date, and within forty-eight (48) hours of execution thereof. 

        3.8   Unless
Gexa has obtained the prior written approval of TXUPM, the Monthly Purchase Obligations incurred relating to any one (1) calendar month shall not exceed
the quantity (expressed in MWh) set forth on Exhibit 5, attached hereto and made a part hereof (the "Monthly Purchase Limit"), and the term of
any such contract shall not extend beyond the scheduled expiration date of this Agreement. If, at any time, Gexa exceeds the then current Monthly Purchase Limit without TXUPM's prior written approval,
such occurrence shall be an Event of Default; provided, however, that TXUPM may, in its sole discretion, waive its rights that arise from any such Event of Default. The Monthly Purchase Limit shall be
reviewed from time-to-time by TXUPM. TXUPM may, in its sole and absolute discretion, increase or decrease the Monthly Purchase Limit; provided, however, that no such increase
or decrease shall be effective unless it is evidenced by written notice from TXUPM to Gexa, and in the event of a decrease to the Monthly Purchase Limit, Gexa must be notified at least 30 days
in advance of the effective date of such decrease. In no event shall the Monthly Purchase Limit be decreased below Gexa's existing aggregate firm purchase or sale obligations for any month. No later
than five (5) Business Days after any change in the Monthly Purchase Limit. TXUPM shall prepare and provide to Gexa a revised Exhibit 5
showing the new Monthly Purchase Limit, all prior Monthly Purchase Limits in effect and the dates which such Monthly Purchase Limits were in effect, which new  Exhibit 5 shall supercede and replace
all prior Exhibits 5 and shall be a part of this Agreement. 

 
 

Article 4 Sale Contracts    
    

        In order to sell electric power, Gexa may enter into Sale Contracts with its Customers and/or Third-Party Purchasers, subject to the following terms and
conditions: 

        4.1   With
respect to Sale Contracts between Gexa and its Customers: 

        (a)   Gexa
shall use the form of agreement depicted in Exhibit l. If, at any time, Gexa desires to change the form of
agreement it offers to its Customers, Gexa shall request that TXUPM review the new proposed form. Upon agreement of both Parties as to the new agreement form. The Parties shall execute a written
amendment to this Agreement whereby the new form shall replace the form of agreement currently depicted in Exhibit 1. 

5

 

        (b)   At
any time Gexa has entered into and has outstanding Sales Contracts, each providing for the sale of more than [*] of electric power per month
("Large Contracts"), which in the aggregate provide for the sale of quantities equal to or less than [*] of Gexa's total sales quantities (the "Large Contract Threshold") Gexa
must obtain approval in writing from TXUPM prior to entering into a Sales Contract with a Customer that provides for the sale of more than [*] of electric power per month. At
any time when Gexa's transactions exceed the Large Contract Threshold, Gexa must obtain approval in writing from TXUPM prior to entering into a Sales Contract with a Customer that provides for the
sale of more than [*] of electric power per month. Failure of Gexa to obtain such approval before entering into such contract shall be an Event of Default. In addition to the
above, Gexa must obtain approval in writing from TXUPM prior to entering into a Sales Contract with a Customer that has an initial fixed term in excess of [*] years. 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

        (c)   Gexa
shall be responsible for invoicing all amounts due from Customers in connection with any Sale Contract. Gexa shall enter into an agreement (a "Billing Services
Agreement") with a third-party billing service, which Billing Services Agreement shall have been reviewed and approved by TXUPM. For purposes hereof, Gexa/Cirro LLC, which is 50% owned by Gexa, shall
qualify as a third party billing service notwithstanding Gexa's partial ownership. Unless Gexa obtains prior written approval from TXUPM, Gexa shall not invoice Customers directly. If Gexa fails for
any reason to invoice any Customer within thirty (30) days after the initial meter read date, TXUPM may, at its option, invoice such Customer, or cause the Customer to be invoiced, to ensure
that payments are received in a manner sufficient to timely satisfy the payment obligations of Gexa to TXUPM hereunder. Payments from such Customers under all Sale Contracts shall be delivered to the
Lockbox Account (as defined in Section 5.1). Gexa represents, warrants and agrees that either (i) all Sale Contracts between Gexa and its
Customers contain a provision directing the Customers to make payment for all sums due thereunder to the Lockbox Account (the "Payment Provision"), or (ii) Gexa shall give legally binding
written instructions consistent with such Payment Provision to any Customer which is not a party to a Sale Contract already containing such a Payment Provision. Gexa agrees that all new Sale Contracts
entered into between Gexa and its Customers shall contain a Payment Provision. Any changes to and/or notices regarding the Payment Provision for any Customer shall be approved in advance by TXUPM. If
requested by TXUPM, Gexa shall provide TXUPM with copies of all then-existing written contracts with any and all Customers and electric power suppliers, as well as copies of monthly
invoices and invoice registers relating thereto. Gexa's failure to comply with this Section 4.1(c) shall be an Event of Default. 

        4.2   With
respect to Sale Contracts between Gexa and Third-Party Purchasers: 

        (a)   Gexa
shall use the form of agreement depicted in Exhibit 2. If Gexa and the Third-Party Purchaser desire to amend
or add special provisions to the agreement form in Exhibit 2 or otherwise enter into a contract form that is not substantially similar to  Exhibit 2, then TXUPM must approve such contract terms before Gexa may execute such Sale Contract. If Gexa executes a Sale Contract form that has
not been previously approved by TXUPM, such occurrence shall be deemed to be an Event of Default. 

6

 

        (b)   All
Sale Contracts between Gexa and Third-Party Purchasers involving the sale of an amount of electric power exceeding [*] per day must be
approved by TXUPM prior to the execution thereof. Failure of Gexa to obtain such approval shall be an Event of Default. 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

        (c)   All
Sale Contracts between Gexa and Third-Party Purchasers must specifically state that the Third-Party Purchaser must remit any payments due to Gexa pursuant to such
Sale Contract to the Lockbox Account and such Sale Contracts shall not provide for any other means or manner of payment to Gexa. 

        (d)   If
Gexa fails for any reason to invoice any Third-Party Purchaser within thirty (30) days after the initial meter read date, TXUPM may, at its option, invoice
such Third-Party Purchaser, or cause the Third-Party Purchaser to be invoiced, to ensure that payments are received in a manner sufficient to timely satisfy the payment obligations of Gexa to TXUPM
hereunder. 

        4.3   Gexa
agrees that it shall use reasonable efforts to ensure at all times that its Purchase Obligations reasonably balance with its Sale Obligations, each expressed in
MWh, so that it will not have excess or insufficient Purchase Obligations or Sale Obligations as measured against its Sale Obligations or Purchase Obligations, respectively. Gexa further agrees to
enter into such financial or physical agreements as may be necessary to minimize its exposure to movements in market prices of electricity, consistent with prudent business management. 

 
 

Article 5 Lockbox Agreement and Lockbox Account    
    

        5.1   TXUPM
and Gexa have executed or will execute one or more agreements as necessary to establish a Lockbox account at a mutually agreeable bank (the "Lockbox Agreement"). A
copy of the Lockbox & Depositary account Requirements are attached hereto as Exhibit 6. Such Lockbox Agreement shall be incorporated by
reference in, and made part of, this Agreement. In the event the Lockbox agreement is modified or amended from time to time, such Lockbox Agreement, as modified or amended, shall for all purposes be
deemed to be the Lockbox Agreement referred to herein. Pursuant to the terms of the Lockbox Agreement, the Parties have or will establish a demand deposit account (the "Lockbox Account") with JPMorgan
Chase Bank (the "Bank") for the deposit of funds received by Gexa pursuant to Sale Contracts and for the disbursement of such funds to Gexa and to TXUPM as described in  Section 5.5 below. The
Parties agree that the execution of the Lockbox Agreement and the establishment of the Lockbox Account shall be conditions
precedent to the effectiveness of this Agreement. 

        5.2   All
references in this Agreement to the "Lockbox Account" shall be deemed to be references to the account established pursuant to the Lockbox Agreement, irrespective of
any differences in the terminology between this Agreement and the Lockbox Agreement. As collateral security for Gexa's obligations to TXUPM under this Agreement, Gexa hereby grants to TXUPM a present
and continuing security interest in (a) the Lockbox and the Lockbox Account, (b) all contract rights and privileges in respect of the Lockbox or the Lockbox Account, and (c) all
cash, checks, money orders and other items of value of Gexa now or hereafter paid, deposited, credited, held (whether for collection, provisionally or otherwise) or otherwise in the possession or
under the control of, or in transit to, Bank or any agent, bailee or custodian thereof, and all proceeds of the foregoing, and the parties agree to give notice to the Bank in accordance with the
Uniform Commercial Code of TXUPM's security interest in such collateral. 

7

 

        5.3   The
Lockbox Account shall be maintained during the entire term of this Agreement, and thereafter until all contracts entered into pursuant hereto shall have been
settled. Notwithstanding anything to the contrary in any other agreement between the Parties, Gexa shall be responsible for all fees and service charges relating to the Lockbox Account; none of which
shall be debited against the Lockbox Account. 

        5.4   As
stated in Sections 4.1(c) and 4.2(c), all Customers must be instructed that all payments due to Gexa thereunder must
be deposited into the Lockbox Account. 

        5.5   Disbursements
from the Lockbox Account shall be made pursuant to the following: 

        (a)   All
funds received into the Lockbox Account shall be held in trust for the benefit of TXUPM to the extent of all amounts owing from Gexa to TXUPM. 

        (b)   TXUPM
shall invoice Gexa for all fees, costs, charges or payments due to TXUPM hereunder each month during the term of this Agreement. TXUPM shall be paid such fees,
costs, charges or payments by disbursements to TXUPM from the Lockbox Account. If the Lockbox Account contains insufficient funds to completely satisfy any such TXUPM fee invoice, in addition to
disbursement of any and all funds in the Lockbox Account to TXUPM, Gexa shall pay TXUPM any remaining deficiency by wire transfer within ten (10) Business Days of invoice due date. Gexa's
failure to adhere to such obligations shall be deemed to be an Event of Default. 

        (c)   Gexa
shall have the obligation to initiate with TXUPM the request for disbursements to Gexa's electric power suppliers, transmission providers, investor owned utilities,
and any other entities to which Gexa owes payment. Gexa shall notify TXUPM of any such request no later than 12:00 p.m. central prevailing time on the second Business Day prior to the requested
date of payment. 

        (d)   On
a monthly basis, after all payments referenced in Sections 5.5(b) and (c) above have been paid, and to the extent
there exist no other claims by TXUPM related to amounts owed by Gexa to TXUPM, then all remaining funds in the Lockbox Account shall be distributed to Gexa. 

        5.6   In
the event interest accrues to the amounts held in the Lockbox Account, Gexa shall be entitled to such interest, subject to any unsatisfied payment obligations under
Section 5.5 above, and TXUPM agrees to authorize disbursements of such accrued interest to Gexa from time to time upon request by Gexa. 

        5.7   Neither
Party shall communicate with the Bank at which the Lockbox Account has been established regarding making any modifications to the Lockbox Account or the Lockbox
Agreement without the prior written consent of the other Party. This provision shall survive the termination of this Agreement until all payments referenced in Sections 5.5(b)
and (c) have been fully and finally paid. Failure to adhere to this provision shall be deemed to be an Event of Default. 

        5.8   Gexa
shall be responsible for all volumetric and financial accounting with respect to the Sale Contracts entered into pursuant to this Agreement. Within ten
(10) days of the end of each calendar month during the term of this Agreement, Gexa shall deliver to TXUPM an accounting setting forth the beginning and ending balances in the Lockbox Account,
together with a description (including amount) of each transaction conducted in connection with this Agreement for the period referenced. Upon TXUPM's request, Gexa shall provide supporting
documentation of any such transactions. 

        5.9   Billing
under any Purchase Contracts shall be in accordance with those contracts. 

8

 

 
 

Article 6 Reporting Obligations    
    

        6.1   By
5:00 p.m. Central Time on the 5th day of each calendar month during the term of this Agreement, Gexa shall submit to TXUPM by e-mail and facsimile,
a report containing the following information, expressed in both dollars and applicable units, with respect to obligations Gexa incurred in the immediately preceding month: 

        (a)   the
Monthly Sale Obligations in MWh, aggregated by ERCOT congestion zone (including, without limitation, the markets, market values, prices, and aggregate monetary
obligations associated therewith); and 

        (b)   the
Monthly Purchase Obligations in MWh, aggregated by ERCOT congestion zone (including, without limitation, the suppliers, supply amounts, prices, and aggregate
monetary obligations associated therewith). 

        6.2   Within
10 days of the end of each calendar month during the term of this agreement, Gexa shall deliver to TXUPM the following information relating to the prior
month's activity: 

        (a)   Copy
of the bank statement for the lock box account if sent to Gexa by the bank; 

        (b)   Summary
reports from the third party billing company showing billings, collections and adjustments activity; 

        (c)   Summary
accounts receivable aging reports from the third party billing company; 

        (d)   Unaudited
Gexa financial statements; and 

        (e)   A
reconciliation in a mutually acceptable format that shows fundamental changes in book cash, bank cash and book accounts receivable that materially agree to items
(a) through (d) noted above in this Section 6.2. 

 
 

Article 7 Fees    
    

        TXUPM shall invoice Gexa for the fees described in Sections 7.1, 7.2 and 7.3 below on or about the 10th day of
each calendar month during the term of this Agreement. Payment of such fees by Gexa shall be due on the 20th day of the month in which such invoice is received; or if such day is not a Business Day,
then the next following Business Day. Any payment not made by the due date shall bear interest at the Interest Rate from the due date until the date paid. 

        7.1   Monthly
Credit Fee 

        Gexa
shall pay TXUPM a monthly fee (the "Monthly Credit Fee") based upon [*]: 

        (a)   [*]

        (b)   [*]:

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

        (c)   TXUPM
shall have the right at reasonable times to audit the books and records of Gexa as necessary to determine the quantity of purchases made by Gexa and the accurate
of the Monthly Credit Fees charged and to monitor Gexa's compliance with the terms, conditions and obligations of this Agreement. 

9

 

        7.2   Guarantee
Fee 

        In
the event from time to time Gexa requests TXUPM to provide guarantees of any of its obligations in connection with Purchase Contracts or Sale Contracts, [*].
In the event that TXUPM or one or more of its Affiliates does provide such Credit Guarantee(s), Gexa shall pay to TXUPM, with respect to each calendar month or portion thereof during which such Credit
Guarantee(s) remains in force and effect, an amount equal to [*] (the "Guarantee Fee"). 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

        7.3   Administrative
Fee 

        The
Parties acknowledge that TXUPM will incur significant administrative costs in connection with providing services to Gexa pursuant to this Agreement. In consideration for TXUPM
providing such services to Gexa, Gexa agrees to pay TXUPM an administrative fee [*]. 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

 
 

Article 8 Deferral of Accounts Payable    
    

        The Parties acknowledge that from time to time with respect to any calendar month during the term of this Agreement, Gexa may have certain payment obligations to
TXUPM, Affiliates of TXUPM, Third-Party Purchasers, Third-Party Sellers, transmission providers, or investor owned utilities, that are due prior to the time Gexa will be receiving payments from its
Customers. In that event, TXUPM may, upon Gexa's request, but shall never be obligated to, defer the payment date on all or any portion of amounts payable by Gexa to TXUPM. The amount and period of
any such payment deferral shall be in the sole discretion of TXUPM. In the event that TXUPM makes such a deferral at the request of Gexa, Gexa shall pay TXUPM the entire amount of the deferred
payments on or before the termination of the period of deferral stipulated by TXUPM (the "Deferred Payment Date") and shall include interest on the deferred amounts from the date due but for such
deferral until the date of payment at a rate of interest equal to the Interest Rate. Gexa shall provide TXUPM at least two (2) Business Days' prior written notice of its request for a deferral
of any payment obligation, and shall include in such request the amount and period of such requested deferral. If Gexa has not made any deferred payment in full by the Deferred Payment Date, then such
failure shall be an Event of Default. 

 
 

Article 9 Security Interest    
    

        In consideration of TXUPM providing to Gexa the forms of credit support and other services described herein, Gexa agrees to grant TXUPM a first priority security
interest in and lien against certain of Gexa's assets. These assets shall include but shall not be limited to: All electric power purchased by Gexa for resale to Customers as contemplated by this
Agreement; all contracts, including but not limited to, Sale Contracts and Purchase Contracts and all proceeds thereof, including all accounts receivable and all cash or non-cash proceeds
of those accounts receivable, including all amounts held in the Lockbox Account. To effect the grant of such security interest, Gexa has executed a Security Agreement, a copy of which is attached
hereto as Exhibit 7. Gexa acknowledges and agrees that TXUPM shall be the sole security interest holder and lien holder with respect to the collateral described in the Security Agreement. Gexa
represents and warrants that this shall be true at the time of Gexa's execution of the Security Agreement and throughout the entire Term of this Agreement. Failure by Gexa to satisfy the foregoing
shall be deemed to be an Event of Default under this Agreement. 

10

 

 
 

Article 10 New Opportunities and Non-Solicitation    
    

        To the extent the Parties agree to additional services to be provided under this Agreement, the terms and conditions related to the provision of such additional
services shall be included in a written amendment to this Agreement which shall be executed by both Parties. Further, in consideration for the prices and fees quoted for provision of the services
described herein, Gexa agrees that during the term of this Agreement, Gexa shall not solicit or enter into any similar arrangements or agreements with any third party for services substantially
similar to those described in this Agreement. TXUPM may enter into arrangements or agreements related to services substantially similar to those described in this Agreement with other third parties
that conduct similar business. 

 
 

Article 11 Representations and Warranties    
    

        Each Party represents and warrants to the other Party that: (i) it is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation; (ii) it has all regulatory authorizations necessary for it to legally perform its obligations under this Agreement and each transaction contemplated hereunder;
(iii) the execution, delivery and performance of this Agreement is within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its
governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it; (iv) this Agreement and each other document executed and delivered in
accordance with this Agreement constitutes its legally valid and binding obligation enforceable against it in accordance with its terms; subject to any defenses pertaining to bankruptcy, insolvency,
reorganization, and other laws affecting creditors' rights generally; (v) it is not Bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened
against it which would result in it being or becoming Bankrupt; (vi) there is not pending or, to its knowledge, threatened against it or any of its Affiliates any legal proceedings that could
materially adversely affect its ability to perform its obligations under this Agreement; (vii) no Event of Default with respect to it has occurred and is continuing and no such event or
circumstance would occur as a result of its entering into or performing its obligations under this Agreement; and (viii) it is acting for its own account, has made its own independent decision
to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so
doing, and is capable of assessing the merits of and understanding, and understands and accepts, the terms, conditions and risks of this Agreement.Gexa represents and warrants that at the time of
execution of this Agreement there shall be no accrued or unaccrued rights, obligations or interests of Aquila Energy Marketing corporation or any of its Affiliates or successors with regard to any
matter subject to this Agreement, and that the Energy Marketing Agreement for Electric Power dated January 1, 2002 between Gexa and Aquila Energy Marketing Corporation has, on or before the
Effective Date of this Agreement, been terminated, and all obligation between Gexa and Aquila arising out of such agreement have been fully discharged and released. 

 
 

Article 12 Indemnification    
    

        Subject to the limitations on liability set forth in Article 13 hereof, each Party (the "Indemnifying Party") shall indemnify and hold harmless the other
Party, its Affiliates, and their respective directors, officers, agents and employees against any and all claims, actions, damages, and expenses (including reasonable attorneys' fees) arising out of
or relating to the actions or inactions of the Indemnifying Party or its personnel in connection with this Agreement. 

11

 

 
 

Article 13 Limitation of Liability    
    

        FOR BREACH OF ANY PROVISION OF THIS AGREEMENT FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE
THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF
DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES
OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER
BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION 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. EXCEPT
FOR WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OR FOR NONPAYMENT OF AMOUNTS DUE PURSUANT TO THIS AGREEMENT, NEITHER TXUPM NOR ANY OF TXUPM'S DIRECTORS, OFFICERS, GOVERNING BOARD MEMBERS, AGENTS, OR
EMPLOYEES SHALL BE LIABLE TO CLIENT OR ANY OTHER PARTY FOR ANY LOSS, DAMAGE, CLAIM, COST, CHARGE OR EXPENSE ARISING FROM PERFORMANCE OR NONPERFORMANCE UNDER THIS AGREEMENT. THIS  ARTICLE 13 SHALL SURVIVE
THE EXPIRATION OR TERMINATION OF THIS AGREEMENT. 

 
 

Article 14 Events of Default; Remedies    
    

        14.1 In
addition to those occurrences specifically identified in this Agreement as an "Event of Default", each of the following occurrences shall constitute an Event of
Default with respect to a Party (the "Defaulting Party"): 

        (a)   the
failure to perform any material covenant or obligation set forth in (1) this Agreement (including, but not limited to, those occurrences specifically referred
to herein as being deemed to be "Events of Default"); (2) any Purchase Contract or Sale Contract; or (3) any other agreement between the Parties entered into pursuant to or otherwise
related to this Agreement, which failure is not remedied within three Business Days after written notice from the Non-Defaulting Party; 

        (b)   the
failure to make, when due, any payment required pursuant to this Agreement if such failure is not remedied within three (3) Business Days after receipt of
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; 

        (d)   such
Party becomes Bankrupt; 

        (e)   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 transferring entity fails to assume all the obligations of such Party under this Agreement to which it or its predecessor
was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other Party. 

12

 

        14.2 If
an Event of Default with respect to a Defaulting Patty shall have occurred and be continuing, then the other Party (the "Non-Defaulting Party"), shall
have the right to (i) to designate a day, no earlier than the day such notice is effective and no later than twenty (20) days after such notice is effective, as an early termination date
("Early Termination Date") to accelerate all amounts owing between the Parties and to liquidate and terminate this Agreement, the Energy Supply Agreement and all Purchase Contracts between the
Parties, (ii) withhold any payments due to the Defaulting Party under this Agreement and all other agreements between the Parties entered into pursuant hereto, (iii) suspend further
performance under this Agreement and all Purchase Contracts, and to exercise any or all rights under any this Agreement, any Purchase Contract and the security agreements between the Parties. It is
specifically agreed that an Event of Default hereunder shall also constitute a default under the Energy Supply Agreement and each and every Purchase Contract between the Parties. 

        14.3 The
remedies herein shall be in addition to and shall in no way modify, supersede or affect the remedies set forth in any Purchase Contract or Sale Contract. 

 
 

Article 15 Conditions Precedent    
    

        Notwithstanding anything in this Agreement to the contrary, TXUPM shall not be obligated to sell any quantities of Energy to Gexa or to take any other action
under this Agreement or under the Master Power Purchase and Sale Agreement unless or until such time as the all of the following listed requirements have been completed: 

that
certain Assignment and Assumption Agreement between TXUPM, Gexa, BP Energy Company and Coral Power, L.L.C. has been fully executed by all parties thereto; 

that
certain Intercreditor Agreement between TXUPM, Gexa, Cora Power, L.L.C. and Aquila Merchant Services, Inc. has been fully executed by all parties thereto; and 

all
documents necessary to create and implement the Lockbox Account have been fully executed and the Lockbox Account has been established. 

 
 

Article 16 Miscellaneous    
    

        16.1 Term 

        Unless
terminated earlier in accordance with this Agreement, this Agreement shall remain in full force and effect from the Effective Date and continue for a five (5) year period
(the "Initial Term"). At the end of the Initial Term, this Agreement shall continue year-to-year thereafter until terminated by either Party at the end of the Initial Term or
at the end of any one year period thereafter with one hundred twenty (120) days prior written notice to the other Party. Such termination shall not affect or excuse the performance of either
Party under any provision of this Agreement that by its terms survives such termination. Further, such termination shall not affect or excuse the performance by either Party under this Agreement or
any agreement between the Parties entered into pursuant hereto related to obligations which were undertaken prior to such termination and which remain unperformed at the time of such termination.
Termination of this Agreement shall not affect the continued effectiveness of the Master Purchase Agreement. 

        16.2 Return
of Documents and Information 

        Upon
the termination or expiration of this Agreement, each Party shall destroy or return to the other all documents, data, and information belonging to the other Party and shall
cooperate fully to ensure that the termination of this Agreement and the transition is accomplished in an efficient and businesslike manner. In the event such documents are destroyed, such destruction
shall be certified to the Party owning the information by an officer of the Party destroying the same. 

13

 

        16.3 Notices

        Except
as otherwise provided herein, all notices to be served under this Agreement shall be in writing and shall be deemed effectively given (i) when personally delivered,
(ii) when received by documented overnight delivery service, (iii) when received by facsimile or either electronic means (to the extent that receipt is confirmed), or if received on a
day which is not a Business Day or if received after 4:00 p.m. on a Business Day, on the next following Business Day, or (iv) on the first date of attempted delivery after being
deposited as certified or registered mail, return receipt requested, in the United States mail, with postage prepaid thereon, to the addresses set forth below, or to such other addresses as may be
stated by the receiving party in writing from time to time. 

	Gexa Corporation:

24 Greenway Plaza, Suite 1826

Houston, Texas 77046

Attention: Neil Liebman

Telephone: (713) 961-9399

Facsimile: (713) 961-7997	 	TXU Portfolio Management Company LP:

1717 Main Street. Suite 2000

Dallas, Texas 75201

Attention: Contract Administration

Telephone No: (214) 875-9471

Facsimile: (214) 875-9066

        16.4 Assignment

        None
of the rights or obligations under this Agreement may be assigned or transferred by either Party without the prior written consent of the other Party; provided, however, that TXUPM
may transfer all or any portion of its rights and obligations under this Agreement to any Affiliate of TXUPM without such consent. 

        16.5 Entire
Agreement; Amendments 

        Except
for additional agreements between the Parties expressly referenced herein, this Agreement contains the entire understanding and agreement of the Parties and shall form a
single integrated agreement between the Parties. This Agreement may be modified, altered or amended only by an agreement in writing, signed by both Parties. 

        16.6 Waiver

        No
waiver of any provision of this Agreement shall be valid or enforceable unless in writing and signed by the Party against whom enforcement of the waiver is sought. The waiver of any
provision of this Agreement, at any time, by either Party, shall not constitute a waiver of future compliance with such provision or a waiver of compliance with any other provision of this Agreement. 

        16.7 Governing
Law 

        This
Agreement and all disputes arising hereunder shall be subject to, governed by, and construed in accordance with the laws of the State of Texas, and any litigation hereunder shall be
brought only in the state of federal courts in Dallas County, Texas. Each Party hereby submits to the jurisdiction of such courts for all purposes hereof. 

        16.8 Severability

        Except
as otherwise set forth herein, in the event that any of the provisions hereof are held by a court of competent jurisdiction to be invalid, void, or otherwise unenforceable, all
other provisions of this Agreement shall remain enforceable to the fullest extent permitted by law. 

14

 

        16.9 Confidentiality

        Each
Party acknowledges that during the term of this Agreement, it will have access to and receive oral and written information concerning the other Party and the transactions entered
into pursuant to or otherwise related to this Agreement (collectively, the "Information"). Each Party hereby agrees that it will use the Information solely for the purposes related to this Agreement.
Each Party hereby further agrees that, unless required by applicable law, order, or rule, it will not disclose any of the Information to any third party other than such Party's employees, Affiliates,
lenders, counsel, accountants, or other advisors. Each Party further agrees that it will notify the other Party of any proceeding of which it is aware that may result in disclosure of Information and
shall use reasonable efforts to prevent or limit such disclosure. 

        16.10 Inspection
of Records 

        TXUPM
shall have the right at reasonable hours and upon reasonable notice to examine the books, records and charts of Gexa to the extent reasonably necessary to verify the accuracy of
any invoice, payment, measurement, calculation, or determination made pursuant to the provisions of this Agreement. If any such examination reveals, or if either Party discovers, any error or
inaccuracy in its own or the other Party's invoice, payment, calculation, measurement or determination, then proper adjustment and correction thereof will be made as promptly as practicable
thereafter; provided, however, that no adjustments or corrections will be made with respect to errors or inaccuracies unless reasonable specific written notice of such error or inaccuracy is given to
the other Party within two (2) years of the date of such erroneous or inaccurate invoice, payment, calculation, measurement or determination; and provided further that no interest shall accrue
on the payment of any such errors or inaccuracies from the date of the original error to the date the corrected amount is due. 

        16.11 Further
Assurances 

        The
Parties agree to take such further actions and execute such further documents as may be reasonably necessary or appropriate to complete the transactions contemplated hereunder.
Further, the Parties agree to execute such additional documents, instruments, or agreements, (including amendments to this Agreement), and take such further action as TXUPM may deem reasonably
necessary to cure any error or omission, to perfect any security interest granted by Gexa, to comply with applicable law or regulation or otherwise effectuate the provisions or purposes of this
Agreement. 

        16.12 Imaged
Agreement 

        Any
original executed Agreement, Purchase Contract, Sale Contract, Confirmation or other related document may be photocopied and stored on computer tapes and disks (the "Imaged
Agreement"). The Imaged Agreement, Purchase Contract or Sale Contract, if introduced as evidenced on paper, the Confirmation if introduced as evidence in automated facsimile form, and all computer
records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the Parties to the same
extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of a Confirmation or any Imaged Agreement
(or photocopies of the transcription of the Confirmation or the Imaged Agreement) on the basis that such were not originated or maintained in documentary form under either the hearsay rule, the best
evidence rule or other rule of evidence. 

15

 

        IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above. 

	TXU PORTFOLIO MANAGEMENT COMPANY LP, By: TXU Portfolio Optimization Company LLC, Its General partner	 	GEXA CORPORATION

D/B/A GEXA ENERGY CORP.
	

By:	

/s/ Jeff Shorter, Sr. Vice President
	
 	

By:	

/s/ Neil Leibman, CEO

16

  

 
 

Exhibit 1
  Form of Customer Sales Contract    
    

        RESIDENTIAL
TERMS OF SERVICE—RELIANT/HL&P, Central Power & Light, West Texas Utilities, Texas New Mexico Power & Oncor/TXU
AREAS—VERSION: 03-15-2002p 

        NON-RESIDENTIAL TERMS OF SERVICE—RELIANT/HL&P, Central Power & Light, West Texas Utilities, Texas New Mexico
power & Oncor/TXU AREAS—VERSION: 03-01-2002 

1

  

 
 

Exhibit 2
  Form of Sales Contract for Third Party Customer    
    

In
lieu of re-printing the document in its entirety, this Exhibit 2 shall be deemed to be the Master Power Purchase and Sale Agreement, Version 2.1 (04/25/00) or any subsequent
version, which is published by the Edison Electric Institute and which appears on the Edison Electric Institute website at www.eei.org. 

1

  

 
 

Exhibit 3
  Specified geographic region and Investor Owned Utility List    
    

	1.
	Center
Point Energy/Reliant 
	2.
	Oncor
Electric/TXU 
	3.
	American
Electric PowerCentral Power & Light/West Texas Utilities 
	4.
	Texas
New Mexico Power 

1

  

 
 

Exhibit 4
  Approved Description and letter for Relationship Between Gexa and TXUPM    
    

TO
WHOM IT MAY CONCERN: 

TXU
Portfolio Management Company LP ("TXUPM") and Gexa Corporation ("Gexa") have entered into an Energy Marketing Support Agreement effective April 8, 2003, and continuing for an initial term
of five (5) years, regarding certain electric power marketing activities of Gexa. This agreement provides that TXUPM will provide various types of support to Gexa to facilitate Gexa's purchases
of electric power and transmission capacity from third parties. The procedure envisioned by such Agreement is for the supplier to enter into contracts with TXUPM for the sale of supplies to TXUPM,
which will be resold to Gexa. TXUPM will be responsible to the supplier for all obligations in connection with such sale and receipt of electric energy and capacity. Because TXUPM will be supporting
Gexa's business in multiple respects, this should satisfy your company's credit requirements. If you have any questions between the relationship between Gexa and TXUPM, please call Bob Almond at TXUPM
at (214) 875-9365. 

1

  

 
 

Exhibit 5
  Monthly Purchase Limit    
    

As
of the Effective Date, [*] 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

1

  

 
 

EXHIBIT 6
  LOCKBOX AND DEPOSITORY ACCOUNT REQUIREMENTS    
    

LOCKBOX 

	1.
	All
receivables received by Gexa Corporation for sale contracts and for disbursement to Gexa Corporation and TXU Portfolio Management Company LP ("TXUPM") must go directly to the joint
lockbox address. This includes, but is not limited to, all customer payment via cash, cashier's check, personal check, money order, and credit card.

	2.
	All
lockbox receipts will be handled solely by bank employees.

	3.
	All
lockbox receipts will be deposited exclusively into the joint depository account on a daily basis.

	4.
	The
lockbox must be maintained during the entire terns of the Support Agreement, and until all contracts entered into have been settled.

	5.
	Gexa
Corporation is responsible for all fees and service charges relating to the lockbox account.

	6.
	Neither
Gexa Corporation nor TXUPM can request modifications to this account without the prior written consent of the other party. 

DEPOSITORY
ACCOUNT 

	1.
	Employees
of Gexa Corporation, as assigned on the bank documentation, have authority only to initiate wire transfers/ACHs for
disbursement.

	2.
	Employees
of TXUPM, as assigned on the bank documentation, have authority to both initiate wire transfers/ACH's (if deemed necessary due
to default under the Support Agreement by Gexa Corporation) and to release all wire transfers/ACH's.

	3.
	All
requests for disbursement must be received no later than 12:00 p.m. CST on the second business day prior to the requested date of payment from Gexa Corporation to the
appropriate TXUPM accountant.

	4.
	Gexa
Corporation is responsible for all fees and service charges relating to the depository account.

	5.
	Blank
checks for the Lockbox Account will remain in the possession of Gexa Corporation except for such checks as may reasonably be requested by TXUPM from time to time.

	6.
	Employees
of Gexa Corporation may fill out checks to be used as payment(s), and then overnight/mail the completed check(s) with all backup detail to the appropriate accountant at TXUPM
for TXUPM's approval and signature.

	7.
	Checks
may be accompanied by stamped Gexa Corporation return mail envelopes for TXUPM to mail, once the appropriate signature has been received.

	8.
	If
Gexa Corporation prefers to mail the check(s) directly, then they shall requested that the check(s) be overnighted/mailed back to their attention for proper disbursement.

	9.
	Employees
of TXUPM, as assigned on the bank documentation, will be the only party signature on any and all checks written from the
depository account. 

1

 

	10.
	On
a monthly basis, after all payments have been paid, and there are no other claims by TXUPM related to amounts owed by Gexa Corporation to TXUPM, then all remaining funds in the
account shall be distributed to Gexa Corporation, via a wire request (per the payment request requirements listed above and in the Lockbox Agreement or the support Agreement, as applicable).

	11.
	Gexa
Corporation is entitled to any interest that accrues in the Lockbox Account, and such interest shall be disbursed to Gexa Corporation upon request (per the payment request
requirements listed above and in the Support Agreement or Lockbox Agreement, as applicable).

	12.
	Neither
Gexa Corporation nor TXUPM can request modifications to this account without the prior written consent of the other party.

	13.
	Gexa
Corporation is required to provide a copy of the monthly bank statements, including a reconciliation, on a monthly basis. 

All
of the items listed above are a summary of the details of the Energy Marketing Support Agreement between TXUPM and Gexa Corporation (the "Support Agreement") and the Lockbox Agreement entered into
by such parties and attached thereto (the "Lockbox Agreement"). In the event of any inconsistencies between this document and the terms or conditions of the Support Agreement or the Lockbox Agreement,
the Support Agreement or Lockbox Agreement, as applicable, shall be regarded as the controlling terms and conditions. In the event of a discrepancy between TXUPM and Gexa regarding contract
interpretation, TXUPM's interpretation will prevail. 

2

  

 
 

Exhibit 7
  Security Agreement    
    

THIS
SECURITY AGREEMENT (this "Agreement") is made and entered into as of April 8, 2003, by and between GEXA CORPORATION, a Texas corporation
doing business as Gexa Energy Corporation (herein "Borrower"), and TXU ENERGY TRADING COMPANY LP, a Texas limited partnership (together with any
successors and assigns, herein "Lender"). 

        A.    Pursuant
to that certain Energy Marketing Support Agreement dated as of                        , 2003, by and between Lender and Borrower
(as amended, supplemented or otherwise
modified from time to time, herein the "Loan Agreement"). Lender has agreed to extend financial accommodations to Borrower. 

        B.    The
parties hereto desire to enter into this Agreement in order to create the security interest contemplated in the Loan Agreement and to set forth the rights and duties
of the parties. 

        C.    Capitalized
terms used herein shall have the meanings assigned to them in Schedule A, or in the Loan Agreement and, for purposes of this Agreement and the other
Loan Documents, the rules of construction set forth in Schedule A shall govern. All schedules, attachments, addenda and exhibits hereto, or expressly identified to this Agreement, are
incorporated herein by reference, and taken together with this Agreement, constitute but a single agreement. 

        NOW,
THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows: 

I.
SECURITY INTEREST 

        1.1   Grant of Security Interest. (a) As collateral security for the prompt and complete payment and performance of the
Obligations, each of the Borrower and any other Credit Party hereafter executing this Agreement hereby grants to the Lender a security interest in and Lien upon all of its property and assets, whether
real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title, or interest, including all of
the following property in which it now has or at any time in the future may acquire any right. title or interest: all Accounts; all Deposit Accounts, all other bank accounts and all funds on deposit
therein; all money, cash and cash equivalents; all Investment Property; all Stock; all Goods (including Inventory, Equipment and Fixtures and specifically including all electric power); all Chattel
Paper, Documents and Instruments; all Books and Records; all General Intangibles; (including all Intellectual Property, contract rights, choses in action, Payment Intangibles and Software); all
Letter-of-Credit Rights; all Supporting Obligations; and to the extent not otherwise included, all Proceeds, tort claims, insurance claims and other rights to payment not
otherwise included in the foregoing and products of all and any of the foregoing and all accessions to, substitutions and replacements for, and rents and profits of, each of the foregoing, but
excluding in all events Hazardous Waste (all of the foregoing, together with any other collateral pledged to the Lender pursuant to any other Loan Document, collectively, the "Collateral"). 

        (b)   Borrower,
Lender and each other Credit Party hereafter executing this Agreement agree that this Agreement creates, and is intended to create, valid and continuing first
priority Liens upon the Collateral in favor of Lender. Borrower and each other Credit Party hereafter executing this Agreement represents, warrants and promises to Lender that: (1) Borrower and
each other Credit Party granting a Lien in Collateral has rights in and the power to transfer each item of the Collateral upon which it purports to grant a Lien pursuant to the Loan Documents, free
and clear of any and all Liens or claims of others, other than Permitted Encumbrances; (ii) the security interests granted pursuant to this Agreement, upon completion of the filings and other
actions listed on Disclosure Schedule 1.1 (which. in the case of all filings and other documents referred to in said Schedule. have been
delivered to the Lender in duly executed form) will constitute valid 

1

 

perfected
security interests in all of the Collateral in favor of the Lender as security for the prompt and complete payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and purchasers from any Credit Party (other than purchasers of Inventory in the ordinary course of business) and such security interests are prior to all
other Liens on the Collateral in existence on the date hereof except for Permitted Encumbrances that have priority by operation of law: and (iii) no effective security agreement, mortgage, deed
of trust, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is or will be on file or of record in any public office,
except those relating to Permitted Encumbrances. Borrower and each other Credit Party executing this Agreement promise to defend the right, title and interest of Lender in and to the Collateral
against the claims and demands of all Persons whomsoever, and each shall take such actions, including (w) all actions necessary to grant Lender "control" of any Investment Property, Deposit
Accounts. Letter-of-Credit Rights or electronic Chattel Paper owned by such Credit Party, with any agreements establishing control to be in form and substance satisfactory to
Lender, (x) the prompt delivery of all original Instruments. Chattel Paper and certificated Stock owned by Borrower and each other Credit Party granting a Lien on Collateral to Lender,
(y) notification of Lender's interest in Collateral at Lender's request, and (z) the institution of litigation against third parties as shall be prudent in order to protect and preserve
each Credit Party's and Lender's respective and several interests in the Collateral. Borrower (and any other Credit Party granting a Lien in Collateral) shall mark its Books and Records pertaining to
the Collateral to evidence the Loan Documents and the Liens granted under the Loan Documents. If any Credit Party retains possession of any Chattel Paper or Instrument with Lender's consent, such
Chattel Paper and Instruments shall be marked with the following legend: "This writing and the obligations evidenced or secured hereby are subject to the security interest of TXU Portfolio Management
Company LP." Each Credit Party executing this Agreement shall promptly, and in any event within two (2) Business Days after the same is acquired by it. notify Lender of any commercial tort
claim (as defined in the Code) acquired by it and unless otherwise consented by Lender, such Credit Party shall enter into a supplement to this Agreement granting to Lender a Lien in such commercial
tort claim. 

        1.2   Lender's Rights. (a) Lender may. (i) at any time in Lender's own name or in the name of Borrower.
communicate with Account Debtors, parties to Contracts, and obligors in respect of Instruments. Chattel Paper or other Collateral to verify to Lender's satisfaction, the existence, amount and terms
of, and any other matter relating to, Accounts, Payment Intangibles, Instruments. Chattel Paper or other Collateral, and (ii) at any time after a Default has occurred and is continuing and
without prior notice to Borrower or any other Credit Party, notify Account Debtors and other Persons obligated on any Collateral that Lender has a security interest therein and that payments shall be
made directly to Lender. Upon the request of Lender, Borrower shall so notify such Account Debtors, parties to Contracts, and obligors in respect of Instruments, Chattel Paper or other Collateral.
Borrower hereby constitutes Lender or Lender's designee as Borrower's attorney with power to endorse Borrower's name upon any notes, acceptance drafts, money orders or other evidences of payment or
Collateral. 

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        (b)   Borrower
shall remain liable under each Contract, Instrument and License to observe and perform all the conditions and obligations to be observed and performed by it
thereunder, and Lender shall have no obligation or liability whatsoever to any Person under any Contract, Instrument Or License (between Borrower or any other Credit Party and any Person other than
Lender) by reason of or arising out of the execution, delivery or performance of this Agreement, and Lender shall not be required or obligated in any manner (i) to perform or fulfill any of the
obligations of Borrower, (ii) to make any payment or inquiry, or (iii) to take any action of any kind to collect, compromise or enforce any performance or the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time or times under or pursuant to any Contract, Instrument or License. 

        (c)   Borrower
and each other Credit Party shall, with respect to each owned, leased, or controlled property, during normal business hours and upon reasonable advance notice
(unless a Default shall have occurred and be continuing, in which event no notice shall be required and Lender shall have access at any and all times): (i) provide access to such property to
Lender and any of its officers, employees and agents, as frequently as Lender determines to be appropriate; (ii) permit Lender and any of its officers, employees and agents to inspect, audit
and make extracts and copies (or take originals if reasonably necessary) from all of Borrower's and such Credit Party's Books and Records: and (iii) permit Lender to inspect, review, evaluate
and make physical verifications and appraisals of the Inventory and other Collateral in any manner and through any medium that Lender considers advisable, and Borrower and such Credit Party agree to
render to Lender, at Borrower's and such Credit Party's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. 

        (d)   After
the occurrence and during the continuance of a Default, Borrower, at its own expense, shall cause the certified public accountant then engaged by Borrower to
prepare and deliver to Lender at any time and from time to time, promptly upon Lender's request, the following reports: (i) a reconciliation of all Accounts: (ii) an aging of all
Accounts; (iii) trial balances; and (iv) test verifications of such Accounts as Lender may request. Borrower, at its own expense, shall cause its certified independent public accountants
to deliver to Lender the results of any physical verifications of all or any portion of the Inventory made or observed by such accountants when and if such verification is conducted. Lender shall be
permitted to observe and consult with Borrower's accountants in the performance of these tasks. 

        1.3   Lender's Appointment as Attorney-in-fact. On the Closing Date, Borrower and each other Credit
Party executing this Agreement shall execute and deliver a Power of Attorney in the form attached as Exhibit A. The power of attorney granted
pursuant to the Power of Attorney and all powers granted under any Loan Document are powers coupled with an interest and shall be irrevocable until the Termination Date. The powers conferred on Lender
under the Power of Attorney are solely to protect Lender's interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Lender agrees not to exercise any power or
authority granted under the Power of Attorney unless an Event of Default has occurred and is continuing. Borrower and each other Credit Party executing this Agreement also hereby (i) authorizes
Lender to file any financing statements, continuation statements or amendments thereto that (x) indicate the Collateral (1) as all assets of such Credit Party (or any portion of such
Credit Party's assets) or words of similar effect, regardless of 

3

 

whether
any particular asset comprised in the Collateral falls within the scope of Chapter 9 of the Code of such jurisdiction, or (2) as being of an equal or lesser scope or with greater
detail, and (y) contain any other information required by Subchapter E of Chapter 9 of the Code for the sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment and (ii) ratifies its authorization for Lender to have filed any initial financial statements, or amendments thereto if filed prior to the date hereof. Borrower and each
other Credit Party executing this Agreement acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without
the prior written consent of Lender and agrees that it will not do so without the prior written consent of Lender, subject to such Credit Party's rights under Section 9.509(d)(2) of the Code. 

        1.4   Grant of License to Use Intellectual Property Collateral. Borrower and each other Credit Party executing this Agreement
hereby grants to Lender an irrevocable, non-exclusive license (exercisable upon the occurrence and during the continuance of an Event of Default without payment of royalty or other
compensation to Borrower or such Credit Party) to use, transfer, license or sublicense any Intellectual Property now owned, licensed to, or hereafter acquired by Borrower or such Credit Party, and
wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof,, and represents, promises and agrees that any such license or sublicense is not and will not be in conflict with the contractual or commercial rights of any third
Person; provided, that such license will terminate on the Termination Date. 

II.
EVENTS OF DEFAULT: RIGHTS AND REMEDIES 

        2.1   Events of Default. The occurrence of any one or more of the following events (regardless of the reason therefor) shall
constitute an "Event of Default" hereunder which shall be deemed to be continuing until waived in writing by Lender in accordance with Section 4.3: 

        (a)   Borrower
shall fail to make any payment in respect of any Obligations when due and payable or declared due and payable; or 

        (b)   Borrower
or any other Credit Party (whether or not such Credit Party has signed this Agreement) shall fail or neglect to perform, keep or observe any of the covenants,
promises, agreements, requirements, conditions or other terms or provisions contained in this Agreement or any of the other Loan Documents; or 

        (c)   an
event of default shall occur under any Contractual Obligation of the Borrower or any other Credit Party (other than this Agreement and the other Loan Documents), and
such event of default (i) involves the failure to make any payment (whether or not such payment is blocked pursuant to the terms of an intercreditor agreement or otherwise), whether of
principal, interest or otherwise, and whether due by scheduled maturity, required prepayment, acceleration, demand or otherwise, in respect of any Indebtedness (other than the Obligations) of such
Person, or (ii) causes (or permits any holder of such Indebtedness or a trustee to cause) such Indebtedness, or a portion thereof, to become due prior to its stated maturity or prior to its
regularly scheduled date of payment; or 

        (d)   any
representation or warranty in this Agreement or any other Loan Document, or in any written statement pursuant hereto or thereto, or in any report, financial
statement or certificate made or delivered to Lender by Borrower or any other Credit Party shall be untrue or incorrect as of the date when made or deemed made, regardless of whether such breach
involves a representation or warranty with respect to a Credit Party that has not signed this Agreement; or 

4

 

        (e)   there
shall be commenced against the Borrower or any other Credit Party any Litigation seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets that results in the entry of an order for any such relief that remains unstayed or undismissed for thirty (30) consecutive days; or
Borrower or any other Credit Party shall have concealed, removed or permitted to be concealed or removed, any part of its property with intent to hinder, delay or defraud any of its creditors or made
or suffered a transfer of any of its property or the incurring of an obligation that may be fraudulent under any bankruptcy, fraudulent transfer or other similar law; or 

        (f)    a
case or proceeding shall have been commenced involuntarily against Borrower or any other Credit Party in a court having competent jurisdiction seeking a decree or
order: (i) under the United States Bankruptcy Code or any other applicable Federal, state or foreign bankruptcy or other similar law, and seeking either (x) the appointment of a
custodian. receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Person or of any substantial part of its properties, or (y) the reorganization or winding up or
liquidation of the affairs of any such Person, and such case or proceeding shall remain undismissed or unstayed for sixty (60) consecutive days or such court shall enter a decree or order
ranting the relief sought in such case or proceeding; or (ii) invalidating or denying any Person's right, power, or competence to enter into or perform any of its obligations under any Loan
Document or invalidating or denying the validity or enforceability of this Agreement or any other Loan Document or any action taken hereunder or thereunder; or 

        (g)   Borrower
or any other Credit Party shall (i) commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it or seeking appointment of a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) for it or any substantial part of its properties, (ii) make a general assignment for the benefit of creditors,
(iii) consent to or take any action in furtherance of, or, indicating its consent to, approval of, or acquiescence in, any of the acts set forth in paragraphs (e) or (f) of this
Section 2.1 or clauses (1) and (ii) of this paragraph (g), or (iv) shall admit in writing its inability to, or shall be generally unable to, pay its debts as such
debts become due: or 

        (h)   a
final judgment or judgments for the payment of money in excess of the $50,000.00 in the aggregate shall be rendered against Borrower or any other Credit Party, unless
the same shall be (i) fully covered by insurance and the issuer(s) of the applicable policies shall have acknowledged full coverage in writing within fifteen (15) days of judgment, or
(ii) vacated, stayed, bonded, paid or discharged within a period of fifteen (15) days from the date of such judgment; or 

        (i)    any
other event shall have occurred that has had or could reasonably be expected to have a Material Adverse Effect; or 

        (j)    any
provision of any Loan Document shall for any reason cease to be valid, binding and enforceable in accordance with its terms, or any Lien granted, or intended by the
Loan Documents to be granted, to Lender shall cease to be a valid and perfected Lien having the first priority (or a lesser priority if expressly permitted in the Loan Documents) in any of the
Collateral (or any Credit Party shall so assert any of the foregoing); or 

        (k)   a
Change of Control shall have occurred with respect to any Corporate Credit Party; or 

        (l)    an
ERISA Event shall have occurred that, in the opinion of the Lender, when taken together with all other ERISA Events that have occurred and are then continuing, could
reasonably be expected to result in liability of any Credit Party in an aggregate amount exceeding $50,000.00. 

5

 

        2.2   Remedies. (a) If any Default shall have occurred and be continuing, then Lender may terminate or suspend its
obligations under the Loan Agreement. In addition, if any Event of Default shall have occurred and be continuing, Lender may, without notice, take any one or more of the following actions:
(i) declare all or any portion of the Obligations to be forthwith due and payable, including contingent liabilities with respect to Credit Guarantees, whereupon such Obligations shall become
and be due and payable; (ii) require that all Credit Guarantees be fully cash collateralized pursuant to Schedule B; or
(iii) exercise any rights and remedies provided to Lender under the Loan Documents or at law or equity, including all remedies provided under the Code; provided, that upon the occurrence of any
Event of Default specified in Sections 2.1 (e), (f) or (g), the Obligations shall become immediately due and payable (and any obligation of Lender to provide credit support and other services
under the Loan Agreement, if not previously terminated, shall immediately be terminated) without declaration, notice or demand by Lender. 

        (b)   Without
limiting the generality of the foregoing, Borrower and each other Credit Party executing this Agreement expressly agrees that upon the occurrence of any Event of
Default, Lender may collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, assign, give an option or options to purchase
or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales, at any exchange at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of any credit risk. Lender shall have the right upon any such public sale, to the extent permitted by law, to purchase for
the benefit of Lender the whole or any part of said Collateral so sold, free of any right of equity of redemption, which equity of redemption Borrower and each other Credit Party executing this
Agreement hereby releases. Such sales may be adjourned, or continued from time to time with or without notice. Lender shall have the right to conduct such sales on any Credit Party's premises or
elsewhere and shall have the right to use any Credit Party's premises without rent or other charge for such sales or other action with respect to the Collateral for such time as Lender deems necessary
or advisable. 

        (c)   Upon
the occurrence and during the continuance of an Event of Default and at Lender's request, Borrower and each other Credit Party executing this Agreement agrees to
assemble the Collateral and make it available to Lender at places that Lender shall reasonably select, whether at its premises or elsewhere. Until Lender is able to effect a sale, lease, or other
disposition of the Collateral, Lender shall have the right to complete, assemble, use or operate the Collateral or any part thereof. to the extent that Lender deems appropriate, for the purpose of
preserving such Collateral or its value or for any other purpose. Lender shall have no obligation to any Credit Party to maintain or preserve the rights of any Credit Party as against third parties
with respect to any Collateral while such Collateral is in the possession of Lender. Lender may, if it so elects, seek the appointment of a receiver or keeper to take possession of any Collateral and
to enforce any of Lender's remedies with respect thereto without prior notice or hearing. To the maximum extent permitted by applicable law, Borrower and each other Credit Party executing this
Agreement waives all claims, damages, and demands against Lender, its Affiliates, agents, and the officers and employees of any of them arising out of the repossession, retention or sale of any
Collateral except such as are determined in a final judgment by a court of competent jurisdiction to have arisen solely out of the gross negligence or willful misconduct of such Person. Borrower and
each other Credit Party executing this Agreement agrees that ten (10) days' prior notice by Lender to such Credit Party of the time and place of any public sale or of the time after which a
private sale may take place is reasonable notification of such matters. Borrower and each other Credit Party shall remain liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which Lender is entitled. 

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        (d)   Lender's
rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Lender may have under any Loan Document or
at law or in equity. Recourse to the Collateral shall not be required. All provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling
and to be limited, to the extent necessary, so that they do not render this Agreement invalid or unenforceable, in whole or in part. 

        2.3   Waivers by Credit Parties. Except as otherwise provided for in this Agreement and to the fullest extent permitted by
applicable law. Borrower and each other Credit Party executing this Agreement waives: (a) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Loan Documents, any notes, commercial paper, Accounts, Contracts, Documents,
Instruments, Chattel Paper and guaranties at any time held by Lender on which such Credit Party may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard:
(b) all rights to notice and a hearing prior to Lender's taking possession or control of, or to Lender's replevy, attachment or levy upon, any Collateral or any bond or security that might be
required by any court prior to allowing Lender to exercise any of its remedies: and (c) the benefit of all valuation, appraisal and exemption laws. Borrower and each other Credit Party
executing this Agreement acknowledges that each has been advised by counsel of its choices and decisions with respect to this Agreement, the other Loan Documents and the transactions evidenced hereby
and thereby. 

        2.4   Proceeds. The Proceeds of any sale, disposition or other realization upon any Collateral shall be applied by Lender upon
receipt to the Obligations in such order as Lender may deem advisable in its sole discretion (including the cash collateralization of any Letter of Credit Obligations), and after the indefeasible
payment and satisfaction in full in cash of all of the Obligations, and after the payment by Lender of any other amount required by any provision of law, including Sections 9.608(a)(1) and 9.615(a)(3)
of the Code (but only after Lender has received what Lender considers reasonable proof of a subordinate party's security interest), the surplus, if any, shall be paid to Borrower or its
representatives or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. 

III.
SUCCESSORS AND ASSIGNS 

        Each
Loan Document shall be binding on and shall inure to the benefit of Borrower and each other Credit Party executing such Loan Document, Lender, and their respective successors and
assigns, except as otherwise provided herein or therein. Neither Borrower nor any other Credit Party may assign, transfer, hypothecate, delegate or otherwise convey its rights, benefits, obligations
or duties under any Loan Document without the prior express written consent of Lender. Any such purported conveyance by Borrower or such Credit Party without the prior express written consent of
Lender shall be void. There shall be no third party beneficiaries of any of the terms and provisions of any of the Loan Documents. Lender reserves the right at any time to create and sell
participations in the Loan Documents and to sell, transfer or assign any or all of its rights in and under the Loan Documents. 

IV.
MISCELLANEOUS 

        4.1   Complete Agreement: Modification of Agreement. This Agreement and the other Loan Documents constitute the complete
agreement between the parties with respect to the subject matter hereof and thereof, supersede all prior agreements, commitments, understandings or inducements (oral or written, expressed or implied).
No Loan Document may be modified, altered or amended except by a written agreement signed by Lender, and each other Credit Party a party to such Loan Document. Borrower and each other Credit Party
executing this Agreement or any other Loan Document shall have all duties and obligations under this Agreement and such other Loan Documents from the date of its execution and delivery, regardless of
whether any financial accommodations have been extended by Lender to Borrower. 

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        4.2   Expenses. Borrower agrees to pay or reimburse Lender for all costs and expenses (including the fees and expenses of all
counsel, advisors, consultants (including environmental and management consultants) and auditors retained in connection therewith) incurred in connection with: (a) the preparation, negotiation,
execution, delivery, performance and enforcement of the Loan Documents and the preservation of any rights thereunder; (b) collection, including deficiency collections; (c) the forwarding
to Borrower or any other Person on behalf of Borrower by Lender of any proceeds (including all wire transfer fees); (d) any amendment, waiver or other modification with respect to any Loan
Document or advice in connection with the administration of the Loan Documents or the rights thereunder; (e) any litigation, dispute, suit, proceeding or action (whether instituted by or
between any combination of Lender, Borrower or any other Person), and an appeal or review thereof, in any way relating to the Collateral, any Loan Document, or any action taken or any other agreements
to be executed or delivered in connection therewith, whether as a party, witness or otherwise; and (f) any effort (i) to monitor transactions arising with respect to the Loan Documents;
(ii) to evaluate, observe or assess Borrower or any other Credit Party or the affairs of such Person; and (iii) to verify, protect, evaluate, assess, appraise, collect, sell, liquidate
or otherwise dispose of the Collateral. 

        4.3   No Waiver. Neither Lender's failure, at any time, to require strict performance by Borrower or any other Credit Party of
any provision of any Loan Document, nor Lender's failure to exercise, nor any delay in exercising, any right, power or privilege hereunder, shall operate as a waiver thereof or waive, affect or
diminish any right of Lender thereafter to demand strict compliance and performance therewith. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or
future exercise thereof or the exercise of any other right, power or privilege. Any suspension or waiver of a Default or other provision under the Loan Documents shall not suspend, waive or affect any
other Default or other provision under any Loan Document, and shall not be construed as a bar to any right or remedy that Lender would otherwise have had on any future occasion. None of the
undertakings, indemnities, agreements, warranties, covenants and representations of Borrower or any other Credit Party to Lender contained in any Loan Document and no Default by Borrower or any other
Credit Party under any Loan Document shall be deemed to have been suspended or waived by Lender, unless such waiver or suspension is by an instrument in writing signed by an officer or other
authorized employee of Lender and directed to Borrower specifying such suspension or waiver (and then such waiver shall be effective only to the extent therein expressly set forth), and Lender shall
not, by any act (other than execution of a formal written waiver), delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder. 

        4.4   Severability: Section Titles. Wherever possible, each provision of the Loan Documents shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of any Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of such Loan Document. Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under the Loan Documents shall in any way affect or impair the Obligations, duties, covenants,
representations and warranties, indemnities, and liabilities of Borrower or any other Credit Party or the rights of Lender relating to any unpaid Obligation. (due or not due, liquidated, contingent or
unliquidated), or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is not required until after the termination of the Loan Agreement,
all of which shall not terminate or expire, but rather shall survive such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that all
indemnity obligations of the Credit Parties under the Loan Documents shall survive the Termination Date. The Section titles contained in any Loan Document are and shall be without substantive meaning
or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 

8

 

        4.5   Authorized Signature. Until Lender shall be notified in writing by Borrower or any other Credit Party to the contrary,
the signature upon any document or instrument delivered pursuant hereto and believed by Lender or any of Lender's officers, agents, or employees to be that of an officer of Borrower or such other
Credit Party shall bind Borrower and such other Credit Party and be deemed to be the act of Borrower or such other Credit Party affixed pursuant to and in accordance with resolutions duly adopted by
Borrower's or such other Credit Party's Board of Directors, and Lender shall be entitled to assume the authority of each signature and authority of the person whose signature it is or appears to be
unless the person acting in reliance thereon shall have actual knowledge to the contrary. 

        4.6   Notices. Except as otherwise provided herein, whenever any notice, demand, request or other communication shall or may be
given to or served upon any party by any other party, or whenever any party desires to give or serve upon any other party any communication with respect to this Agreement, each such communication
shall be in writing and shall be deemed to have been validly served, given or delivered (a) upon the earlier of actual receipt and three (3) days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 4.6), (c) one (1) Business Day after deposit
with a reputable overnight courier with all charges prepaid or (d) when hand-delivered, all of which shall be addressed to the party to be notified and sent to the address or
facsimile number indicated in Schedule C or to such other address (or facsimile number) as may be substituted by notice given as herein provided.
Failure or delay in delivering copies of any such communication to any Person (other than Borrower or Lender) designated in Schedule C to receive
copies shall in no way adversely affect the effectiveness of such communication. 

        4.7   Counterparts. Any Loan Document may be authenticated in any number of separate counterparts by any one or more of the
parties thereto, and all of said counterparts taken together shall constitute one and the same instrument. Any Loan Document may be authenticated by manual signature, facsimile or, if approved in
writing by Lender, electronic means, all of which shall be equally valid. 

        4.8   Time of the Essence. Time is of the essence for performance of the Obligations under the Loan Documents. 

        4.9   GOVERNING LAW. THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE LOAN DOCUMENTS SHALL BE GOVERNED BY. AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF
LAWS. 

        4.10 SUBMISSION TO JURISDICTION: WAIVER OF JURY TRIAL. (A) BORROWER AND EACH OTHER CREDIT PARTY HEREAFTER EXECUTING
THIS AGREEMENT HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN TEXAS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND SUCH
CREDIT PARTY AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT
LENDER, BORROWER AND SUCH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A FEDERAL COURT LOCATED OUTSIDE OF TEXAS; AND FURTHER PROVIDED, THAT NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER 

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JURISDICTION
TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER 1N FAVOR OF LENDER. BORROWER AND EACH
OTHER CREDIT PARTY HEREINAFTER EXECUTING THIS AGREEMENT EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER AND SUCH CREDIT
PARTY HEREBY WAIVE ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY
WANE PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESSED TO BORROWER OR SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN SCHEDULE C OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S OR SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. 

        (B)  BORROWER
AND EACH OTHER CREDIT PARTY HEREAFTER EXECUTING THIS AGREEMENT HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT. OR OTHERWISE BETWEEN LENDER, BORROWER AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. 

        4.11 Press Releases. Neither any Credit Party nor any of its Affiliates will in the future issue any press release or other
public disclosure using the name of TXU Portfolio Management Company LP or its affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days'
prior notice to Lender and without the prior written consent of Lender unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then. in any event. such
credit Party or Affiliate will consult with Lender before issuing such press release or other public disclosure. 

        4.12 Reinstatement. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time
payment of all or any part of the Obligations is rescinded or must otherwise be returned or restored by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower
or any other Credit Party, or otherwise, all as though such payments had not been made. 

        4.13 Statutory Compliance. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 

        IN
WITNESS WHEREOF, this Security Agreement has been duly executed as of the date first written above. 

/s/
GEXA CORPORATION 

/s/
TXU ENERGY TRADING COMPANY LP 

10

  

 
 

SCHEDULE A
  
    DEFINITIONS    

        Capitalized
terms used in this Agreement and the other Loan Documents shall have (unless otherwise provided elsewhere in this Agreement or in the other Loan Documents) the following
respective meanings: 

        "Account
Debtor" means any Person who is or may become obligated with respect to. or on account of. an.Account, Chattel Paper or General Intangible (including a Payment Intangible). 

        "Accounts"
means all "accounts," as such term is defined in the Code, now owned or hereafter acquired by any Person, including: (i) all accounts receivable, other receivables,
book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper or Instruments) (including any such obligations that may be characterized as an account or
contract right under the Code); (ii) all of such Person's rights in, to and under all purchase orders or receipts for goods or services; (iii) all of such Person's rights to any goods
represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods);
(iv) all rights to payment due to such Person for Goods or other property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued. for a
secondary obligation incurred or to be incurred, for energy, provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or
charge card, or for services rendered or to be rendered by such Person or in connection with any other transaction (whether or not yet earned by performance on the part of such Person): (v) all
health care insurance receivables; and (vi) all collateral security of any kind given by any Account Debtor or any other Person with respect to any of the foregoing. 

        "Affiliate"
means, with respect to any Person: (i) each other Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other
fiduciary, five percent (5%) or more of the Stock having ordinary voting power for the election of directors of such Person; (ii) each other Person that controls, is controlled by or is under
common control with such Parson or any Affiliate of such Person; or (iii) each of such Person's officers, directors, joint venturers and partners. For the purpose of this definition, "control"
of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract
or otherwise. 

        "Agreement"
means this Agreement including all appendices, exhibits or schedules attached or otherwise identified thereto, restatements and modifications and supplements thereto, and any
appendices, exhibits or schedules to any of the foregoing, each as in effect at the time such reference becomes operative. 

        "Books
and Records" means all books, records, board minutes, contracts, licenses, insurance policies, environmental audits, business plans, files, computer files, computer discs and
other data and software storage and media devices, accounting books and records, financial statements (actual and pro forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or Borrower's business. 

        "Borrower"
means the Person identified as such in the preamble of this Agreement. 

        "Business
Day" means any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of Texas. 

        "Cash
Collateral Account" has the meaning assigned to it in Schedule C. 

11

 

        "Change
of Control" means, with respect to any Person on or aver the Closing Date, that any change in the composition of its stockholders as of the Closing Date shall occur which would
result in any stockholder or group acquiring 49.9% or more of any class of Stock of such Person, or that any Person (or group of Persons acting in concert) shall otherwise acquire, directly or
indirectly (including through Affiliates), the power to elect a majority of the Board of Directors of such Person or otherwise direct the management or affairs of such Person by obtaining proxies,
entering into voting agreements or trusts, acquiring securities or otherwise. 

        "Charges"
means all Federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to PBGC at the time due and payable). levies, customs or
other duties, assessments, charges, liens, and all additional charges, interest, penalties, expenses, claims or encumbrances upon or relating to (i) the Collateral, (ii) the Obligations,
(iii) the employees, payroll, income or gross receipts of any Credit Party, (iv) the ownership or use of any assets by any Credit Party, or (v) any other aspect of any Credit
Party's business. 

        "Chattel
Paper" means all "chattel paper," as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by any Person. 

        "Closing
Daze" means the Business Day on which the Loan Agreement is executed and delivered. 

        "Code"
means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of Texas; provided, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection or priority of, or remedies with respect to, Lender's Lien on in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction
other than the State of Texas, the term "Code" means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such provisions; provided further, that to the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern. 

        "Collateral"
has the meaning assigned to it in Section 1.1. 

        "Contracts"
means all the contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Person may now or
hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account. 

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

        "Copyright
License" means rights under any written agreement now owned or hereafter acquired by any Person granting the right to use any Copyright or Copyright registration. 

        "Copyrights"
means all of the following now owned or hereafter adopted or acquired by any Person: (i) all copyrights in any original work of authorship fixed in any tangible
medium of expression, now known or later developed, all registrations and applications for registration of any such copyrights in the United States or any other country, including registrations,
recordings and applications, and supplemental registrations, recordings, and applications in the United States Copyright Office, and (ii) all Proceeds of the foregoing, including license
royalties and proceeds of infringement suits, the right to sue for past, present and future infringements. all rights corresponding thereto throughout the world and all renewals and extensions
thereof: 

        "Corporate
Credit Party" means any Credit Party that is a corporation, partnership or limited liability company. 

12

 

        "Credit
Guarantee" has the meaning assigned to such term in the Loan Agreement. 

        "Credit
Party" means Borrower, and each other Person (other than Lender) that is or may become a party to this Agreement or any other Loan Document. 

        "Default"
means any Event of Default or any event that, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default. 

        "Deposit
Accounts" means all "deposit accounts" as such term is defined in the Code, now or hereafter held in the name of any Person. 

        "Documents"
means all "documents," as such tern is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including all hills of lading, dock warrants,
dock receipts, warehouse receipts, and other documents of title, whether negotiable or non-negotiable. 

        "Environmental
Laws" means all Federal, state and local laws, statutes, ordinances and regulations, now or hereafter in effect, and in each case as amended or supplemented from time to
time, and any applicable judicial or administrative interpretation thereof relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient
air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). 

        "Environmental
Liabilities" means all liabilities, obligations, responsibilities, remedial actions, removal costs, losses, damages of whatever nature, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines, penalties, sanctions and interest incurred as a result of
any claim, suit, action or demand of whatever nature by any Person and which relate to any health or safety condition regulated under any Environmental Law, environmental permits or in connection with
any Release, threatened Release, or the presence of a Hazardous Material. 

        "Equipment"
means all "equipment" as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including any and all machinery, apparatus,
equipment, fittings, furniture, fixtures, motor vehicles and other tangible personal property (other than Inventory) of every kind and description that may be now or hereafter used in such Person's
operations or that are owned by such Person or in which such Person may have an interest, and all parts, accessories and accessions thereto and substitutions and replacements therefor. 

        "ERISA"
means the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder. 

        "ERISA
Affiliate" means any trade or business (whether or not incorporated) that, together with any Credit Party, is treated as a single employer under Section 414(b), (c),
(m) or (o) of the IRC, or, solely for the purposes of Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer under Section 414 of the IRC. 

13

 

        "ERISA
Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for
which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the IRC or
Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by any Credit Party or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or to appoint a trustee to
administer any Plan; (f) the incurrence by any Credit Party or any ERISA Affiliate of any liability with respect to any withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or
(g) the receipt by any Credit Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice, concerning the
imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. 

        "Event
of Default" has the meaning assigned to it in Section 2.1. 

        "Fixtures"
means all "fixtures" as such term is defined in the Code, now owned or hereafter acquired by any Person. 

        "GAAP"
means generally accepted accounting principles in the United States of America as in effect from time to time, consistently applied. 

        "General
Intangibles" means all "general intangibles," as such term is defined in the Code, now owned or hereafter acquired by any Person, including all right, title and interest which
such Person may now or hereafter have in or under any Contract, all Payment Intangibles, customer lists, Licenses, Intellectual Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how,
software, data bases, data, skill, expertise, experience, processes, models, drawings, materials, Books and Records, Goodwill (including the Goodwill associated with any Intellectual Property), all
rights and claims in or under insurance policies (including insurance for fire. damage. loss, and casualty. whether covering personal property. real property, tangible rights or intangible rights, all
liability, life. key-person, and business interruption insurance, and all unearned premiums), uncertificated securities, chores in action, deposit accounts, rights to receive tax refunds
and other payments, rights to received dividends, distributions, cash, Instruments and other property in respect of or in exchange for pledged Stock and Investment Property, and rights of
indemnification. 

        "Goods"
means all "goods," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including all electric power, embedded software to the
extent included in "goods" as defined in the Code, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals. 

        "Governmental
Authority" means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government. 

        "Hazardous
Waste" has the meaning ascribed to such term in the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et. seq.). 

        "Instruments"
means all "instruments," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including all certificated securities and all
promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. 

14

 

        "Intellectual
Property" means any and all Licenses, Patents, Copyrights, Trademarks, trade secrets and customer lists. 

        "Inventory"
means all "inventory," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located, including all inventory, merchandise, goods and
other personal property that are held by or on behalf of such Person for sale or lease or are furnished or are to be furnished under a contract of service or that constitute raw materials, work in
process, finished goods, returned goods or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Person's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software. 

        "Investment
Property" means all "investment property," as such term is defined in the Code, now owned or hereafter acquired by any Person, wherever located. 

        "IRC"
and "IRS" mean respectively, the Internal Revenue Code of 1986 and the Internal Revenue Service, and any successors thereto. 

        "Lender"
means TXU Portfolio Management Company LP and, if at any time Lender shall decide to assign or syndicate all or any of the Obligations, such term shall include such assignee or
such other members of the syndicate. 

        "Letter-of-Credit
Rights" means "letter-of-credit rights" as such term is defined in the Code, now owned or hereafter acquired by any
Person, including tights to payment or performance under a letter of credit, whether or not such Person, as beneficiary, has demanded or is entitled to demand payment or performance. 

        "License"
means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by any Person. 

        "Lien"
means any mortgage, security deed or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, security title, easement or
encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and the filing of. or agreement to give, any financing, statement perfecting a security interest under the Code or comparable law
of any jurisdiction). 

        "Loan
Documents" means this Agreement, the Loan Agreement, the financial statements, the Power of Attorney, the lock box account agreements, and all security agreements, mortgages and
all other documents, instruments, certificates, and notices at any time delivered by any Person (other than Lender) in connection with any of the foregoing. 

        "Lock
Box Account" and "Lock Box Agreement" have the meaning assigned to such terms in the Loan Agreement. 

        "Material
Adverse Effect" means: a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of Borrower or any other Credit Party
or the industry within which Borrower or any other Credit Party operates, (b) Borrower's or any other Credit Party's ability toy pay or perform the Obligations under the Loan Documents to which
such Credit Party is a party in accordance with the terms thereof, (c) the Collateral or Lender's Liens on the Collateral or the priority of any such Lien, or (d) Lender's rights and
remedies under this Agreement and the other Loan Documents. 

        "Multiemployer
Plan" means a "multiemployer plan," as defined in Section 4001(a) (3) of ERISA, to which Borrower, any other Credit Party or any ERISA Affiliate is making,
is obligated to make, has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. 

15

 

        "Obligations"
means all loans, advances, debts, expense reimbursement, fees, liabilities, and obligations for the performance of covenants, tasks or duties or for payment of monetary
amounts (whether or not such performance is then required or contingent. or amounts are liquidated or determinable) owing by Borrower and any other Credit Party to Lender, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or other instrument, whether arising under any of the Loan Documents or under any other agreement between Borrower, such Credit Party
and Lender, and all covenants and duties regarding such amounts. This term includes all principal, interest (including interest accruing at the then applicable rate provided in this Agreement after
the maturity of the Loans and interest accruing at the then applicable rate provided in this Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding). Fees, Charges, expenses, attorneys' fees and
any other sum chargeable to Borrower under any of the Loan Documents, and all principal and interest due in respect of the Loans and all obligations and liabilities of any Guarantor under any
Guaranty. 

        "Patent
License" means rights under any written agreement now owned or hereafter acquired by any Person granting any right with respect to any invention on which a Patent is in
existence. 

        "Patents"
means all of the following in which any Person now holds or hereafter acquires any interest: (i) all letters patent of the United States or any other country. all
registrations and recordings thereof, and all applications for letters patent of the United States or any other country, including registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United States, any State or Territory thereof, or any other country; and (ii) all reissues, continuations,
continuations-in-part or extensions thereof. 

        "Payment
Intangibles" means all "payment intangibles" as such term is defined in the Code, now owned or hereafter acquired by any Person. 

        "PBGC"
means the Pension Benefit Guaranty Corporation or any successor thereto. 

        "Permitted
Encumbrances" means the following encumbrances: (i) Liens for taxes or assessments or other governmental Charges or levies, either not yet due and payable or to the
extent that nonpayment thereof is permitted by the terms of the Loan Documents; (ii) pledges or deposits securing obligations under worker's compensation, unemployment insurance, social
security or public liability laws or similar legislation; (iii) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any
Credit Party is a party as lessee made in the ordinary course of business; (iv) deposits securing public or statutory obligations of any Credit Party; (v) inchoate and unperfected
workers', mechanics', or similar liens arising in the ordinary course of business so long as such Liens attach only to Equipment, fixtures or real estate; (vi) carriers', warehousemans',
suppliers' or other similar possessory liens arising in the ordinary course of business and securing indebtedness not vet due and payable in an outstanding aggregate amount not in excess of $25,000 at
any time so long as such Liens attach only to Inventory; (vii) deposits of money securing. or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party;
(viii) zoning restrictions. easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the
same do not materially impair the use, value, or marketability of such real estate; and (ix) Liens in favor of Lender securing the Obligations. 

        "Person"
means any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, entity or government (whether Federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns. 

16

 

        "Plan"
means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the IRC or Section 302 of
ERISA, and in respect of which any Credit Party or any ERISA Affiliate is (or, if such plan were terminated. would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA. 

        "Proceeds"
means "proceeds," as such term is defined in the Code and. in any event, shall include: (i) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to Borrower or any other Credit Party from time to time with respect to any Collateral; (ii) any and all payments (in any form whatsoever) made or due and payable to Borrower or any
other Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any Collateral by any governmental body, authority, bureau or agency (or
any person acting under color of governmental authority); (iii) any claim of Borrower or any other Credit Party against third patties (a) for past, present or future infringement of any
Intellectual Property or (b) for past, present or future infringement or dilution of any Trademark or Trademark License or for injury to the goodwill associated with any Trademark, Trademark
registration or Trademark licensed under any Trademark License; (iv) any recoveries by Borrower or any other Credit Party against third parties with respect to any litigation or dispute
concerning any Collateral, including claims arising out of the loss or nonconformity of interference with the use of, defects in, or infringement of rights in, or damage to, Collateral; (v) all
amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock; and
(v) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral. 

        "Requirement
of Law" means as to any Person, the Certificate or Articles of Incorporation and By-Laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case binding upon such Person or any of its property or to which such Person or
any of its property is subject. 

        "Software"
means all "software" as such term is defined in the Code, now owned or hereafter acquired by any Person, including all computer programs and all supporting information
provided in connection with a transaction related to any program. 

        "Stock"
means all certificated and uncertificated shares, options, warrants, membership interests, general or limited partnership interests, participation or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange
Act of 1934). 

        "Supporting
Obligations" means all "supporting; obligations" as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper,
Documents, General Intangibles, Instruments, or Investment Property. 

        "Termination
Date" means the date on which all Obligations under this Agreement are indefeasibly paid in full, in cash (other than amounts in respect of Credit Guarantees if any, then
outstanding. provided that Borrower shall have funded such amounts in cash in full into the Cash Collateral Account), and Borrower shall have no further right to obtain financial accommodations under
any Loan Document. 

        "Trademark
License" means rights under any written agreement now owned or hereafter acquired by any Person granting any right to use any Trademark or Trademark registration. 

17

 

        "Trademarks"
means all of the following now owned or hereafter adopted or acquired by any Person: (i) all trademarks, trade names, corporate names, business names, trade styles,
service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered
or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any State or Territory thereof; or any other country or any political subdivision thereof (ii) all reissues, extensions
or renewals thereof; and (iii) all goodwill associated with or symbolized by any of the foregoing. 

        "Withdrawal
Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA. 

        Any
accounting term used in this Agreement or the other Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance
with GAAP. All other undefined terms contained in this Agreement or the other Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code. The words
"herein," "hereof and "hereunder" or other words of similar import refer to this Agreement as a whole, including the exhibits and schedules thereto, as the same may from time to time be amended,
modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement. 

        For
purposes of this Agreement and the other Loan Documents, the following additional rules of construction shall apply, unless specifically indicated to the contrary:
(a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural; (b) the term "or" is not exclusive;
(c) the term "including" (or any form thereof) shall not be limiting or exclusive; (d) all references to statutes and related regulations shall include any amendments of same and any
successor statutes and regulations; and (e) all references to any instruments or agreements, including references to any of the Loan Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals thereof. 

18

May 30, 2003 

Mr. Neil
Leibman

Gexa Energy Corp.

24 Greenway Plaza, Ste 1826

Houston, Texas 77046 

	Re:
	Monthly
Purchase Limit 

Dear
Neil: 

This
letter serves as written notice of an increase in the Monthly Purchase Limit as contemplated in section 3.8 of our Energy Marketing Support Agreement dated April 8, 2003. Effective
today, May 30, 2003, the new Monthly Purchase Limit is [*]. 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

In
addition, and in accordance with section 3.8 of our Energy Marketing Support Agreement, please find enclosed a revised Exhibit 5 to said agreement. This exhibit supercedes and
replaces the previous exhibit. 

If
you have any questions, please contact me. 

Sincerely. 

/s/
Keith Ford 

enclosure 

 
 

Exhibit 5
  Monthly Purchase Limit    
    

As
of the Effective Date, [*] 

As
of May 30, 2003, [*] 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

October 13, 2003 

Mr. Neil
Liebman

Gexa Corporation

24 Greenway Plaza, Suite 1826

Houston, Taws 77046 

RE:    Energy
Marketing Support Agreement dated April 8, 2003 (the "Support Agreement") between TXU Portfolio Management Company LP ("TXUPM") and Gexa Corporation, d/b/a Gexa Energy
Corporation ("Gexa") 

Dear
Neil: 

The
purpose of this letter agreement is to clarify the mutual understanding of Gexa and TXUPM regarding the interpretation of Section 4.3 is the Support Agreement regarding Gexa's obligation as
of the date hereof to balance its sales obligations with its purchase obligations. For purposes of said Section 4.3, Gexa and TXUPM agree that with respect to residential customer contracts and
other contracts that are subject to consumer protection rules such that this term is of a month to month nature, that such contracts shall have an assumed term of six months. Except for the use of the
assumed term stated in the prior sentence, Gexa shall ensure that its purchases and sales quantities are in balance using commercially reasonable estimates and business practices. 

If
at any time TXUPM determines in its sole discretion that then current market conditions or other factors indicate the interpretation set forth above is no longer appropriate or satisfactory, TXUPM
may terminate the understanding set forth in this letter upon written notice to Gexa, provided that any quantities theretofore contracted for by Gexa in accordance with this letter agreement shall not
be deemed to be a violation of Section 4.3 of the Support Agreement. Upon termination of this letter by TXUPM, Gexa and TXUPM agree to reasonably negotiate to determine another mutually
agreeable interpretation of Section 4.3. 

In
the event of a conflict between the Support Agreement and this letter, this letter shall control. Except as may be modified herein, the Support Agreement shall continue in full force and effect in
accordance with its terms. If you are in agreement with the foregoing, please so signify by signing and returning one copy of this letter to the undersigned. 

	

Sincerely,

/s/  JEFF SHORTER      	
 	

 	

Agreed,

/s/  NEIL LEIBMAN      

  

 
 

AMENDMENT NO. 1 TO ENERGY MARKETING SUPPORT AGREEMENT    
    

        THIS AGREEMENT (the "Amendment") is made and entered into as of this 13th day of October, 2003, by and between TXU Portfolio Management Company LP,
a Texas Limited partnership ("TXUPM"), and Gexa Corporation, D/B/A Gexa Energy Corporation, a Texas Corporation ("Gexa"). Each of TXUPM and Gexa may be referred to herein individually as a "Party" or
collectively as "Parties". 

        WHEREAS,
the Parties hereto have heretofore entered into that certain Energy Marketing Support Agreement dated April 8, 2003, under the terms of which the TXUPM will purchase and
resell to Gexa electric capacity and energy and will provide Gexa with various services as set forth herein to support Gexa's growth strategy; and 

        WHEREAS,
the Parties desire to amend the Support Agreement as hereinafter set forth; 

        NOW,
THEREFORE, for and in consideration of the mutual covenants set forth herein and other good and valuable consideration, the Parties do hereby agree as follows: 

        1.     Subparagraph
(b) of Section 7.1 of the Support Agreement is deleted in its entirety and the following is substituted therefor: 

        (b)   TXUPM
shall calculate the Monthly Credit Fee applicable to Baseline Purchases pursuant to the following schedule: 

        [*]

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

        2.     Section 5.5(b)
is deleted from the Support Agreement in its entirety, and the following is substituted therefor: 

        (b)   TXUPM
shall invoice Gexa for all fees, costs, charges or payments due to TXUPM hereunder each month during the term of this Agreement. TXUPM shall be paid such fees,
costs, charges or payments by disbursements to TXUPM from the Lockbox Account on (i) the fourth (4th) day of November 2003 for deliveries made during September 2003;
(ii) the third (3rd) day of December 2003 for deliveries made during the month of October, 2003; (iii) the second (2nd) day of January 2004 for
deliveries made during November 2003; (iv) the second (2nd) day of February 2004 for deliveries made during December 2003, and (v) the last Business
Day of each month following the month of delivery thereafter. If the Lockbox Account contains insufficient funds to completely satisfy any such TXUPM fee invoice, in addition to disbursement of any
and all funds in the Lockbox Account to TXUPM, Gexa shall immediately pay TXUPM any remaining deficiency by wire transfer. Gexa's failure to adhere to such obligations shall be deemed to be an Event
of Default. 

        3.     Exhibit 5
to the Support Agreement is deleted in its entirety and the Exhibit 5 attached to this Amendment No. 1 is substituted therefor. 

1

 

        4.     The
following Section 3.9 is added to Article 3 of the Support Agreement: 

        3.9   Notwithstanding
anything to the contrary herein, Gexa may create separate legal entities which are affiliates or subsidiaries of Gexa to make purchases and sales of
electric power from or to third parties, which purchases and sales will not subject to the terms of this Support Agreement or the Master Power Purchase Agreement, under the following conditions: 

        3.9.1 In
the event TXUPM declines to allow an increase in the Monthly Purchase Limit set forth in Exhibit 5 hereof above the applicable limit set forth therein from
time to time (assuming Gexa has provided all additional Independent Amounts as required to increase the Monthly Purchase Limit to the maximum permitted under Exhibit 5), and Gexa is purchasing
the Monthly Purchase Limit in accordance with the terms of this Agreement and the Master Power Purchase and Supply Agreement, Gexa may make additional purchases and associated retail sales within
Texas in excess of the applicable Monthly Purchase Limit through another Retail Electric Provider which is an affiliate or subsidiary of Gexa (the "New REP"). Any contracts entered into by such New
REP while Gexa is purchasing the Monthly Purchase Limit from TXUPM shall continue to effect, and purchases shall continue to be made by the New REP in accordance with the terms thereof, even in the
event the Monthly Purchase Limit is thereafter increased or Gexa's purchases under the Master Power Purchase and Sale Agreement fall below the Monthly Purchase Limit in Exhibit 5. 

        3.9.2. In
the event Gexa desires to make sales of electric power to markets outside the State of Texas ("Non-Texas Transactions"), Gexa may make such sales and
associated purchases to and from any third parties through another entity (the "Non-Texas Entity") which is an affiliate or subsidiary of Gexa. Non-Texas Transactions shall not
be subject in any manner to the terms of this Agreement or the Master Power Purchase and Sale Agreement without any additional written agreement relating thereto between Gexa and TXUPM. 

        3.9.3 Gexa
shall ensure that no party to any contract which is entered into by a New REP as contemplated in Section 3.9.1 or with respect to Non-Texas
Transactions as contemplated in Section 3.9.2 has any recourse or claim against or security interest in Gexa Corporation or any of Gexa Corporation's assets with respect to any matter arising
from or relating in any manner to any such contract. 

        3.9.4 It
is recognized that Gexa has granted TXUPM a security interest in and Lien upon all of its property and assets to secure its obligations under this Agreement and
under the Master Power Purchase and Sale Agreement (the "Security Interest"). Upon request of Gexa, TXUPM shall release any New REP, all contracts and other interests of any New REP, any
Non-Texas Entity and any Non-Texas Transactions from the Security Interest. Gexa shall reimburse TXUPM for any direct costs (including, without limitation, attorneys fees and
recording fees) incurred in releasing such assets from the Security Interest. 

        5.     The
following Section 16.14 is added to the Support Agreement: 

        16.14 It
is recognized that Gexa is serving as its own Qualified Scheduling Entity ("QSE") for all quantities of power delivered to Gexa under the Master Power Purchase and
Sale Agreement. If at any time (i) there exists an Event of Default or a Potential Event of Default, however designated, with respect to Gexa under either the Master Power Purchase and Sale
Agreement or this Energy Marketing Support Agreement, or (ii) ERCOT determines that Gexa is not creditworthy, Gexa shall, upon written notice from TXUPM, appoint TXUPM as Gexa's QSE for all
quantities of power delivered under the Master Power Purchase and Sale Agreement, and shall fully cooperate with TXUPM in implementing such change at the earliest practicable date. 

        5.     This
Amendment shall be effective as of the date first hereinabove written, and shall be binding upon the Parties hereto and upon their respective successors and assigns. 

        6.     Except
as herein changed and amended, the Support Agreement shall continue and remain in full force and effect in accordance with its terms. 

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

	TXU Portfolio Management Company, LP

/s/  JEFF SHORTER      	 	Gexa Corporation

/s/  NEIL LEIBMAN      

2

  

 
 

Exhibit 5
  Monthly Purchase Limit    
    

The
Monthly Purchase Limit (as defined in Section 3.8 of this Agreement) for any month shall be the quantity set forth opposite the lowest value of a Letter of Credit provided and maintained by
Gexa in favor of TXUPM during such month as an Independent Amount under the Master Power Purchase and Sale Agreement. 

[*]

Gexa
may, so long as there is no Event of Default or Potential Event of Default, however designated, under either this Agreement or the Master Power Purchase and Sale Agreement, increase the Monthly
Purchase Limit above [*] by providing to TXUPM in advance additional Performance Assurance, as an increase in the Independent Amount under the Master Power Purchase and Sale
Agreement, in the form of a Letter of Credit in the amount of [*] for each incremental increase of [*] or any portion thereof, provided, however, that
the Monthly Purchase Limit shall not be increased above [*] without the prior written consent of TXUPM. Nothing herein shall be construed to affect TXUPM's contained right to
adjust the Monthly Purchase Limit herein as provided in Section 3.8 of this Agreement. 

	[*]
	This
information has been omitted in reliance on Rule 24B-2 under the Securities Exchange Act of 1934, and has been filed separately with the Securities
and Exchange Commission. 

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SECOND AMENDED AND RESTATED
  LIMITED LIABILITY COMPANY AGREEMENT    
    
    OF    
    
    REF-FUEL HOLDINGS LLC    
    
    (f/k/a DUKE/UAE REF-FUEL LLC)    
    
    dated as of
April 30, 2004    
    
    between    
    
    MSW ENERGY HOLDINGS II LLC,    
    
    UAE REF-FUEL II CORP.,    
    
    MSW ENERGY HUDSON LLC    
    
    and    
    
    DUKE ENERGY ERIE LLC    

   TABLE OF CONTENTS  

	 
	 	 
	 	PAGE

	ARTICLE I	 	DEFINITIONS	 	1
	 	Section 1.1	 	Defined Terms	 	1
	ARTICLE II	 	ORGANIZATIONAL MATTERS	 	1
	 	Section 2.1	 	Continuation of the Company	 	1
	 	Section 2.2	 	Name	 	2
	 	Section 2.3	 	Principal Place of Business	 	2
	 	Section 2.4	 	Registered Office and Registered Agent	 	2
	 	Section 2.5	 	Term	 	2
	 	Section 2.6	 	Tax Status	 	2
	ARTICLE III	 	BUSINESS OF THE COMPANY	 	2
	 	Section 3.1	 	Business	 	2
	ARTICLE IV	 	NAMES AND ADDRESSES OF MEMBERS	 	2
	 	Section 4.1	 	Names and Addresses of Members	 	2
	ARTICLE V	 	CONTRIBUTIONS TO THE COMPANY	 	3
	 	Section 5.1	 	Capital Contributions	 	3
	 	Section 5.2	 	Intentionally Omitted	 	3
	 	Section 5.3	 	No Withdrawal of Capital	 	3
	 	Section 5.4	 	Required Capital Contributions	 	3
	 	Section 5.5	 	Intentionally Omitted	 	3
	 	Section 5.6	 	Maintenance of Capital Accounts	 	3
	 	Section 5.7	 	Certification	 	4
	ARTICLE VI	 	DISTRIBUTIONS	 	4
	 	Section 6.1	 	Distributions	 	4
	 	Section 6.2	 	Dissolution	 	4
	 	Section 6.3	 	Limitation Upon Distributions	 	4
	 	Section 6.4	 	Amounts Withheld	 	4
	 	Section 6.5	 	"Flip-Up Loans" and Refinancings	 	5
	ARTICLE VII	 	ALLOCATIONS	 	5
	 	Section 7.1	 	Profits and Losses	 	5
	 	Section 7.2	 	Tax Allocations	 	7
	 	Section 7.3	 	Code Section 754 Election	 	8
	ARTICLE VIII	 	MANAGEMENT OF THE COMPANY	 	8
	 	Section 8.1	 	Board of Directors	 	8
	 	Section 8.2	 	Services	 	8
	 	Section 8.3	 	Liability for Certain Acts	 	9
	 	Section 8.4	 	No Exclusive Duty to Company	 	9
	 	Section 8.5	 	Indemnity of Members, Employees and Other Agents	 	9
	 	Section 8.6	 	Compensation	 	10
	 	Section 8.7	 	Intentionally Omitted	 	10
	ARTICLE IX	 	RIGHTS AND OBLIGATIONS OF MEMBERS	 	10
	 	Section 9.1	 	Limitation on Liability and Authority	 	10
	 	Section 9.2	 	No Liability for Company Obligations	 	10
	 	Section 9.3	 	Priority and Return of Capital	 	10
	 	Section 9.4	 	Waiver of Conflicts	 	10
	 	Section 9.5	 	Regulatory Matters	 	10
	ARTICLE X	 	ACCOUNTING AND TAX MATTERS	 	11
	 	Section 10.1	 	Fiscal Year	 	11
	 	Section 10.2	 	Books and Records; Audit	 	11
	 	 	 	 	 

i

 

	 	Section 10.3	 	Reports	 	12
	 	Section 10.4	 	Tax Returns	 	12
	 	Section 10.5	 	Tax Matters Partner	 	12
	 	Section 10.6	 	Bank Accounts	 	12
	ARTICLE XI	 	TRANSFERS; ADJUSTMENT OF INITIAL OWNERSHIP PERCENTAGES	 	12
	 	Section 11.1	 	Restrictions on Transfers	 	12
	 	Section 11.2	 	Intentionally Omitted	 	13
	 	Section 11.3	 	Intentionally Omitted	 	13
	 	Section 11.4	 	Substitute Member	 	13
	ARTICLE XII	 	DISSOLUTION AND TERMINATION	 	13
	 	Section 12.1	 	Dissolution	 	13
	 	Section 12.2	 	Effect of Dissolution	 	13
	 	Section 12.3	 	Winding Up, Liquidation and Distribution of Assets	 	14
	 	Section 12.4	 	Certificate of Cancellation	 	14
	 	Section 12.5	 	Return of Contribution; Nonrecourse Against Other Members	 	14
	ARTICLE XIII	 	REPRESENTATIONS AND WARRANTIES	 	15
	 	Section 13.1	 	Representations and Warranties	 	15
	ARTICLE XIV	 	INTENTIONALLY OMITTED	 	15
	ARTICLE XV	 	MISCELLANEOUS PROVISIONS	 	15
	 	Section 15.1	 	Notices	 	15
	 	Section 15.2	 	Jurisdiction; Venue	 	16
	 	Section 15.3	 	Entire Agreement	 	16
	 	Section 15.4	 	Modifications and Waivers	 	16
	 	Section 15.5	 	Separable Provisions	 	16
	 	Section 15.6	 	Counterparts	 	16
	 	Section 15.7	 	Governing Law	 	16
	 	Section 15.8	 	Further Assurances	 	16
	 	Section 15.9	 	Successors and Assigns	 	16
	 	Section 15.10	 	Third-Party Beneficiaries	 	16
	 	Section 15.11	 	No Partnership Intended for Nontax Purposes; Membership Interests not Securities	 	16
	 	Section 15.12	 	Confidentiality and Publicity	 	17
	EXHIBIT A	 	Capital Contributions	 	 
	EXHIBIT B	 	Ownership Percentages	 	 
	EXHIBIT C	 	Form of Certificate of Membership Interest in Ref-Fuel Holdings LLC	 	 
	APPENDIX A	 	Definitions	 	 

ii

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT  

 OF  

 REF-FUEL HOLDINGS LLC  

 (f/k/a DUKE/UAE REF-FUEL LLC)  

        THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (THIS "AGREEMENT") OF REF-FUEL HOLDINGS LLC (f/k/a
DUKE/UAE REF-FUEL LLC), a Delaware limited liability company (the "Company"), is made and entered into as of April 30, 2004, by and among MSW Energy Holdings
II LLC, a Delaware limited liability company ("MSW Holdings II"), UAE Ref-Fuel II Corp., a Delaware corporation ("UAE RF II"), MSW Energy Hudson LLC (f/k/a Duke Energy Hudson LLC), a
Delaware limited liability company ("MSW Hudson"), and Duke Energy Erie LLC, a Delaware limited liability company ("Duke Erie"). 

W I T N E S S E T H:  

        WHEREAS, the Company was formed pursuant to a Certificate of Formation filed with the Secretary of State of Delaware on September 23, 1997, in accordance
with the provisions of the Delaware Limited Liability Company Act; and 

        WHEREAS,
the Company filed a Certificate of Amendment to Certificate of Formation with the Secretary of State of Delaware on July, 28, 2003, in accordance with the provisions of the
Delaware Limited Liability Company Act, whereby the Company changed its name to "Ref-Fuel Holdings LLC"; and 

        WHEREAS,
the Company is governed by that certain Amended and Restated Limited Liability Company Agreement of Ref-Fuel Holdings LLC (f/k/a Duke/UAE Ref-Fuel LLC),
dated as of April 30, 2001, as amended by the Amendment to Amended and Restated Limited Liability Company Agreement dated as of April 30, 2001, as further amended by the Second Amendment
to LLC Agreement dated as of March 19, 2003, and as further amended by the
Third Amendment to LLC Agreement dated as of June 30, 2003 (as so amended, the "Amended Agreement"); and 

        WHEREAS,
the parties desire to amend and restate the Amended Agreement to set forth their agreements regarding the manner in which the Company shall be governed and operated. 

        NOW,
THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows: 

ARTICLE I  

 DEFINITIONS  

        Section 1.1    Defined Terms.    

        (a)   For
purposes hereof, capitalized terms used herein shall have the meanings assigned to such terms in Appendix A. 

        (b)   The
rules of interpretation set forth in Appendix A shall apply to this Agreement and the Exhibits hereto. 

ARTICLE II  

 ORGANIZATIONAL MATTERS  

        Section 2.1    Continuation of the Company.    The Members hereby continue the Company as a limited liability
company under and pursuant to the provisions of the Act and agree that the rights, 

 

duties
and liabilities of the Members shall be as provided in the Act, except as otherwise provided herein. This amendment and restatement of this Agreement shall become binding and effective as an
agreement among the Members as of the date of this Agreement (the "Effective Date"). 

        Section 2.2    Name.    The name of the Company is Ref-Fuel Holdings LLC. 

        Section 2.3    Principal Place of Business.    The Company may locate its principal place of business in
Montvale, New Jersey, or any other place or places that the Board of Directors may from time to time deem advisable. 

        Section 2.4    Registered Office and Registered Agent.    The Company's initial registered office shall be at
the office of its registered agent at Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805. The name of its initial registered agent at such address is Corporation Service
Company. The registered office and registered agent may be changed by the Board of Directors from time to time by filing the address of the new registered office and/or the name of the new registered
agent with the Secretary of State of Delaware pursuant to the Act and the applicable rules promulgated thereunder. 

        Section 2.5    Term.    The term of the Company commenced on the date its Certificate of Formation was filed
with the Secretary of State of Delaware and shall continue until the filing of a Certificate of Cancellation with the Secretary of State of Delaware as provided in  Section 12.4.

        Section 2.6    Tax Status.    The Members intend that the Company shall be treated as a partnership for Federal
and state income tax purposes, rather than an association taxable as a corporation, and neither the Members nor the Company shall make any election pursuant to Regulations
Section 30l.7701-3(c) or any similar state statute, regulation, rule or policy to be treated as other than a partnership for Federal and state income tax purposes. 

ARTICLE III  

 BUSINESS OF THE COMPANY  

        Section 3.1    Business.    The business of the Company shall be (a) to own the Project Partnerships
(directly or through its Affiliates), (b) directly or through its Affiliates, to maintain, finance, and otherwise operate and deal with the Project Partnerships, (c) directly or through
its Affiliates, to acquire, construct, own, maintain, finance and otherwise operate other facilities in the United States that utilize Municipal Solid Waste for the production and sale of electricity
and ancillary services (together with the facilities currently held by the Project Partnerships, the "Facilities"), and (d) directly or through its Affiliates, to sell, exchange, transfer or
otherwise dispose of any part of the Project Partnerships and the Facilities. The Company's business objective shall be its long-term profitability and growth, as distinct from the related
businesses of its Members or their Affiliates. 

ARTICLE IV  

 NAMES AND ADDRESSES OF MEMBERS  

        Section 4.1    Names and Addresses of Members.    The names and addresses of the Members are set forth on  Exhibit A attached hereto
and in Section 15.1 hereof, as such exhibit and addresses may be
amended or changed from time to time. 

2

 
ARTICLE V  

 CONTRIBUTIONS TO THE COMPANY  

        Section 5.1    Capital Contributions.    The Capital Contributions of the Members are set forth opposite their
respective names on Exhibit A attached hereto, and the Ownership Percentages of the Members are set forth opposite their respective names on  Exhibit B attached hereto. 

        Section 5.2    Intentionally Omitted    

        Section 5.3    No Withdrawal of Capital.    Except as specifically provided in this Agreement, no Member shall
have the right to withdraw all or any part of its Capital Contributions from the Company, nor shall any Member have any right to demand and receive property other than cash as a return of its Capital
Contributions. Except as specifically provided in this Agreement, no Member shall have the right to receive interest on its Capital Contributions or its Capital Account. 

        Section 5.4    Required Capital Contributions.    No Member shall have any obligation to make any Capital
Contributions to the Company other than as expressly set forth herein. In particular, no Member shall have any obligation to restore (to the Company or to any creditor of the Company) any deficit
balance in its Capital Account at any time, whether on liquidation or otherwise, and such deficit balance shall not be considered a debt owed by such Member to the Company or to any other Person for
any purpose whatsoever. 

        Section 5.5    Intentionally Omitted.    

        Section 5.6    Maintenance of Capital Accounts.    

        (a)   A
Capital Account shall be established and maintained for each Member. 

        (b)   Each
Member's Capital Account (i) shall be increased by (A) the amount of money contributed by such Member to the Company, (B) the Fair Market Value
of property contributed by such Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of
the Code) and (C) allocations to such Member of Company income and gain (or items thereof), including income and gain exempt from tax and income and gain described in
Section 1.704-l(b)(2)(iv)(g) of the Regulations, but excluding income and gain described in Section 1.704-l(b)(4)(i) of the Regulations or allocated to a
Member pursuant to Section 704(c) of the Code, and (ii) shall be decreased by (A) the amount of money distributed to such Member by the Company (B) the Fair Market Value of
property distributed to such Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the
Code), after adjusting each Member's Capital Account by such Member's share of the unrealized income, gain, loss and deduction inherent in such property and not previously reflected in such Capital
Account, as if the property had been sold for its then Fair Market Value on the date of distribution, (C) allocations to such Member of expenditures of the Company described in
Section 705(a)(2)(B) of the Code and (D) allocations of Company loss and deduction (or items thereof), including loss and deduction described in
Section 1.704-l(b)(2)(iv)(g) of the Regulations, but excluding items described in clause (ii)(C) of this Section 5.6(b)
and loss or deduction described in Section l.704-l(b)(4)(i) or Section l.704-l(b)(4)(iii) of the Regulations. The Members' Capital Accounts also
shall be maintained and adjusted as permitted by the provisions of Section l.704-l(b)(2)(iv)(f) of the Regulations and as required by the other provisions of
Section l.704-l(b)(2)(iv) and Section 1.704-l(b)(4) of the Regulations, including adjustments to reflect the allocations to the Members of depreciation,
depletion, amortization and gain or loss as computed for book purposes with respect to property contributed to the Company, rather than the allocation of the corresponding items as computed for tax
purposes, as required by Section 1.704-l(b)(2)(iv)(g) of the Regulations. Upon the transfer of all or part of an interest in the
Company, the Capital Account of the transferor that is attributable to the transferred 

3

 

interest
in the Company shall carry over to the transferee Member in accordance with the provisions of Section 1.704-l(b)(2)(iv)(l) of the Regulations, except as otherwise required
to satisfy Section 1.704-1(b) of the Regulations in connection with a termination of the Company under Section 708(b)(l)(B) of the Code. 

        (c)   In
the event the Board of Directors shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including,
without limitation, debits or credits relating to liabilities that are secured by contributed or distributed property or that are assumed by the Company or the Members) are computed in order to comply
with the Code and the Regulations, the Board of Directors may make such modification; provided, that, in the good faith judgment of the Board of
Directors, it is not likely to have a material adverse effect on the amounts distributable or the timing of distributions to any Member. The Board of Directors also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between (A) the Capital Accounts of the Members and (B) the amount of Company capital reflected on the Company's
balance sheet, as computed for book purposes, in accordance with Section l.704-l(b)(2)(iv)(g) of the Regulations, and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with Section 1.704-l(b) of the Regulations. 

        Section 5.7    Certification.    The Company hereby irrevocably elects that all Membership Interests shall be
securities governed by Article 8 of the U.C.C. and shall be evidenced by certificates, a form of which is attached hereto as Exhibit C,
each of which shall bear the following legend: "This Certificate of Membership Interest evidences a membership interest in Ref-Fuel Holdings LLC, and shall be a security for purposes of
Article 8 of the Uniform Commercial Code as in effect in the State of Delaware." Each Certificate for Membership Interests shall be signed by an Authorized Signatory and shall be in such form
as the Board of Directors determines. Such determination shall be conclusively evidenced by the signature of an Authorized Signatory on such Certificate. The certificated interests shall be in
registered form within the meaning of Article 8 of the U.C.C. 

ARTICLE VI  

 DISTRIBUTIONS  

        Section 6.1    Distributions.    Subject to any contractual restrictions binding upon the Company, its
Subsidiaries and the Project Partnerships, which restrictions shall not be amended or modified in any manner to be more restrictive upon the Company, its Subsidiaries or any of the Project
Partnerships (and new restrictions shall not be agreed to) without the vote of the Board of Directors, Distributable Cash shall be distributed to the Members in the following order of priority, and
the Company shall, and shall cause each of its Subsidiaries to, make distributions, on a monthly basis to the extent practicable, but in no event less frequently than quarterly, of all Distributable
Cash, to the Members in accordance with their respective Ownership Percentages; provided, however, that
all principal, interest and any other amounts outstanding under any Capital Contribution Loan (whether or not due) shall be paid out of Distributable Cash prior to the making of any distributions
pursuant to this Section 6.1.

        Section 6.2    Dissolution.    Notwithstanding the provisions of  Section 6.1, upon dissolution of the Company as provided in
Section 12.1, all
distributions occurring after such dissolution shall be made in accordance with Section 12.3.

        Section 6.3    Limitation Upon Distributions.    No distributions shall be made to any Member if prohibited by
the Act or if such Member shall at the time of such distribution be in material default of its obligations under this Agreement. 

        Section 6.4    Amounts Withheld.    All amounts withheld pursuant to the Code or any provision of any state,
local or other tax law with respect to any payment or distribution to the Members shall be 

4

 

treated
as amounts distributed to the Members pursuant to this Article VI for all purposes of this Agreement. 

        Section 6.5    "Flip-Up Loans" and Refinancings.    No Project Partnership shall issue or incur any
indebtedness for borrowed money, nor refinance or extend the maturity of any existing indebtedness for borrowed money, without the approval of the Board of Directors. 

ARTICLE VII  

 ALLOCATIONS  

        Section 7.1    Profits and Losses.    

        (a)    Profits.    Subject to Section 7.1(c), any Profits of
the Company for any Fiscal Year or any other period shall be allocated among the Members as follows: 

        (1)   first, to the Members pro rata until the cumulative amount of Profits
allocated to each Member pursuant to this Section 7.1(a)(1) equals the cumulative amount of Losses allocated to each Member pursuant to  Section 7.1(b), with such Losses to be offset in reverse chronological order (i.e., Losses allocated pursuant to Section
7.1(b)(3) shall first be offset, Losses allocated pursuant to Section 7.1(b)(2) shall next be offset, and Losses
allocated pursuant to Section 7.1(b)(1) shall be offset last); and 

        (2)   second, to the Members in accordance with their respective Ownership Percentages. 

        (b)    Losses.    Subject to Section 7.1(c), any Losses of the
Company for any Fiscal Year or other period shall be allocated among the Members as follows: 

        (1)   first, to the Members pro rata based on, and to the extent of, their
respective Common Equity; and 

        (2)   second, to the Members in accordance with their respective Ownership Percentages. 

        (c)    Special Rules.    Notwithstanding the general allocation rules set forth in Sections
7.1(a) and (b), the following special allocation rules shall apply under the circumstances described: 

        (i)    Limitation on Loss Allocations.    The Losses allocated to any Member pursuant to  Section 7.1(b) with respect to any
Fiscal Year shall not exceed the maximum amount of Losses that can be so allocated without causing such Member
to have an Adjusted Capital Account Deficit at the end of such Fiscal Year if any other Member has a positive Capital Account balance. All Losses in excess of the limitation set forth in this  Section 7.1(c)(i)
 shall be allocated (1) first, to those Members who will not be subject to this limitation, in the ratio that their
Ownership Percentages bear to each other, and (2) second, any remaining amount to the Members in the manner required by the Code and the Regulations. 

        (ii)    Qualified Income Offset.    If in any Fiscal Year a Member unexpectedly receives an adjustment, allocation or
distribution described in Regulations Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6), and such adjustment, allocation or distribution causes or increases an Adjusted Capital
Account Deficit for such Member, then, before any other allocations are made under this Agreement or otherwise, such Member shall be allocated items of income and gain (consisting of a  pro rata portion
of each item of Company income, including gross income and gain) in an amount and manner sufficient to eliminate such Adjusted Capital
Account Deficit as quickly as possible. 

        (iii)    Company Minimum Gain Chargeback.    If there is a net decrease in Company Minimum Gain during any Fiscal
Year, then, except as provided in Regulations Section 1.704-2(f)(2), (3) or (5), each Member shall be allocated items of income and gain for such Fiscal Year (and, if
necessary, for subsequent Fiscal Years) in proportion to, and to the extent of, such Member's share 

5

 

of
the net decrease in Company Minimum Gain during such Fiscal Year. To the extent that this Section 7.1(c)(iii) is inconsistent with Regulations
Section 1.704-2(f) or 1.704-2(k) or incomplete with respect to such Regulations, the Company Minimum Gain Chargeback provided for herein shall be applied and interpreted
in accordance with such Regulations. 

        (iv)    Member Nonrecourse Debt Minimum Gain Chargeback.    If there is a net decrease in Member Nonrecourse Debt
Minimum Gain during any Fiscal Year, then, except as provided in Regulations Section l.704-2(i)(4), each Member shall be allocated items of income and gain for such Fiscal Year
(and, if necessary, for subsequent Fiscal Years) in proportion to, and to the extent of, such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain during such Fiscal Year. For purposes of determining whether the Company has a net decrease in Member Nonrecourse Debt
Minimum Gain, all increases and decreases, if any, of Member Nonrecourse Debt Minimum Gain allocated to the Company with respect to its interests in lower-tier partnerships (such as the
Project Partnerships) in accordance with Regulations Section 1.704-2(k) shall be aggregated and netted with all such increases and decreases at the Company level. To the extent that
this Section 7.1(c)(iv) is inconsistent with Regulations Section 1.704-2(i)(4) or 1.704-2(k) or incomplete with
respect to such Regulations, the Member Nonrecourse Debt Minimum Gain chargeback provided for herein shall be applied and interpreted in accordance with such Regulations. 

        (v)    Member Nonrecourse Deductions.    Member Nonrecourse Deductions shall be allocated among the Members in
accordance with the ratios in which the Members share the economic risk of loss for the Member Nonrecourse Debt that gave rise to those deductions. This allocation is intended to comply with the
requirements of Regulations Section 1.704-2(i) and shall be interpreted and applied consistent therewith. 

        (vi)    Company Nonrecourse Deductions.    Nonrecourse deductions that are not related to Member Nonrecourse Debt
shall be allocated to the Members in proportion to their respective Ownership Percentages. 

        (vii)    Curative Allocations.    Any allocations of items of income, gain, or loss pursuant to  Sections 7.1(c)(i)-(vi) hereof shall
be taken into account in computing subsequent allocations pursuant to this  Article VII, so that the net amount of any items so allocated and the income, losses, and other items allocated to each
Member pursuant to this  Article Vll shall, to the extent possible, be equal to the net amount that would have been allocated to each Member had no allocations ever been made
pursuant to Sections 7.1(c)(i)-(vi). 

        (viii)    Change in Regulations.    If the Regulations incorporating the allocations set forth in  Sections 7.1(c)(i)-(vii) (the
"Regulatory Allocations") are hereafter changed or if new Regulations are hereafter adopted, and such changed or new
Regulations, in the opinion of tax counsel for the Company, make it necessary to revise the Regulatory Allocations or provide further special allocation rules in order to avoid a significant risk that
a material portion of any allocation set forth in this Article VII would not be respected for Federal income tax purposes, the Members shall make
such reasonable amendments to this Agreement as, in the opinion of such counsel, are necessary or desirable, taking into account the interests of the Members as a whole and all other relevant factors,
to avoid or reduce significantly such risk to the extent possible without materially changing the amounts allocable and distributable to any Member pursuant to this Agreement. 

        (ix)    Change in Members' Interests.    In the event of a transfer of a Membership Interest or a change in a Member's
Ownership Percentage during any Fiscal Year, allocations among the Members shall be made in accordance with their Ownership Percentages from time to time during such Fiscal Year in accordance with
Code Section 706, using the methodology determined by the Board of Directors, except that Depreciation shall be deemed to accrue ratably on a daily basis 

6

 

over
the entire Fiscal Year during which the corresponding asset is owned by the Company if such asset is placed in service prior to or during the Fiscal Year. 

         (x)  Notwithstanding
anything in this Agreement to the contrary, solely for purposes of computing the Profits and Losses allocable to MSW Holdings II and UAE RF II (but not
for purposes of computing any Profits or Losses allocable to MSW Hudson or Duke Erie), the Profits and Losses allocable to MSW Holdings II and UAE RF II shall be computed as if the Book Value of all
Company assets had been adjusted as of June 30, 2003 to equal their respective fair market values in accordance with clause (ii) of the definition of Book Value herein (the "Hypothetical
Revaluation"); any items of income, gain, loss, expense, or deduction that would have been allocable to either MSW Holdings II or UAE RF II but that have not been allocated to either MSW Holdings II
or UAE RF II by reason of the Hypothetical Revaluation shall be specially allocated 99.8% to MSW Holdings II and 0.2% to UAE RF II. 

        (d)    Optional Capital Account Restoration Obligation.    Notwithstanding any other provision of this Agreement, if
an item of loss, deduction, income or gain would be allocated from or to a Member in a manner other than in accordance with the Member's Ownership Percentage as a result of such Member having an
Adjusted Capital Account Deficit, such Member shall be entitled, at its sole option, to elect to agree to unconditionally restore a deficit balance (or portion thereof) in its Capital Account by
providing written notice of such election to the Company and the other Members such that such Member shall not incur an Adjusted Capital Account Deficit;  provided, however, such Member may eliminate such deficit restoration obligation (in whole or in part)
if, after such elimination, such Member does not then have an Adjusted Capital Account Deficit by providing written notice thereof to the Company and the other Member. This section is intended to meet
the requirements of Regulations Section 1.704-1(b)(2) such that a Member shall not be denied an allocation of loss or deduction or be allocated income or gain as the result of an
Adjusted Capital Account Deficit. 

        (e)    Excess Nonrecourse Liabilities.    For purposes of calculating Members' shares of "excess nonrecourse
liabilities" of the Company (within the meaning of Regulations Section 1.752-3), the Members intend that they be considered as sharing profits of the Company in proportion to their
respective Ownership Percentages. 

        Section 7.2    Tax Allocations.    

        (a)    In General.    Except as set forth in Section 7.2(b), allocations for tax purposes of items of income,
gain, loss, deduction, and credits, shall be made in the same manner as the applicable allocation of Profit or Loss set forth in Section 7.1.
Allocations pursuant to this Section 7.2 are solely for purposes of Federal, state and local income taxes and shall not affect, or in any way be
taken into account in computing, any Member's Capital Account or share of Profits, Losses, other items, Distributable Cash or other distributions pursuant to any provision of this Agreement. 

        (b)    Special Rules.    

        (i)    Elimination of Book/Tax Disparities.    In determining a Member's allocable share of Company taxable income or
tax loss, the Member's allocable share of each item of income, gain, loss and deduction shall be properly adjusted to reflect the difference between such Member's share of the adjusted tax basis and
the Book Value of each of the Company assets used in determining such item. With respect to depreciation, for example, in determining the taxable income or tax loss allocable to a Member, Profits and
Losses allocable to that Member shall be adjusted by eliminating Depreciation allocable to that Member and substituting therefor tax depreciation, amortization or other cost recovery deduction
allocable to that Member determined by reference to that Member's share of the tax basis of Company assets. This provision is intended to comply with the requirements of Code Section 704(c) and
Regulations 

7

 

Section 1.704-l(b)(2)(iv)(f)(4)
and shall be interpreted in conformity therewith. Any elections or other decisions relating to such tax allocations shall be made by the Board of
Directors. 

        (ii)    Tax Credits.    Any tax credits shall be allocated among the Members in accordance with Regulations
Section l.704-l(b)(4)(ii), unless the applicable Code provision shall otherwise require. 

        (c)    Conformity of Reporting.    The Members are aware of the income tax consequences of the allocations made by
this Section 7.2 and hereby agree to be bound by the provisions of this Section 7.2 in
reporting their shares of Company profits, gains, income, losses, deductions, credits and other items for income tax purposes. 

        Section 7.3    Code Section 754 Election.    To the extent and at the times provided by law, the Board
of Directors, on behalf of the Company, may elect in a timely manner pursuant to Section 754 of the Code and pursuant to corresponding provisions of applicable state and local tax laws, to
adjust the tax bases of the assets of the Company pursuant to Sections 734 and 743 of the Code. 

ARTICLE VIII  

 MANAGEMENT OF THE COMPANY  

        Section 8.1    Board of Directors.    

        (a)   The
overall management and control of the Company shall be exercised by a board of directors elected by the Members ("Board of Directors"). The Board of Directors shall
be empowered to set policy for, and to make all decisions on behalf of the Company, subject to the limitations set forth in this Agreement. The Board of Directors shall appoint such officers as it
shall determine appropriate for the Company. Such officers shall hold office until death, resignation or removal, with removal at the pleasure of the Board of Directors. The Board of Directors may
delegate such of its authorities and responsibilities to such officers. 

        (b)   The
Board of Directors shall hold such meetings as may be called by any director upon 10 days' prior written notice for meetings in person, or upon
24 hours' prior written notice for special telephonic or televideo meetings. When feasible, the Chairman and Chief Executive Officer, if any, shall provide the representatives on the Board of
Directors with an agenda for each Board of Directors meeting reasonably in advance of such meeting. No director shall be entitled to compensation or reimbursement of expenses from the Company for
attendance at such meetings. Any meeting of the Board of Directors may be held by conference telephone call, televideo arrangement or through similar communications equipment. Participation in a
meeting via telephone or televideo shall constitute presence in person at such meeting. The Chairman and Chief Executive Officer, if any, shall keep and maintain minutes of each meeting of the Board
of Directors with the other books and records of the Company. 

        (c)   At
all meetings of the Board of Directors, a majority of the total number of directors constituting the entire Board of Directors shall constitute a quorum. If at any
meeting of the Board of Directors there be less than a quorum present, a majority of those present or any director solely present may adjourn the meeting without further notice. Unless the act of a
greater number is required by law or this Agreement, the act of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. 

        (d)   Any
action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if all representatives on the Board of Directors
consent thereto in writing. Such consents shall be filed with the minutes of the Board of Directors. 

        Section 8.2    Services.    Upon disclosure to the Company and the other Members, any Member or its Affiliates
may provide energy trading, engineering and other services to the Company or the Project 

8

 

Partnerships
at market prices and on market terms, in accordance with the general procedures for approval of contractual obligations of the Company or the applicable Project Partnership. 

        Section 8.3    Liability for Certain Acts.    Each Member shall act in good faith with respect to the Company
and with such care as an ordinary prudent person in a like position would use under similar circumstances. No Member has guaranteed nor shall it have any obligation with respect to the return of a
Member's Capital Contributions, and no Member has guaranteed profits from the operation of the Company. No Member shall be liable to the Company or to any other Member for any loss or damage sustained
by the Company or any Member, except for (i) any loss or damage resulting from intentional misconduct, gross negligence or a knowing violation of law by such Member or its officers, directors,
agents or Affiliates, or (ii) a transaction for which such Member, or its officers, directors, agents or Affiliates received a personal benefit in violation or breach of the provisions of this
Agreement. In no event shall any Member be liable to the Company or to any other Member for any indirect or consequential damages sustained by the Company or any other Member. Each Member shall be
entitled to rely on information, opinions, reports or statements, including, but not limited to, financial statements or other financial data prepared or presented in accordance with the provisions of
Section 18-406 of the Act. 

        Section 8.4    No Exclusive Duty to Company.    A Member shall not be required to tend to the business and
affairs of the Company as such Member's sole and exclusive function, and any Member may have other business interests and may engage in other activities in addition to those relating to the Company,
including those that may be in competition with the Company or any of its Members. Neither the Company nor any Member shall have any right, by virtue of this Agreement, to share or participate in such
other investments or activities of a Member or to the income or proceeds derived therefrom. A Member shall incur no liability to the Company or to any of the other Members as a result of engaging in
any other business or venture. 

        Section 8.5    Indemnity of Members, Employees and Other Agents.    

        (a)   To
the fullest extent permitted under the Act, the Company shall indemnify the Company's officers and employees, the representatives (including any alternates) on the
Board of Directors and the other Members (and the respective officers, directors, employees, agents, members and stockholders of each of the foregoing) (each of the foregoing, an "Indemnitee") in
connection with the management of the Company when the same shall be acting within the scope of their authority conferred by the provisions of this Agreement or pursuant to a duly authorized
delegation of authority from the Board of Directors; provided that no such indemnification shall be available in respect of (i) any loss or
damage to the extent that such loss or damage results from intentional misconduct, gross negligence or a knowing violation of law by the party seeking indemnification or its Affiliate or (ii) a
transaction for which the Person seeking indemnity hereunder or its Affiliate received a personal benefit in violation or breach of the provisions of this Agreement. 

        (b)   To
the extent that an Indemnitee is successful on the merits or otherwise in any Proceeding (as hereafter defined), such Indemnitee shall be indemnified by the Company
against all expenses actually and reasonably incurred by such Indemnitee or on such Indemnitee's behalf in connection therewith. If an Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all Claims, issues or matters in such Proceeding, the Company shall indemnify such Indemnitee against all expenses actually and
reasonably incurred by him or on his behalf in connection with each successfully resolved Claim, issue or matter. For purposes of this  Section 8.5(b) and without limitation, the termination of any
Claim, issue or matter in such a Proceeding by dismissal or withdrawal with or
without prejudice, shall be deemed to be a successful result as to such Claim, issue or matter. For purposes of this Section 8.5, "Proceeding"
includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing and any other proceeding (including any appeals from any of the foregoing) whether
civil, criminal, 

9

 

administrative
or investigative that arise out of or otherwise relate to this Agreement and the terms hereof. 

        (c)   The
Company shall advance all reasonable expenses incurred by or on behalf of an Indemnitee in connection with any Proceeding within 20 days after the receipt by
the Company of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or
statements shall reasonably evidence the expenses incurred by the Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of any Indemnitee to repay any expenses
advanced if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified against such expenses. 

        Section 8.6    Compensation.    No Member shall be entitled to compensation for actions taken on behalf of the
Company; however, Members shall be reimbursed for all reasonable and necessary expenses incurred on behalf of the Company if provided for in the operating budget of the Company. 

        Section 8.7    Intentionally Omitted.    

ARTICLE IX  

 RIGHTS AND OBLIGATIONS OF MEMBERS  

        Section 9.1    Limitation on Liability and Authority.    Each Member's liability shall be limited as set forth
in this Agreement, the Act and other applicable law. Each Member agrees that it will not exercise its authority under the Act to bind or commit the Company to agreements, transactions or other
arrangements, or hold itself out as an agent of the Company, unless such Member is acting expressly within the scope of its authority under this Agreement or an express duly authorized delegation of
authority by the Board of Directors. 

        Section 9.2    No Liability for Company Obligations.    No Member will have any liability for any debts or
losses of the Company except as provided by law relating to liability for wrongful distributions or pursuant to Section 7.1(d) relating to a
Member's Capital Account restoration option. 

        Section 9.3    Priority and Return of Capital.    Except as is expressly provided herein, no Member shall have
priority over any other Member, either as to the return of Capital Contributions or as to Profits, Losses, or distributions. 

        Section 9.4    Waiver of Conflicts.    To the fullest extent permitted by law, each Member hereby waives any
conflicts of interest of UAE and its Affiliates (including MSW Holdings II), of each other Member and its Affiliates, and of each of their respective members, shareholders, directors, officers and
employees (each, a "Related Party") arising out of or relating to any relationships between a Related Party and its Affiliates, currently existing or hereafter arising, including without limitation
the activities of any Related Party or Affiliates of any Related Party as a provider of credit support under the Equity Contribution Agreement. In each case, the Related Party shall have the same
rights and powers in its relevant capacity as would an unrelated third party and may exercise such rights and powers without regard to such other capacities and as though such Related Party were not a
party to this Agreement, all without liability for any duties owed in such other capacities or for any benefits derived by any other Related Person in such other capacities. 

        Section 9.5    Regulatory Matters.    

        (a)   None
of UAE Holdings, UAE, MSW Holdings II, UAE RF II, MSW Hudson, Duke Erie nor any other Member of the Company shall take any action, and each shall use commercially
reasonable efforts to prevent any third-party action within its reasonable control, if such action would result in an Adverse QF Event or an Adverse PUHCA Event. Each of UAE Holdings, UAE, MSW
Holdings II, UAE RF II, MSW Hudson, Duke Erie and each other Member of the Company hereby agrees to 

10

 

cooperate
with any affected Member, and to use all commercially reasonable efforts, to remedy any Adverse QF Event or Adverse PUHCA Event. Each of UAE Holdings, UAE, MSW Holdings II, UAE RF II, MSW
Hudson, Duke Erie and each other Member of the Company agrees to use commercially reasonable efforts not to acquire any interest in any electric utility or electric utility holding company that would
result in an Adverse QF Event. Subject to the requirements above, in connection with any Transfer, MSW Holdings II, UAE RF II, MSW Hudson, Duke Erie and their respective Subsidiaries, or any other
Member and any Subsidiary of such Member, as applicable, will request that the proposed assignee represent either (i) that to its knowledge it does not have any stockholders who are "public
utility companies" or "holding companies" within the meaning of PUHCA (and if such transferor is a publicly owned corporation or a subsidiary of a publicly owned corporation, it may rely on the fact
that publicly available 13(d) or 13(g) documents do not reveal ownership by "public utility companies" or "holding companies") or (ii) if it does know of such stockholders who are "public
utility companies" or "holding companies," the amount of such ownership by such stockholders in such assignee. Unless otherwise required by law, none of MSW Holdings II, UAE RF II, MSW Hudson, Duke
Erie or their respective Subsidiaries, or any other Member or any Subsidiary of such Member will consummate any Transfer if based on the information received by MSW Holdings II, UAE RF II, MSW Hudson,
Duke Erie or such other Member, set forth above, such Transfer would result in an Adverse QF Event or if MSW Holdings II, UAE RF II, MSW Hudson, Duke Erie or such other Member or one of their
respective Subsidiaries otherwise has knowledge that such Transfer would result in an Adverse QF Event. If any party breaches the covenants set forth in this  Section 9.5(a), then the other parties
shall be entitled to such relief at law or in equity as may be awarded by a court of competent
jurisdiction. 

        (b)   Each
of the Members agrees to cause the Project Partnerships to file an application for each of the waste-to-energy projects of the Project
Partnerships to be designated as an exempt wholesale generator under PUHCA and to use commercially reasonable efforts to secure such designation. 

ARTICLE X  

 ACCOUNTING AND TAX MATTERS  

        Section 10.1    Fiscal Year.    The Company's annual accounting period (the "Fiscal Year") shall be the
calendar year, unless otherwise approved by the Board of Directors or otherwise required by the Code. 

        Section 10.2    Books and Records; Audit.    

        (a)   The
Company shall maintain or cause to be maintained separate records and accounts. Such records and accounts shall show a true and accurate record of all operations,
costs and expenditures, charges made, credits made and received, and income derived in connection with the operation of the Company in accordance with GAAP consistently applied. The Company may cause
accountants who are employees of one or more Members to keep the Company's books and records, or the Company may hire third-party accountants to keep the Company's books and records. The Company shall
use the accrual method of accounting in preparation of its annual reports and for tax purposes and shall keep its books accordingly. 

        (b)   Without
limiting the generality of the foregoing, the Company shall keep or cause to be kept the following records at the principal place of business of the Company: 

          (i)  a
current list of the full name and last known address of each Member; 

         (ii)  a
copy of the Certificate of Formation of the Company and all amendments thereto; 

        (iii)  copies
of the Company's Federal, state, and local income tax returns and reports, if any, for the six most recent years; 

        (iv)  minutes
of each meeting of the Board of Directors maintained pursuant to Section 8.1(b); 

11

  

         (v)  a
copy of this Agreement, together with any amendments thereto; and 

        (vi)  copies
of all financial statements of the Company for the three most recent years. 

        (c)   Each
Member shall, at its sole expense, have the right, at any time and from time to time without notice to the other Members, to examine, copy and audit the Company's
books and records during normal business hours. 

        Section 10.3    Reports.    Within 120 days after the end of each Fiscal Year, 45 days after the
end of each of the first three fiscal quarters of each Fiscal Year, and 30 days after the end of each month (other than months that are also the end of fiscal quarters or the Fiscal Year), the
Company shall furnish each Member with a copy of the balance sheet of the Company as of the last day of the applicable period, and a statement of income or loss for the Company for such period, which
shall be prepared from the books and records of the Company in accordance with GAAP consistently applied. The Company's year-end annual statements shall be audited by a firm of independent
certified public accountants of national standing, unless the Board of Directors shall determine that such audit is not required. Such annual financial statements shall also include a statement
showing any item of income, deduction, credit, or loss allocable for Federal income tax purposes pursuant to the terms of this Agreement. 

        Section 10.4    Tax Returns.    The Company shall prepare and timely file all tax returns required to be filed
by the Company pursuant to the Code and all other lax returns deemed necessary and required in each jurisdiction in which the Company does business. Copies of such returns, together with any schedules
or other information that each Member may require in connection with preparation of such Member's own tax affairs, shall be finished to the Members within 150 days after the end of each Fiscal
Year. 

        Section 10.5    Tax Matters Partner.    The "tax matters partner" of the Company for all purposes under the
Code shall be MSW Holdings II or such other Member as may be appointed as such by the Board of Directors from time to time. The tax matters partner shall take no action in such capacity without first
consulting with and receiving approval from the Board of Directors as to a mutually agreeable course of action. Copies of all notices and other information received by the tax matters partner shall
promptly be given to all Members. The tax matters partner shall not charge the Company a fee for its services except as permitted under  Section 8.2, but the Company shall reimburse the tax matters
partner for its reasonable, documented out-of-pocket
expenses related to its duties as tax matters partner. 

        Section 10.6    Bank Accounts.    The funds of the Company shall not be commingled with the funds of any Member
or any other Person, and the Company shall not employ or permit any other Person to employ such funds in any manner except for the benefit of the Company. The bank accounts of the Company shall be
maintained in the name of the Company in such banking institutions as are approved by the Board of Directors, and withdrawals shall be made only in the regular course of Company business and as
otherwise authorized in this Agreement on such signature or signatures as the Board of Directors may determine. 

ARTICLE XI  

 TRANSFERS; ADJUSTMENT OF INITIAL OWNERSHIP PERCENTAGES  

        Section 11.1    Restrictions on Transfers.    

        (a)   Subject
to subsections (b) and (c) of this Section 11.1, a Member may (i) transfer, sell,
assign, pledge, encumber or otherwise directly dispose of all or any portion of its Membership Interest, or (ii) by merger or other business combination involving such Member or a company
directly or indirectly owning equity interests in such Member, cause a change in the ownership of, all or any portion of its 

12

 

Membership
Interest (any transaction described in clauses (i) or (ii), a "Transfer"), in each case without the prior consent of any other Member. 

        (b)   All
Transfers hereunder shall be by instrument (including in the case of a merger or business combination the relevant agreement or plan of merger or combination), in
form and substance reasonably satisfactory to the Company, which instrument shall contain an express statement by the transferee of its agreement to accept, adopt and be bound by all of the terms and
provisions of this Agreement, as the same may have been amended from time to time, which shall include a Certificate duly endorsed for transfer by the transferring Member and delivered to the Company.
All Transfers shall provide for the payment by the transferring Member of all reasonable expenses incurred by the Company in connection with such Transfer, including, without limitation, the necessary
amendments to this Agreement to reflect such Transfer. The transferring Member and the transferee shall execute and acknowledge any and all such instruments as the Company may reasonably request to
effectuate such Transfer, in each case in form and substance reasonably satisfactory to the Company. In no event shall the Company dissolve or terminate pursuant to Section 708 of the Code or
otherwise upon the admission of any Member to the Company or upon any permitted Transfer of an interest in the Company by any Member. 

        (c)   Notwithstanding
anything to the contrary in this Agreement, at law or in equity, no Member shall Transfer or otherwise affect any Membership Interest in a way that would
cause a default under any material agreement, license, permit or other instrument of any kind whatsoever to which the Company is a party or by which it is bound or that would cause, or might be
reasonably expected to cause, an Adverse PUHCA Event or an Adverse QF Event. In addition, without the consent of the other Members, no Transfer (whether to a Subsidiary or otherwise) shall relieve or
release the assigning Member from any of its obligations under this LLC Agreement or the Equity Contribution Agreement, except as permitted thereunder. 

        Section 11.2    Intentionally Omitted.    

        Section 11.3    Intentionally Omitted.    

        Section 11.4    Substitute Member.    Any transferee of a Membership Interest in accordance with this
Article XI shall automatically become a substitute Member. The Company shall not register any Transfer of a Certificate or issue any new Certificates pursuant to  Section 5.7 unless the
proposed Transfer or issuance is in compliance with this  Article XI.
 

ARTICLE XII  

 DISSOLUTION AND TERMINATION  

        Section 12.1    Dissolution.    

        (a)   The
Company shall be dissolved upon the occurrence of any of the following events: 

          (i)  the
sale of all or substantially all of the property of the Company; 

         (ii)  the
written agreement of all Members for the Company to terminate and be dissolved; or 

        (iii)  upon
an Event of Bankruptcy in respect of a Member, unless the Members owning a majority of the Ownership Percentages elect to continue the business of the Company
within 90 days after such event. 

        Section 12.2    Effect of Dissolution.    Upon dissolution, the Company shall cease to carry on its business,
except as permitted or required by the Act. Upon dissolution, the Liquidating Trustee shall file a statement of commencement of winding up pursuant to the Act and publish the notice permitted
by the Act. 

13

 

        Section 12.3    Winding Up, Liquidation and Distribution of Assets.    

        (a)   Upon
dissolution of the Company, no further business shall be conducted except for the taking of such action as shall be necessary for the winding up of the affairs of
the Company and the distribution of its assets to the Members pursuant to the provisions of this Article XII. The Board of Directors shall
appoint a Liquidating Trustee. The Liquidating Trustee shall have full authority to wind up the affairs of the Company and to make distributions as provided herein. 

        (b)   Upon
dissolution of the Company, the Liquidating Trustee shall either sell the assets of the Company at the best price available, or the Liquidating Trustee may
distribute to the Members all or any portion of the Company's assets in kind. The property of the Company shall be liquidated as promptly as is consistent with obtaining the fair value thereof. If any
assets are to be distributed in kind, the Liquidating Trustee shall ascertain the Fair Market Value of such assets (based upon a single appraisal, in the case of a disagreement, at the expense of the
Company). Each Member's Capital Account shall be charged or credited, as the case may be, for the net gain or net loss on the sale of the assets or in the case of an in-kind distribution,
any net gain or net loss deemed recognized on such deemed sale, as if such asset had been sold for cash at such Fair Market Value and the net gain or net loss recognized thereby shall be allocated to
and among the Members in accordance with Article VII.

        (c)   All
assets of the Company shall be applied and distributed by the Liquidating Trustee in the following order: 

          (i)  first, to the creditors of the Company (including any Member who has made a loan to the Company); 

         (ii)  second, to setting up the reserves that the Liquidating Trustee may deem reasonably necessary for contingent or
unforeseen liabilities or obligations of the Company; 

        (iii)  third, to the Members in an amount equal to the positive balances of their Capital Accounts in proportion and to the
extent of such positive balances (after such Capital Accounts have been adjusted to reflect any Profits or Losses to be allocated to the Members in connection with the dissolution and liquidation of
the Company); and 

        (iv)  thereafter, to the Members in accordance with their respective Ownership Percentages. 

        Section 12.4    Certificate of Cancellation.    When all debts, liabilities and obligations of the Company have
been paid and discharged or adequate provisions have been made therefor and all of the remaining property and assets of the Company have been distributed to the Members, a Certificate of Cancellation
shall be executed and filed with the Secretary of State of Delaware in accordance with Section 18-203 of the Act. 

        Section 12.5    Return of Contribution; Nonrecourse Against Other Members.    Except as provided by law or as
expressly provided in this Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of its Capital Contribution. If the assets of the Company remaining
after the payment or discharge of the debts and liabilities of the Company is insufficient to return the cash contribution of one or more Members, such Member or Members shall have no recourse against
any other Member. 

14

 

ARTICLE XIII  

 REPRESENTATIONS AND WARRANTIES  

        Section 13.1    Representations and Warranties.    Each Member hereby represents and warrants to the other
Members that: 

        (a)   Such
Member is duly organized and validly existing under the laws of the state of its organization and has the requisite power and authority to enter into and carry out
the terms of this Agreement; 

        (b)   All
actions required to be taken by such Member to execute and deliver this Agreement and to perform its obligations hereunder as of the date hereof have been duly
taken, and no further approval of any board, court, or other body is necessary in order to permit such Member to consummate this Agreement and the transactions contemplated hereby and thereby, and
this Agreement has been duly authorized, executed and delivered by such Member, and constitutes the legal, valid and binding obligation of such Member, enforceable against such Member in accordance
with its terms; 

        (c)   To
the best of such Member's knowledge, there is no action, Proceeding or investigation, pending or threatened (nor any basis therefor) that questions, directly or
indirectly, the validity or enforceability of this Agreement as to such Member or that would materially and adversely affect any Project Partnership; and 

        (d)   Such
Member is not an "investment company" or a company "controlled" by an investment company within the meaning of the Investment Company Act of 1940. 

ARTICLE XIV  

 INTENTIONALLY OMITTED  

ARTICLE XV  

 MISCELLANEOUS PROVISIONS  

        Section 15.1    Notices.    All notices or other communications required or permitted by this Agreement shall
be in writing and shall be deemed to have been duly given upon receipt if delivered in person, by facsimile transmission, by Federal Express or other reputable overnight courier, or mailed by
certified or registered mail, return receipt requested, postage pre-paid, and addressed as follows: 

        if
to Duke Erie: 

	c/o Duke Energy Global Asset Development, Inc.

5400 Westheimer Court, WO 4B68

Houston, Texas 77056-5310
	Attention:	 	Steven F. Gilliland
	Telephone:	 	713 627-4633
	Facsimile:	 	713 627-4655

        if
to MSW Holdings II, UAE RF II or MSW Hudson: 

	155 Chestnut Ridge Road

Montvale, New Jersey 07645
	Attention:	 	President
	Telecopy:	 	201 690-4860
	Telephone:	 	201 690-4832

15

 

or
to such other address as may be specified by a party hereto pursuant to notice given by such party in accordance with the provisions of this  Section 15.1. 

        Section 15.2    Jurisdiction; Venue.    Any dispute regarding the interpretation or validity of, otherwise
arising out of or relating to, this Agreement shall be subject to the exclusive jurisdiction of the federal court sitting in the Southern District of New York or, if such court does not have
jurisdiction, any district court sitting in the Borough of Manhattan, New York County, New York. Each party hereto hereby submits to the personal and exclusive jurisdiction and venue of such courts
(and of the appropriate appellate courts therefrom) in any such dispute and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of
the venue of any such dispute in any such court or that any such dispute that is brought in any such court has been brought in an inconvenient forum. 

        Section 15.3    Entire Agreement.    This Agreement contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes all prior agreements and understandings of the parties relating to the subject matter hereof. 

        Section 15.4    Modifications and Waivers.    No amendment or other modification of any provision of this
Agreement shall be valid or binding unless it is in writing and signed by each of the parties hereto. No waiver of any provision of this Agreement shall be valid or binding unless it is in writing and
signed by the party waiving compliance with such provision. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall any waiver of any partial exercise of any such right, power or privilege preclude any further exercise thereof or the
exercise of any other such right, power or privilege. No waiver of any breach, term or condition of this Agreement by any party shall constitute a subsequent waiver of the same or any other breach,
term or condition. 

        Section 15.5    Separable Provisions.    If any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction, the remainder nevertheless shall remain in full force and effect. 

        Section 15.6    Counterparts.    This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 

        Section 15.7    Governing Law.    This Agreement shall be governed by and construed in accordance with the law
of the State of Delaware without regard to its principles of conflicts of laws. 

        Section 15.8    Further Assurances.    Each of the parties shall execute such agreements, instruments and other
documents and take such further actions as may be reasonably required or desirable to carry out the provisions and the transactions contemplated by this Agreement, including but not limited to the
execution of such further instruments of assignment, transfer, conveyance, endorsement, direction or authorization, and cooperating in obtaining any third party consents and approvals necessary in
order to accomplish and give full force and effect to the transactions contemplated hereby. 

        Section 15.9    Successors and Assigns.    Each and all of the covenants, terms, provisions and agreements
herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective successors and assigns. 

        Section 15.10    Third-Party Beneficiaries.    The provisions of this Agreement shall only be for the benefit
of and enforceable by, the Company and its Members and shall not inure to the benefit of or be enforceable by any third party. 

        Section 15.11    No Partnership Intended for Nontax Purposes; Membership Interests not Securities.    The
Members have formed the Company under the Act and expressly do not intend hereby to form a partnership under either the Delaware Uniform Partnership Act or the Delaware Uniform Limited 

16

 

Partnership
Act. The Members do not intend to be partners to one another, or partners as to any third party, for any purpose other than Federal, state, local or foreign tax purposes. To the extent any
Member, by word or action, represents to another person that any other Member is a partner or that the Company is a partnership, the Member making such wrongful representation shall be liable to any
other Member who incurs personal liability by reason of such wrongful representation. 

        Section 15.12    Confidentiality and Publicity.    

        (a)   Each
Member agrees that it shall (and shall cause its Affiliates and its and their officers, directors, employees, legal counsel, agents and representatives (together
with the Affiliates, the "Confidentiality Affiliates") to (i) hold confidential and not disclose (other than by a Member to its Confidentiality
Affiliates having a reasonable need to know in connection with the permitted purposes hereunder), without the prior written consent of the other Members, all confidential or proprietary written,
recorded or oral information or data (including research, developmental, engineering, manufacturing, technical, marketing, sales, financial, operating, performance, cost, business and process
information or data, know how and computer programming and other software techniques) provided or developed by the Company, another Member or its Confidentiality Affiliates in connection herewith or
with the Business, whether such confidentiality or proprietary status is indicated orally or in writing or in a context in which the Company or the disclosing Member or its Confidentiality Affiliates
reasonably communicated, or the receiving Member or its Confidentiality Affiliates should reasonably have understood, that the information should be treated as confidential, whether or not the
specific words "confidential" or "proprietary" are used ("Confidential Information") and (ii) use such Confidential Information only for the
purposes of performing its obligations hereunder to which it is a party and carrying on the business of the Company; provided,  however, that Members may
disclose any such Confidential Information on a confidential basis to current and prospective lenders in connection with a
loan or prospective loan to a Member and to prospective purchasers of Membership Interests from a Member, as well as to their legal counsel, agents and representatives. Notwithstanding the foregoing,
the Members may disclose any such Confidential Information on a confidential basis to limited partners or prospective limited partners or investors of a Member or its Confidentiality Affiliates in
connection with fundraising efforts and reporting requirements; provided, that such disclosure shall not require any disclosure to existing
securityholders of the Company, MSW Energy Holdings, UAE Holdings or their respective Subsidiaries in accordance with applicable securities laws, including Regulation FD under the Exchange Act; and
provided further, that such disclosure shall not contain any projections, forecasts or budgets of or with respect to the Company. 

        (b)   The
obligations contained in Section 5.01(a) shall not apply, or shall cease to apply, to Confidential Information
if or when, and to the extent that, such Confidential Information (i) was, or becomes through no breach of the receiving Member's obligations hereunder, known to the public, (ii) becomes
known to the receiving Member or its Confidentiality Affiliates from other sources under circumstances not involving any breach of any confidentiality obligation between such source and the disclosing
Member's or discloser's Confidentiality Affiliates or a third party, (iii) is independently developed by the receiving Member or its Confidentiality Affiliates, or (iv) is required to be
disclosed by law, governmental regulation or applicable legal process. 

        (c)   Except
as required by applicable law, each Member agrees that it will not issue or release for external publication any article or advertising or publicity matter
relating to the Company or the Business without the prior consent of the Board of Directors, which consent shall not be unreasonably withheld or delayed. 

[the remainder of this page is left intentionally blank] 

17

 

        IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized representative as of the date first above written. 

	 	 	MSW ENERGY HOLDINGS II LLC
	

 	
 	

By:	
 	

/s/ [ILLEGIBLE]

	 	 	 	 	Name:	 	[ILLEGIBLE]
	 	 	 	 	Title:	 	Vice President Chief Financial Officer
	

 	
 	
UAE REF-FUEL II CORP.
	

 	
 	

By:	
 	

/s/  MARK W. ROMEFELT      

	 	 	 	 	Name:	 	Mark W. Romefelt
	 	 	 	 	Title:	 	Vice President
	

 	
 	
MSW ENERGY HUDSON LLC
	

 	
 	

By:	
 	

/s/  MARK W. ROMEFELT      

	 	 	 	 	Name:	 	Mark W. Romefelt
	 	 	 	 	Title:	 	Vice President
	

 	
 	
DUKE ENERGY ERIE LLC
	

 	
 	

By:	
 	

/s/ [ILLEGIBLE]

	 	 	 	 	Name:	 	[ILLEGIBLE]
	 	 	 	 	Title:	 	By: MSW Energy Holdings LLC

As: Attorney-In-Fact
	

 	
 	
Solely with respect to Section 9.5
	

 	
 	
UNITED AMERICAN ENERGY CORP.
	

 	
 	

By:	
 	

/s/  MARK W. ROMEFELT      

	 	 	 	 	Name:	 	Mark W. Romefelt
	 	 	 	 	Title:	 	Vice President
	

 	
 	
Solely with respect to Section 9.5
	

 	
 	
UNITED AMERICAN ENERGY HOLDINGS CORP.
	

 	
 	

By:	
 	

/s/  MARK W. ROMEFELT      

	 	 	 	 	Name:	 	Mark W. Romefelt
	 	 	 	 	Title:	 	Vice President

18

   EXHIBIT A  

CAPITAL CONTRIBUTIONS  

	Member and Address
 
	 	Capital Contributions

	MSW Energy Holdings II LLC

155 Chestnut Ridge Road

Montvale, NJ 07645	 	$	24,500,000
	UAE Ref-Fuel II Corp.

155 Chestnut Ridge Road

Montvale, NJ 07645	 	$	500,000
	MSW Energy Hudson LLC

155 Chestnut Ridge Road

Montvale, NJ 07645	 	$	24,900,000
	Duke Energy Erie LLC

Attn: Steven F. Gilliland

c/o Duke Energy Global Asset Development, Inc.

5400 Westheimer Court, WO 4B68

Houston, Texas 77056-5310	 	$	100,000

19

   EXHIBIT B  

OWNERSHIP PERCENTAGES  

	Member
 
	 	Ownership Percentage
	 
	MSW Energy Holdings II LLC	 	49.0	%
	UAE Ref-Fuel II Corp.	 	1.0	%
	MSW Energy Hudson LLC	 	49.8	%
	Duke Energy Erie LLC	 	0.2	%

        Subject
to Section 7.1 (c) hereof, with respect to the member indicated above, as of June 30, 2003, the percentage interest
of such Member in the Profits, Losses, and Distributable Cash of the Company realized or distributed, as the case may be, after the date hereof, shall be in accordance with the Ownership Percentages
as indicated above. The interest in the capital of the Company of MSW ENERGY HOLDINGS II LLC and UAE REF-FUEL II CORP. shall be 49.9% and 0.1% respectively, as represented by Certificates
Nos. 5 and 6 issued to MSW ENERGY HOLDINGS II LLC and UAE REF-FUEL II CORP., respectively, and UAE REF-FUEL II CORP. shall succeed to a percentage of the Capital Account
balances of MSW ENERGY HOLDINGS II LLC as of June 30, 2003 immediately before the admission of UAE REF-FUEL II CORP. as a Member of the Company equal to that amount that represents
0.1% of the aggregate Capital Account balances of all of the members of the Company as of that date. 

20

   EXHIBIT C  

NO.               

FORM OF CERTIFICATE OF MEMBERSHIP INTERESTS

IN  

 REF-FUEL HOLDINGS LLC  

        This Certificate of Membership Interests certifies
that                        is the owner of
a                        % membership interest in Ref-Fuel Holdings
LLC, a Delaware limited liability company. Transfer of any or all of these membership interest is subject to certain restrictions contained in the Second Amended and Restated Limited Liability Company
Agreement of Ref-Fuel Holdings LLC, dated as of April 30, 2004, as from time to time amended, and can be effect only upon compliance with all of those restrictions and the
presentation of this Certificate, properly endorsed to Ref-Fuel Holdings LLC. 

        This
Certificate of Membership Interests evidence a membership interest in Ref-Fuel Holdings LLC, and shall be a security for purposes of Article 8 of the Uniform
Commercial Code as in effect in the State of Delaware. 

	 	 	 	 	REF-FUEL HOLDINGS LLC
	

 	
 	

 	
 	

By:	
 	

 
	 	 	 	 	 	 	
 Authorized Signatory
	

Dated:	
 	

 	
 	

 	
 	

 
	 	 	
	 	 	 	 

21

APPENDIX A

DEFINITIONS  

        The terms defined in this Appendix A relate, to the extent used therein, to the LLC Agreement (as defined below). Unless otherwise indicated, such terms
include the plural as well as the singular. Any agreement defined or referred to below shall include each amendment, modification and supplement thereto, and each waiver, approval and consent in
respect thereof, as may become effective from time to time, except where otherwise indicated, and shall include all Appendices, Exhibits, Schedules and other attachments thereto and instruments,
agreements or other documents incorporated therein. Any term defined in this Appendix A below by reference to any document shall be deemed to be amended herein to the extent that such term is
subsequently amended in such document. If any such document is subsequently amended, modified or terminated, the affected parties to any agreement to which this Appendix A is attached shall in
good faith select another comparable definition for any term theretofore defined below by reference to such document. 

        Unless
the context otherwise requires: a reference to any law or governmental regulation includes any amendment, modification or successor thereto; a reference to any Person includes its
successors and assigns; accounting terms not otherwise defined have the meanings assigned to them by United States GAAP applied on a consistent basis by the accounting entity to which they refer;
unless otherwise indicated, all references to Sections, Articles, other subdivisions. Appendices, Schedules and Exhibits shall mean and refer to the respective Sections, Articles, other subdivisions,
Appendices, Schedules and Exhibits in or attached to the agreement or document in which such reference appears; the words "include," "includes" and "including" are not limiting and shall be deemed to
be followed by the words "without limitation" whether or not in fact followed by such words or words of like import; and the terms "hereof" "herein," "hereunder" and comparable terms refer to the
entire agreement with respect to which such terms are used and not to any particular article, section or other subdivision thereof. 

        If,
and to the extent that, the LLC Agreement shall be amended, modified or supplemented from time to time, this Appendix A shall be, or be deemed to have been, amended, modified
or supplemented concurrently with the execution and delivery of each such amendment, modification or supplement of the LLC Agreement in order to conform the definitions herein and therein to the new
or amended, modified or supplemented definitions set forth in or required by each such amendment to the LLC Agreement. 

        "Act" means the Delaware Limited Liability Company Act, Title 6 of the Delaware Code, Sections 18-101  et seq., as the same may be amended from time to time. 

        "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of
the end of the relevant Fiscal Year, after giving effect to the following adjustments: 

          (i)  such
Capital Account shall be deemed to be increased by any amounts that such Member is obligated to restore to the Company (pursuant to the LLC Agreement or otherwise)
or is deemed to be obligated to restore pursuant to (A) the penultimate sentence of Regulations Section 1.704-2(g)(l), or (B) the penultimate sentence of Regulations
Section 1.704-2(i)(5); and 

         (ii)  such
Capital Account shall be deemed to be decreased by the items described in Regulations Sections 1.704-l(b)(2)(ii)(d)(4), (5) and (6). 

        "Adverse PUHCA Event" means that the Company or any of its "affiliates" (within the meaning of Section 2(a)(11)(B) of PUHCA) become
a "public utility company" or a "holding company" within the meaning of PUHCA at a time at which applicable provisions of PUHCA, or any successor statute thereof, and the rules and regulations
thereunder are in effect and such event or occurrence has or with the passage of time will have, an adverse effect on the Company or any Member. 

        "Adverse OF Event" means any event or occurrence that causes any "electric utility, electric utility holding company, or companies, or any
combination thereof" within the meaning of 18 C.F.R. 

 

§292.206(b),
to directly or indirectly own more than 50% of any LLC QF at a time at which applicable provisions of PURPA, or any successor statute thereof, and the rules and regulations
thereunder are in effect and such event or occurrence has or with the passage of time, will have, an adverse effect on the Company or any Member. 

        "Affiliate" means with respect to any Person, any other Person who, directly or indirectly, controls such first Person or is controlled by
said Person or is under common control with said Person, where "control" means power and ability to direct, or share equally in the direction of, the management and/or policies of a Person, whether
through ownership or control by proxy of more than 50% of the voting shares or other equivalent interests of the controlled enterprise, by contract or otherwise. 

        "Authorized Signatory" means any member of the Board of Directors. 

        "Book Value" means, with respect to any asset of the Company, the adjusted basis of such asset as of the relevant date for Federal income
tax purposes, except as follows: 

          (i)  the
initial Book Value of any asset contributed by a Member to the Company shall be the fair market value of such asset at the time of contribution; 

         (ii)  the
Book Values of all Company assets (including intangible assets such as goodwill) may be adjusted to equal their respective fair market values as of the following
times: 

        (A)  the
purchase of an additional interest in the Company by any new or existing Member in exchange for more than a de
minimis Capital Contribution; 

        (B)  the
distribution by the Company to a Member of more than a de minimis amount of money or Company property as
consideration for an interest in the Company; and 

        (C)  the
liquidation of the Company within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g); and 

        (iii)  if
the Book Value of an asset has been determined or adjusted pursuant to subsection (i) or (ii) above, such Book Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses and other items allocated pursuant to  Section 7.1 of the LLC Agreement. 

        The
foregoing definition of Book Value is intended to comply with the provisions of Regulations Section l.704-l(b)(2)(iv) and shall be interpreted and applied
consistently therewith. 

        "Board of Directors" means the committee established in accordance with  Section 8.1(a) of the LLC Agreement. 

        "Business Day" means any day other than a Saturday, Sunday or other day on which banks are authorized or required to be closed in New
York, New York. 

        "Capital Account" means a book account to be established and maintained by the Company for each Member as computed from time to time in
accordance with the capital account maintenance rules set forth in Regulations Section 1.704-l(b)(2)(iv). 

        "Capital Contribution" means the amount of money and the agreed fair market value of other property (net of any liabilities secured by
such property that the Company is considered to assume or take subject to under Code Section 752) contributed by a Member to the Company pursuant to the LLC Agreement. 

        "Certificate" means a certificate representing a membership interest in the Company issued pursuant to  Section 5.7 of the LLC Agreement. 

        "Citibank Credit Agreement" means the Amended and Restated Credit Agreement, dated as of May 1, 2003, by and among American
Ref-Fuel Company LLC, as Borrower, the banks named therein, 

2

 

Citicorp
North America, Inc., as Administrative Agent, Citibank, N.A., as Sub-Agent and the other parties named therein, as amended and in effect from time to time. 

        "Claim" means any demand, demand letter, claim, action, notice of noncompliance or violation, or other proceeding. 

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

        "Common Equity" means, with respect to any Member, that Member's Capital Account balance. 

        "Common Interest" or "Common Interests" means that portion of the Membership Interests of
any Member hereunder. 

        "Company" has the meaning specified in the recitals to the LLC Agreement. 

        "Company Minimum Gain" means the amount determined in accordance with Regulations Section 1.704-2(d) by
(i) computing with respect to each non-recourse liability of the Company the amount of income or gain, if any, that would be realized by the Company if it disposed of the property
securing such non-recourse liability in full satisfaction thereof, and (ii) aggregating all separate amounts so computed. 

        "Depreciation" means, for each Fiscal Year or part thereof, an amount equal to the depreciation, amortization, or other cost recovery
deduction allowable for Federal income tax purposes with respect to an asset for such Fiscal Year or part thereof, except that if the Book Value of an asset differs from its adjusted basis for Federal
income tax purposes at the beginning of such Fiscal Year, the depreciation, amortization or other cost recovery deduction for such Fiscal Year or part thereof shall be an amount that bears the same
ratio to such Book Value as the Federal income tax depreciation, amortization or other cost recovery deduction for such Fiscal Year or part thereof bears to such adjusted tax basis. If such asset has
a zero adjusted tax basis, the depreciation, amortization or other cost recovery deduction for each Fiscal Year shall be determined under a method reasonably selected by the Board of Directors. 

        "Distributable Cash" means, with respect to any period, all cash (i) derived by the Company from normal business operations,
(ii) received as proceeds from any Company financing, refinancing or other extraordinary event (including cash received from the sale of all or substantially all the Company's property) or
(iii) withdrawn from reserves during such period, minus (w) all expenses (other than depreciation and other similar noncash expenses)
incurred incident to the normal operation of the Company's business, (x) all capital expenditures made during such period, (y) all payments of principal and interest made during such
period with respect to Company loans, including Member loans, and (z) all amounts set aside during such period as agreed by the Members for the creation of or addition to such reserves as the
Board of Directors deems necessary for the reasonable needs and prudent operation of the Company's business, including identified operating needs of, and necessary reserves for likely Claims against,
the Project Partnerships. 

        "Dollars" and the "$" symbol mean currency of the United States of America. 

        "Effective Date" has the meaning specified in Section 2.1 of the LLC Agreement. 

        "Equity Contribution Agreement" means the Equity Contribution Agreement, dated as of the Effective Date, among MSW Energy Holdings LLC,
United American Energy Corp., the Company and American Ref-Fuel Company LLC, as the same may be amended or modified. 

        "Event of Bankruptcy" has the meaning specified in the Act. 

        "Facilities" has the meaning specified in Section 3.1 of the LLC Agreement. 

        "Fair Market Value" means the value of any specified interest or property, which shall not in any event be less than zero, that would be
obtained in an arm's length transaction for cash between an 

3

 

informed
and willing buyer and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, and without regard to the particular circumstances of the
buyer or seller, but taking into account discounts for minority interests, restrictions on transfer, lack of marketability, and other similar factors typically considered in valuing securities in a
privately held enterprise. In determining the Fair Market Value of any Member's Membership Interest, the value shall be determined assuming that the Company is an ongoing business enterprise. Fair
Market Value shall be determined in the following order of descending priority: 

        (a)   by
agreement of the buyer and seller; 

        (b)   if
the buyer and seller shall not agree upon a value pursuant to subsection (a) above within 10 days in advance of the date the Fair Market Value is
required to be determined, by a qualified appraiser selected by mutual agreement of the buyer and seller; or 

        (c)   if
the buyer and seller shall not agree upon a qualified appraiser within 15 days following the date the Fair Market Value is required to be determined, by taking
the arithmetic average of the value assigned by three qualified appraisers, one selected by the buyer and the other selected by the seller (or all Persons whose interests are aligned in respect of
such determination), and the third selected by agreement of the two appraisers so selected; provided that, if the appraised value assigned by any
appraiser selected by the buyer or the seller shall be less than 90% or more than 110% of the appraised value assigned by the third appraiser, then such first value shall, for purposes of this
subsection (c) be increased to 90% or decreased to 110%, as applicable, of the appraised value assigned by such third appraiser. In the event that either the buyer or the seller shall fail to
appoint an appraiser pursuant to this subsection (c) within 15 days following the date the Fair Market Value determination is required, then the appraiser, if any, appointed by the other
Person shall make the determination of Fair Market Value. 

        If
the Fair Market Value is determined by an appraiser selected by mutual agreement, the seller shall pay the cost of the appraiser. If the Fair Market Value is determined by the average
of three appraisals, the seller shall pay the costs of the appraiser selected by the seller and the appraiser selected by the other two appraisers, and the buyer shall pay the cost of the appraiser
selected by it. 

        "Fiscal Year" means the annual accounting period specified in Section 10.1 of the
LLC Agreement. 

        "GAAP" means United States generally accepted accounting principles. 

        "Hypothetical Revaluation" has the meaning specified in Section 7.1(c)(x). 

        "Indemnitee" has the meaning specified in Section 8.5(a) of the LLC Agreement. 

        "Liquidating Trustee" means the Person appointed by the Board of Directors to act in the capacity provided in  Article XII of the LLC Agreement. 

        "LLC Agreement" means this Second Amended and Restated Limited Liability Company Agreement of Ref-Fuel Holdings LLC, as the
same may be amended or modified. 

        "LLC OF" means a "qualifying small power producer" or "qualifying cogenerator" (in each case within the meaning of PURPA) in which the
Company holds, directly or indirectly, an equity interest. 

        "Member" means each of the Persons that are parties to the LLC Agreement, and any other Person that hereafter becomes a Member in
accordance with Article XI of the LLC Agreement. 

        "Member Nonrecourse Debt" has the meaning ascribed to the term "partner nonrecourse debt" in Regulations
Section 1.704-2(b)(4). 

        "Member Nonrecourse Debt Minimum Gain" means the aggregate amount of gain (of whatever character), determined for each Member Nonrecourse
Debt, that would be realized by the Company (or a lower-tier partnership in which the Company owns an interest, as the case may be) if it disposed 

4

 

of
the Company property (or the property of a lower-tier partnership, as the case may be) subject to such Member Nonrecourse Debt in a taxable transaction in full satisfaction thereof (and
for no other consideration), determined in accordance with the provisions of Regulations Sections l.704-2(i)(5) and 1.704-2(k)(5) for determining a Member's share of minimum
gain attributable to a Member Nonrecourse Debt. 

        "Member Nonrecourse Deductions" means any and all items of loss, deduction or expenditure (described in Section 705(a)(2)(B) of the
Code) that, in accordance with the principles of Regulations Sections 1.704-2(i)(2) and 1.704-2(k), are attributable to Member Non-Recourse Debt,  provided that, for purposes of determining Member
Nonrecourse Deductions, all increases and decreases, if any, of Member Nonrecourse Debt Minimum Gain
allocated to the Company with respect to its interests in lower-tier partnerships (such as the Project Partnerships) in accordance with Regulations Section 1.704-2(k)
shall be aggregated and netted with all such increases and decreases at the Company level. 

        "Membership Interest" means, in respect of any Member, such Member's entire interest in the Company. 

        "Municipal Solid Waste" means normal waste of the type customarily collected by municipalities, including durable goods, containers,
packaging, food waste, yard waste and miscellaneous inorganic waste, but excluding industrial waste, agricultural waste, sewage sludge, tires and all categories of hazardous waste, including batteries
and medical waste. 

        "Ownership Percentage" means, in respect of any Member, the percentage set forth opposite such Member's name on  Exhibit B to the LLC Agreement, as such exhibit may
be amended from time to time. 

        "PUHCA" means the Public Utility Holding Company Act of 1935, as amended. 

        "PURPA" means the Public Utility Regulatory Policies Act of 1978, as amended. 

        "Person" means any natural person, corporation, partnership, limited liability company, firm, association, trust, government, governmental
agency or any other entity, whether acting in an individual, fiduciary or other capacity. 

        "Proceeding" has the meaning specified in Section 8.5(b) of the LLC Agreement. 

        "Profits" and "Losses" means, for each Fiscal Year or part thereof, the taxable income or
loss of the Company for such Fiscal Year determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(l) shall be included in taxable income or loss), with the following adjustments: 

          (i)  any
income of the Company that is exempt from Federal income tax shall be added to such taxable income or tax loss; 

         (ii)  any
expenditures of the Company described in Code Section 705(a)(2)(B) or treated as such pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i) shall be subtracted from such taxable income or tax loss; 

        (iii)  any
Depreciation for such Fiscal Year or part thereof shall be taken into account in lieu of the depreciation, amortization and other cost recovery deductions taken
into account in computing such taxable income or tax loss; 

        (iv)  gain
or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for Federal income tax purposes shall be computed with
reference to the Book Value of the property disposed of, rather than the adjusted tax basis of such property; and 

5

 

         (v)  such
taxable income or tax loss shall be deemed not to include any income, gain, loss, deduction or other item thereof allocated pursuant to Section 7.1(c) of the
LLC Agreement. 

        "Project Partnerships" means the following Persons, as well as any other Person that owns or is developing an energy generating project
and in which a direct or indirect interest is acquired by the Company on or after the date hereof: (i) American Ref-Fuel Company of Essex County, a New Jersey general partnership;
(ii) American Ref-Fuel Company of Hempstead, a New York general partnership; (iii) American Ref-Fuel Company of Niagara, L.P., a Delaware limited partnership;
(iv) American Ref-Fuel Company of Southeastern Connecticut, a Connecticut general partnerships, (v) SEMASS Partnership, a Massachusetts limited partnership, and
(vi) American Ref-Fuel Company of Delaware Valley, L.P., a Delaware limited partnership. 

        "Regulations" means the Federal Income Tax Regulations promulgated under the Code, as such Regulations may be amended from time to time
(including corresponding provisions of succeeding regulations). 

        "Regulatory Allocations" has the meaning specified in Section 7.1(d)(vi) of the LLC
Agreement. 

        "Regulatory Restrictions" means any Requirement of Law, including, without limitation, PURPA and PUHCA, that prohibits, materially
restricts or limits, or otherwise makes it impracticable or uneconomic for a Member or any of its Affiliates to acquire an additional interest in the Company. 

        "Related Party" has the meaning specified in Section 9.4 of the LLC Agreement. 

        "Subsidiary" means, with respect to any Person, a Person that directly, or indirectly through one or more intermediaries, and through
greater than 50% equity ownership, controls or is controlled by, or is under common control with the Person specified. 

        "Transfer" has the meaning specified in Section 11.1(a) of the LLC Agreement. 

        "UAE" means United American Energy Corp., a Delaware corporation. 

        "UAE Holdings" means United American Energy Holdings Corp., a Delaware corporation. 

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QuickLinks

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF REF-FUEL HOLDINGS LLC (f/k/a DUKE/UAE REF-FUEL LLC) dated as of April 30, 2004 between MSW ENERGY HOLDINGS II LLC, UAE REF-FUEL II CORP., MSW
ENERGY HUDSON LLC and DUKE ENERGY ERIE LLC

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}]]