Document:

Exhibit 10.1A

 

[Execution
Version]

 

 

 

 

 

 

 

 

 

CREDIT SLEEVE AND
REIMBURSEMENT AGREEMENT

 

dated as of

 

September 24, 2006

 

among

 

RELIANT ENERGY
POWER SUPPLY, LLC,

 

The Other Reliant
Retail Obligors referred to herein,

as Reimbursement
Guarantors,

 

MERRILL LYNCH
COMMODITIES, INC.,

as Sleeve
Provider,

 

and

 

MERRILL LYNCH
& CO., INC.,

as ML Guarantee
Provider,

 

 

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

Reliant Retail Obligor

 

 

                                                                                   TABLE
OF CONTENTS

 

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

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  Section 1.

  	
   

  	
  Definitions and Accounting Matters.

  	
   

  	
  1

  
	
  1.01.

  	
   

  	
  Certain Defined Terms

  	
   

  	
  1

  
	
  1.02.

  	
   

  	
  Terms Generally

  	
   

  	
  32

  
	
  1.03.

  	
   

  	
  Accounting Terms and Determinations

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2. 

  	
   

  	
  Credit Sleeve for Reliant Retail Obligors

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.01.

  	
   

  	
  Credit Sleeve Generally; Exclusivity

  	
   

  	
  33

  
	
  2.02.

  	
   

  	
  Credit Sleeve of OTC Trading and Hedging Activities

  	
   

  	
  37

  
	
  2.03.

  	
   

  	
  Credit Sleeve of Exchange Traded Hedging Activities

  	
   

  	
  41

  
	
  2.04.

  	
   

  	
  Credit Sleeve of C&I and Governmental Contracts

  	
   

  	
  42

  
	
  2.05.

  	
   

  	
  Credit Sleeve of Regulatory Obligations

  	
   

  	
  43

  
	
  2.06.

  	
   

  	
  Term

  	
   

  	
  43

  
	
  2.07.

  	
   

  	
  Posting Collateral to Increase K

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3. 

  	
   

  	
  Payments, Fees and Records

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.01.

  	
   

  	
  Notice of Payment on ML Guarantee or Collateral
  Foreclosure

  	
   

  	
  43

  
	
  3.02.

  	
   

  	
  Repayment of Draw Reimbursement Obligations

  	
   

  	
  44

  
	
  3.03.

  	
   

  	
  Interest

  	
   

  	
  44

  
	
  3.04.

  	
   

  	
  Monthly Sleeve Fee

  	
   

  	
  46

  
	
  3.05.

  	
   

  	
  Make-whole Payment

  	
   

  	
  46

  
	
  3.06.

  	
   

  	
  Structuring Fee

  	
   

  	
  46

  
	
  3.07.

  	
   

  	
  Payments Generally

  	
   

  	
  46

  
	
  3.08.

  	
   

  	
  Records; Prima Facie Evidence

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4. 

  	
   

  	
  Conditions.

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5. 

  	
   

  	
  Representations and Warranties

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.01.

  	
   

  	
  Existence, Qualification and Power; Compliance with
  Laws

  	
   

  	
  47

  
	
  5.02.

  	
   

  	
  Authorization; No Contravention

  	
   

  	
  47

  
	
  5.03.

  	
   

  	
  Governmental Authorization; Other Consents

  	
   

  	
  48

  
	
  5.04.

  	
   

  	
  Binding Effect

  	
   

  	
  48

  
	
  5.05.

  	
   

  	
  Financial Statements; No Material Adverse Effect

  	
   

  	
  48

  
	
  5.06.

  	
   

  	
  Litigation

  	
   

  	
  49

  
	
  5.07.

  	
   

  	
  No Default

  	
   

  	
  49

  
	
  5.08.

  	
   

  	
  Ownership of Property; Liens

  	
   

  	
  49

  
	
  5.09.

  	
   

  	
  Environmental Matters

  	
   

  	
  50

  
	
  5.10.

  	
   

  	
  Insurance

  	
   

  	
  50

  
	
  5.11.

  	
   

  	
  Taxes

  	
   

  	
  51

  
	
  5.12.

  	
   

  	
  ERISA Compliance

  	
   

  	
  51

  
									

 

i

 

	
  5.13.

  	
   

  	
  Subsidiaries; Equity Interests

  	
   

  	
  52

  
	
  5.14.

  	
   

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

  	
   

  	
  52

  
	
  5.15.

  	
   

  	
  Disclosure

  	
   

  	
  52

  
	
  5.16.

  	
   

  	
  Compliance with Laws

  	
   

  	
  53

  
	
  5.17.

  	
   

  	
  Intellectual Property; Licenses, Etc.

  	
   

  	
  53

  
	
  5.18.

  	
   

  	
  Solvency

  	
   

  	
  53

  
	
  5.19.

  	
   

  	
  Perfection, Etc.

  	
   

  	
  53

  
	
  5.20.

  	
   

  	
  Employees, Etc.

  	
   

  	
  53

  
	
  5.21.

  	
   

  	
  Information Technology Systems

  	
   

  	
  54

  
	
  5.22.

  	
   

  	
  Marks

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  Affirmative Covenants

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.01.

  	
   

  	
  Financial Statements

  	
   

  	
  54

  
	
  6.02.

  	
   

  	
  Certificates; Other Information

  	
   

  	
  55

  
	
  6.03.

  	
   

  	
  Notices

  	
   

  	
  56

  
	
  6.04.

  	
   

  	
  Payment of Obligations

  	
   

  	
  57

  
	
  6.05.

  	
   

  	
  Preservation of Existence, Etc.

  	
   

  	
  57

  
	
  6.06.

  	
   

  	
  Maintenance of Properties

  	
   

  	
  57

  
	
  6.07.

  	
   

  	
  Maintenance of Insurance

  	
   

  	
  57

  
	
  6.08.

  	
   

  	
  Compliance with Laws

  	
   

  	
  57

  
	
  6.09.

  	
   

  	
  Books and Records

  	
   

  	
  58

  
	
  6.10.

  	
   

  	
  Inspection Rights

  	
   

  	
  58

  
	
  6.11.

  	
   

  	
  Addition and Removal of Transaction Parties;
  Collateral Matters; Waterfall

  	
   

  	
  58

  
	
  6.12.

  	
   

  	
  Further Assurances

  	
   

  	
  61

  
	
  6.13.

  	
   

  	
  Risk Management Policy

  	
   

  	
  62

  
	
  6.14.

  	
   

  	
  Employees

  	
   

  	
  64

  
	
  6.15.

  	
   

  	
  Information Technology Systems

  	
   

  	
  64

  
	
  6.16.

  	
   

  	
  Marks

  	
   

  	
  64

  
	
  6.17.

  	
   

  	
  Reliant Parent Services Agreement

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7. 

  	
   

  	
  Negative Covenants

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.01.

  	
   

  	
  Liens

  	
   

  	
  65

  
	
  7.02.

  	
   

  	
  Investments and Acquisitions

  	
   

  	
  65

  
	
  7.03.

  	
   

  	
  Indebtedness

  	
   

  	
  65

  
	
  7.04.

  	
   

  	
  Consolidation and Mergers

  	
   

  	
  66

  
	
  7.05.

  	
   

  	
  Asset Sales

  	
   

  	
  67

  
	
  7.06.

  	
   

  	
  Limitation on Issuances and Sales of Certain Equity
  Interests

  	
   

  	
  68

  
	
  7.07.

  	
   

  	
  Restricted Payments

  	
   

  	
  68

  
	
  7.08.

  	
   

  	
  Line of Business

  	
   

  	
  68

  
	
  7.09.

  	
   

  	
  Transactions with Affiliates

  	
   

  	
  68

  
	
  7.10.

  	
   

  	
  Restrictive Agreements

  	
   

  	
  69

  
	
  7.11.

  	
   

  	
  Modification and Enforcement of Transaction
  Documents

  	
   

  	
  70

  
	
  7.12.

  	
   

  	
  Fiscal Year

  	
   

  	
  70

  
	
  7.13.

  	
   

  	
  Specified Transaction

  	
   

  	
  70

  
	
  7.14.

  	
   

  	
  Services

  	
   

  	
  70

  
	
  7.15.

  	
   

  	
  Tax Agreements

  	
   

  	
  70

  

 

ii

 

	
  7.16.

  	
   

  	
  Posting of Collateral

  	
   

  	
  71

  
	
  7.17.

  	
   

  	
  Accepted Products

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8. 

  	
   

  	
  Events of Default

  	
   

  	
  71

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.01.

  	
   

  	
  Reliant Events of Default

  	
   

  	
  71

  
	
  8.02.

  	
   

  	
  Sleeve Provider Events of Default

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9. 

  	
   

  	
  Remedies and Termination

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.01.

  	
   

  	
  Remedies of Sleeve Provider

  	
   

  	
  75

  
	
  9.02.

  	
   

  	
  Remedies of REPS

  	
   

  	
  76

  
	
  9.03.

  	
   

  	
  Certain Intercreditor Agreements

  	
   

  	
  77

  
	
  9.04.

  	
   

  	
  Certain Limitations on Remedies

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  Unwind

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.01.

  	
   

  	
  Permitted Activities during Unwind Period

  	
   

  	
  79

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11. 

  	
   

  	
  Reimbursement Guaranty by Other Reliant Retail
  Parties

  	
   

  	
  80

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.01.

  	
   

  	
  Reimbursement Guaranty of the Obligations

  	
   

  	
  80

  
	
  11.02.

  	
   

  	
  Payment by Guarantors

  	
   

  	
  80

  
	
  11.03.

  	
   

  	
  Liability of Reimbursement Guarantors Absolute

  	
   

  	
  81

  
	
  11.04.

  	
   

  	
  Waivers by Reimbursement Guarantors

  	
   

  	
  83

  
	
  11.05.

  	
   

  	
  Reimbursement Guarantors’ Rights of Subrogation,
  Contribution, etc

  	
   

  	
  83

  
	
  11.06.

  	
   

  	
  Subordination of Other Obligations

  	
   

  	
  84

  
	
  11.07.

  	
   

  	
  Continuing Reimbursement Guaranty

  	
   

  	
  84

  
	
  11.08.

  	
   

  	
  Authority of Reimbursement Guarantors or REPS

  	
   

  	
  84

  
	
  11.09.

  	
   

  	
  Financial Condition of REPS

  	
   

  	
  84

  
	
  11.10.

  	
   

  	
  Bankruptcy, etc.

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12. 

  	
   

  	
  Miscellaneous

  	
   

  	
  85

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.01.

  	
   

  	
  Notices

  	
   

  	
  85

  
	
  12.02.

  	
   

  	
  Confidentiality; Limitation on Use of Information

  	
   

  	
  87

  
	
  12.03.

  	
   

  	
  Reliant Employees

  	
   

  	
  88

  
	
  12.04.

  	
   

  	
  Provisions relating to Collateral Trust Agreement
  and Reimbursement Guarantee

  	
   

  	
  89

  
	
  12.05.

  	
   

  	
  Waiver

  	
   

  	
  90

  
	
  12.06.

  	
   

  	
  Amendments, Etc.

  	
   

  	
  90

  
	
  12.07.

  	
   

  	
  Expenses, Etc.

  	
   

  	
  91

  
	
  12.08.

  	
   

  	
  Successors and Assigns

  	
   

  	
  91

  
	
  12.09.

  	
   

  	
  Assignments

  	
   

  	
  91

  
	
  12.10.

  	
   

  	
  Survival

  	
   

  	
  91

  
	
  12.11.

  	
   

  	
  Counterparts

  	
   

  	
  92

  
	
  12.12.

  	
   

  	
  Governing Law; Jurisdiction; Etc.

  	
   

  	
  92

  
	
  12.13.

  	
   

  	
  Certain Dispute Resolution Procedures

  	
   

  	
  93

  
	
  12.14.

  	
   

  	
  Captions

  	
   

  	
  93

  
	
  12.15.

  	
   

  	
  Limitation on Interest

  	
   

  	
  94

  
	
  12.16.

  	
   

  	
  Integration

  	
   

  	
  94

  

 

iii

	
  12.17.

  	
   

  	
  Amendment and Restatement

  	
   

  	
  94

  

 

iv

	
   

  	
   

  	
   

  	
   

  	
  Schedules and Exhibits

   

  
	
  SCHEDULE 1.01(a)

  	
   

  	
  —

  	
   

  	
  Risk Management Policy
  Violations

  
	
  SCHEDULE 1.01(b)

  	
   

  	
  —

  	
   

  	
  Calculations Relating
  to Exchange Traded Contracts

  
	
  SCHEDULE 1.01(c)

  	
   

  	
  —

  	
   

  	
  Determination of K and
  VaR

  
	
  SCHEDULE 1.01(e)

  	
   

  	
  —

  	
   

  	
  Trademarks

  
	
  SCHEDULE 1.01(f)

  	
   

  	
  —

  	
   

  	
  Credit Limit Approval
  Guidelines

  
	
  SCHEDULE 2.01(b)

  	
   

  	
  —

  	
   

  	
  C&I Customer
  Wholesale Purchase Provisions

  
	
  SCHEDULE 2.02(a)

  	
   

  	
  —

  	
   

  	
  Counterparty Document
  Negotiation Provisions

  
	
  SCHEDULE 2.04

  	
   

  	
   

  	
   

  	
  C&I Contracts and
  Governmental Contracts receiving ML Guarantee

  
	
  SCHEDULE 3.04

  	
   

  	
  —

  	
   

  	
  Calculation and
  Settlement of Monthly Sleeve Fee

  
	
  SCHEDULE 3.05

  	
   

  	
   

  	
   

  	
  Calculation of
  Make-whole Payment

  
	
  SCHEDULE 3.07(a)

  	
   

  	
   

  	
   

  	
  Merrill Account

  
	
  SCHEDULE 5.13

  	
   

  	
  —

  	
   

  	
  List of Subsidiaries

  
	
  SCHEDULE 7.14

  	
   

  	
  —

  	
   

  	
  List of Retail Services

  
	
  SCHEDULE 2.13

  	
   

  	
  —

  	
   

  	
  List of Calculation
  Agents

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A1

  	
   

  	
  —

  	
   

  	
  Form of ML Guarantee
  for Accepted Counterparties

  
	
  EXHIBIT A2

  	
   

  	
  —

  	
   

  	
  Form of ML Guarantee
  for C&I Customers

  
	
  EXHIBIT B

  	
   

  	
  —

  	
   

  	
  List of Accepted
  Counterparties

  
	
  EXHIBIT C1

  	
   

  	
  —

  	
   

  	
  Form of EEI Power
  Purchase and Hedging Contract

  
	
  EXHIBIT C2

  	
   

  	
  —

  	
   

  	
  Form of ISDA Power
  Purchase and Hedging Contract

  
	
  EXHIBIT C3

  	
   

  	
  —

  	
   

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

  
	
  EXHIBIT C4

  	
   

  	
  —

  	
   

  	
  Form of RECs Purchase
  Contract for ERCOT

  
	
  EXHIBIT D1

  	
   

  	
  —

  	
   

  	
  Form of EEI Collateral
  Annex

  
	
  EXHIBIT D2

  	
   

  	
  —

  	
   

  	
  Form of ISDA Credit
  Support Annex

  
	
  EXHIBIT E1

  	
   

  	
  —

  	
   

  	
  Reliant Energy — Retail
  Risk Policy

  
	
  EXHIBIT E2

  	
   

  	
  —

  	
   

  	
  Hedge Limit
  Calculations

  
	
  EXHIBIT F

  	
   

  	
  —

  	
   

  	
  ERCOT Asset List

  
	
  EXHIBIT G

  	
   

  	
  —

  	
   

  	
  Form of Joinder
  Agreement

  
	
  EXHIBIT H

  	
   

  	
  —

  	
   

  	
  Form of Compliance
  Certificate

  
	
  EXHIBIT 11

  	
   

  	
  —

  	
   

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

  
	
  EXHIBIT 12

  	
   

  	
  —

  	
   

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

  

 

v

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

 

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

Section 1.               Definitions and Accounting
Matters.

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

 

“A&R Date” means August 1, 2007.

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

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

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

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

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

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

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

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

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

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

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

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

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

2

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

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

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

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

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

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

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

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

(6)           any
Permitted Investment;

(7)           a
disposition resulting from any Condemnation; and

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

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

3

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

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

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

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

 

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

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

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

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

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

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

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

4

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

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

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

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

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

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

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

“Capital Stock” means:

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

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

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

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

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

5

“Cash Equivalents”
means:

(a)           Dollars;

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

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

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

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

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

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

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

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

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

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

6

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

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

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

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

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

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

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

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

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

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

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

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

7

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

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

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

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

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

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

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

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

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

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

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

8

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

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

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

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

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

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

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

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

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

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

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

9

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

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

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

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

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

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

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

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

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

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

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

10

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

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

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

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

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

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

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

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

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

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

11

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

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

 

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

 

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

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

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

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

“Execution Date” means September 24, 2006.

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

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

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

12

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

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

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

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

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

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

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

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

“GLO” means the Texas General Land Office.

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

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

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

13

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

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

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

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

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

“ICE” means the Intercontinental Exchange or its successor.

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

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

(a)           in respect of borrowed money;

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

(c)           in respect of banker’s acceptances;

14

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

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

(f)            representing any Interest Hedging
Obligations; or

(g)           consisting of Disqualified Stock;

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

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

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

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

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

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

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

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

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

15

“Initial Effective Date” means December 1, 2006.

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

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

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

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

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

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

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

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

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

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

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

16

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

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

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

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

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

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

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

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

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

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

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

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

17

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

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

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

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

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

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

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

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

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

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

18

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

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

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

“ML Guarantee Provider” means ML&Co.

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

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

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

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

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

“MWh” means a megawatt hour of energy.

“MW” means one million watts.

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

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

19

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

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

 

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

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

 

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

 

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

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

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

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

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

 

20

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

“Permitted Investments” means:

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

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

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

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

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

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

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

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

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

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

 

21

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

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

“Permitted Liens” means:

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

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

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

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

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

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

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

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

22

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

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

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

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

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

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

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

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

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

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

23

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

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

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

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

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

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

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

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

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

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

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

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

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

24

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

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

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

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

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

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

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

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

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

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

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

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

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

25

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

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

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

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

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

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

 

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

“RECs” means renewable energy credits.

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

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

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

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

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

26

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

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

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

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

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

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

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

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

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

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

“Restricted Payment” means any of the following:

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

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

27

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

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

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

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

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

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

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

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

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

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

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

28

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

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

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

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

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

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

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

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

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

29

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

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

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

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

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

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

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

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

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

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

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

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

30

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

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

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

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

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

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

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

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

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

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

31

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

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

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

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

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

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

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

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

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

 

32

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

 

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

 

Section 2.               Credit Sleeve for Reliant
Retail Obligors

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

 

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

 

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

 

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

 

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

 

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

 

33

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

 

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

 

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

 

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

 

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

 

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

34

(b)           Exclusivity.

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

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

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

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

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

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

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

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

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

35

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

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

	
  Type of REC

  	
   

  	
  Quantity

  
	
  ERCOT

  	
   

  	
  100,000

  
	
  PJM Class I

  	
   

  	
  40,000

  
	
  PJM Class II

  	
   

  	
  60,000

  
	
  PJM Solar

  	
   

  	
  500

  
	
  PJM Green E (further described as of 

  the
  A & R Date at the following 

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

  	
   

  	
  30,000

  

 

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

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

36

2.02.        Credit
Sleeve of OTC Trading and Hedging Activities.

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

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

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

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

37

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

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

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

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

38

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

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

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

39

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

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

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

40

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

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

                                2.03.        Credit Sleeve of Exchange Traded
Hedging Activities.

 

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

 

41

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

 

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

 

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

 

42

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

 

                                2.06.        Term

 

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

 

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

 

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

 

                                Section
3.               Payments, Fees and
Records.

 

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

 

43

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

 

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

 

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

 

                                3.03.        Interest.

 

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

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

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

 

44

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

 

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

 

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

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

 

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

 

45

 

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

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

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

                                3.07.        Payments Generally.

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

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

                                3.08.        Records; Prima Facie Evidence.

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

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

46

                                Section
4.               Conditions.

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

 

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

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

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

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

 

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

 

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

 

47

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

 

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

 

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

 

                                5.05.        Financial
Statements; No Material Adverse Effect.

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

 

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

48

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

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

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

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

 

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

 

                                5.08.        Ownership of Property; Liens.

 

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

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

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

 

49

                                5.09.        Environmental Matters.

 

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

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

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

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

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

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

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

 

50

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

 

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

 

                                5.12.        ERISA Compliance.

 

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

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

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

51

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

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

 

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

 

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

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

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

 

52

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

 

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

 

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

 

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

 

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

 

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

 

53

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

 

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

 

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

 

 

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

 

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

 

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

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

54

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

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

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

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

 

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

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

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

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

55

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

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

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

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

                                6.03.        Notices.  Promptly notify the Sleeve Provider:

 

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

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

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

56

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

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

 

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

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

 

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

 

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

 

57

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

 

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

 

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

 

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

 

58

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

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

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

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

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

59

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

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

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

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

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

60

 

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

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

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

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

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

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

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

 

61

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

 

                                6.13.        Risk
Management Policy

 

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

 

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

 

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

 

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

 

62

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

63

accordance with the provisions of Exhibit E2.

 

                                6.14.        Employees.

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

 

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

 

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

 

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

 

                                6.17.        Reliant Parent Services Agreement.

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

 

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

 

64

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

 

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

 

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

 

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

 

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

 

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

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

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

65

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

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

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

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

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

                                7.04.        Consolidation and Mergers

 

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

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

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

66

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

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

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

                                7.05.        Asset Sales.

 

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

 

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

 

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

 

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

 

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

 

67

 

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

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

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

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

 

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

 

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

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

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

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

 

                                7.09.        Transactions with Affiliates.

 

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

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

68

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

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

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

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

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

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

                (vii)         the Reliant Parent Services Agreement;

                (viii)        the REES/REPS Power Purchase Agreement;

(ix)           the RES/REPS Power Purchase
Agreement;

(x)            the Channelview Services Agreement;

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

(xii)          the Intercompany Cash Management
Agreement;

(xiii)         any other Transaction Documents, and

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

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

 

69

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

 

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

 

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

 

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

 

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

 

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

 

70

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

 

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

 

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

 

                                Section 8.               Events of Default.

 

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

 

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

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

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

 

71

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

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

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

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

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

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

72

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

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

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

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

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

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

73

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

 

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

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

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

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

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

74

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

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

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

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

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

                                Section
9.               Remedies and
Termination.

 

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

 

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

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

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

75

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

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

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

                                9.02.        Remedies
of REPS.

 

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

 

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

 

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

 

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

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

 

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

 

76

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

 

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

 

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

 

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

 

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

 

                                9.03.        Certain
Intercreditor Agreements.

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

 

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

 

77

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

 

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

 

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

 

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

 

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

78

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

 

                                Section 10.             Unwind

 

                                10.01.                      Permitted
Activities during Unwind Period.

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

 

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

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

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

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

79

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

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

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

 

                                Section
11.             Reimbursement Guaranty
by Other Reliant Retail Parties 

 

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

 

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

 

80

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

 

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

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

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

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

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

81

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

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

 

82

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

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

 

83

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

 

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

 

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

 

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

 

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

 

84

                                11.10.                      Bankruptcy,
etc.

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

 

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

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

 

                                Section
12.             Miscellaneous.

 

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

 

85

(a)           if to the REPS:

 

 

RELIANT ENERGY POWER
SUPPLY, LLC

1000 Main Street

Houston, Texas  77002

Attention:  Andrew C. Johannesen

Telephone No.:  (713) 497-6417

Telecopy No.:    (713)
497-9289

E-Mail:  AJohannesen@reliant.com

 

with a copy to:

 

RELIANT ENERGY POWER SUPPLY, LLC

1000 Main Street

Houston, Texas 
77002

Attention: 
Michael L. Jines

Telephone No.: 
(713) 497-7465

Telecopy No.:    (713) 497-0140

E-Mail: 
MJines@reliant.com

 

 

(b)           if to the Sleeve Provider:

 

MERRILL LYNCH COMMODITIES,
INC.

20 East Greenway Plaza

Suite 700

Houston, Texas  77046

Attention:  Legal Department

Telephone No.:  (713) 544-5263

Telecopy No.:    (713)
544-5551

E-Mail:
reliantsleeve_notices@ml.com

 

(c)           if to the ML Guarantee Provider:

 

MERRILL LYNCH & CO., INC.

222 Broadway

17th Floor

New York, New York  10038

Attention:  Office of General Counsel

Telephone
No.:  (212) 670-0434

Telecopy No.:    (212)
670-4703

E-Mail:  reliantsleeve_notices@ml.com

 

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

86

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

 

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

 

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

 

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

 

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

 

87

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

 

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

 

 

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

 

 

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

 

88

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

 

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

 

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

 

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

 

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

 

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

 

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

 

89

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

90

                                12.07.      Expenses, Etc.

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

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

 

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

 

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

 

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

 

 

91

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

 

                                12.12.      Governing Law; Jurisdiction; Etc.

 

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

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

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

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

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

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

 

92

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

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

 

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

 

 

93

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

 

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

 

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

 

[signatures
follow]

 

 

 

 

 

 

94

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

 

	
  RELIANT ENERGY
  POWER SUPPLY, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Lloyd A.
  Whittington

  	
   

  
	
   

  	
  Lloyd A.
  Whittington

  	
   

  
	
   

  	
  Vice President
  and Treasurer

  	
   

  
				

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Credit Sleeve and Reimbursement
Agreement

 

 

 

 

	
  MERRILL PARTIES

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
    MERRILL
  LYNCH COMMODITIES, INC.,

  	
   

  
	
   

  	
  as Sleeve
  Provider

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Dennis
  Albrecht

  	
   

  
	
  Name:

  	
  Dennis Albrecht

  	
   

  
	
  Title:  

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  	
   

  
	
    MERRILL
  LYNCH & CO., INC.,

  	
   

  	
   

  
	
   

  	
  as ML Guarantee
  Provider

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Marlene
  Debel

  	
   

  
	
  Name:

  	
  Marlene Debel

  	
   

  
	
  Title:  

  	
  Assistant
  Treasurer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
									

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Credit Sleeve and Reimbursement
Agreement

 

 

 

                                                                                                OTHER
RELIANT RETAIL OBLIGORS

 

	
       

  	
  RERH HOLDINGS, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   /s/ Lloyd A. Whittington

  
	
   

  	
  Lloyd A.
  Whittington

  
	
   

  	
  Assistant
  Treasurer

  
	
   

  	
   

  
				

 

 

	
       

  	
  RELIANT ENERGY RETAIL HOLDINGS, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   /s/ Lloyd A. Whittington

  
	
   

  	
  Lloyd A.
  Whittington

  
	
   

  	
  Assistant
  Treasurer

  
	
   

  	
   

  
				

 

 

	
   

  	
  RELIANT ENERGY RETAIL SERVICES, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   /s/ Lloyd A. Whittington

  
	
   

  	
  Lloyd A.
  Whittington

  
	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  
				

 

 

	
       

  	
  RE RETAIL RECEIVABLES, LLC

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   /s/ Lloyd A. Whittington

  
	
   

  	
  Lloyd A.
  Whittington

  
	
   

  	
  Assistant
  Treasurer

  
	
   

  	
   

  
				

 

 

	
       

  	
  RELIANT ENERGY SOLUTIONS EAST, LLC

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   /s/ Lloyd A. Whittington

  
	
   

  	
  Lloyd A.
  Whittington

  
	
   

  	
  Vice President
  and Treasurer

  
	
   

  	
   

  
				

 

 

 

 

 

 

 

Signature Page to Credit Sleeve and Reimbursement
AgreementExhibit
10.1B

 

Schedules
and Exhibits to the

Credit Sleeve and Reimbursement Agreement

dated as of September 24, 2006,

as
amended and restated as of August 1, 2007

 

(Portions of this Exhibit have been
omitted

pursuant to a request for confidential treatment)

 

	
  SCHEDULE 1.01(a)

  	
  —

  	
  Risk
  Management Policy Violations

  
	
  SCHEDULE
  1.01(b)

  	
  —

  	
  Calculations
  Relating to Exchange Traded Contracts

  
	
  SCHEDULE
  1.01(c)

  	
  —

  	
  Determination
  of K and VaR

  
	
  SCHEDULE
  1.01(e)

  	
  —

  	
  Trademarks

  
	
  SCHEDULE
  1.01(f)

  	
  —

  	
  Credit
  Limit Approval Guidelines

  
	
  SCHEDULE
  2.01(b)

  	
  —

  	
  C&I
  Customer Wholesale Purchase Provisions

  
	
  SCHEDULE
  2.02(a)

  	
  —

  	
  Counterparty
  Document Negotiation Provisions

  
	
  SCHEDULE
  2.04

  	
  —

  	
  C&I
  Contracts and Governmental Contracts receiving ML Guarantee

  
	
  SCHEDULE
  3.04

  	
  —

  	
  Calculation
  and Settlement of Monthly Sleeve Fee

  
	
  SCHEDULE
  3.05

  	
  —

  	
  Calculation
  of Make-whole Payment

  
	
  SCHEDULE
  3.07(a)

  	
  —

  	
  Merrill
  Account

  
	
  SCHEDULE
  5.13

  	
  —

  	
  List
  of Subsidiaries

  
	
  SCHEDULE
  7.14

  	
  —

  	
  List
  of Retail Services

  
	
  SCHEDULE
  12.13

  	
  —

  	
  List
  of Calculation Agents

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  A1

  	
  —

  	
  Form
  of ML Guarantee for Accepted Counterparties

  
	
  EXHIBIT
  A2

  	
  —

  	
  Form
  of ML Guarantee for C&I Customers

  
	
  EXHIBIT
  B

  	
  —

  	
  List
  of Accepted Counterparties

  
	
  EXHIBIT
  C1

  	
  —

  	
  Form
  of EEI Power Purchase and Hedging Contract

  
	
  EXHIBIT
  C2

  	
  —

  	
  Form
  of ISDA Power Purchase and Hedging Contract

  
	
  EXHIBIT
  C3

  	
  —

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

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  C4

  	
  —

  	
  Form
  of RECs Purchase Contract for ERCOT

  
	
  EXHIBIT
  D1

  	
  —

  	
  Form
  of EEI Collateral Annex

  
	
  EXHIBIT
  D2

  	
  —

  	
  Form
  of ISDA Credit Support Annex

  
	
  EXHIBIT
  E1

  	
  —

  	
  Reliant
  Energy — Retail Risk Policy

  
	
  EXHIBIT
  E2

  	
  —

  	
  Hedge
  Limit Calculations

  
	
  EXHIBIT
  F

  	
  —

  	
  ERCOT
  Asset List

  
	
  EXHIBIT
  G

  	
  —

  	
  Form
  of Joinder Agreement

  
	
  EXHIBIT
  H

  	
  —

  	
  Form
  of Compliance Certificate

  
	
  EXHIBIT
  I1

  	
  —

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

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  I2

  	
  —

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

  
	
   

  	
   

  	
   

  

 

 

 

 

Schedule 1.01(a)

To Credit Sleeve
and Reimbursement Agreement

Risk Management Policy Violations

[***]

	
  ***

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

  

 

 

 

Schedule 1.01(b)

To Credit Sleeve and
Reimbursement Agreement

Calculations Relating to
Exchange Traded Contracts

 

Adjusted Volume:

 

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

 

	
  Period (Month)

  	
   

  	
  ETC Commodity

  Quantities

  	
   

  
	
  0

  	
   

  	
  Q0

  	
   

  
	
  1

  	
   

  	
  Q1

  	
   

  
	
  2

  	
   

  	
  Q2

  	
   

  
	
  3

  	
   

  	
  Q3

  	
   

  
	
  ...

  	
   

  	
  ...

  	
   

  
	
  ...

  	
   

  	
  ...

  	
   

  
	
  N

  	
   

  	
  QN

  	
   

  

 

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

 

	
  Period (Month)

  	
   

  	
  Adjusted Volume

  	
   

  
	
  0

  	
   

  	
  Q0 / AZP0

  	
   

  
	
  1

  	
   

  	
  Q1 / AZP1

  	
   

  
	
  2

  	
   

  	
  Q2 / AZP2

  	
   

  
	
  3

  	
   

  	
  Q3 / AZP3

  	
   

  
	
  ...

  	
   

  	
  ...

  	
   

  
	
  ...

  	
   

  	
  ...

  	
   

  
	
  N

  	
   

  	
  QN / AZPN

  	
   

  

 

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

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

 

Calculation of Adjusted Zero Curve:

 

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

 

“MCC Adder” shall be:

 

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

 

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

	
  ***

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

  

 

 

 

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

 

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

 

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

 

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

 

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

 

	
  Period (Month)

  	
   

  	
  Monthly Date

  	
   

  	
  Adjusted LIBOR

  Forward Curve

  	
   

  	
  Adjusted Zero

  Curve

  	
   

  
	
  0

  	
   

  	
   

  	
   

  	
  AL0 = 0

  	
   

  	
  AZP0 = 1

  	
   

  
	
  1

  	
   

  	
   

  	
   

  	
  AL1

  	
   

  	
  AZP1

  	
   

  
	
  2

  	
   

  	
   

  	
   

  	
  AL2

  	
   

  	
  AZP2

  	
   

  
	
  3

  	
   

  	
   

  	
   

  	
  AL3

  	
   

  	
  AZP3

  	
   

  
	
  ...

  	
   

  	
   

  	
   

  	
  ...

  	
   

  	
  ...

  	
   

  
	
  ...

  	
   

  	
   

  	
   

  	
  ...

  	
   

  	
  ...

  	
   

  
	
  ...

  	
   

  	
   

  	
   

  	
  ...

  	
   

  	
  ...

  	
   

  
	
  N

  	
   

  	
   

  	
   

  	
  ALN

  	
   

  	
  AZPN

  	
   

  

 

Treatment for Options:

 

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

	
  ***

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

  

 

 

 

Physical Exposure Management Fee:

 

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

 

 

 

 

Schedule 1.01(c)

To Credit Sleeve
and Reimbursement Agreement

Determination of K and VaR

[***]

	
  ***

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

  

 

 

 

6

 

 

Schedule 1.01(e)

To Credit Sleeve and Reimbursement Agreement

Trademarks

 

 

	
  NAME

  	
  OWNER

  	
  GOODS/SERVICES

  	
  REG.

  	
  APPL. #

  
	
  Energy Commander

  	
  RERH

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

  	
  2764995

  	
  76/263578

  
	
  Energy Commander

  	
  RERH

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

  	
  2813513

  	
  76/263577

  
	
  PowerZone

  	
  RERH

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

  Class 42. Sweepstake services.

  	
   

  	
  78/762804

  
	
  Your Houston Business

  	
  RERH

  	
  Class 16. Business magazines.

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

  	
  2865827

  	
  78/156502

  
	
  Power Card and Design

  	
  RERH

  	
  Class 35. Promoting the services of public libraries
  through sponsorship of library membership cards.

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

  	
  2428481

  	
  75/940944

  
	
  Reliant

  	
  IP Trust

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

  	
  3097811

  	
  78/622356

  
	
  Reliant

  	
  IP Trust

  	
  Class 39. Distribution and delivery of energy.

  	
  2886710

  	
  78/311694

  
	
  Reliant

  	
  IP Trust

  	
  Class 40. Production and generation of energy.

  	
  2886711

  	
  78/311695

  

 

 

 

 

	
  NAME

  	
  OWNER

  	
  GOODS/SERVICES

  	
  REG.

  	
  APPL. #

  
	
  Reliant Arena

  	
  IP Trust

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

  	
  2976601

  	
  76/195453

  
	
  Reliant Arena

  	
  IP Trust

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

  	
  2896040

  	
  76/195451

  
	
  Reliant Arena

  	
  IP Trust

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

  	
  2943295

  	
  76/195450

  
	
  Reliant Center

  	
  IP Trust

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

  	
  2897602

  	
  76/195564

  
	
  Reliant Center

  	
  IP Trust

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

  	
  2875207

  	
  76/195562

  
	
  Reliant Center

  	
  IP Trust

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

  	
  2926480

  	
  75/981963

  

 

 

 

 

	
  NAME

  	
  OWNER

  	
  GOODS/SERVICES

  	
  REG.

  	
  APPL. #

  
	
  Reliant Energy

  	
  IP Trust

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

  	
  3053512

  	
  78/451768

  
	
  Reliant Energy

  	
  IP Trust

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

  	
  3132302

  	
  78/622380

  
	
  Reliant Energy

  	
  IP Trust

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

  	
  3053513

  	
  78/451803

  
	
  Reliant Energy

  	
  IP Trust

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

  	
  3045140

  	
  78/451815

  
	
  Reliant Energy & Design

  	
  IP Trust

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

  	
  2747525

  	
  75/623509

  
	
  Reliant Energy & Design

  	
  IP Trust

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

  	
  2681501

  	
  75/623512

  
	
  Reliant Energy & Design

  	
  IP Trust

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

  	
  2895973

  	
  75/623308

  
	
  Reliant Energy & Design

  	
  IP Trust

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

  	
  2983403

  	
  75/623514

  

 

 

 

 

	
  NAME

  	
  OWNER

  	
  GOODS/SERVICES

  	
  REG.

  	
  APPL. #

  
	
  Reliant Energy & Design

  	
  IP Trust

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

  	
  2666766

  	
  75/623309

  
	
  Reliant Park

  	
  IP Trust

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

  	
  2897601

  	
  76/195468

  
	
  Reliant Park

  	
  IP Trust

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

  	
  2897600

  	
  76/195465

  
	
  Reliant Park

  	
  IP Trust

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

  	
  2884611

  	
  76/195473

  
	
  Reliant Park

  	
  IP Trust

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

  	
  2935264

  	
  76/195471

  
	
  Reliant Park

  	
  IP Trust

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

  	
  2933500

  	
  76/195470

  
	
  Reliant Stadium

  	
  IP Trust

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

  	
  2955241

  	
  76/195558

  
	
  Reliant Stadium

  	
  IP Trust

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

  	
  2929142

  	
  76/195448

  

 

 

 

 

	
  NAME

  	
  OWNER

  	
  GOODS/SERVICES

  	
  REG.

  	
  APPL. #

  
	
  Reliant Stadium

  	
  IP Trust

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

  	
  2929141

  	
  76/195445

  
	
  Reliant Stadium

  	
  IP Trust

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

  	
  2896039

  	
  76/195443

  
	
  Reliant Stadium

  	
  IP Trust

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

  	
  2729638

  	
  75/981391

  

 

 

 

 

Schedule 1.01(f)

To Credit Sleeve
and Reimbursement Agreement

Credit Limit Approval Guidelines

[***]

	
  ***

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

  

 

 

 

 

 

Schedule 2.01(b)

To Credit Sleeve and Reimbursement Agreement

C&I Customer Wholesale Purchase Provisions

 

[***]

	
  ***

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

  

 

 

 

 

Schedule 2.02(a)

To Credit Sleeve and Reimbursement Agreement

Counterparty Document Negotiation Provisions

 

[***]

	
  ***

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

  

 

 

 

 

Schedule 2.04

To Credit Sleeve and Reimbursement Agreement

C&I Contracts and Governmental Contracts Receiving ML Guarantee

 

[***]

	
  ***

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

  

 

 

 

 

Schedule 3.04

To Credit Sleeve and
Reimbursement Agreement

Calculation and Settlement of Monthly Sleeve Fee

 

 

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

 

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

 

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

 

(i)            Monthly Initial Settlement
Calculation:

 

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

 

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

 

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

 

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

 

 

 

 

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

 

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

 

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

 

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

 

(ii)           Monthly Final Settlement
Calculation:

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

 

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

 

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

 

(B)           REPS shall provide to the Sleeve
Provider:

 

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

 

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

 

Annex A to
Schedule 3.04

To Credit Sleeve and Reimbursement Agreement

 

 

 

Certain
Adjustments to the Sleeve Fee Factor

 

 

Sleeve
Fee Increase Zones

 

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

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

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

  

 

 

 

 

Schedule 3.05

To Credit Sleeve and Reimbursement Agreement

Calculation of Make-whole Payment

 

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

 

 

 

 

 

Schedule 3.07(a)

To Credit Sleeve and Reimbursement Agreement

Merrill Account

 

JP Morgan Chase

ABA 021000021

Account Number# [***]

Account Name Merrill Lynch Commodities, Inc.

 

	
  ***

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

  

 

 

 

Schedule 5.13

To Credit Sleeve and Reimbursement Agreement

List of Subsidiaries

 

Equity investment

 

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

 

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

a.               1,000 units of the membership interest of Reliant
Energy Retail Services, LLC

b.              1,000 units of the membership interest of Reliant
Energy Power Supply, LLC

c.               1,000 units of the membership interest of Reliant
Energy Solutions East, LLC

 

3.               Reliant Energy Retail Services, LLC’s ownership of
1,000 units of the membership interest of RE Retail Receivables, LLC

 

	
   

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Organizational/Taxpayer

  Identification Number

  	
   

  
	
  RERH Holdings,
  LLC

  	
   

  	
  Delaware

  	
   

  	
  4191623/20-5222227

  	
   

  
	
  Reliant Energy
  Retail Holdings, LLC

  	
   

  	
  Delaware

  	
   

  	
  3279845/76-0655580

  	
   

  
	
  Reliant Energy
  Retail Services, LLC

  	
   

  	
  Delaware

  	
   

  	
  3279840/76-0655567

  	
   

  
	
  R E Retail
  Receivables, LLC

  	
   

  	
  Delaware

  	
   

  	
  3531400/41-2046596

  	
   

  
	
  Reliant Energy
  Power Supply, LLC

  	
   

  	
  Delaware

  	
   

  	
  4142914/20-4823108

  	
   

  
	
  Reliant Energy
  Solutions East, LLC

  	
   

  	
  Delaware

  	
   

  	
  3487883/46-0471983

  	
   

  

 

Address of principal
place of business for all of the above:

1000 Main Street

Houston, Texas  77002

 

 

 

Schedule 7.14

To Credit Sleeve and Reimbursement Agreement

List of Retail Services

 

 

[***]

	
  ***

  	
  The content of this
  Schedule 7.13 (consisting of 3 pages) has been omitted and filed separately with
  the Securities and Exchange Commission. Confidential treatment has been
  requested with respect to the omitted portions.

  

 

 

 

Schedule 12.13

To Credit Sleeve and Reimbursement Agreement

List of Calculation Agents

 

[***]

	
  ***

  	
  The content of this
  Schedule 12.13 (consisting of 1 page) has been omitted and filed separately
  with the Securities and Exchange Commission. Confidential treatment has been
  requested with respect to the omitted portions.

  

 

 

 

Exhibit A1

To Credit Sleeve and Reimbursement Agreement

Form of ML Guarantee for Accepted Counterparties

 

 

GUARANTEE OF MERRILL LYNCH & CO., INC.

WHEREAS, Reliant Energy
Power Supply, LLC, a Delaware limited liability company (“REPS”), and certain
of its affiliates have entered into an agreement with Merrill Lynch
Commodities, Inc., a corporation duly organized and existing under the laws of
the State of Delaware (“MLCI”), and its parent, Merrill Lynch & Co., Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (“ML & CO.”), related to an enhanced credit structure for the
retail electric business of REPS and its affiliates;

WHEREAS, as part of the
consideration for the above described agreement, ML & Co. has agreed to
issue this Guarantee, guarantying the obligations of REPS under the Agreement
described below, consistent with the terms and conditions set forth below.

FOR VALUE RECEIVED,
receipt of which is hereby acknowledged, ML & CO. hereby unconditionally
guarantees to [                  ] (the “Company”), the due and
punctual payment of any and all amounts payable by REPS, its successors and
permitted assigns, to the extent such successors or permitted assigns are
direct or indirect subsidiaries of RERH Holdings, LLC, a Delaware limited
liability company, under the terms of the [EEI/ISDA]  Master Agreement between the Company and
REPS, dated as of [                 ],
2006 (the “Agreement”), including, in case of default, interest on any amount
due, when and as the same shall become due and payable, whether on the
scheduled payment dates, at maturity, upon declaration of termination or
otherwise, according to the terms thereof. 
In case of the failure of REPS punctually to make any such payment, ML
& Co. hereby agrees to make such payment, or cause such payment to be made,
promptly upon demand made by the Company to ML & Co.; provided, however
that delay by the Company in giving such demand shall in no event affect ML
& Co.’s obligations under this Guarantee. 
This Guarantee shall remain in full force and effect or shall be reinstated
(as the case may be) if at any time any payment guaranteed hereunder, in whole
or in part, is rescinded or must otherwise be returned by the Company upon the
insolvency, bankruptcy or reorganization of REPS or otherwise, all as though
such payment had not been made.

ML & Co. hereby
agrees that its obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Agreement; the absence of any
action to enforce the same; any waiver or consent by the Company concerning any
provisions thereof; the rendering of any judgment against REPS or any action to
enforce the same; or any other circumstances that might otherwise constitute a
legal or equitable discharge of a guarantor or a defense of a guarantor.  ML & Co. covenants that this guarantee
will not be discharged except by complete payment of the amounts payable under
the Agreement.  This Guarantee shall
continue to be effective if REPS merges or consolidates with or into another
entity, loses its separate legal identity or ceases to exist.

ML & Co. hereby
waives diligence; presentment; protest; notice of protest, acceleration, and
dishonor; filing of claims with a court in the event of insolvency or
bankruptcy of REPS; all demands whatsoever, except as noted in the first
paragraph hereof; and any right to require a proceeding first against REPS.

ML & Co. hereby
certifies and warrants that this Guarantee constitutes the valid obligation of
ML & Co. and complies with all applicable laws.  This Guarantee guarantees only payment
obligations of REPS and does not guarantee the performance of any other
obligations of, including, but not limited to, physical delivery or, to the
extent applicable, reporting obligations of REPS.  This Guarantee constitutes a guarantee of payment
and not of collection.

This Guarantee shall be
governed by, and construed in accordance with, the law of the State of New
York.

 

 

This Guarantee may be
terminated at any time by notice by ML & Co. to the Company given in
accordance with the notice provisions of the Agreement, effective upon receipt
of such notice by the Company or such later date as may be specified in such
notice; provided, however, that this Guarantee shall continue in full force and
effect, and shall be irrevocable, with respect to any payment obligation of
REPS arising under any Transaction under and as defined in the Agreement
entered into prior to the effectiveness of such notice of termination.

This Guarantee becomes
effective upon written notice to such effect from ML & Co., or MLCI on its
behalf, to the Company given in accordance with the notice provisions of the
Agreement making specific reference to this Guarantee and the Agreement.

IN WITNESS WHEREOF, ML
& Co. has caused this Guarantee to be executed in its corporate name by its
duly authorized representative.

 

	
   

  	
  MERRILL LYNCH & CO., INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

 

 

Exhibit A2

To Credit Sleeve and
Reimbursement Agreement

Form of ML Guarantee for
C&I Customers

 

 

GUARANTEE OF MERRILL LYNCH & CO., INC.

WHEREAS, [Reliant Energy Retail Services, LLC][Reliant
Energy Solutions East, LLC], a Delaware limited liability company (“[RERS][RESE]”),
and certain of its affiliates have entered into an agreement with Merrill Lynch
Commodities, Inc., a corporation duly organized and existing under the laws of
the State of Delaware (“MLCI”), and its parent, Merrill Lynch & Co., Inc.,
a corporation duly organized and existing under the laws of the State of
Delaware (“ML & CO.”), related to an enhanced credit structure for the
retail electric business of [RERS][RESE] and its affiliates;

WHEREAS, as part of the consideration for the above
described agreement, ML & Co. has agreed to issue this Guarantee,
guarantying the obligations of [RERS][RESE] under the Agreement described
below, consistent with the terms and conditions set forth below.

FOR VALUE RECEIVED, receipt of which is hereby
acknowledged, ML & CO. hereby unconditionally guarantees to [                       ] (the “Company”), the due and
punctual payment of any and all amounts payable by [RERS][RESE], its successors
and permitted assigns, to the extent such successors or permitted assigns are
direct or indirect subsidiaries of RERH Holdings, LLC, a Delaware limited
liability company, under the terms of the [Contract] between
the Company and [RERS][RESE], dated as of [                 ]
(the “Agreement”), including, in case of default, interest on any amount due,
when and as the same shall become due and payable, whether on the scheduled
payment dates, at maturity, upon declaration of termination or otherwise,
according to the terms thereof.  In case
of the failure of [RERS][RESE] punctually to make any such payment, ML &
Co. hereby agrees to make such payment, or cause such payment to be made,
promptly upon demand made by the Company to ML & Co.; provided, however
that delay by the Company in giving such demand shall in no event affect ML
& Co.’s obligations under this Guarantee. 
This Guarantee shall remain in full force and effect or shall be
reinstated (as the case may be) if at any time any payment guaranteed
hereunder, in whole or in part, is rescinded or must otherwise be returned by
the Company upon the insolvency, bankruptcy or reorganization of [RERS][RESE]
or otherwise, all as though such payment had not been made.

ML & Co. hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Agreement; the absence of any action to enforce the same;
any waiver or consent by the Company concerning any provisions thereof; the
rendering of any judgment against [RERS][RESE] or any action to enforce the
same; or any other circumstances that might otherwise constitute a legal or
equitable discharge of a guarantor or a defense of a guarantor.  ML & Co. covenants that this guarantee
will not be discharged except by complete payment of the amounts payable under
the Agreement.  This Guarantee shall
continue to be effective if [RERS][RESE] merges or consolidates with or into
another entity, loses its separate legal identity or ceases to exist.

ML & Co. hereby waives diligence; presentment;
protest; notice of protest, acceleration, and dishonor; filing of claims with a
court in the event of insolvency or bankruptcy of [RERS][RESE]; all demands
whatsoever, except as noted in the first paragraph hereof; and any right to
require a proceeding first against [RERS][RESE].

ML & Co. hereby certifies and warrants that this
Guarantee constitutes the valid obligation of ML & Co. and complies with
all applicable laws.  This Guarantee
guarantees only payment obligations of [RERS][RESE] and does not guarantee the
performance of any other obligations of, including, but not limited to,
physical delivery or, to the extent applicable, reporting obligations of
[RERS][RESE].  This Guarantee constitutes
a guarantee of payment and not of collection.

This Guarantee shall be governed by, and construed in
accordance with, the law of the State of New York.

 

 

 

This Guarantee becomes
effective upon written notice to such effect from ML & Co., or MLCI on its
behalf, to the Company (which notice may be given by e-mail) making specific
reference to this Guarantee and the Agreement.

IN WITNESS WHEREOF, ML
& Co. has caused this Guarantee to be executed in its corporate name by its
duly authorized representative.

 

	
   

  	
  MERRILL LYNCH & CO., INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

 

 

 

Exhibit B

To Credit Sleeve
and Reimbursement Agreement

List of Accepted
Counterparties

[***]

	
  ***

  	
  The content of this
  Exhibit B (consisting of 6 pages) has been omitted and filed separately with
  the Securities and Exchange Commission. Confidential treatment has been
  requested with respect to the omitted portions.

  

 

 

 

 

Exhibit C1

To Credit Sleeve
and Reimbursement Agreement

Form of EEI Power
Purchase and Hedging Contract

 

MASTER
POWER PURCHASE AND SALE AGREEMENT

COVER SHEET

This Master Power
Purchase and Sale Agreement (“Master Agreement”)
is made of the following date:                   
(“Effective Date”).  The Master Agreement, together with the exhibits, schedules and
any written supplements hereto, the Party A Tariff, if any, the Party B Tariff,
if any, any designated collateral, credit support or margin agreement or
similar arrangement between the Parties and all Transactions (including any
confirmations accepted in accordance with Section 2.3 hereto) shall be referred
to as the “Agreement.”  The Parties to
this Master Agreement are the following:

	
  Name: 
  Reliant Energy Power Supply, LLC (“REPS” or “Party A”)

  	
  Name: 
  __________ (“_____” or “Party B”)

  
	
   

  	
   

  
	
  All
  Notices:

  	
  All
  Notices:

  
	
   

  	
   

  
	
  Street:
  1000 Main St., Suite 1100, Houston, 77002

  	
  Street:                                                   

  
	
   

  	
   

  
	
  P. O. Box 4455

  City:   Houston, TX               Zip: 77210-4455

  	
   

  City: _______________ Zip:
  _______________

  
	
   

  	
   

  
	
  Attn: Contract
  Administration

  Phone:  (713) 497-5855

  Facsimile:  (713) 497-9562

  Duns:  623988644

  Federal Tax ID Number:  204823108

  With a copy to:

   

  Merrill Lynch Commodities, Inc.

  20 East Greenway Plaza, 7th Floor

  Houston, Texas 77253-3327

  Attn:  Legal

  Phone: 713-544-4975

  Facsimile:  713-544-5551

  	
  Attn: Contract
  Administration

  Phone:                                                  

  Facsimile:                                             

  Duns:                                                    

  Federal Tax ID Number:                     

  
	
   

  	
   

  
	
  Invoices:

  Attn:  ERCOT Settlement Accounting, 11th
  Floor

  Phone:  (713) 497-4402

  Facsimile:  (713) 497-0098

  	
  Invoices:

  Attn:                                              

  Phone:                                           

  Facsimile:                                      

  
	
   

  	
   

  
	
  Scheduling:

  Attn:  ERCOT 24 Hour Scheduling

  Phone:  (713) 497-1144

  Facsimile:  (713) 497-0098

  	
  Scheduling:

  Attn:                                              

  Phone:                                           

  Facsimile:                                      

  
	
   

  	
   

  
	
  Payments:

  Attn:   ERCOT Settlement Accounting, 11th
  Floor

  Phone:   (713) 497-4402

  Facsimile:  (713) 497-0098

  	
  Payments:

  Attn:                                              

  Phone:                                           

  Facsimile:                                      

  

 

 

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  Wire
  Transfer:

  BNK:     Mellon Bank — Pittsburgh, PA

  ABA:     043 000 261  

  ACCT:   1194193

  	
  Wire
  Transfer:

  BNK:                                              

  ABA:                                             

  ACCT:                                           

  
	
   

  	
   

  
	
  Credit
  and Collections:

  Attn:  Credit Risk Management

  Phone:  (713) 497-1052

  Facsimile:  (713) 497-1058

  	
  Credit
  and Collections:

  Attn:                                              

  Phone:                                           

  Facsimile:                                      

  
	
   

  	
   

  
	
  With additional Notices of an Event of Default or Potential Event of
  Default to:

  Attn: Vice
  President and General Counsel —Trading, Suite 2100

  Phone: (713) 497-7063

  Facsimile: (713) 537-7063

   

  	
  With additional Notices
  of an Event of Default or Potential Event of Default to:

  Attn:                                              

  Phone:                                           

  Facsimile:                                      

  

 

The Parties hereby agree
that the General Terms and Conditions are incorporated herein, and to the
following provisions as provided for in the General Terms and Conditions:

Party A
Tariff:  FERC Electric Tariff, Original
Volume No. 1 Dated:  September 19,
2006  Docket Number:  ER06-1272

Party B
Tariff:   Tariff                                                            Dated                                        Docket Number                                

	
  Article Two

  	
   

  
	
   

  	
   

  
	
  Transaction Terms and
  Conditions

  	
  x Optional provision in Section
  2.4.   If not checked, inapplicable.

  
	
  Article Four

  	
   

  
	
   

  	
   

  
	
  Remedies for Failure 

  to Deliver or Receive

  	
  x Accelerated Payment of Damages. If not
  checked, inapplicable.

  
	
  Article Five

  	
  x Cross Default for Party A:

  
	
   

  	
   

  
	
  Events of Default;
  Remedies

  	
  o Party A:                                        

  	
  Cross Default
  Amount $                    

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  x  Other Entity:  Merrill Lynch &   
       Co., Inc. (“ML& Co.”)

  	
  Cross Default
  Amount:  $100,000,000

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  x 
  Cross Default for Party B:

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  o 
  Party B:                                       

  	
  Cross Default
  Amount $                    

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  o 
  Other Entity:                               

  	
  Cross Default
  Amount $                    

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  5.6 
  Closeout Setoff

  
	
   

  	
   

  
	
   

  	
  x   Option
  A (Applicable if no other selection is made.) 
  As amended in Paragraph 10.

  o    Option
  B — Affiliates shall have the meaning set forth in the Agreement unless
  otherwise specified as follows:  With
  respect to Party A, _________; with respect to Party B, ____________.

  

 

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  o    Option
  C (No Setoff)

  
	
  Article 8

  	
  8.1  Party
  A Credit Protection:

  
	
   

  	
   

  
	
  Credit and Collateral
  Requirements

  	
  (a) 
  Financial Information:

  
	
   

  	
   

  
	
   

  	
  o    Option
  A

  o    Option
  B   Specify: ________________

  o    Option
  C   Specify:                                       

  So long as such
  Financial Information is publicly available through the Securities Exchange
  Commission’s EDGAR database or such similar database maintained by the
  Securities Exchange Commission, Party B shall not be required to deliver such
  Financial Information directly to Party A.

  
	
   

  	
   

  
	
   

  	
  (b) 
  Credit Assurances:

  
	
   

  	
   

  
	
   

  	
  x   Not
  Applicable

  o    Applicable

  
	
   

  	
   

  
	
   

  	
  (c) 
  Collateral Threshold:  If
  applicable, the provisions of Section 8.1 (c) of the Master Agreement shall
  be replaced by the provisions of the Collateral Annex attached hereto.

  
	
   

  	
   

  
	
   

  	
  o    Not
  Applicable

  x   Applicable

  
	
   

  	
   

  
	
   

  	
  (d) 
  Downgrade Event:

  
	
   

  	
   

  
	
   

  	
  x   Not
  Applicable

  o    Applicable

  
	
   

  	
   

  
	
   

  	
  (e)  Guarantor for Party B:                                                                                       

  
	
   

  	
   

  
	
   

  	
  Guarantee Amount:  The amount, if any, referenced in the

  Guaranty provided by
  [CP Guarantor], which shall be in the form of Exhibit B, attached hereto.

  
	
   

  	
   

  
	
   

  	
  8.2  Party B Credit Protection:

  
	
   

  	
   

  
	
   

  	
  (a) 
  Financial Information:

  
	
   

  	
   

  
	
   

  	
  o    Option
  A

  x   Option
  B   Specify:  ML&Co.                                           o        Option
  C   Specify:                                       

  So long as such
  Financial Information is publicly available through the Securities Exchange
  Commission’s EDGAR database or such similar database maintained by the
  Securities Exchange Commission, Party A shall not be required to deliver such
  Financial Information directly to Party B.

   

  

 

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  (b) 
  Credit Assurances:

  
	
   

  	
   

  
	
   

  	
  x   Not
  Applicable

  o    Applicable

  
	
   

  	
   

  
	
   

  	
  (c) 
  Collateral Threshold:   If
  applicable, the provisions of Section 8.2 (c) of the Master Agreement shall
  be replaced by the provisions of the Collateral Annex attached hereto.

  
	
   

  	
  o    Not
  Applicable

  x   Applicable

  
	
   

  	
   

  
	
   

  	
  (d) 
  Downgrade Event:

  
	
   

  	
   

  
	
   

  	
  x   Not
  Applicable

  o    Applicable

  
	
   

  	
   

  
	
   

  	
  (e)  Guarantor for Party A: ML&Co.

  
	
   

  	
   

  
	
   

  	
  Guarantee Amount:  The amount, if any, referenced in the
  Guaranty issued by ML&Co., which shall be in the form of Exhibit A
  attached hereto.

  
	
   

  	
   

  
	
  Article 10

  	
   

  
	
   

  	
   

  
	
  Confidentiality

  	
  x 
  Confidentiality Applicable

  	
  If not checked,
  inapplicable.

  
	
   

  	
   

  	
   

  
	
  Schedule M

  	
   

  
	
   

  	
   

  
	
   

  	
  o 
  Party A is a Governmental Entity or Public Power System

  
	
   

  	
  o  Party B is a Governmental Entity or Public
  Power System

  
	
   

  	
  o 
  Add Section 3.6.  If not
  checked, inapplicable

  
	
   

  	
  o 
  Add Section 8.6.  If not
  checked, inapplicable

  

 

	
  Other Changes:  
  Yes

  	
   

  

Article
One:  General Definitions

Section 1.12, “Credit Rating” shall be deleted.  “Credit Rating” shall have the meaning given
in the Collateral Annex.

The following definitions are amended as set forth below:

1. Section 1.1 is revised
to add the following at the end of such section: “Notwithstanding the
foregoing, “Affiliate” means, with respect to Party A, RERH Holdings, LLC, and
any subsidiary thereof, including Reliant Energy Retail Holdings, LLC, and
Reliant Energy Retail Services, LLC,  and
with respect to Party B,                          
[if we know the Affiliates then fill in blank and if not use “Affiliate”] shall
have the meaning given in the first two sentences of this definition..”

2.  Section 1.50 is amended to delete the
reference to Section “2.4” and add “2.5”.

3.  Section 1.51 is amended to add the phrase “for
delivery” immediately before the phrase “at the Delivery Point” in the second
line.

4.  Section 1.53 is amended to (i) delete the
phrase “at the Delivery Point” from the second line and (ii) insert after the
phrase “commercially reasonable manner” in the sixth line, the following phrase
“; provided, however if the Seller is unable after using commercially
reasonable efforts to resell all or a portion of the Product not received by
Buyer, the Sales Price with respect to such unsold Product shall be deemed
equal to zero (0)”.

The following
shall be added as a new definition:

““1.62  Merger Event” means, with respect to a Party or its
Guarantor, as applicable, that such Party or its Guarantor consolidates
or amalgamates with, or merges with or into, or transfers all or substantially
all its assets to, or reorganizes, reincorporates or reconstitutes into or as,
another entity and, at the time of such consolidation, 

 

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amalgamation, merger,
transfer, reorganization, reincorporation or reconstitution:

 

(l)            the resulting, surviving or
transferee entity fails to assume all the obligations of such Party or its
Guarantor under this Agreement to which it or its predecessor was a party; or

(2)           the benefits of any Guaranty fails to
extend (without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under this
Agreement.”

Article Two: 
Transaction Terms and Conditions

Section 2.4 is amended by
deleting the words “either orally or” after the words “agreed to” in line
seven.

Section 2.5 is amended by adding the words “regarding
any Transaction and the terms thereof” after the word “Parties” in line three.

Article Four: 
Remedies for Failure to Deliver/Receive

The following is added as
a new Section 4.3:

“4.3   Suspension of Performance.  Notwithstanding, and in addition to the
remedies provided pursuant to Sections 4.1 and 4.2, if Seller or Buyer fails to
schedule and/or deliver/receive all or part of the Product pursuant to a
Transaction, and such failure is not excused under the terms of the Product or
by the other Party’s failure to perform, then upon one (1) Business Day prior
notice, and for so long as the non-performing Party fails to perform, the
performing Party shall have the right to suspend its performance under any or
all Transactions.”

Article Five:  Events of Default; Remedies

Section 5.1(e) is
amended by deleting “hereof;” and replacing it with the following: “and the
Collateral Annex if such failure is not remedied within two (2) Business Days
after written notice”.

Section 5.1(f) is
amended in its entirety as follows:  “a
Merger Event occurs with respect to such Party or its Guarantor;”.

Section 5.1(h)(ii)
is amended to delete the following phrase from the third and fourth line
thereof:  “and such failure shall not be
remedied within three (3) Business Days after written notice”.

The
following is added as an additional Event of Default under Section 5.1:

“Section 5.1(i) an event of default occurs (howsoever determined) with
respect to such Party under any agreement between Party A and Party B under any
forward contract, swap agreement or commodities contract (whether financially
or physically settled) (collectively a “Specified Transaction”), in each case
as defined in the United States Bankruptcy Code, and after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation of,
an acceleration of obligations under, or an early termination of that Specified
Transaction.”

Section 5.2 is
amended to (i) reverse the placement of “(i) and “to” in line three, and  (ii) delete the parenthetical beginning, (“or
to the extent that in the reasonable opinion” through the rest of Section 5.2
and replace with the following:  “(it being
understood, that to the extent in the reasonable opinion of the Non-Defaulting
Party any of the Terminated Transactions may not be liquidated and terminated
under applicable law on the Early Termination Date, then such Terminated
Transactions shall be liquidated and terminated as soon thereafter as is
reasonably practicable).   The
Non-Defaulting Party (or its agent) may determine its Gains and Losses by
reference to information either available to it internally or supplied by one
or more third parties including, without limitation, quotations (either firm or
indicative) of relevant rates, prices, yields, yield curves, volatilities,
spreads or other relevant market data in the relevant markets.  Third parties supplying such information may
include, without limitation, dealers in the relevant markets, information
vendors and other sources of market information.”

Article Seven:  Limitations

Section 7.1 shall
be amended by: (a) deleting “Except as set forth herein” from the first
sentence and “Unless expressly herein provided” from the fifth sentence, (b)
adding “Notwithstanding anything in this Agreement to the contrary” to the
beginning of the fifth sentence, and “set forth in this Agreement” after “indemnity
provision” and before “or otherwise”, also in the fifth sentence, and (c)
adding the following language after the word “Equity” in the 

 

 

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fourth sentence: “(except
for the remedies provided by the Uniform Commercial Code for claims of
anticipatory repudiation)”.

Article Ten:  Miscellaneous

Section 10.2 (vi) is amended to add the phrase “except as disclosed in
each parties’ or its Guarantor’s, as applicable, SEC filing” at the end of the
sentence in Section 10.2.

Section 10.2 (ix) is amended to read in its entirety as follows:

“(ix) it acknowledges and agrees that (A) Transaction(s) constitute “forward
contracts” within the meaning of title 11 of the United States Code (the “Bankruptcy Code”); (B) each of Party A
and Party B is a “forward contract merchant” within the meaning of the
Bankruptcy Code with respect to any Transactions that constitute “forward
contracts”; (C) all payments made or to be made by one Party to the other Party
pursuant to this Agreement constitute “settlement payments” within the meaning
of the Bankruptcy Code; (D) all transfers of Performance Assurance by one Party
to the other Party under this Agreement constitute “margin payments” within the
meaning of the Bankruptcy Code; (E) each Party’s rights under Section 5.2, “Declaration
of an Early Termination Date and Calculation of Settlement Amounts”, of this
Agreement constitutes a “contractual right to liquidate” the Transactions
within the meaning of the Bankruptcy Code; and (F) the other party is not a “utility”
as such term is used in Section 366 of the Bankruptcy Code, and each party
agrees to waive and not to assert the applicability of the provisions of
Section 366 in any bankruptcy proceeding wherein such Party is a debtor. In any
such proceeding, each party further agrees to waive the right to assert that
the other party is a provider of last resort;”

 

Section 10.4 is amended to add the phrase “unless a Claim is due to
such Party’s gross negligence or willful misconduct” at the end of the first
sentence of Section 10.4.

Section 10.5 is amended
to (i) add the words “shall not be unreasonably withheld or delayed” after the
words “which consent” in the second line; (ii) delete the words “may be
withheld in the exercise of its sole discretion” in the second and third line;
(iii) delete subparagraphs (i) and (ii) in their entirety from the fourth
through sixth lines; and (iv) delete “or (iii)” from the eighth line.”

Section 10.11 is amended to (i)add “Merrill Lynch Commodities, Inc. or”
after the word “than” in the third line; 
(ii) add the following phrase after the word “lenders”: “and their
counsel and advisors”; (iii) add the following after the word “accountants”: “Guarantor”;
and (iv) add the following to the end of the paragraph:  “The Parties hereby acknowledge that the
disclosure of price data only without counterparty name does not contravene
this Section 10 so long as the data is disclosed to an index publisher that
publishes the data in aggregated form and does not identify the Parties.”

 

The following shall be
added as a new Section 10.12:

“10.12  With respect to any suit, action or
proceedings relating to this Agreement, each Party irrevocably submits to the
non-exclusive jurisdiction of the courts of the State of New York and the
United States District Court located in the borough of Manhattan in New York
City and waives any objection it may have at any time to the laying of venue of
any such proceedings brought in any such court, waives any claim that such
proceedings have been brought in any inconvenient forum and further waives the
right to object, with respect to such proceedings, that such court does not
have any jurisdiction over such Party. 
EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT.”

The following shall be
added as a new Section 10.13:

“10.13  From the date of entering
into a Transaction under this Master Agreement and throughout the term of such
Transaction, the Parties each warrant and covenant as follows:

(a)     Absent the agreement of all Parties to the
proposed change, the standard of review for changes to any section of this
Master Agreement (including all Transactions and/or Confirmations) specifying
the rate(s) or other material economic terms and conditions agreed to by the
Parties herein, whether proposed by a Party, a non-party or FERC acting sua
sponte, shall be the “public interest” standard of review set forth in United
Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal
Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956)( the “Mobile-Sierra”
doctrine).

 

 

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(b)     The Parties, for themselves and their
successors and assigns, (i) agree that this “public interest” standard shall
apply to any proposed changes in any other documents, instruments or other
agreements executed or entered into by the Parties in connection with this
Master Agreement and (ii) hereby expressly and irrevocably waive any rights
they can or may have to the application of any other standard of review,
including the “just and reasonable” standard.”

(c)     With respect to Transactions in ERCOT,
absent the agreement of all Parties to the proposed change, the standard of
review for changes to any portion of this Master Agreement or any Transaction
entered into hereunder proposed by a Party, a non-party, or the Public Utility
Commission of Texas acting sua sponte,
shall be the “public interest” standard of review set forth in High Plains Natural Gas Co. v. Railroad Commission,
Tex. Cov. Appl. — Austin 1971, writ ref d
n.r.e.)(the “High Plains” doctrine).”

 

The
following shall be added as a new Section 10:14:

“10.14  Credit Sleeve Provisions:

(a)     Consent to
Assignment.  Party B hereby
consents to the assignment by Party A to Merrill Lynch Commodities, Inc. and
Merrill Lynch & Co., Inc (together, the “Merrill Parties”) of all of Party A’s
rights under this Agreement, including all rights to receive payments from
Party B under this Agreement (any such payment, a “Receivable”),
as collateral security for Party A’s obligations to the Merrill Parties in
connection with an enhanced credit structure for Party A’s retail electric
business provided by the Merrill Parties (the “Collateral Assignment”).

 

(b)     Collateral Account.  Party A hereby unconditionally and
irrevocably authorizes and directs Party B to make, and, unless and until
otherwise required by law or this agreement is terminated, Party B hereby
agrees to make, any and all payments in respect of Receivables directly by wire
transfer to the account specified in this Cover Sheet (the “Collateral Account”).  All such payments by Party B to the
Collateral Account shall be free and clear of any deduction, set-off, netting
arrangements or counterclaim, except as expressly provided in this Agreement.

 

(c)     Notice & Right to Cure Events of Default.  As set forth above, the Merrill Parties shall
be provided with all notices under this Agreement, including notices of any
Potential Event of Default or Event of Default hereunder.  In the event of a Potential Event of Default
or Event of Default in which Party A is, or may become, the Defaulting Party,
the Merrill Parties shall be permitted, at their option, to cure such default, [(if such event of default is capable
of being cured by either Merrill Party [TO BE USED AS FALLBACK])] within
any grace period applicable to Party A for  such
Potential Event of Default or Event of Default.”

Additional
Provisions:

The following
provisions shall be added to Schedule P: Products and Related Definitions:

“1.  Other Products and Service Levels.

        If the Parties agree to a service level defined by a
different agreement (i.e., the WSPP agreement, the ERCOT agreement, etc.) for a
particular Transaction, then, unless the Parties expressly state and agree that
all the terms and conditions of such other agreement will apply, such reference
to a service level/product defined by such other agreement means that the
service level for that Transaction is subject to the applicable regional
reliability requirements and guidelines as well as the excuses for performance,
Force Majeure, Uncontrollable Forces, or other such excuses applicable to
performance under such other agreement, to the extent inconsistent with the
terms of this Agreement, but all other terms and conditions of this Agreement remain
applicable including, without limitation, Section 2.2.

 2.   Index Transactions. If the
Contract Price for a Transaction is determined by reference to a third-party
information source, then the following provisions shall be applicable to such
Transaction.

(a)   Market Disruption. If a Market
Disruption Event occurs during a Determination Period, the Floating Price for
the affected Trading Day(s) shall be the fallback reference price specified by
the Parties if the Parties have specified such a fallback reference price.  If the Parties did not specify a fallback
reference price the Floating Price shall be determined by reference to the
Floating Price specified in the Transaction for the first Trading Day
thereafter on which no Market Disruption Event exists; provided, however, if
the Floating Price is not so determined within three (3) Business Days after
the first Trading Day on which the Market Disruption Event occurred or existed,
then the Parties shall negotiate in good faith to agree on a Floating Price (or
a method for determining a Floating Price), and if the Parties have not so
agreed on or before the twelfth Business Day following the first Trading Day on
which the Market Disruption Event occurred or existed, then the Floating Price
shall be determined in good faith by taking the average of two dealer quotes
obtained from Reference Market Makers as defined in the Collateral Annex.

 

 

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    “Determination Period”
means each calendar month a part or all of which is within the Delivery Period
of a Transaction.

      “Exchange” means, in respect of a
Transaction, the exchange or principal trading market specified in the relevant
Transaction.

        “Floating Price” means a Contract Price specified in a
Transaction that is based upon a Price Source.

       “Market Disruption Event” means,
with respect to any Price Source, any of the following events: (a) the failure
of the Price Source to announce or publish the specified Floating Price or
information necessary for determining the Floating price; (b) the failure of
trading to commence or the permanent discontinuation or material suspension of
trading in the relevant options contract or commodity on the Exchange or in the
market specified for determining a Floating Price; (c) the temporary or
permanent discontinuance or unavailability of the Price Source; (d) the
temporary or permanent closing of any Exchange specified for determining a
Floating Price; or  (e) a material change
in the formula for or the method of determining the Floating Price.

        “Price Source” means, in respect of a Transaction, the
publication (or such other origin of reference, including an Exchange)
containing (or reporting) the specified price (or prices from which the
specified price is calculated) specified in the relevant Transaction.

      “Trading Day” means a day in
respect of which the relevant Price Source published the Floating Price.

(b)   Corrections to Published Prices.  For purposes of determining a Floating Price
for any day, if the price published or announced on a given day and used or to
be used to determine a relevant price is subsequently corrected and the
correction is published or announced by the person responsible for that
publication or announcement within two (2) years of the original publication or
announcement, either Party may notify the other Party of (i) that correction
and (ii) the amount (if any) that is payable as a result of that correction.  If, not later than thirty (30) days after
publication or announcement of that correction, a Party gives notice that an
amount is so payable, the Party that originally either received or retained
such amount will, not later than three (3) Business Days after the
effectiveness of that notice, pay, subject to any applicable conditions
precedent, to the other Party that amount, together with interest at the
Interest Rate for the period from and including the day on which payment
originally was (or was not) made to but excluding the day of payment of the
refund or payment resulting from that correction.

(c)   Calculation of Floating Price.  For the purposes of the calculation of a
Floating Price, all numbers shall be rounded to three (3) decimal places.  If the fourth (4th) decimal number
is five (5) or greater, then the third (3rd) decimal number shall be
increased by one (1), and if the fourth (4th) decimal number is less
than five (5), then the third (3rd) decimal number shall remain
unchanged.”

 

 

 

 

 

 

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IN WITNESS
WHEREOF, the Parties have caused this Master Agreement to be duly executed as
of the date first above written.

	
  RELIANT
  ENERGY POWER SUPPLY, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
  Title:

  	
   

  
							

 

 

DISCLAIMER:  This
Master Power Purchase and Sale Agreement was prepared by a committee of
representatives of Edison Electric Institute (“EEI”) and National Energy
Marketers Association (“NEM”) member companies to facilitate orderly trading in
and development of wholesale power markets. 
Neither EEI nor NEM nor any member company nor any of their agents,
representatives or attorneys shall be responsible for its use, or any damages
resulting therefrom.  By providing this
Agreement EEI and NEM do not offer legal advice and all users are urged to
consult their own legal counsel to ensure that their commercial objectives will
be achieved and their legal interests are adequately protected.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Version 2.1 (modified
4/25/00)

©COPYRIGHT 2000  by the Edison Electric Institute and National Energy Marketers
Association

Exhibit C2

To Credit Sleeve
and Reimbursement Agreement

Form of ISDA Power Purchase and Hedging Contract

 

ISDA®

International
Swaps and Derivatives Association, Inc.

 

SCHEDULE

 

to the

2002
Master Agreement

 

dated as of        T.B.D.
             

 

between

 

RELIANT ENERGY
POWER SUPPLY, LLC (“Party A”)

 

and

 

                                                                                 (“Party B”)

 

 

Part 1

TERMINATION
PROVISIONS

 

 

In this Agreement:

 

(a)           “Specified
Entity” means in relation to Party A for the purpose of:

 

                                                                                Section
5(a)(v):     Not Applicable

                                                                                Section
5(a)(vi):    Not Applicable

                                                                                Section
5(a)(vii):   Not Applicable

                                                                                Section
5(b)(v):     Not Applicable

 

                in relation to Party B for the purpose of:

 

                                                                                Section
5(a)(v):     Not Applicable

                                                                                Section
5(a)(vi):    Not Applicable

                                                                                Section
5(a)(vii):   Not Applicable

                                                                                Section
5(b)(v):     Not Applicable

 

(b)                                 The “Default Under Specified
Transaction” provision of Section 5(a)(v) of this Agreement and
the definition of “Specified Transaction” of
this Agreement will apply only to each of Party A, Party B, and Party B’s
Credit Support Provider but will not apply to Party A’s Credit Support
Provider.

 

(c)                                  The “Cross
Default” provisions of Section 5(a)(vi) of this Agreement will
apply to both Party A and Party B provided, however, that Section 5(a)(vi)(1)
shall be amended as follows:

 

 

 

The words “or
other similar condition or event (however described)” in the first  line of the provision are deleted and the
comma in the second line is replaced with “or”.

 

“Threshold Amount” means (i) with respect to Party A, $100,000,000
(or its equivalent in another currency) and (ii) with respect to Party B, $                 
(or its equivalent in another currency).

 

(d)                                 The “Automatic
Early Termination” provision of Section 6(a) of this Agreement
will not apply.

 

(e)           “Termination
Currency” means United States Dollars.

 

(f)                                    “Additional
Termination Event(s)”  will not
apply.

 

 

Part 2

TAX REPRESENTATIONS

 

(a)                                  Payer Tax Representation.  For the purpose of Section 3(e) of this
Agreement, each of Party A and Party B will make the following representation:

 

It is not required
by any applicable law, as modified by the practice of any relevant governmental
revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment (other than interest
under Section 9(h) of this Agreement) to be made by it to the other party under
this Agreement.  In making this
representation, it may rely on (i) the accuracy of any representations made by
the other party pursuant to Section 3(f) of this Agreement, (ii) the
satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this
Agreement and the accuracy and effectiveness of any document provided by the
other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and
(iii) the satisfaction of the agreement of the other party contained in Section
4(d) of this Agreement; provided that it shall not be a breach of this
representation where reliance is placed on clause (ii) herein and the other
party does not deliver a form or document under Section 4(a)(iii) by reason of
material prejudice to its legal or commercial position.

 

(b)                                 Payee Tax Representations.  For the purpose of Section 3(f) of this Agreement,
Party A and Party B make the representation(s) specified below, if any:

 

Party A: Party A is a limited liability company
organized under the laws of the State of Delaware and is a resident of the
United States of America for U.S. tax purposes. 
Party A’s Federal Tax I.D. number is 20-4823108.

 

Party B: Party B is a [corporation] organized
under the laws of the State of                  
and is a resident of the United States of America for U.S. tax purposes.  Party B’s Federal Tax I.D. number is                  .

 

 

 

 

Part 3

AGREEMENT TO DELIVER DOCUMENTS

 

For the purpose of
Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the
following documents, as applicable:

 

	
  Party
  Required to Deliver Document

  	
   

  	
  Form/

  Document/

  Certificate

  	
   

  	
  Date By
  Which

  To Be

  Delivered

  	
   

  	
  Covered
  By Section 3(d) Representation

  
	
  Each party and its
  Credit Support Provider, as applicable.

  	
   

  	
  Copies of documents
  evidencing necessary corporate or equivalent authorizations and approvals
  regarding execution, delivery and performance of this Agreement and any
  Credit Support Document.

   

  	
   

  	
  Upon request.

  	
   

  	
  Yes.

  
	
  Each party and its
  Credit Support Provider, as applicable.

  	
   

  	
  Certificate of
  Authority and specimen signatures of individuals executing this Agreement and
  any Credit Support Document.

   

  	
   

  	
  Upon request.

  	
   

  	
  Yes.

  
	
  Each party.

  	
   

  	
  Specimen signatures or
  other confirming evidence of individuals authorized to execute Confirmations.

   

  	
   

  	
  Upon request.

  	
   

  	
  Yes.

  
	
  Each party and its
  Credit Support Provider, as applicable.

  	
   

  	
  A duly executed
  original of the Credit Support Annex, and, if specified in Part 4 below, a
  guarantee in the form specified below, executed by such party’s Credit
  Support Provider specified below.

   

  	
   

  	
  Upon execution.

  	
   

  	
  Yes.

  
	
  Each party and its
  Credit Support Provider, as applicable.

  	
   

  	
  Audited annual
  financial statements of such party’s Credit Support Provider, or, if no
  Credit Support Provider, such party for each fiscal year prepared in
  accordance with generally accepted accounting principles in the country in
  which such entity is organized and on a basis consistent with that of the
  audited annual financial statements of such entity for its prior fiscal year.

  	
   

  	
  As soon as
  practicable after demand but no later than 120 days after the end of each
  fiscal year of a party’s Credit Support Provider if such financial statement
  is not available on “EDGAR” or its home page on the World Wide Web at http://www.ml.com/,
  with respect to Party A and [Insert Counterparty’s Web Address], with respect
  to Party B.

  	
   

  	
  Yes.

  
	
  Each party and its
  Credit Support Provider, as applicable.

  	
   

  	
  Unaudited financial
  statements of such party’s Credit Support Provider, or, if no Credit Support
  Provider, such party for each quarter prepared in accordance with generally
  accepted accounting principles in the country in which such entity is
  organized and on a basis consistent with that of the annual financial
  statements of such entity.

  	
   

  	
  As soon as
  practicable after demand if such financial statement is not available on
  “EDGAR” or its home page on the World Wide Web at http://www.ml.com/, with
  respect to Party A and [Insert Counterparty’s Web Address], with respect to
  Party B.

  	
   

  	
  Yes.

  

 

 

Part 4

MISCELLANEOUS

 

(a)           Address for Notices. 
For the purpose of Section 12(a) of this Agreement:

 

                Address for notices or communications to Party A:

 

	
  Street Address:

  	
   

  	
  1000 Main,
  Houston, TX 77002

  
	
  Mailing
  Address:

  	
   

  	
  P.O. Box 4455,
  Houston, TX 77210-4455

  
	
  Attention:

  	
   

  	
  Contract
  Administration

  
	
  Facsimile No.:

  	
   

  	
  (713) 497-9561

  
	
  Telephone No.:

  	
   

  	
  (713) 497-5855

  
	
  Confirmations:

  	
   

  	
  (713) 497-9562
  (Facsimile)

  
	
  Invoices:

  	
   

  	
  (713) 497-0098
  (Facsimile)

  

 

With a copy to:

 

	
  Merrill Lynch Commodities, Inc.

  
	
  20 East Greenway Plaza

  
	
  7th Floor

  
	
  Houston, Texas 77253-3327

  
	
  Attn:  Legal

  
	
  Fax:  713-544-5551

  
	
  Phone:  713-544-4975

  

 

With additional
notices of an Event of Default or Potential Event of Default to:

	
  Street Address:

  	
   

  	
  1000 Main,
  Houston, TX 77002

  
	
  Attention:

  	
   

  	
  Vice President
  and General Counsel

  
	
  Facsimile No.:

  	
   

  	
  (713) 537-7063

  
	
  Telephone No.:

  	
   

  	
  (713) 497-7063

  

 

Address for
notices or communications to Party B:

 

	
  Address:

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  
	
  Facsimile No.:

  	
   

  	
   

  
	
  Telephone No.:

  	
   

  	
   

  
	
  Confirmations:

  	
   

  	
  (Facsimile)

  

 

(b)                                 Process Agent. 
For the purpose of Section 13(c) of this Agreement:

 

                Party
A appoints as its Process Agent: CT Corporation Systems, 111 Eighth Avenue, New
York, New York 10011.

 

                Party B appoints as its Process
Agent:                  

 

(c)                                  Offices. 
The provisions of Section 10(a) of this Agreement will apply to this
Agreement.

 

(d)                                 Multibranch
Party.  For the purpose of Section 10(b) neither
Party A nor Party B is a Multibranch Party.

 

(e)                                  Calculation
Agent.  The Calculation Agent is Party A unless
otherwise specified in a Confirmation in relation to the relevant
Transaction.  If Party A is the
Defaulting Party, the Calculation Agent shall be Party B until such time as
Party A is no longer a Defaulting Party. 
All determinations by the Calculation Agent are subject to agreement by
Party A and Party B.  If the Parties are
unable to agree on a calculation made by a particular Calculation Agent, then
the parties shall appoint another mutually acceptable Calculation Agent that is
a recognized dealer in the relevant market. 
Each party agrees to submit invoices on a monthly basis for amounts due
from the other party.

 

 

(f)            Credit Support Document.

 

	
  (i)

  	
  With respect to Party A and Party B, the Credit
  Support Annex attached hereto, which constitutes a Credit Support Document is
  incorporated by reference in, and made part of this Agreement (unless
  provided otherwise in a Confirmation) as set forth in full in this Agreement.

  
	
   

  	
   

  
	
  (ii)

  	
  With respect to Party
  A, a Guaranty executed by Party A’s Credit Support Provider in the form of
  Exhibit A.

  
	
   

  	
   

  
	
  (iii)

  	
  With respect to Party
  B, a Guaranty executed by Party B’s Credit Support Provider in form and
  substance reasonably satisfactory to Party A.

  

 

(g)                                 Credit Support
Provider.

 

Credit Support
Provider means in relation to Party A: Merrill Lynch & Co., Inc. (“ML&Co.”)

 

                                                Credit Support Provider means in relation
to Party B:                 

 

(h)                                 Governing Law. 
This Agreement will be governed by and construed in accordance with the
laws of the State of New York (without reference to choice of law doctrine), as
provided in Section 5-1401 of the New York General Obligations Law.

 

(i)                                     Jurisdiction. 
Section 13(b)(i) of this Agreement is hereby deleted in its entirety and
replaced with the following:

 

                                                “(b)         Jurisdiction.  With respect to any suit, action or proceedings
relating to this Agreement (“Proceedings”), each party irrevocably:

 

submits to the non-exclusive jurisdiction of the
courts of the State of New York and the United States District Court located in
the borough of Manhattan in New York City in accordance with the provisions of
Section 5-1402 of the New York General Obligations Law.”

 

(j)                                     Waiver of Jury
Trial.  Section 13 of this Agreement is hereby
amended to add the following as a new Section 13(e) of this Agreement:

 

                                                “(e)         WAIVER OF JURY TRIAL.  EACH PARTY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT AND CLAIM OR RECOVER
IN ANY SUCH SUIT, ACTION, CLAIM OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES. EACH PARTY (i) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTY OR ANY CREDIT SUPPORT PROVIDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF SUCH A SUIT, ACTION, CLAIM OR PROCEEDING, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND PROVIDE FOR ANY CREDIT SUPPORT DOCUMENT,
AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION.”

 

(k)                                  Netting of
Payments.  Subparagraph (ii) of Section 2(c) of this
Agreement will not apply and therefore, the Multiple Transaction Payment
Netting specified in Section 2(c) of this Agreement will apply to all
Transactions[, except Power Transactions and Gas Transactions.   Power Transactions and Gas Transactions
shall be netted together in accordance with Parts 7 and 8 of the Schedule.]  REVISE ACCORDINGLY, IF
USING THE GAS AND/OR POWER ANNEX

 

 

(l)                                     “Affiliate” with respect to Party A, will mean RERH
Holdings, LLC, and any subsidiary thereof, including Reliant Energy Retail
Holdings, LLC,  and Reliant Energy Retail
Services, LLC, and with respect to Party B, will mean                  
or if none use [have the meaning specified in Section 14 of this Agreement.

 

(m)                               No Agency. 
The provisions of Section 3(g) will apply to this Agreement.

 

 

Part 5

OTHER PROVISIONS

 

(a)                                  Absence
of Litigation.  Section 3(c) of this Agreement is hereby
amended by: (i) adding in the third line thereof after the word, “governmental”
the words “or regulatory”; (ii) adding the words “in any material respect
except as disclosed in each parties’ or its Credit Support Provider’s, as
applicable, SEC filing” immediately prior to the end thereof; and (iii)
deleting “, to its knowledge,” after “or” in the first line and reinserting
such phrase before “pending” in the first line of such section.

 

(b)                                 Accuracy
of Specified Information.  Section 3(d) of this Agreement is hereby
deleted in its entirety and replaced with the following:

 

                                                “All information that is furnished in
writing by or on behalf of it to any of the other parties hereto is, as of the
date of the information, true accurate and complete in every material respect,
or, in the case of audited or unaudited financial statements, fairly present
the financial condition of the relevant entity and have been prepared in
accordance with generally accepted accounting principles, consistently applied,
except as otherwise indicated in the notes of such financial statements.”

 

(c)                                  Additional
Representations.  Section 3 of this Agreement is hereby
further amended by adding at the end thereof the following subsections (h),
(i), and (j):

 

“(h)                           Eligible Contract
Participant.  It constitutes an “Eligible Commercial Entity”
and an “Eligible Contract Participant” as such terms are defined in Sections
1a(11) and 1a(12) (respectively) of the Commodity Exchange Act, as amended (7
U.S.C. §§ 1a (11), 1a (12) (2000).

 

                (i)                                     Standardization,
Creditworthiness, and Transferability.  The economic
terms of this Agreement, any Credit Support Document to which it is a party and
each Transaction have been individually tailored and negotiated by it.  It has received and reviewed financial
information concerning the other party and has had a reasonable opportunity to
ask questions of and receive answers and information from the other party
concerning such other party, this Agreement, such Credit Support Document, and
such Transaction, and the creditworthiness of the other party was a material
consideration in its entering into or determining the terms of this Agreement,
such Credit Support Document, and such Transaction.  The transferability of this Agreement, such
Credit Support Document, and such Transaction is restricted as provided herein
and therein.

 

                                                (j)                                     No Reliance.  In
connection with the negotiation of, the entering into, and the confirming of
the execution of, this Agreement, any Credit Support Document to which it is a
party, and each Transaction: (i) it is not relying upon any advice, statements,
recommendations or representations (whether written or oral) of the other party
other than the written representations expressly set forth in this Agreement,
in such Credit Support Document or in the Confirmation of such Transaction;
(ii) the other party has not given to it (directly or indirectly through any
other person) any advice, counsel, assurance, guarantee, or representation
whatsoever as to the expected or projected success, profitability, return, performance,
result, effect, consequence, or benefit (either legal, regulatory, tax,
financial, accounting, or otherwise) of this Agreement, such Credit Support
Document, or such Transaction; (iii) it has consulted with its own legal,
regulatory, tax, business, investment, financial, and accounting advisors to
the extent it has deemed necessary, and it has made its own investment,
hedging, and trading decisions based upon its own judgment and upon any advice
from such advisors as it has deemed necessary, and not upon any view expressed by

 

 

 

the other party;
(iv) all trading decisions have been the result of arm’s length negotiations
between the parties and are not intended to preclude either Party (or any of
such party’s Affiliates) from undertaking proprietary trading activities,
including hedging and other transactions relating, directly or indirectly, to
generation capacity owned or controlled by such party or its Affiliates; (v) it
is entering into this Agreement, such Credit Support Document, and such Transaction
with a full understanding of all of the risks hereof and thereof (economic and
otherwise) and it is capable of assuming and willing to assume (financially and
otherwise) those risks and (vi) it has the capacity to evaluate (internally or
through independent professional advice) this Agreement, any such Credit
Support Document and each such Transaction (including decisions regarding the
appropriateness or suitability thereof) and has made its own decision to enter
into this Agreement, such Credit Support Document and each such Transaction.”

 

(d)                               Provisions Relating to
Bankruptcy Code.

 

(A)            Each Party acknowledges and agrees
that (i) Power Transaction(s) and Gas Transaction(s) constitute “forward
contracts” within the meaning of title 11 of the United States Code (the “Bankruptcy Code”); (ii) each of
Party A and Party B is a “forward contract merchant” within the meaning of the
Bankruptcy Code with respect to any Transactions that constitute “forward
contracts”; (iii) all payments made or to be made by one Party to the other
Party pursuant to this Agreement constitute “settlement payments” within the
meaning of the Bankruptcy Code; (iv) all transfers of Credit Support by one
Party to the other Party under this Agreement constitute “margin payments” within
the meaning of the Bankruptcy Code; and (v) each Party’s rights under Section
6, “Early Termination”, of this Agreement constitutes a “contractual right to
liquidate” the Transactions within the meaning of the Bankruptcy Code.

 

(B)                                      Each Party acknowledges and agrees that,
for purposes of this Agreement, the other Party is not a “utility” as such term
is used in Section 366 of the Bankruptcy Code, and each Party agrees to waive
and not to assert the applicability of the provisions of Section 366 in any bankruptcy
proceeding wherein such Party is a debtor. In any such proceeding, each Party
further agrees to waive the right to assert that the other Party is a provider
of last resort.

 

 

(e)                                    Accounts.  Payments shall be made in United States
Dollars to the following accounts:

 

                                Party A

 

                                Pay:                        Reliant Energy Power
Supply, LLC

                                Bank:                      Mellon Bank — Pittsburgh,
PA

 

                                Fed.
ABA No.:      043000261

                                Account No. :       1194193

 

                                Party B

 

                                Pay:                                                                                                                        

                                Bank:                                                                                                                      

                                Fed.
ABA No.:                                                                                                      

                                Account
No/

                                CHIPS
UID:                                                                                                           

 

 

(f)                                    Confirmations.  Section
9(e)(ii) is hereby amended by deleting in its entirety and replacing with the
following:

 

                                                “(ii) The parties intend that they are
legally bound by the terms of each Transaction from the moment they 

 

 

                agree to those terms (whether
orally or otherwise).   Party A shall
send to Party B within three (3) Local Business Days after the Transaction is
entered into a Confirmation setting forth the terms of such Transaction.  Party B shall execute and return the
Confirmation to Party A or request correction in writing of any error within
two (2) Local Business Days of receipt. 
Failure of Party B to respond within such period shall not affect the
validity or enforceability of such Transaction and shall be deemed to be an affirmation
of such terms sent.  If Party A fails to
send a Confirmation within three (3) Local Business Days after the Transaction
is entered into, a Confirmation may be forwarded by Party B to Party A.  If Party A objects to any term(s) of such
Confirmation, Party A shall notify Party B in writing of such objections within
two (2) Local Business Days of Party A’s receipt thereof, failing which Party A
shall be deemed to be an affirmation of such terms sent.  If Party A and Party B each send a
Confirmation and neither party objects to the other party’s Confirmation within
two (2) Local Business Days of receipt, Party A’s Confirmation shall be deemed
to be accepted and shall be the controlling Confirmation, unless (i) Party A’s
Confirmation was sent more than three (3) Local Business Days after the
Transaction was entered into and (ii) Party B’s Confirmation was sent prior to
Party A’s Confirmation, in which case Party B’s Confirmation shall be deemed to
be accepted and shall be the controlling Confirmation.  Failure by either party to send or either
party to return an executed Confirmation or any objection by either party shall
not invalidate the Transaction agreed to by the parties.” However,
notwithstanding the prior paragraph, in the event that any Confirmation for any
Transaction contains  provisions not
relating to the commercial terms of the Transaction, which modify or supplement
the general terms and conditions of this Agreement, such provisions shall not
be deemed accepted unless agreed to in writing by the parties. Failure to send
or to return an executed Confirmation or any objection regarding a Confirmation
by either party shall not invalidate the Transaction agreed to by the parties.”

 

(g)           Illegality.  Section 5(b)(i) is hereby amended by adding
in the first line thereof after the word “provision” and before the comma the
words “(including Part 5(i) Severability of this Schedule).”

 

(h)           Tax Event.  For purposes
of this Agreement, Section 5(b)(iii) is hereby amended to delete the words, “or
there is a substantial likelihood that it will”, as they appear after the word “will”
and before the word “on” in the fourth line thereof.

 

(i)            Severability.  Any provision of this Agreement
(including any Transaction hereunder or any Credit Support Document) which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, such Transaction or
such Credit Support Document or affecting the validity or enforceability of
such provision in any other jurisdiction unless such severance shall
substantially impair the benefits of the remaining portions of this Agreement,
such Transaction or such Credit Support Document or changes the reciprocal
obligations of the parties. The parties hereto shall endeavor in good faith
negotiations to replace the prohibited or unenforceable provision with a valid
provision, the economic effect of which comes as close as possible to that of the
prohibited or unenforceable provision.

 

(j)            Telephone Recording.  Each party to this Agreement
acknowledges and agrees to the taping or electronic recording (“Recording”) of
conversations between the parties regarding any Transaction and the terms thereof
to this Agreement whether by one or the other or both parties, and that any
such Recordings will be retained in confidence, secured from improper access,
and may be submitted as evidence in any suit, action or proceedings relating to
this Agreement or any actual or potential Transaction hereunder.  In the event of any dispute between the
parties relating to an actual or potential Transaction, the parties may use
Recordings and any other “sufficient evidence” (as such term is defined in
Section 5-701(b)(3) of the New York General Obligations Law) that a contract
has been made between the parties as prima facie
evidence of the terms and conditions of such Transaction until such time (if
any) as a written Confirmation has been executed.  Each party waives any further notice of such
monitoring or Recording, and agrees to notify its personnel of such monitoring
or recording and to obtain any necessary consent of such personnel.

 

(k)           Confidentiality.  Unless otherwise
agreed, the contents of this Agreement, 
the Confirmations, and all Transactions, hereunder,  as well as all other documents relating
thereto and any information pertaining thereto made available by either party
or its Credit Support Provider(s) to the other party or its Credit Support
Provider(s) is confidential and shall not be disclosed to any third party
(other than the Credit Support Providers), except for such information (a) as
is or may become generally available to the public, (b) as may be required in
response to any regulatory authority or any lawful summons, subpoena, or
otherwise in connection with any litigation or to comply with any applicable
law, order, regulation, ruling, or accounting

 

 

                disclosure rule or standard, (c) as may
be obtained from a non-confidential source that disclosed such information in a
manner that did not, to such party’s knowledge, violate its obligations to the
non-disclosing party or its Credit Support Provider(s) in making such
disclosure, (d) as may be furnished to Merrill Lynch Commodities, Inc. (“MLCI”)
or the disclosing party’s Affiliates, and to each of such Person’s auditors,
attorneys, advisors, lenders and their counsel and advisors, or prospective
purchasers which are required to keep the information that is disclosed in
confidence or that is disclosed in connection with communications between the
parties under the terms of Section 7, (e) regarding price, volume or delivery
point(s) of a particular Transaction(s), 
as may be disclosed to an energy pricing information aggregator,
provided that the name or any other identifying information relating to the
other party, including unique attributes or requirements thereof, is redacted
and/or otherwise not disclosed, or (f) as may have been disclosed prior to the
effective date of this Agreement.

 

(l)            Transfer.  Section 7 shall be amended by adding “which
consent shall not be unreasonably withheld or delayed” between “of the Party”
and “,except that” in the first sentence of such Section.

 

(m)          Netting. 
In the event that any Terminated Transaction cannot be aggregated
and netted against all other Terminated Transactions under Section 6(e) of the
Agreement, such excluded Terminated Transactions shall be aggregated and netted
amongst themselves to the fullest extent permitted by law.

 

(n)           Limitation
of Liability.  UNLESS
EXPRESSLY HEREIN PROVIDED, NO PARTY SHALL BE LIABLE UNDER THIS AGREEMENT FOR
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, INCLUDING
CONSEQUENTIAL LOST PROFITS OR OTHER CONSEQUENTIAL BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR CONTRACT OR OTHERWISE.  IT IS THE INTENT OF THE PARTIES THAT THE
LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT
REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY
PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR
PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE
LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR
IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS
INCONVENIENT, AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.

 

(o)           Method of Notice. Section 12(a)(ii) of the
Agreement is deleted in its entirety.

 

Part 6

ADDITIONAL
PROVISIONS FOR

COMMODITY
DERIVATIVE TRANSACTIONS

 

(a)                                  Amendments to ISDA Commodity
Definitions

Definitions. 
This Agreement and each Transaction are subject to the 2005 ISDA
Commodity Definitions (the “Definitions”), each as published by the
International Swaps and Derivatives Association, Inc. (“ISDA”), and will be
governed in all respects by the Definitions. 
The Definitions are incorporated herein by reference in and made a part
of, this Agreement as if set forth in full herein.  In the event of any inconsistency between the
provisions of this Master Agreement (including the Schedule) and the
Definitions, this Master Agreement (including the Schedule) will prevail.  In the event of any inconsistency between the
provisions of a Confirmation and this Master Agreement (including the Schedule)
or the Definitions, the Confirmation will prevail for the purpose of such
Transaction.

 

(b)           The  “Market Disruption Events”
specified in Section 7.4(d)(i) of the Definitions shall apply, except as
otherwise specifically provided herein or specified in a Confirmation.

 

(c)           The  “Disruption Fallbacks”
specified in Section 7.5 of the Definitions shall apply, except as otherwise
specifically provided in a Confirmation.

 

                “Additional Market Disruption Events”  shall apply only if so specified in the
relevant Confirmation.

 

 

Part 7

PHYSICALLY SETTLED POWER
TRANSACTIONS

 

Pursuant to ARTICLE XIV of the
2005 ISDA Commodity Definitions, Sub-Annex F (“Power Annex”) is incorporated
into, the Agreement as a new Part 7 to the Agreement; provided, however, that
the following elections set forth in “(j) Elective Provisions” and “(k) Other Provisions” below
shall be applicable to such Part 7.  All references to “Part[6]” in Sub-Annex
F shall be replaced with “Part 7.”

 

(j)    Elective Provisions

1.               (a)(i)
         Applicability of Part 7
to Outstanding Power Transactions.  If
not checked, not applicable.

2.                (a)(ii)         
Applicability of Outstanding Credit Support held by a party in connection with
Outstanding Power Transactions.  If not
checked, not applicable.

3.               (c)
   X     Accelerated Payment Damages.  If not checked, not applicable.

4.               (d)(ii):  Timeliness of Payment

                                   Option A

                                   Option B[CHECK THIS BOX IF NOT USING
GAS ANNEX]

                           X     See Gas Annex[DELETE THIS BOX IF NOT USING GAS
ANNEX]

                        If neither is checked, Option B
shall be deemed to apply.

5.               (h)(i):   Wholesale Power Tariffs

                           X     Party A Electric Tariff.  FERC Electric Tariff, Original Volume No.
1  Dated: 
September 19, 2006   Docket
Number:  ER06-1272

                                   Party B Electric Tariff.  [Tariff/Date/Docket]  

                        If not checked, not applicable.

6.     (h)(ii) 
   X     Applicability of Severability provision.  If not checked, not applicable.

7.               (h)(iii)    X     Applicability of FERC Standard of Review and
Certain Covenants and Waivers.  If not
checked, not applicable.

 

(k)                                  Other Provisions. Notwithstanding anything in the
Agreement to the contrary, including the Power Annex hereby incorporated as
Part 7 to the Agreement and the Schedule to the Master Agreement, the following
provisions shall be deemed to amend and/or supplement the provisions of the
ISDA Power Annex set forth as a new Part 7 to the Agreement:

 

(i)                                     Part 7(b)(iii) Force
Majeure is amended by deleting the last sentence of that
provision and replacing it with the following:

 

                                                                                                    “If the pre-printed form portion of this
Agreement is the 2002 ISDA Master Agreement form, Section 5(b)(ii) of this
Agreement and the concept of “Force Majeure Event” as used elsewhere in this
Agreement shall not apply to any Power Transaction.”

 

(ii)                                  Part 7(c)(iii) Limitation on Condition Precedent  is amended by deleting the section
in inverted commas and replacing it with the following:

 

“(provided, however, that in relation to any Transaction that is a Power
Transaction, the Non-Defaulting Party may suspend performance of any or all
Power Transactions only after providing written notice to the Defaulting Party
and provided further that if an Event of Default or a Potential Event of
Default has occurred and is continuing for longer than ten (10) NERC Business Days
without an Early Termination Date being designated, then the condition
specified in this clause (1) shall cease to be a condition precedent to the
obligations under Section 2(a)(i)).”

 

 

(iii)                               Part 7(c)(iv) Suspension of Performance shall be added as a new section as follows:

“(iv) Suspension
of Performance.  Notwithstanding, and in addition to the
remedies provided pursuant to Part 7(c)(i) and 7(c)(ii), if Seller or Buyer
fails to schedule and/or deliver/receive all or part of the Product pursuant to
a Transaction, and such failure is not excused under the terms of the Product
or by the other party’s failure to perform, then upon one (1) Local Business
Day prior written notice, and for so long as the non-performing party fails to
perform, the performing party shall have the right to suspend its performance
under any or all Transactions.”

(iv)                              Part 7(d)(v) Disputes and Adjustments of Invoices shall be added as a new section as follows:

“(v) Disputes
and Adjustments of Invoices.  With respect to any Power Transaction,
a party may, in good faith, dispute the correctness of any invoice or
any adjustment to an invoice, rendered under this Agreement or adjust any
invoice for any arithmetic or computational error within twelve (12) months of
the date the invoice, or adjustment to an invoice, was rendered.  In the event an invoice or portion thereof,
or any other claim or adjustment arising hereunder, is disputed, payment of the
undisputed portion of the invoice shall be required to be made when due, with
notice of the objection given to the other party.  Any invoice dispute or invoice adjustment
shall be in writing and shall state the basis for the dispute or
adjustment.  Payment of the disputed
amount shall not be required until the dispute is resolved.  Upon resolution of the dispute, any required
payment shall be made within two (2) Business Days of such resolution along
with interest accrued at the Interest Rate from and including the due date to
but excluding the date paid.  Inadvertent
overpayments shall be returned upon request or deducted by the party receiving
such overpayment from subsequent payments, with interest accrued at the
Interest Rate from and including the date of such overpayment to but excluding
the date repaid or deducted by the party receiving such overpayment.  Any dispute with respect to an invoice is
waived unless the other party is notified in accordance with this section
within twelve (12) months after the invoice is rendered or any specific adjustment
to the invoice is made.  If an invoice is
not rendered within twelve (12) months after the close of the month during
which performance of a Transaction occurred, the right to payment for such
performance is waived.”

 

(v)                                 Part 7(h)(iii) Miscellaneous to this
Agreement is amended by inserting the following as a new subparagraph:

“(E)  With respect to
Transactions in ERCOT, absent the agreement of all Parties to the proposed
change, the standard of review for changes to any portion of this Agreement or
any Transaction entered into hereunder proposed by a Party, a non-party, or the
Public Utility Commission of Texas acting sua
sponte, shall be the “public interest” standard of review set forth
in High Plains Natural Gas Co. v. Railroad
Commission, Tex. Cov. Appl. — Austin 1971, writ ref d n.r.e.)(the “High Plains”
doctrine).”

(vi)          Part 7(i)(ii)(B) shall be deleted and replaced with the
following:

“(B) With respect
to all Power Transactions, the words “(or to deliver or receive the Product,
the exclusive remedy for which is provided in clause (c) of Part 7 of the
Schedule)” are hereby added at the end of the parenthetical of Section
5(a)(ii)(1) of this Agreement.”

(vii)                           Part
7(i)(iv) Definitions:

 “Sales Price” is amended to (i) delete the
phrase “at the Delivery Point” from the second line and (ii) insert after the
phrase “commercially reasonable manner” in the sixth line, the following phrase
“; provided, however if the Seller is unable after using commercially
reasonable efforts to resell all or a portion of the Product not received by
Buyer, the Sales Price with respect to such unsold Product shall be deemed
equal to zero (0)”.

(viii)        Part 7(i)(iv) Definitions is
amended by adding the following definitions:

 “Claims” means all third party claims or
actions, threatened or filed and, whether groundless, false, fraudulent or
otherwise, that directly or indirectly relate to the subject matter of an
indemnity, and the resulting losses, damages, 

 

 

expenses, attorney’s
fees and court costs whether incurred by settlement or otherwise, and whether
such claims or actions are threatened or filed prior to or after the
termination of this Agreement.

 

(ix)                                Part 7(i) Certain Modifications to this
Agreement  is amended by inserting the following
as new subparagraphs:

(v)           Tax
Event:  Section 5(b)(iii).  With respect to any Power Transaction,
Section 5(b)(iii) is hereby deleted, and the concept of “Tax Event” as used
elsewhere in this Agreement shall not apply to any Power Transactions.

(vi)          Miscellaneous:  Section 9.  Section 9 of this Agreement is hereby amended
by adding the following as a new subsection:

“ (i)                 Other Products and Service
Levels.

If the Parties
agree to a service level defined by a different agreement (i.e., the ERCOT
agreement, etc.) for a particular Transaction, then, unless the Parties
expressly state and agree that all the terms and conditions of such other
agreement will apply, such reference to a service level/product defined by such
other agreement means that the service level for that Transaction is subject to
the applicable regional reliability requirements and guidelines as well as the
excuses for performance, Force Majeure, Uncontrollable Forces, or other such
excuses applicable to performance under such other agreement, to the extent
inconsistent with the terms of this Agreement, but all other terms and
conditions of this Agreement remain applicable.”

 

[Delete if not using Gas
Annex]Part 8

PHYSICALLY SETTLED NATURAL GAS
TRANSACTIONS

 

Pursuant to ARTICLE XIII of
the 2005 ISDA Commodity Definitions, Sub-Annex E (“Gas Annex”) is hereby deemed
to be part of, and incorporated into, the Agreement as a new Part 8 to the
Agreement; provided, however, that the following elections set forth in “(l)
Elective Provisions” “(m) Notices for Gas Transactions” and “(n) “Other
Provisions/Modifications to this Gas Annex”. 
All references to “Part [6]” in Sub-Annex E shall be replaced with “Part
8”.

 

(l)            Elective Provisions

 

1. (a)(ii) —
Outstanding Gas Transactions.  This
Gas Annex shall apply to the following pre-existing Gas Transactions pursuant
to clause (a)(ii):

 

         
Option A: All Gas Transactions outstanding between the parties as of the
date this Gas Annex becomes effective.

 

           Option B: The Gas Transactions listed in
Schedule 1 to this Gas Annex.

 

          Option C: None of the Gas Transactions between the
parties that were executed prior to the date this Gas Annex becomes effective.

 

   X      Option D: Not applicable.

 

If none of the
above options is selected, Option A shall apply.

 

2.
(a)(iii) — Outstanding Gas Credit Support

 

          Outstanding Gas Credit Support held by a party in
connection with Outstanding Gas Transactions shall be deemed to have been
delivered under and in connection with this Agreement pursuant to clause
(a)(iii).

 

If not checked,
not applicable.

 

 

 

3.
(b)(ii) — Performance Obligation (remedy for breach of Firm obligation)

 

   X     Option A:
Cover Standard

 

          Option B: Spot Price Standard

 

If neither option
is selected, Option A shall apply.

 

4.
(e) — Taxes

 

   X     Option A:
Buyer Pays At and After Delivery Point

 

           Option B: Seller Pays Before and At Deliver
Point

 

If neither option
is selected, Option A shall apply.

 

5.
(f)(ii) — Payment Date

 

           Option A: the later of the 25th Day of Month
following Month of delivery or 10 Days after receipt of the invoice by Buyer
(provided that if the Payment Date is not a Local Business Day, payment is due
on the next Local Business Day following that date).

 

          Option B: the later of the         
Day of Month following Month of delivery or 10 Days after receipt of the
invoice by Buyer (provided that if the Payment Date is not a Local Business
Day, payment is due on the next Local Business Day following that date).

 

          Option C: Notwithstanding anything to the contrary in
the Schedule, payments with respect to both Gas Transactions and Power
Transactions (as defined separately in the Schedule) will be netted and payable
on or before the later of the 20th Day of Month following Month of delivery or
10 Days after receipt of the invoice by Buyer (provided that if the Payment
Date is not a Local Business Day, payment is due on the next Local Business Day
following that date).

 

   X     Option D: Notwithstanding anything to the contrary in
the Schedule, payments with respect to both Gas Transactions and Power
Transactions (as defined separately in the Schedule) will be netted and payable
on or before the later of the 25th Day of Month following Month of delivery or
10 Days after receipt of the invoice by Buyer (provided that if the Payment Date
is not a Local Business Day, payment is due on the next Local Business Day
following that date).

 

If none of the
above options is selected, Option A shall apply.

 

6.
(k)(xxii) — Alternative to Spot Price Index. The parties have selected the following alternative
index as the Spot Price Index:                 .
If no index is specified, the Spot Price Index specified in clause (l)(xxi)
applies.

 

(m)          Notices for Gas Transactions

 

	
  PARTY
  A

  	
  PARTY
  B

  
	
  Invoices:

  	
  Invoices:

  
	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  
	
  Attn: Gas Accounting

  	
  Attn:

  
	
  Phone: 713-497-4143

  	
  Phone:

  
	
  Facsimile: 713-497-9663

  	
  Facsimile:

  

 

 

	
  Nominations:

  	
  Nominations:

  
	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  
	
  Attn:

  	
  Attn:

  
	
  Phone:

  	
  Phone:

  
	
  Facsimile:

  	
  Facsimile:

  
	
   

  	
   

  
	
  Confirmations:

  	
  Confirmations:

  
	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  
	
  Attn: Contract
  Administration

  	
  Attn:

  
	
  Phone: 713-497-3639

  	
  Phone:

  
	
  Facsimile: 713-497-9562  

  	
  Facsimile:

  
	
   

  	
   

  
	
  Option
  Exercise:

  	
  Option
  Exercise:

  
	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  	
  As set forth in Part 4
  of the Schedule unless otherwise set forth below:

  
	
  Attn:

  	
  Attn:

  
	
  Phone:

  	
  Phone:

  
	
  Facsimile:

  	
  Facsimile:

  
	
   

  	
   

  
	
  o  Wire Transfer - or - o  ACH (check one box):

  	
  o  Wire
  Transfer - or - o  ACH (check one box):

  
	
  Bank:

  	
   

  	
     Bank: 

  	
   

  
	
  ABA: 

  	
   

  	
     ABA: 

  	
   

  
	
  Account: 

  	
   

  	
     Account: 

  	
   

  
	
  Other Details:

  	
   

  	
     Other Details:

  	
   

  
					

 

(n)                                 Other
Provisions/Modifications to this Gas Annex.

 

(i)                                     Part 8(b)(ii) Option A Cover Standard is
amended by adding the following phrase after the phrase   “and no such replacement or sale is
available”: “or the non-breaching party elects, at its sole option not to
replace Gas or sell Gas”.

 

(ii)           Part
8(b)(v) Limitation on
Condition Precedent shall be added as a new section.

 

“(iv)        Limitation on Condition Precedent.  Section 2(a)(iii) of this Agreement is hereby
amended by adding the following phrase at the end of clause (1) immediately
before the last comma of such phrase:

 

“(provided, however, that
in relation to any Transaction that is a Gas Transaction, the Non-Defaulting
Party may suspend performance of any or all Gas Transactions only after
providing written notice to the Defaulting Party and provided further that if
an Event of Default or a Potential Event of Default has occurred and is continuing
for longer than ten (10) Business Days without an Early Termination Date being
designated, then the condition specified in this clause (1) shall cease to be a
condition precedent to the obligations under Section 2(a)(i)).”

 

(iii)                               Part 8(f)(vi) shall be added as a new
section.

 

 

                                “(vi)  Notwithstanding, and in addition, to the
remedies provided pursuant to Part 8(b), if Seller or Buyer fails to schedule
and/or deliver/receive all or part of the Firm Gas pursuant to a Transaction,
and such failure is not excused by Force Majeure (or for any other reason which
excuses performance of a Firm obligation), then upon one (1) Business Day prior
written notice, and for so long as the non-performing party fails to perform,
the performing party shall have the right to suspend its performance under any
or all transactions between the parties for the purchase and sale of Gas.”

 

(iv)                              Part 8(g)(i) shall be amended by adding the
words “at and” after the word “Gas” in line three.

 

(v)                                 Part 8 (j) shall be amended by adding the
following as new provisions:

 

“(iv)  Tax Event: Section 5(b)(iii).  With respect to any Gas Transaction, Section
5(b)(iii) is hereby deleted, and the concept of “Tax Event” as used elsewhere
in this Agreement shall not apply to any Gas Transactions.”

 

 

Part 9 [change to Part 8 if not
using Gas Annex]

 

(a)                                  Consent to Assignment. 
Party B hereby consents to the assignment by Party A to Merrill Lynch
Commodities, Inc. and Merrill Lynch & Co., Inc (together, the “Merrill Parties”) of all of Party A’s
rights under this Agreement, including all rights to receive payments from
Party B under this Agreement (any such payment, including payments under
Section 2 and Section 6 of the Agreement, a “Receivable”),
as collateral security for Party A’s obligations to the Merrill Parties in
connection with an enhanced credit structure for Party A’s retail electric
business provided by the Merrill Parties (the “Collateral Assignment”).

 

(b)                                 Collateral Account. 
Party A hereby unconditionally and irrevocably authorizes and directs
Party B to make, and, unless and until otherwise required by law or this
agreement is terminated, Party B hereby agrees to make, any and all payments in
respect of Receivables directly by wire transfer to the account specified in
Part 5(e) of this Schedule (the “Collateral Account”).  All such payments by Party B to the
Collateral Account shall be free and clear of any deduction, set-off, netting
arrangements or counterclaim, except as expressly provided pursuant to this
Agreement.

 

(c)                                  Notice & Right to Cure
Events of Default.  Pursuant to Part 4(a) of this
Schedule, the Merrill Parties shall be provided with all notices under this
Agreement, including notices of any Potential Event of Default, Event of
Default or Termination Event hereunder.  In
the event of a Potential Event of Default or Event of Default in which Party A
is, or may become, the Defaulting Party, or a Termination Event in respect of
which Party A is the Affected Party, the Merrill Parties shall be permitted, at
their option, to cure such default or Termination Event,
within any grace period applicable to Party A for  such
Potential Event of Default, Event of Default or Termination Event.

 

 

 

 

SIGNATURE PAGE

 

OF THE

 

SCHEDULE

 

TO THE

 

2002 MASTER AGREEMENT

 

BETWEEN

 

RELIANT ENERGY POWER SUPPLY, LLC (“PARTY A”)

 

AND

 

_____________________ (“PARTY B”)

 

 

 

IN
WITNESS WHEREOF, the parties hereto have executed this document as of the date
specified on the first page hereof.

 

	
  Reliant Energy Power Supply, LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Title:

  	
   

  
							

 

 

 

 

Exhibit C3

To Credit Sleeve
and Reimbursement Agreement

Form of EEI Power Purchase and Hedging Contract for
WMBEs in ERCOT

 

MASTER POWER PURCHASE AND
SALE AGREEMENT

COVER SHEET

This Master Power
Purchase and Sale Agreement (“Master Agreement”)
is made as of the following date:                     
(“Effective Date”).  The Master Agreement, together with the exhibits, schedules and
any written supplements hereto, the Party A Tariff, if any, the Party B Tariff,
if any, any designated collateral, credit support or margin agreement or
similar arrangement between the Parties and all Transactions (including any
confirmations accepted in accordance with Section 2.3 hereto) shall be referred
to as the “Agreement.”  The Parties to
this Master Agreement are the following:

	
  Name:  Reliant Energy Power Supply, LLC (“REPS” or
  “Party A”)

  	
  Name:                                (“Party B”)

  
	
   

  	
   

  
	
  All Notices:

  	
  All Notices:

  
	
   

  	
   

  
	
  Street:
  1000 Main St., Suite 1100, Houston, 77002

  	
  Street:                                                   

  
	
   

  	
   

  
	
  P. O. Box 4455

  City:   Houston, TX               Zip: 77210-4455

  	
   

  City: _______________ Zip:
  _______________

  
	
   

  	
   

  
	
  Attn: Contract
  Administration

  Phone:  (713) 497-5855

  Facsimile:  (713) 497-9562

  Duns:  623988644

  Federal Tax ID Number:  20-4823108

  	
  Attn: Contract
  Administration

  Phone: 

  Facsimile: 

  Duns:                                                    

  Federal Tax ID Number: 

  
	
   

  	
   

  
	
  Invoices:

  Attn:  ERCOT Settlement Accounting, 11th
  Floor

  Phone:  (713) 497-4402

  Facsimile:  (713) 497-0098

  	
  Invoices:

  Attn: 

  Phone: 

  Facsimile: 

  
	
   

  	
   

  
	
  Scheduling:

  Attn:  ERCOT 24 Hour Scheduling

  Phone:  (713) 497-1144

  Facsimile:  (713) 497-0098

  	
  Scheduling:

  Attn:                                              

  Phone:                                           

  Facsimile:                                      

  
	
   

  	
   

  
	
  Payments:

  Attn:   ERCOT Settlement Accounting, 11th
  Floor

  Phone:   (713) 497-4402

  Facsimile:  (713) 497-0098

  	
  Payments:

  Attn: 

  Phone: 

  Facsimile: 

  
	
   

  	
   

  
	
  Wire
  Transfer:

  BNK:     Mellon Bank — Pittsburgh, PA

  ABA:     043 000 261  

  ACCT:   119 4193

  	
  Wire
  Transfer:

  BNK: 

  ABA: 

  ACCT: 

  

 

 

 

 

	
  Credit
  and Collections:

  Attn:  Credit Risk Management, 11th
  Floor

  Phone:  (713) 497-1052

  Facsimile:  (713) 497-1058

  	
  Credit
  and Collections:

  Attn: 

  Phone: 

  Facsimile: 

  
	
   

  	
   

  
	
  With additional Notices of an Event of Default or Potential Event of
  Default to:

  Attn: Vice
  President and General Counsel

  Phone: (713) 497-7063

  Facsimile: (713) 537-7063

   

  	
  With additional Notices
  of an Event of Default or Potential Event of Default to:

  Attn: 

  Phone: 

  Facsimile: 

  

 

The Parties hereby agree
that the General Terms and Conditions are incorporated herein, and to the
following provisions as provided for in the General Terms and Conditions:

Party A
Tariff:   FERC Electric Tariff, Original
Volume No. 1  Dated:  September 19, 2006  Docket Number: ER06-1272

Party B Tariff:   No Tariff 

	
  Article Two

  	
   

  	
   

  	
   

  	
   

  
	
  Transaction Terms and Conditions

  	
   

  	
  x Optional provision in Section 2.4.If
  not checked, inapplicable.

  
	
   

  	
   

  	
   

  
	
  Article Four

  	
   

  	
   

  	
   

  	
   

  
	
  Remedies for Failure 

  to Deliver or Receive

  	
   

  	
  x Accelerated Payment of Damages. If not
  checked, inapplicable.

  
	
   

  	
   

  	
   

  
	
  Article Five

  	
   

  	
  o Cross Default for Party A: Not
  Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Events of Default; Remedies

  	
   

  	
  o Party A:

  	
   

  	
  Cross Default Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o Other Entity:

  	
   

  	
  Cross Default Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o Cross Default for Party B: Not
  Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o Party B:

  	
   

  	
  Cross Default Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o Other Entity:

  	
   

  	
  Cross Default Amount

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.6 Closeout Setoff

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  x Option A (Applicable if no other
  selection is made.)

   

  	
   

  	
   

  
	
   

  	
   

  	
  o Option B — Affiliates shall have the
  meaning set forth in the Agreement unless otherwise specified as
  follows:  

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o Option C (No Setoff)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 8

  	
   

  	
  8.1 Party A Credit Protection:

  	
   

  	
   

  
	
  Credit and Collateral Requirements

  	
   

  	
     (a) Financial Information:

  	
   

  	
   

  
	
   

  	
   

  	
  x Option A

  o Option B Specify: 

  o Option C Specify:

  	
   

  	
   

  

 

 

	
   

  	
   

  	
  (b) Credit Assurances:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  x Not Applicable

  o Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Collateral Threshold:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  x Not Applicable

  o Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Downgrade Event:

  	
   

  	
   

  
	
   

  	
   

  	
  x Not Applicable

  o Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e) Guarantor for Party B: Not Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Guarantee
  Amount: Not Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8.2 Party B Credit Protection:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)
  Financial Information:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o Option A

  x Option B Specify: RERH Holdings, LLC

  o Option C Specify:

  

  So long as such Financial Information is publicly available through the
  Securities Exchange Commission’s EDGAR database or such similar database
  maintained by the Securities Exchange Commission, Party B shall not be
  required to deliver such Financial Information directly to Party B.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b) Credit Assurances:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  x Not Applicable

  o Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c) Collateral Threshold:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  x Not Applicable

  o Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d) Downgrade Event:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  x Not Applicable

  o Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e) Guarantor for Party A: Not Applicable

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Guarantee
  Amount: Not Applicable

  	
   

  	
   

  

 

 

 

 

	
  Article 10

  	
   

  	
   

  	
   

  	
   

  
	
  Confidentiality

  	
   

  	
  x Confidentiality Applicable

  	
   

  	
  If not checked, inapplicable.

  
	
  Schedule M

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o Party A is a Governmental Entity or
  Public Power System

  	
   

  	
   

  
	
   

  	
   

  	
  o Party B is a Governmental Entity or
  Public Power System

  	
   

  	
   

  
	
   

  	
   

  	
  o Add Section 3.6. If not checked,
  inapplicable

  	
   

  	
   

  
	
   

  	
   

  	
  o Add Section 8.6. If not checked,
  inapplicable

  	
   

  	
   

  

 

Other Changes:   Yes

 

Article
One:  General Definitions

The following
definitions are amended as set forth below:

Section 1.1 is revised to
add the following at the end of such section: “Notwithstanding the foregoing,
“Affiliate” means, with respect to Party A, RERH Holdings, LLC, and any
subsidiary thereof, including Reliant Energy Retail Holdings, LLC, and Reliant
Energy Retail Services, LLC, and with respect to Party B, shall have the
meaning given in the first two sentences of this definition.”

1.  Section 1.50 is amended to delete the
reference to Section “2.4” and add “2.5”.

2.  Section 1.51 is amended to add the phrase
“for delivery” immediately before the phrase “at the Delivery Point” in the
second line.

3.  Section 1.53 is amended to delete the phrase
“at the Delivery Point” from the second line and (ii) insert after the phrase
“commercially reasonable manner” in the sixth line, the following phrase “;
provided, however if the Seller is unable after using commercially reasonable
efforts to resell all or a portion of the Product not received by Buyer, the
Sales Price with respect to such unsold Product shall be deemed equal to zero
(0)”.

The following
shall be added as a new definition:

“1.62  “Merger Event” means, with respect to a
Party, such Party consolidates or amalgamates with, or merges into or with, or
transfers all or substantially all of its assets to, or reorganizes,
reincorporates or reconstitutes into or as, another entity and at the time of
such consolidation, amalgamation, merger, transfer, reoganization,
reincorporation or reconstitution the resulting, surviving or transferee entity
fails to assume all the obligations of such Party.

Article Two:
Transaction Terms and Conditions

Section 2.4 is
amended by deleting the words “either orally or” after the words “agreed to” in
line seven.

Section 2.5 is
amended by adding the words “regarding any Transaction and the terms thereof”
after the word “Parties” in line three.

Article Four:  Remedies for Failure to Deliver/Receive

The following is added as
a new Section 4.3:

“4.3   Suspension of Performance.  Notwithstanding, and in addition to the
remedies provided pursuant to Sections 4.1 and 4.2, if Seller or Buyer fails to
schedule and/or deliver/receive all or part of the Product pursuant to a
Transaction, and such failure is not excused under the terms of the Product or
by the other Party’s failure to perform, then upon one (1) Business Day prior
notice, and for so long as the non-performing Party fails to perform, the
performing Party shall have the right to suspend its performance under any or
all Transactions.”

Article Five:  Events of Default; Remedies

5.1  Section 5.1(f) is amended in its entirety as
follows:  “a Merger Event occurs with
respect to such Party;”.

5.2          Section
5.2 is amended to (i) reverse the placement of “(i)” and “to” in line three,
and (ii) delete the parenthetical beginning, “(or, to the extent that in the
reasonable opinion” through the rest of Section 5.2 and replace with the

 

 

 

 

 

 

                         following:
“(it being understood, that to the extent in the reasonable opinion of the
Non-Defaulting Party any of the Terminated Transactions may not be liquidated
and terminated under applicable law on the Early Termination Date, then such
Terminated Transactions shall be liquidated and terminated as soon thereafter
as is reasonably practicable.    The Non-
Defaulting Party (or its agent) may determine its Gains and Losses by reference
to information either available to it internally or supplied by one or more
third parties including, without limitation, quotations (either firm or
indicative) of relevant rates, prices, yields, yield curves, volatilities,
spreads or other relevant market data in the relevant markets.  Third parties supplying such information may
include, without limitation, dealers in the relevant markets, information
vendors and other sources of market information.”

Section 5.6(A)
shall be deleted in its entirety and replaced with the following:  “Party B shall make each payment due under this
Agreement without deduction, set-off or counterclaim, except (A) as
specifically provided in Article 6, and (B) that Party B, if it is the
Non-defaulting Party shall be entitled to set off the Termination Payment owed
by Party B to Party A under this Agreement (whether pursuant to Article 6 or
under any other provision under this Agreement) against amounts owed by Party A
to Party B under this Agreement (whether pursuant to Article 6 or under any
other provision under this Agreement). 
Party A shall make each payment due under this Agreement without
deduction, set-off counterclaim, except (A) as specifically provided in Article
6 , and (B) that Party A, if Party A is the Non-defaulting Party shall be
entitled to set off the Termination Payment owed by Party A to Party B under
this Agreement (whether pursuant to Article 6 or under any other provision
under this Agreement) against amounts owed by Party B to Party A under this
Agreement (whether pursuant to Article 6 or under any other provision under this
Agreement).  For the avoidance of doubt:

(A)      the term “Party
A” means Reliant Energy Power Supply, LLC (and any other Person that succeeds
to all of the rights and obligations of Reliant Energy Power Supply, LLC under
this Agreement in accordance with its terms), and ‘Party A’ shall in no event
include any of its affiliates or any other Person except as stated above; and

(B)        the term “Party
B” means [insert name of Party B] (and any other Person that succeeds to all of
the rights and obligations of [insert name of Part B] under this Agreement in
accordance with its terms), and ‘Party B’ shall in no event include any of its
affiliates or any other Person except as stated above.

Article
Seven:  Limitations

7.1    Section 7.1 shall be amended by: (a)
deleting “Except as set forth herein” from the first sentence and “Unless
expressly herein provided” from the fifth sentence, (b) adding  “Notwithstanding anything in this Agreement
to the contrary” to the beginning of the fifth sentence, and “set forth in this
Agreement’ after “indemnity provisions” and before “or otherwise”, also in the
fifth sentence, and (c) adding the following language after the word “Equity”
in the fourth sentence: “except for the remedies provided by the Uniform
Commercial Code for claims of anticipatory repudiation”.

 

Article Ten:  Miscellaneous

Section 10.2(vi) is
amended to add the phrase “except as disclosed in each parties’ or its
Guarantor’s, as applicable, SEC filing” at the end the of sentence in Section
10.2

Section 10.2 (ix) is
amended to read in its entirety as follows:

“(ix) it acknowledges and agrees that (A) Transaction(s) constitute “forward
contracts” within the meaning of title 11 of the United States Code (the “Bankruptcy Code”); (B) each of Party A
and Party B is a “forward contract merchant” within the meaning of the
Bankruptcy Code with respect to any Transactions that constitute “forward
contracts”; (C) all payments made or to be made by one Party to the other Party
pursuant to this Agreement constitute “settlement payments” within the meaning
of the Bankruptcy Code; (D) all transfers of Performance Assurance by one Party
to the other Party under this Agreement constitute “margin payments” within the
meaning of the Bankruptcy Code; (E) each Party’s rights under Section 5.2, “Declaration
of an Early Termination Date and Calculation of Settlement Amounts”, of this
Agreement constitutes a “contractual right to liquidate” the Transactions
within the meaning of the Bankruptcy Code; and (F) the other party is not a “utility”
as such term is used in Section 366 of the Bankruptcy Code, and each party
agrees to waive and not to assert the applicability of the provisions of
Section 366 in any bankruptcy proceeding wherein such Party is a debtor. In any
such proceeding, each party further agrees to waive the right to assert that
the other party is a provider of last resort;”

 

 

Section 10.4 is amended
to add the phrase “unless a Claim is due to such Party’s gross negligence or
willful misconduct” at the end of the first sentence of Section 10.4.

Section 10.5 is amended
to (i) add the words “shall not be unreasonably withheld or delayed” after the
words “which consent” in the second line; (ii) delete the words “may be
withheld in the exercise of its sole discretion” in the second and third line;
(iii) delete subparagraphs (i) and (ii) in their entirety from the fourth
through sixth lines; and iv) delete “or (iii)” from the eighth line.

Section 10.10 is hereby
amended to add the following phrase at the end of the sentence after the words “United
States Bankruptcy Code”, “, except such Transactions that provide for maturity
within two (2) days after the Transaction has been agreed to by the Parties.

“Section 10.11 is amended
(i) to add “Merrill Lynch Commodities, Inc. or “ after the word “than” in the
third line, (ii) to add the following phrase after the word “lenders”:  “and their counsel and advisors”; and (iii)
to add the following after the word “accountants”: “Guarantor”.

The following language
shall be added to the end of Section 10.11:

“The Parties hereby acknowledge that the disclosure of price data only
without counterparty name does not contravene this Section 10 so long as the
data is disclosed to an index publisher that publishes the data in aggregated
form and does not identify the Parties.

Notwithstanding anything
in this Section to the contrary, the terms and conditions of this Master
Agreement and any and all Confirmations may be disclosed to customers of Party
A and its affiliates without restriction or limitation on the use of such
information, or subsequent disclosure, by such customers, and as is necessary
to comply with the requirements of electricity purchase and sale
agreements.  Further, the particulars of
any dispute between Party A and Party B may be disclosed to the City of Houston
in order to comply with Section 10.12 of this Master Agreement.

To the extent it is necessary for Party B to disclose the terms of any
Transaction to a supplier of Energy to Party B (“Supplier”), Party B may,
provided that it receives prior written approval from Party A (which shall not
be unreasonably withheld), disclose the terms of such Transaction. Party B
shall (a) disclose the terms of such Transaction only to those representatives
of Supplier who need to know, solely for the purposes of evaluating Party B’s
credit and/or payment rights or requirements; (b) inform the Supplier and its
representatives of the confidential nature of the terms of such Transaction;
and (c) be responsible for any breach of the confidentiality provisions
pertaining to such disclosed Transaction by the Supplier or any of its
representatives.”

 The following is added as a new Section 10.12:

“10.12     Dispute Resolution.  Any controversy between the Parties involving
the construction or application of any of the terms, covenants or conditions of
this Master Agreement or any Transaction shall, on the written request of one
Party served upon the other or upon notice by the City of Houston’s Affirmative
Action Director (the “Affirmative Action Director”) served on both Parties, be
submitted to binding arbitration, under the Texas General Arbitration Act (Tex.
Civ. Prac. & Rem. Code Ann., Ch. 171 --- the “Act”).  Arbitration shall be conducted according to
the following procedures:

(a)                                  Upon the decision of the Affirmative
Action Director or upon written notice to the Affirmative Action Director from
either Party that a dispute has arisen, the Affirmative Action Director shall
notify both Parties that they must resolve the dispute within thirty (30) days
or the matter may be referred to arbitration.

(b)                                 If the dispute is not resolved within the
time specified, either Party or the Affirmative Action Director may submit the
matter to arbitration conducted by the American Arbitration Association under
the rules of the American Arbitration Association on file in the Office of the
City of Houston’s Affirmative Action Division.

(c)                                  Each Party shall pay all fees required of
it by the American Arbitration Association and sign a form releasing the
American Arbitration Association and its arbitrators from liability for
decisions reached in the arbitration.

(d)                                 If the American Arbitration Association
no longer administers Affirmative Action arbitration for the City of Houston,
the Affirmative Action Director shall prescribe alternate procedures as
necessary to provide 

 

arbitration by neutrals in accordance with the requirements of Chapter
15 of the Houston City Code of Ordinances.

(e)                                  All arbitrations shall be conducted in
Houston, Texas unless the Parties agree to another location in writing.

The following is added as
a new Section 10.13:

“10.13 With respect to any suit, action or proceeding
relating to this Agreement, each Party irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the borough of Manhattan in New York City and waives
any objection it may have at any time to the laying of venue of any such
proceedings brought in any such court, waives any claim that such proceedings
have been brought in any inconvenient forum and further waives the right to
object, with respect to such proceedings, that such court does not have
jurisdiction over such Party.  EACH PARTY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION, CLAIM OR PROCEEDING
RELATING TO THIS AGREEMENT OR CREDIT SUPPORT DOCUMENT.

The following is added as
a new Section 10.14

“10.14     Additional
Warranties and Covenants.   From the
date of entering into a Transaction under this Agreement and throughout the
term of such Transaction, the Parties each warrant and covenant as follows:

(a)                                  such Transaction has been negotiated at
arms length between Parties of equal sophistication and represents a
bargained-for exchange;

(b)                                 neither Party will directly or indirectly
challenge the equity, fairness or reasonableness of any terms or conditions set
forth in or established according to such Transaction, as those terms or
conditions may be at issue before any Governmental Authority or court, if the
successful result of such challenge would be to preclude or excuse all, or any
portion of, the performance of such Transaction by either Party;

(c)                                  each Party shall agree that the prices
agreed upon in such Transaction are just and reasonable and waives any right it
may have (now or in the future) to refunds related thereto; and

(d)                                 without limiting the foregoing, neither
Party shall exercise any of its respective rights under Section 205 or 206 of
the Federal Power Act to challenge or seek to modify any of the rates or other
terms and conditions of such Transaction.

For the purposes
of such Transaction, “Governmental Authority” means the government of the
United States or any state or territory thereof including the executive
branches and offices, a municipality, county, governmental board, air quality
management districts, public power authority, public utility district, joint
action agency, or other political subdivision, public entity, agency or
instrumentality of the United States, one or more states or territories of the
United States or any combination thereof or any regional reliability counsel,
independent systems operator, regional transmission authority, power exchange
or similar body or utility or other entity with power or control over
emissions, air quality, energy, electric or gas transmission, transportation,
or distribution.”

The following is added as
a new Section 10.15:

“10.15     MWBE Covenants.

(a)                                  Party B shall not delegate or subcontract
more than 50% of the work under this Master Agreement or any Transaction to any
other subcontractor or supplier without the express written consent the
Affirmative Action Director.

(b)                                 Party B shall permit representatives of
the City of Houston, at all reasonable times, to perform (1) audits of the
books and records of Party B, and (2) inspections of all places where work is
to be undertaken in connection with this Agreement and/or any and all
Transactions.  Party B shall keep such
books and records available for inspection for at least four (4) years after
the end of its performance under this Master Agreement and/or any and all
Transactions.  Nothing in this provision
shall change the time for bringing a cause of action.

(c)                                  Within five (5) Business Days of the full
execution of this Master Agreement, Party A and Party B shall 

 

designate in writing to the Affirmative Action Director its respective
agent for receiving any notice required or permitted to be given pursuant to
Chapter 15 of the Houston City Code of Ordinances, along with the street and
mailing address and phone number of such agent.”

The following is added as
a new Section 10.16:

“10.16     Standard
of Review.   From the date of
entering into a Transaction under this Master Agreement and throughout the term
of such Transaction, the Parties each warrant and covenant as follows:

(d)                                 Absent the agreement of all Parties to
the proposed change, the standard of review for changes to any section of this
Master Agreement (including all Transactions and/or Confirmations) specifying
the rate(s) or other material economic terms and conditions agreed to by the
Parties herein, whether proposed by a Party, a non-party or FERC acting sua
sponte, shall be the “public interest” standard of review set forth in United
Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal
Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956)( the “Mobile-Sierra”
doctrine).

(e)                                  The Parties, for themselves and their
successors and assigns, (i) agree that this “public interest” standard shall
apply to any proposed changes in any other documents, instruments or other
agreements executed or entered into by the Parties in connection with this
Master Agreement and (ii) hereby expressly and irrevocably waive any rights
they can or may have to the application of any other standard of review,
including the “just and reasonable” standard.”

(f)                                    With respect to Transactions in ERCOT,
absent the agreement of all Parties to the proposed change, the standard of
review for changes to any portion of this Master Agreement or any Transaction
entered into hereunder proposed by a Party, a non-party, or the Public Utility
Commission of Texas acting sua sponte,
shall be the “public interest” standard of review set forth in High Plains Natural Gas Co. v. Railroad Commission,
Tex. Cov. Appl. — Austin 1971, writ ref d
n.r.e.)(the “High Plains” doctrine).”

The following is added as
a new Section 10.17:

(a)                                  Consent to Assignment.  Party B hereby consents to the assignment by
Party A to Merrill Lynch Commodities, Inc. and Merrill Lynch & Co., Inc.
(together, the “Merrill Parties”) of all of Party A’s rights under this
Agreement, including all rights to receive payments from Party B under this
Agreement (any such payment, a “Receivable”),
as collateral security for Party A’s obligations to the Merrill Parties in
connection with an enhanced credit structure for Party A’s retail electric
business provided by the Merrill Parties (the “Collateral Assignment”).

(b)                                 Collateral Account.  Party A hereby unconditionally and irrevocably
authorizes and directs Party B to make, and, unless and until otherwise
required by law or this agreement is terminated, Party B hereby agrees to make,
any and all payments in respect of Receivables directly by wire transfer to the
account specified in the Cover Sheet (the “Collateral Account”).  All such payments by Party B to the
Collateral Account shall be free and clear of any deduction, set-off, netting
arrangements or counterclaim, except as expressly provided in this Agreement.

(c)           Notice & Right to Cure Events of
Default.  As set forth above, the Merrill
Parties shall be provided with all notices under this Agreement, including
notices of any Potential Event of Default or Event of Default hereunder.  In the event of a Potential Event of Default
or Event of Default in which Party A is, or may become, the Defaulting Party,
the Merrill Parties shall be permitted, at their option, to cure such default ,
[(if such event of default is capable of being cured by either Merrill Party)
TO BE USED AS FALLBACK] within any grace period applicable to Party A for such
Potential Event of Default or Event of Default.”

 

Additional
Provisions:

The following
provisions shall be added to Schedule P: Products and Related Definitions:

“Index Transactions. If
the Contract Price for a Transaction is determined by reference to a
third-party information source, then the following provisions shall be
applicable to such Transaction.

(b)           Market Disruption. If a Market
Disruption Event occurs during a Determination Period, the Floating Price for
the affected Trading Day(s) shall be the fallback reference price specified by
the Parties if the Parties have specified such a fallback reference price.  If the Parties did not specify a fallback reference
price the Floating Price shall be determined by 

 

reference to the
Floating Price specified in the Transaction for the first Trading Day
thereafter on which no Market Disruption Event exists; provided, however, if
the Floating Price is not so determined within three (3) Business Days after
the first Trading Day on which the Market Disruption Event occurred or existed,
then the Parties shall negotiate in good faith to agree on a Floating Price (or
a method for determining a Floating Price), and if the Parties have not so
agreed on or before the twelfth Business Day following the first Trading Day on
which the Market Disruption Event occurred or existed, then the Floating Price
shall be determined in good faith by taking the average of two dealer quotes
obtained from dealers of the highest credit standing which satisfy all the
criteria that the Seller applies generally at the time in deciding to offer or
to make an extension of credit.

“Determination Period” means each calendar
month a part or all of which is within the Delivery Period of a Transaction.

 “Exchange” means, in respect of a
Transaction, the exchange or principal trading market specified in the relevant
Transaction.

“Floating Price”
means a Contract Price specified in a Transaction that is based upon a Price
Source.

“Market Disruption
Event” means, with respect to any Price Source, any of the following
events: (a) the failure of the Price Source to announce or publish the
specified Floating Price or information necessary for determining the Floating
price; (b) the failure of trading to commence or the permanent discontinuation
or material suspension of trading in the relevant options contract or commodity
on the Exchange or in the market specified for determining a Floating Price;
(c) the temporary or permanent discontinuance or unavailability of the Price
Source; (d) the temporary or permanent closing of any Exchange specified for
determining a Floating Price; or  (e) a
material change in the formula for or the method of determining the Floating
Price.

“Price Source”
means, in respect of a Transaction, the publication (or such other origin of
reference, including an Exchange) containing (or reporting) the specified price
(or prices from which the specified price is calculated) specified in the
relevant Transaction.

“Trading Day”
means a day in respect of which the relevant Price Source published the  Floating Price.

(b)           Corrections to Published Prices.  For purposes of determining a Floating Price
for any day, if the price published or announced on a given day and used or to
be used to determine a relevant price is subsequently corrected and the
correction is published or announced by the person responsible for that
publication or announcement within two (2) years of the original publication or
announcement, either Party may notify the other Party of (i) that correction
and (ii) the amount (if any) that is payable as a result of that
correction.  If, not later than thirty
(30) days after publication or announcement of that correction, a Party gives
notice that an amount is so payable, the Party that originally either received
or retained such amount will, not later than three (3) Business Days after the
effectiveness of that notice, pay, subject to any applicable conditions
precedent, to the other Party that amount, together with interest at the
Interest Rate for the period from and including the day on which payment
originally was (or was not) made to but excluding the day of payment of the
refund or payment resulting from that correction.

(c)           Calculation of Floating Price.  For the purposes of the calculation of a
Floating Price, all numbers shall be rounded to three (3) decimal places.  If the fourth (4th) decimal number
is five (5) or greater, then the third (3rd) decimal number shall be
increased by one (1), and if the fourth (4th) decimal number is less
than five (5), then the third (3rd) decimal number shall remain
unchanged.”

 

 

IN WITNESS WHEREOF, the
Parties have caused this Master Agreement to be duly executed as of the date
first above written.

	
  RELIANT ENERGY POWER SUPPLY, LLC

  	
  [CounterParty]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name: 

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title: 

  	
   

  
							

 

 

DISCLAIMER:  This Master Power Purchase and Sale Agreement
was prepared by a committee of representatives of Edison Electric Institute (“EEI”)
and National Energy Marketers Association (“NEM”) member companies to
facilitate orderly trading in and development of wholesale power markets.  Neither EEI nor NEM nor any member company
nor any of their agents, representatives or attorneys shall be responsible for
its use, or any damages resulting therefrom. 
By providing this Agreement EEI and NEM do not offer legal advice and
all users are urged to consult their own legal counsel to ensure that their
commercial objectives will be achieved and their legal interests are adequately
protected.

 

 

Exhibit C4

To Credit Sleeve
and Reimbursement Agreement

Form of RECs Purchase Contract for ERCOT

Transaction Confirmation

 

Date:                
      , 200    

 

Re:          Renewable
Energy Credits

 

This Transaction Confirmation,
together with the attached General Terms and Conditions, constitute the
Purchase and Sale Contract (“Contract”) between                               
(“Counterparty”) and Reliant Energy Power Supply, LLC (“REPS”)  (together, the “Parties”) based on the terms
set forth herein.  Terms used but not
defined herein will have the meanings ascribed thereto in the Public Utility
Commission of Texas (“PUCT”) Substantive Rule Section 25.173, or any successor
thereto (the “Texas Rules”).  “Business
Day” means any day, other than Saturday and Sunday, on which commercial banks
are open for business in Texas.

 

	
  Seller:

  	
   

  	
  Counterparty

  
	
   

  	
   

  	
   

  
	
  Buyer:

  	
   

  	
  REPS, at 1000 Main Street, Houston, Texas 77002.

  
	
   

  	
   

  	
   

  
	
  Product:

  	
   

  	
  Renewable energy credits (“RECs”) for Texas, as
  provided for in the Texas Rules. Each REC represents one megawatt hour of
  electricity generated by renewable energy technology in Texas, certified by
  the PUCT and tracked by the Program administrator, in each case as provided
  for in the Texas Rules.

  
	
   

  	
   

  	
   

  
	
  Quantity:

  	
   

  	
  _________________ RECs

  
	
   

  	
   

  	
   

  
	
  Price:

  	
   

  	
  Total U.S. $          (U.S.$ /REC)

  
	
   

  	
   

  	
   

  
	
  Vintage Year:

  	
   

  	
  200    . All RECs sold and
  delivered hereunder will be produced during the period between January 1,
  200     and December 31, 200    .

  
	
   

  	
   

  	
   

  
	
  Delivery and Payment:

  	
   

  	
  The Product will be delivered and paid for under the
  following terms: [OPTION A OR OPTION B TO BE DETERMINED BY RELIANT]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Delivery will be effectuated through the “Renewable
  energy credits trading program” (as defined in the Texas Rules). Title to the
  Product will transfer at such time as the “Program administrator” (as defined
  in the Texas Rules) recognizes the transfer by Seller of the Product from
  Seller’s “Renewable energy credit account” (as defined in the Texas Rules) to
  Buyer’s Renewable energy credit account. Unless Buyer notifies Seller
  otherwise, Buyer’s Renewable energy credit account will be: “Reliant Energy
  Power Supply, LLC.” Buyer will promptly confirm, in accordance with the
  requirements of the Program administrator, such transfer by Seller to Buyer
  of the Product. Each Party shall provide to the other any information or
  documentation required by the Program administrator to effectuate delivery
  hereunder and will comply with, and will assist the other Party to comply
  with any and all regulatory obligations relating to recording, the transfer
  of, and tracking the transfer of the RECs sold hereunder. With regard to the
  performance of their obligations hereunder, the Parties will abide by the
  provisions set forth in Section 14 of the ERCOT Protocols and the Texas
  Rules.

  
	
   

  	
   

  	
   

  

 

 

OPTION A:

By 9:30 a.m. Central
Prevailing Time on [insert date],
Seller will deliver to Buyer (i) the full Quantity of RECs, and (ii) an invoice
for the amount to be paid by Buyer hereunder for such RECs.  With regard to (ii) above, Buyer will pay
Seller as provided for herein within five (5) Business Days of Buyer’s receipt
of both the Product and invoice.  All
funds to be paid to Seller shall be made in immediately available funds (U.S.
Dollars) by wire transfer.  If either
Party fails to remit any amount payable by it when due, interest on such unpaid
portion shall accrue at a rate equal to the prime interest rate in effect at
the time as published by Citibank, N.A. plus two percent (2%) (the “Interest
Rate”) from the date payment is due to the date of payment.

 

OPTION B:

By [insert
date], Seller will deliver to Buyer an invoice for the amount to be
paid by Buyer hereunder for delivery of the Product.  Within three (3) Business Days of Buyer’s
receipt of such invoice, Buyer will pay to Seller an amount equal to the
Price.  By no later than 9:30 a.m.
Central Prevailing Time on the second Business Day following Seller’s receipt
of the payment provided for herein, Seller will deliver to Buyer the full
Quantity of RECs.  All funds to be paid
to Seller shall be made in immediately available funds (U.S. Dollars) by wire
transfer.  If either Party fails to remit
any amount payable by it when due, interest on such unpaid portion shall accrue
at a rate equal to the prime interest rate in effect at the time as published
by Citibank, N.A. plus two percent (2%) (the “Interest Rate”) from the date
payment is due to the date of payment.

 

Payment:                                                                                             The invoice from Seller to Buyer will be
sent to the following:

 

Reliant Energy Power
Supply, LLC

Attn:       ERCOT Settlements

P.O. Box 148

                                                                                                                                                Houston, TX  77001-0148

                                                                                                                                                Phone:    713-497-2792

                                                                                                                                                Fax:         713-497-0098

 

Payment by Buyer
to Seller shall be made to the following account:

 

                                                                                                                                                Bank:

For the Account of:

                                                                                                                                                ABA No.:

                                                                                                                                                Account No.:

 

                                                                                                                                                With respect to the payment of
Receivables (as defined herein) by Seller to Buyer, as set forth in Section 6
of this Contract, Seller shall make all such payments to the Buyer’s Collateral
Account (as defined herein), as more specifically described in Section 6
hereof.

 

 

 

Term:                                                                                                              This Contract will terminate after the
full Quantity of the Product has been delivered and paid for under the terms
hereof (the “Term”).  Provided, that,
Section 1 of the Special Conditions, and Sections 1 and 10 of the General Terms
and Conditions will each survive termination.

 

Special Conditions:                                      1.                                       Seller covenants, represents and warrants
the following to Buyer:

 

a)     The RECs sold by Seller to Buyer hereunder
comply with the technical specifications as set forth in this Confirmation and
have not been sold, retired, claimed or represented as part of electricity
output, usage or sales, or used to satisfy renewable energy or other
obligations in any state or jurisdiction, nor will Seller take any such action
with respect to such RECs subsequent to the transfer thereof to Buyer.

 

b)    With regard to the RECs sold by Seller to
Buyer hereunder, Seller has, and conveys to Buyer sole and exclusive title
(free of any liens, claims, security interests, encumbrances and other defects
of title).

 

                                                                                                                                                2.                                       Each Party covenants that upon its
receipt of notice from the Program administrator that the transfer of RECs
pursuant to a transaction will not be recognized or Delivery of Product was not
made as required pursuant to the terms of a transaction, it will immediately so
notify the other Party, providing a copy of such notice, and both Parties will
cooperate in taking such action as are necessary and commercially reasonable to
cause such transfer to be recognized and such Product Delivered.

 

3.                                       gThe General Terms and Conditions attached hereto are
included herein for all purposes and are an integral part of this
Contract.  Provided, that, to the extent
there is any conflict between a provision in the General Terms and Conditions
and this Transaction Confirmation, the terms of the Transaction Confirmation
shall control.  This Contract sets forth
the entire agreement between the Parties with respect to the REC purchase
identified in this document superseding any and all contemporaneous or prior
conversations, memoranda, agreements (oral or written) or other communication
with respect to its subject matter between the Parties or any of their
respective agents. This Contract may not be terminated (other than as provided
in this Contract) or changed except by a writing signed by both Parties.  No right, obligation or provision of this
Contract shall be deemed waived unless such waiver is evidenced by a writing
signed by the Party charged with the waiver and any such waiver shall be
strictly limited to the express terms of such writing.  No representations or warranties have been
given other than those expressly stated in this Contract to induce either Party
to enter into this Contract.

 

[Remainder of Page Intentionally Left Blank]

 

IN
WITNESS WHEREOF,
and intending to be legally bound, the Parties have executed this Contract by
the undersigned duly authorized representatives as of the date of this
Contract.

 

 

	
  Counterparty

  	
  Reliant Energy Power Supply, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  	
  Date

  	
   

  	
   

  
									

 

 

GENERAL TERMS AND CONDITIONS

 

1.             Events of
Default and Remedies.

1.1       An “Event of Default” shall mean, with respect to a
Party (a “Defaulting Party”), the occurrence of any of the following:

(a)                the failure to make, when due, any payment required pursuant to this
Contract if such failure is not remedied within three (3) business days after
written notice;

(b)               the failure by
Seller to deliver to Buyer, when required pursuant to this Contract, the RECs
if such failure is not remedied within three (3) business days after written
notice;

 

(c)                any representation
or warranty made by such Party herein is false or misleading in any material
respect when made or when deemed made or repeated;

 

(d)               a material breach
of a covenant or obligation (other than as separately provided for in this
Section 1.1) set forth in this Contract not cured within five (5) days
following written notice thereof

 

(e)                such Party (i)
files a petition or otherwise commences, authorizes or acquiesces in the
commencement of a proceeding or cause of action under any bankruptcy,
insolvency, reorganization or similar law, or has any such petition filed or
commenced against it and not discharged within thirty (30) days, (ii) makes an
assignment or any general arrangement for the benefit of creditors, (iii) otherwise
becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator,
administrator, receiver, trustee, conservator or similar official appointed
with respect to it or any substantial portion of its property or assets, or (v)
is generally unable to pay its debts as they fall due.

 

(f)                  such Party
consolidates or amalgamates with, or merges with or into, or transfers all or
substantially all of its assets to, another entity and, at the time of such
consolidation, amalgamation, merger or transfer, the resulting, surviving or
transferee entity fails to assume all the obligations of such Party under this
Contract to which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other Party.

 

1.2         If an Event of Default with respect to a Defaulting
Party shall have occurred and be continuing, the other Party shall have the
right to (i) suspend performance, (ii) withhold any payments due to the
Defaulting Party under this Contract, and (iii) terminate this Contract on two
(2) business days prior notice to accelerate all amounts owing between the
Parties and to liquidate and recover its damages resulting from such Event of
Default in accordance with the methodology set forth in Section 1.3 below.

 

1.3         If Seller fails to deliver all or part of the Quantity
of the Product in accordance with the terms of this Contract or if there is an
Event of Default hereunder in respect of Seller, Seller shall pay Buyer, within
ten (10) days of receipt of an invoice from Buyer an amount equal to the
product of (i) the deficiency in the Quantity of Product delivered and (ii) the
positive difference, if any, obtained by subtracting the per unit Price from
the per unit Replacement Price. “Replacement Price” means the price at which
Buyer, acting in a commercially reasonable manner, purchases (if at all)
substitute or replacement Product, having the same or a subsequent Vintage Date
as the Product, for the Product not delivered by Seller, plus any commercially
reasonable costs of Buyer to obtain replacement Product, less any costs Buyer
avoids as a consequence of Seller’s failure to perform; or, absent any such
purchase, the market price for such quantity of substitute or replacement
Product having the same or a subsequent Vintage Date as the Product; provided,
however, in no event shall the Replacement Price include any penalties, or
similar charges or any stranded costs. 
For amounts of Product for which Seller breaches its obligations pursuant
to Section 1 of the Special Conditions in the Transaction Confirmation, Seller
will be deemed 

 

 

not to have delivered such Product to Buyer and, as
such, notwithstanding anything to the contrary, Buyer will be entitled to the
remedies set forth in this Section 1.3.

 

If Buyer fails to receive
all or part of the Quantity of the Product in accordance with the terms of this
Contract or if there is an Event of Default hereunder in respect of Buyer,
Buyer shall pay Seller, within ten (10) days of receipt of an invoice from
Seller, an amount equal to the product of (i) the deficiency in the Quantity of
Product received and (ii) the positive difference, if any, obtained by
subtracting the per unit Sales Price from the per unit Price. “Sales Price”
means the price at which Seller, acting in a commercially reasonable manner,
resells (if at all) the Product not received by Buyer, less any costs Seller
avoids as a consequence of Buyer’s failure to perform; or, absent any such
sale, the market price for such quantity of substitute or replacement Product;
provided, however, in no event shall the Sales Price include any penalties, or
similar charges or any stranded costs.

1.4         THE PARTIES
CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS
CONTRACT SATISFY THE ESSENTIAL PURPOSES HEREOF, THAT SUCH EXPRESS REMEDY OR
MEASURE OF DAMAGES SHALL BE THE PARTY’S SOLE AND EXCLUSIVE REMEDY FOR FAILURE
OF THE OTHER TO MAKE OR TAKE DELIVERY HEREUNDER, THE OBLIGOR’S LIABILITY SHALL
BE LIMITED AS SET FORTH AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY
ARE WAIVED. FOR BREACH OF ANY OTHER OBLIGATION IMPOSED IN THIS CONTRACT, THE
OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT
ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AVAILABLE TO IT AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. NEITHER PARTY SHALL
BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, PUNITIVE, SPECIAL, EXEMPLARY OR
INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY
STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION IN THIS CONTRACT OR
OTHERWISE.  IT IS THE INTENT OF THE
PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF
DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE
NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT,
OR ACTIVE OR PASSIVE.  TO THE EXTENT ANY
DAMAGES REQUIRED TO BE PAID HEREUNDER ARE DEEMED TO BE LIQUIDATED, THE PARTIES
ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE,
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED
DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE ESTIMATED HARM OR LOSS
ATTRIBUTABLE TO A BREACH.

2.             No Waiver. 
No waiver at any time by any Party hereto of its rights with respect to
the other Party or with respect to any matter arising in connection with the
Contract shall be considered a waiver with respect to any subsequent default or
matter.

3.             Assignment. 
Neither Party shall assign this Contract without the prior written
consent of the other Party, which consent may not be unreasonably withheld;
provided that, Seller expressly consents to the Collateral Assignment (as
defined herein, and as more specifically set forth in Section 6 of this
Contract), by Buyer to Merrill Lynch Commodities, Inc., and Merrill Lynch &
Co., Inc., (together, the “Merrill Parties”). 
Additionally, either Party may, without the consent of the other Party
(and without relieving itself from liability hereunder), (i) transfer or assign
this Contract to an affiliate of such Party which affiliate’s creditworthiness
is equal to or higher than that of such Party, or (ii) transfer or assign this
Contract to any person or entity succeeding to all or substantially all of the
assets whose creditworthiness is equal to or higher than that of such Party;
provided, however, that in each such case, any such assignee shall agree in
writing to be bound by the terms and conditions hereof and so long as the
transferring Party delivers such tax and enforceability assurance as the non-transferring
Party may reasonably request.

4.             Taxes and Indemnity.  Seller will be responsible for any taxes
imposed by any government authority on the creation, ownership, or transfer of
the Product under this Contract up to and including the time and place at which
title transfers.  Buyer will be
responsible for any taxes imposed by any government authority on the receipt or
ownership of the Product after the time and place at which title transfers.  Each Party will indemnify, defend and hold
harmless the other Party from and against any claims or demands made by others
arising from or out of any event, circumstance, act or incident first occurring
or existing during the period when title to the Product is vested in such Party
as provided herein, except to the extent arising from such Party’s own gross
negligence or willful misconduct.  Each
Party will 

 

indemnify,
defend and hold harmless the other Party against any taxes for which such Party
is responsible as provided herein.

5.             Representations.

5.1           From
the date of entering into this Contract and throughout the Term of this
Contract, the Parties each warrant and covenant as follows:

a)              it is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation;

b)             it has all regulatory authorizations necessary for it
to legally perform its obligations under this Contract;

c)              it has the requisite authority to enter into and
perform its respective obligations under the Contract;

d)             the obligations hereunder are binding on it;

e)              it is not the subject of any bankruptcy proceeding or
involved in litigation that would materially affect its ability to perform
hereunder, except as provided for in any SEC Filing by it or any of its
affiliates;

f)                the Contract has been negotiated in the ordinary
course of  business, in good faith, for
fair consideration on an arms length basis between Parties of equal
sophistication and represents a bargained for exchange; and

g)             it has entered into this Contract in connection with
the conduct of its business and it has the capacity and ability to perform its
obligations hereunder.

6.                                       Credit Sleeve Provisions

 

(a)                                  Consent to Assignment.  Seller hereby consents to the assignment by
Buyer to the Merrill Parties of all of Buyer’s rights under this Contract,
including all rights to receive payments from Seller under this Contract (any
such payment, a “Receivable”), as collateral security for Buyer’s obligations
to the Merrill Parties in connection with an enhanced credit structure for
Buyer’s retail electric business provided by the Merrill Parties (the “Collateral
Assignment”).

 

(b)                                 Collateral Account.  Buyer hereby unconditionally and irrevocably
authorizes and directs Seller to make, and, unless and until otherwise required
by law, or this Contract is terminated, Seller hereby agrees to make, any and
all payments in respect of Receivables directly by wire transfer to the account
specified below (the “Collateral Account”). 
All such payments by Seller to the Collateral Account shall be free and
clear of any deduction, set-off, netting arrangements or counterclaim, except
as expressly provided pursuant to this Contract.

 

                                                Collateral Account

 

	
   

  
	
   

  
	
   

  

 

(c)                                  Notice & Right to Cure Events of
Default.  Pursuant to Section 7 of these
General Terms and Conditions, the Merrill Parties shall be provided with all
notices under this Contract, including notices of any Event of Default, or any
event that with notice of lapse of time would be an Event of Default (a “Potential
Event of Default”) hereunder.  In the
event of a Potential Event of Default or Event of Default in which Buyer is, or
may become, the Defaulting Party, the Merrill Parties shall be permitted, at
their option, to cure such default,  if such
Event of Default or Termination Event is capable of being cured by either
Merrill Party, within any grace period applicable to Buyer for  such Potential Event of Default or
Event of Default.

 

7.             Notices.  All notices to REPS under the Contract shall
be given to:  

 

	
  Reliant Energy Power Supply, LLC

  Attn: Contract Administration

  P. O. Box 4455

  Houston, TX77210-4455

  Phone: (713) 497-5855

  Facsimile: (713) 497-9561

   

   

  All notices to         
  under the Contract shall be given to:

  	
   

  	
  With additional Notices
  of an Event of Default or Potential

  Event of Default to:

  Attn: Dave Sladic, Vice President and Deputy General Counsel

  Phone: (713) 497-7063

  Facsimile: (713) 537-7063

   

  With additional Notices
  of an Event of Default or

  Potential Event of Default to:

  

 

 

With a copy to:

 

Merrill Lynch Commodities, Inc.

20 East Greenway Plaza

7th Floor

Houston, Texas 77253-3327

Attn:                                            Legal

Fax:   713-544-5551

Phone:                                   713-544-4975

 

 

Except as otherwise expressly provided herein, all notices to the other
Party under the Contract shall be in writing and shall be deemed effective upon
receipt if received prior to 5:00 p.m., local time, on a business day, or on
the next succeeding business day if otherwise.

 

8.             Choice of Law.  This Contract will be governed by the laws of
the state of [New York/Texas], without regard to choice of law doctrine.

 

9.             Waiver of Jury
Trial.  Each Party waives its
respective right to any jury trial with respect to any litigation arising
under, or in connection with this Contract.

 

10.           Confidentiality.  Except to the extent required by any
governmental or judicial authority or process, including without limitation as
may be necessary for Buyer to demonstrate compliance with any renewable energy
requirements imposed by the state of Texas and the Electric Reliability Council
of Texas, the Parties will not disclose the provisions of this Contract to any
party, except as hereinafter provided:  A
Party may disclose the provisions of this Contract to its officers, directors,
employees, agents, accountants and attorneys (collectively, “Representatives”)
and to its affiliates and its affiliates’ Representatives.  Additionally, REPS will have the right to
disclose the provisions of this Contract to Merrill Lynch Commodities, Inc. and
Merrill Lynch & Co., Inc.

 

Exhibit D1

To Credit Sleeve
and Reimbursement Agreement

Form of EEI Collateral Annex

 

PARAGRAPH 10

to the

COLLATERAL ANNEX

to the

EEI MASTER POWER PURCHASE AND SALE AGREEMENT

 

CREDIT ELECTIONS COVER SHEET

 

DATED AS OF

 

[   T.B.D.    
]

 

 

BETWEEN

 

RELIANT ENERGY POWER SUPPLY, LLC
(“Party A”)

 

AND

 

_________________________________________
(“Party B”)

 

AND

 

MERRILL
LYNCH COMMODITIES, INC. (“MLCI”)

 

 

Paragraph 10.   
Elections and Variables

 

I.              Collateral
Threshold.

 

A.                                    Party
A Collateral Threshold.

 

o           $                             
(the “Threshold Amount”). [DELETE the following language if we use this option
& the amount is Zero (0)    The
amount (the “Threshold Amount”) equal to the lower of (i) the maximum amount
payable under guaranty provided by [Party B][Party B’s Guarantor] guaranteeing
Party B’s payment obligations hereunder, if any, and (ii) $                             ;
provided, however, that the Collateral Threshold for Party A shall be
zero [remove the following if no Guaranty provided - if (i) no Guaranty has
been provided or (ii) upon the occurrence and during the continuance of an
Event of Default or a Potential Event of Default with respect to Party A; and
provided further that, in the event that, and on the date that, Party A
cures the Potential Event of Default on or prior to the date that Party A is
required to post Performance Assurance to Party B pursuant to a demand made by
Party B pursuant to the provisions of the Collateral Annex on or after the
occurrence of such Potential Event of Default, (i) the Collateral Threshold for
Party A shall automatically increase from zero to the Threshold Amount and (ii)
Party A shall be relieved of its obligation to post Performance Assurance
pursuant to such demand.]

 

 

 

o           The amount (the “Threshold Amount”)
equal to the amount set forth below under the heading “Party A Collateral
Threshold” opposite the Credit Rating for Party A’s Guarantor on the relevant
date of determination, and if Party A’s Guarantor’s Credit Ratings shall not be
equivalent, the [lower/higher] Credit Rating shall govern; provided, however,
that the Collateral Threshold for Party A shall be zero if (i) no Guaranty has
been provided, (ii) on the relevant date of determination Party A’s Guarantor
does not have a Credit Rating from any rating agency specified below or (iii)
an Event of Default or a Potential Event of Default with respect to Party A has
occurred and is continuing; and provided further that, in the event
that, and on the date that, Party A cures the Potential Event of Default on or
prior to the date that Party A is required to post Performance Assurance to
Party B pursuant to a demand made by Party B pursuant to the provisions of the
Collateral Annex on or after the occurrence of such Potential Event of Default,
(i) the Collateral Threshold for Party A shall automatically increase from zero
to the Threshold Amount and (ii) Party A shall be relieved of its obligation to
post Performance Assurance pursuant to such demand.

 

	
  Party A

  Collateral Threshold

  	
   

  	
  S&P Credit Rating

  	
   

  	
  Moody’s Credit Rating

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
  AA- (or above)

  	
   

  	
  Aa3 (or above)

  
	
  $                  

  	
   

  	
  A+ thru A-

  	
   

  	
  A1 thru A3

  
	
  $                  

  	
   

  	
  BBB+

  	
   

  	
  Baa1

  
	
  $                  

  	
   

  	
  BBB

  	
   

  	
  Baa2

  
	
  $                  

  	
   

  	
  BBB-

  	
   

  	
  Baa3

  
	
  $                  

  	
   

  	
  BB+

  	
   

  	
  Ba1

  
	
  $                  

  	
   

  	
  BB

  	
   

  	
  Ba2

  
	
  $                  

  	
   

  	
  BB-

  	
   

  	
  Ba3

  
	
  $                  

  	
   

  	
  B+

  	
   

  	
  B1

  
	
  $                  

  	
   

  	
  B

  	
   

  	
  B2

  
	
  $                  

  	
   

  	
  Below B

  	
   

  	
  Below B2

  
	
  $                  

  	
   

  	
  Unrated

  	
   

  	
  Unrated

  

 

o           The
amount (the “Threshold Amount”)  set
forth below under the heading “Party A Collateral Threshold” opposite the
Credit Rating for [Party A][Party A’s Guarantor] on the relevant date of
determination, and if [Party A’s][Party A’s Guarantor’s] Credit Ratings shall
not be equivalent, the lower Credit Rating shall govern or (b) zero if on the
relevant date of determination [Party A][its Guarantor] does not have a Credit
Rating from the rating agency(ies) specified below or an Event of Default or a
Potential Event of Default with respect to Party A has occurred and is
continuing; provided, however, in the event that, and on the date that,
Party A cures the Potential Event of Default on or prior to the date that Party
A is required to post Performance Assurance to Party B pursuant to a demand
made by Party B pursuant to the provisions of the Collateral Annex on or after
the occurrence of such Potential Event of Default, (i) the Collateral Threshold
for Party A shall automatically increase from zero to the Threshold Amount and
(ii) Party A shall be relieved of its obligation to post Performance Assurance
pursuant to such demand.

 

	
  Party A

  Collateral Threshold

  	
   

  	
  Credit Rating

  	
   

  	
  Credit Rating

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
               
  (or above)

  	
   

  	
               
  (or above)

  
	
  $                  

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
  Below 

  	
   

  	
  Below 

  

 

o            The amount of the
Guaranty Agreement dated            
from            , as
amended from time to time but in no event shall Party A’s Collateral Threshold
be greater than $           .

 

 

o            Other — see attached threshold
terms

 

 

B.                                    Party
B Collateral Threshold.

 

o            $                             
(the “Threshold Amount”).  [DELETE the
following language only if   we use this
option & the amount is Zero (0)   
The amount (the “Threshold Amount”) equal to the lower of (i) the
maximum amount payable under guaranty provided by [Party B][Party B’s
Guarantor] guaranteeing Party B’s payment obligations hereunder, if any, and
(ii) $                             ;;
provided, however, that the Collateral Threshold for Party B shall be
zero [remove the following if no Guaranty provided - if (i) no Guaranty has
been provided or (ii) upon the occurrence and during the continuance of an
Event of Default or a Potential Event of Default with respect to Party B; and provided
further that, in the event that, and on the date that, Party B cures the
Potential Event of Default on or prior to the date that Party B is required to
post Performance Assurance to Party A pursuant to a demand made by Party A
pursuant to the provisions of the Collateral Annex on or after the occurrence
of such Potential Event of Default, (i) the Collateral Threshold for Party B
shall automatically increase from zero to the Threshold Amount and (ii) Party B
shall be relieved of its obligation to post Performance Assurance pursuant to
such demand.]

 

o            The amount (the “Threshold
Amount”) equal to the [delete highlighted language if Guaranty is uncapped or
no Guarantor at all] lower of (i) the maximum amount payable under the guaranty
provided by Party B’s Guarantor guaranteeing Party B’s payment obligations
hereunder, if any and (ii) the] amount set forth below under the heading “Party
B Collateral Threshold” opposite the Credit Rating for Party B[‘s Guarantor] on
the relevant date of determination, and if Party B’s [Guarantor’s] Credit
Ratings shall not be equivalent, the [lower/higher] Credit Rating shall govern
provided, however, that the Collateral Threshold for Party B shall be zero if
[(i) no Guaranty has been provided, delete if Party B has no Guarantor] (ii) on
the relevant date of determination Party B[‘s Guarantor] does not have a Credit
Rating from any rating agency specified below or (iii) an Event of Default or a
Potential Event of Default with respect to Party B has occurred and is
continuing; and provided, further that, in the event that, and on the
date that, Party B cures the Potential Event of Default on or prior to the date
that Party B is required to post Performance Assurance to Party A pursuant to a
demand made by Party A pursuant to the provisions of the Collateral Annex on or
after the occurrence of such Potential Event of Default, (i) the Collateral
Threshold for Party B shall automatically increase from zero to the Threshold
Amount and (ii) Party B shall be relieved of its obligation to post Performance
Assurance pursuant to such demand.

 

	
  Party B

  Collateral Threshold

  	
   

  	
  Credit Rating

  	
   

  	
  Credit Rating

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
  AA- (or above)

  	
   

  	
  Aa3 (or above)

  
	
  $                  

  	
   

  	
  A+ thru A-

  	
   

  	
  A1 thru A3

  
	
  $                  

  	
   

  	
  BBB+

  	
   

  	
  Baa1

  
	
  $                  

  	
   

  	
  BBB

  	
   

  	
  Baa2

  
	
  $                  

  	
   

  	
  BBB-

  	
   

  	
  Baa3

  
	
  $                  

  	
   

  	
  BB+

  	
   

  	
  Ba1

  
	
  $                  

  	
   

  	
  BB

  	
   

  	
  Ba2

  
	
  $                  

  	
   

  	
  BB-

  	
   

  	
  Ba3

  
	
  $                  

  	
   

  	
  B+

  	
   

  	
  B1

  
	
  $                  

  	
   

  	
  B

  	
   

  	
  B2

  
	
  $                  

  	
   

  	
  Below B

  	
   

  	
  Below B2

  
	
  $                  

  	
   

  	
  Unrated

  	
   

  	
  Unrated

  

 

 

 

o            The amount (the “Threshold
Amount”) set forth below under the heading “Party B Collateral Threshold”
opposite the Credit Rating for [Party B][Party B’s Guarantor] on the relevant
date of determination, and if [Party B’s][Party B’s Guarantor’s] Credit Ratings
shall not be equivalent, the lower Credit Rating shall govern or (b) zero if on
the relevant date of determination [Party B][its Guarantor] does not have a
Credit Rating from the rating agency(ies) specified below or an Event of
Default or a Potential Event of Default with respect to Party B has occurred
and is continuing; provided, however, in the event that, and on the date
that, Party B cures the Potential Event of Default on or prior to the date that
Party B is required to post Performance Assurance to Party A pursuant to a
demand made by Party A pursuant to the provisions of the Collateral Annex on or
after the occurrence of such Potential Event of Default, (i) the Collateral Threshold
for Party B shall automatically increase from zero to the Threshold Amount and
(ii) Party B shall be relieved of its obligation to post Performance Assurance
pursuant to such demand:

 

	
  Party B

  Collateral Threshold

  	
   

  	
  Credit Rating

  	
   

  	
  Credit Rating

  
	
   

  	
   

  	
               
  (or above)

  	
   

  	
               
  (or above)

  
	
  $                  

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
   

  	
   

  	
   

  
	
  $                  

  	
   

  	
  Below 

  	
   

  	
  Below 

  

 

 

o            The amount of the
Guaranty Agreement dated            
from            , as
amended from time to time but in no event shall Party B’s Collateral Threshold
be greater than $           .

 

o            Other — see attached threshold
terms.

 

 

II.            Eligible
Collateral and Valuation Percentage.

 

The following items will
qualify as “Eligible Collateral” for the Party specified:

	
   

  	
   

  	
  MLCI

  (on behalf of Party

  A and itself)

  	
   

  	
  Party B

  	
   

  	
  Valuation
  %

  
	
  (A) Cash

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  100%

  
	
  (B) Letters of
  Credit.  100% of the undrawn portion of such
  Letter of Credit unless either (i) a Letter of Credit Default shall have
  occurred and be continuing with respect to such Letter of Credit, or (ii)
  twenty (20) or fewer Business Days remain prior to the expiration of such
  Letter of Credit, in which cases the Valuation Percentage shall be zero (0).

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  100%

  
	
  (C) Negotiable debt obligations issued by
  the U.S. Treasury Department having an original maturity at issuance of not
  more than one year (“Treasury Bills”)

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  99%

  
	
  (D) Negotiable debt obligations issued by
  the U.S. Treasury Department having an original maturity at issuance of more
  than one year but not more than ten years (“Treasury Notes”)

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  98%

  
	
  (E) Negotiable debt obligations issued by
  the U.S. Treasury Department having an original maturity at issuance of more
  than ten years (“Treasury Bonds”)

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  95%

  

 

 

 

III.           Independent
Amount.       (NOT APPLICABLE)

 

A.                                    Party
A Independent Amount.     (NOT
APPLICABLE)

 

o                                   Party A shall have a Fixed Independent
Amount of $                   .   If the Fixed Independent Amount option is
selected for Party A, then Party A (which shall be a Pledging Party with
respect to the Fixed IA Performance Assurance) will be required to Transfer or
cause to be Transferred to Party B (which shall be a Secured Party with respect
to the Fixed IA Performance Assurance) Performance Assurance with a Collateral
Value equal to the amount of such Independent Amount (the “Fixed IA Performance
Assurance”).   The Fixed IA Performance
Assurance shall not be reduced for so long as there are any outstanding
obligations between the Parties as a result of the Agreement, and shall not be
taken into account when calculating Party A’s Collateral Requirement pursuant
to the Collateral Annex.  Except as
expressly set forth above, the Fixed IA Performance Assurance shall be held and
maintained in accordance with, and otherwise be subject to, Paragraphs 2, 5(b),
5(c), 6, 7 and 9 of the Collateral Annex.

 

o                                   Party A shall have a Full Floating
Independent Amount of $                   .    If the Full Floating Independent Amount
option is selected for Party A, then for purposes of calculating Party A’s
Collateral Requirement pursuant to Paragraph 3 of the Collateral Annex, such
Full Floating Independent Amount for Party A shall be added by Party B to its
Exposure Amount for purposes of determining Net Exposure pursuant to Paragraph
3(a) of the Collateral Annex.

 

o                                   Party A shall have a Partial Floating
Independent Amount of $                   .   If the Partial Floating Independent Amount
option is selected for Party A, then Party A will be required to Transfer or
cause to be Transferred to Party B Performance Assurance with a Collateral
Value equal to the amount of such Independent Amount (the “Partial Floating IA
Performance Assurance”) if at any time Party A otherwise has a Collateral
Requirement (not taking into consideration the Partial Floating Independent
Amount) pursuant to Paragraph 3 of the Collateral Annex.   The Partial Floating IA Performance
Assurance shall not be reduced so long as Party A has a Collateral Requirement
(not taking into consideration the Partial Floating Independent Amount).   The Partial Floating Independent Amount
shall not be taken into account when calculating a Party’s Collateral
Requirements pursuant to the Collateral Annex. 
Except as expressly set forth above, the Partial Floating Independent
Amount shall be held and maintained in accordance with, and otherwise be
subject to, the Collateral Annex.

 

B.                                    Party
B Independent Amount.       [ (NOT APPLICABLE)  ]

 

o                                   Party B shall have a Fixed Independent
Amount of $                   .    If the Fixed Independent Amount Option is
selected for Party B, then Party B (which shall be a Pledging Party with
respect to the Fixed IA Performance Assurance) will be required to Transfer or
cause to be Transferred to Party A (which shall be a Secured Party with respect
to the Fixed IA Performance Assurance) Performance Assurance with a Collateral
Value equal to the amount of such Independent Amount (the “Fixed IA Performance
Assurance”).   The Fixed IA Performance
Assurance shall not be reduced for so long as there are any outstanding
obligations between the Parties as a result of the Agreement, and shall not be 

 

 

taken into account
when calculating Party B’s Collateral Requirement pursuant to the Collateral
Annex.  Except as expressly set forth
above, the Fixed IA Performance Assurance shall be held and maintained in
accordance with, and otherwise be subject to, Paragraphs 2, 5(b), 5(c), 6, 7
and 9 of the Collateral Annex.

 

o                                   Party B shall have a Full Floating
Independent Amount of $                   .     If
the Full Floating Independent Amount Option is selected for Party B then for
purposes of calculating Party B’s Collateral Requirement pursuant to Paragraph
3 of the Collateral Annex, such Full Floating Independent Amount for Party B
shall be added by Party A to its Exposure Amount for purposes of determining
Net Exposure pursuant to Paragraph 3(a) of the Collateral Annex.

 

o                                   Party B shall have a Partial Floating
Independent Amount of $                   .     If the Partial Floating Independent Amount
option is selected for Party B, then Party B will be required to Transfer or
cause to be Transferred to Party A Performance Assurance with a Collateral
Value equal to the amount of such Independent Amount (the “Partial Floating IA
Performance Assurance”) if at any time Party B otherwise has a Collateral
Requirement (not taking into consideration the Partial Floating Independent
Amount) pursuant to Paragraph 3 of the Collateral Annex.   The Partial Floating IA Performance
Assurance shall not be reduced for so long as Party B has a Collateral
Requirement (not taking into consideration the Partial Floating Independent
Amount).   The Partial Floating
Independent Amount shall not be taken into account when calculating a Party’s
Collateral Requirements pursuant to the Collateral Annex.   Except as expressly set forth above, the
Partial Floating Independent Amount shall be held and maintained in accordance
with, and otherwise be subject to, the Collateral Annex.

 

 

IV.           Minimum
Transfer Amount.

 

A.            Party
A Minimum Transfer Amount:             $1

 

B.            Party
B Minimum Transfer Amount:             $1

 

 

V.            Rounding
Amount.

 

A.            Party A Rounding Amount:               $250,000

 

B.            Party
B Rounding Amount:               $250,000

 

 

VI.           Administration
of Cash Collateral.

 

A.            Party
A Eligibility to Hold Cash.

 

o                                   Party A shall not be entitled to hold
Performance Assurance in the form of Cash.  
Performance Assurance in the form of Cash shall be held in a Qualified
Institution in accordance with the provisions of Paragraph 6(a)(ii)(B) of the
Collateral Annex.  Party A shall pay to
Party B in accordance with the terms of the Collateral Annex the amount of
interest it receives from the Qualified Institution on any Performance
Assurance in the form of Cash posted by Party B.

 

x                                  MLCI and its
Custodian  shall be entitled to
hold (and, for the avoidance of doubt, use in accordance with Paragraph
6(a)(ii)) Performance Assurance in the form of Cash on behalf of Party A and
the Merrill Parties provided
that the following conditions are satisfied: 
(1) it is not a Defaulting Party and (2) Cash shall be held only in any
jurisdiction within the 

 

United States.   
To the extent Party A is entitled to hold Cash, the Interest Rate
payable to Party B on Cash shall be as selected below:

 

 

Party A Interest Rate.

 

x          The
“Interest Rate” will be at a rate per
annum equal to the one month London Interbank Offered Rate for Dollar deposits
as may from time to time be in effect as reported in The Wall Street
Journal.  Such interest shall be
calculated on the basis of the actual number of days elapsed and on the basis
of a year of 360 days.

 

o    Other - 

 

B.            Party
B Eligibility to Hold Cash.

 

o                                   Party B shall not be entitled to hold
Performance Assurance in the form of Cash. 
Performance Assurance in the form of Cash shall be held in a Qualified
Institution in accordance with the provisions of Paragraph 6(a)(ii)(B) of the
Collateral Annex.  Party B shall pay to
Party A in accordance with the terms of the Collateral Annex the amount of
interest it receives from the Qualified Institution on any Performance
Assurance in the form of Cash posted by Party A.

 

x                                  Party B shall
be entitled to hold Performance Assurance in the form of Cash provided that the following conditions
are satisfied:  (1) it is not a
Defaulting Party and (2) Cash shall be held only in any jurisdiction within the
United States.    To the extent Party B
is entitled to hold Cash, the Interest Rate payable to Party A on Cash shall be
as selected below:

 

Party B Interest Rate.

 

x                                  The “Interest Rate”
will be at a rate per annum equal to the one month London Interbank Offered
Rate for Dollar deposits as may from time to time be in effect as reported in
The Wall Street Journal.  Such interest
shall be calculated on the basis of the actual number of days elapsed and on
the basis of a year of 360 days.

 

o            Other - 

 

C.                                    Notwithstanding
the foregoing Party A Eligibility to Hold Cash or Party B Eligibility to Hold
Cash, MLCI, Party A and Party B hereby covenant and agree that, except at such
times as, in the case of Party A, ML&Co., or, in the case of Party B, it or
its Guarantor, as the case may be, has a Credit Rating of at least Baa2 (Moody’s)
or BBB (S&P), in the case of Party A, MLCI, and in the case of Party B,
Party B will cause all Performance Assurance received from the other Party to
be entered in one or more accounts (each, a “CA Collateral Account”) with a
Qualified Institution, each of which accounts may include property of other
parties, but will bear a title indicating the Pledging Party’s interest in said
account and the Performance Assurance in said account.  In the event the Credit Ratings shall not be
equivalent, the lower Credit Rating shall govern.  In addition, the Secured Party may direct the
Pledging Party to deliver Eligible Collateral directly into the Secured Party’s
CA Collateral Account(s).  The Secured
Party may move the CA Collateral Accounts from one Qualified Institution to
another upon reasonable notice to the Pledging Party.  The Secured Party shall cause statements
concerning the Performance Assurance to be sent to the Pledging Party on
request, which may not be made more frequently than once in each calendar
month.

 

VII.         Notification
Time.

 

o            Other
— 12:00 p.m. Central Standard Time

 

 

 

VIII.        General.

 

With
respect to the Collateral Threshold, Independent Amount, Minimum Transfer Amount
and Rounding Amount, if no selection is made in this Cover Sheet with respect
to a Party, then the applicable amount in each case for such Party shall be
zero (0).  In addition, with respect to
the “Administration of Cash Collateral” section of this Paragraph 10, if no
selection is made with respect to a Party, then such Party shall not be
entitled to hold Performance Assurance in the form of Cash and such Cash, if
any, shall be held in a Qualified Institution pursuant to Paragraph 6(a)(ii)(B)
of the Collateral Annex.    If a Party is
eligible to hold Cash pursuant to a selection in this Paragraph 10 but no
Interest Rate is selected, then the Interest Rate for such Party shall be the
Federal Funds Effective Rate as defined in Section VI of this Paragraph 10.

 

 

IX.           Additional
Amendments to Collateral Annex.

 

Introductory Paragraph.

 

                                                Delete “Paragraph 10 Elections” in the first
introductory paragraph and replace it with “Paragraph 10 Cover Sheet”.

 

Paragraph 1.   Definitions.

 

The following definitions
are amended as set forth below:

 

The definition of “Letter
of Credit” is deleted in its entirety and replaced with the following:

 

“Letter of Credit” shall mean an irrevocable, transferable,
standby Letter of Credit, issued by a Qualified Institution, in a form as the
issuing bank may require and which is reasonably acceptable to the Party in
whose favor the Letter of Credit is issued.

 

The definition of “Notification Time” is amended to  “12:00 p.m. Central Standard Time”.

 

The definition of “Performance Assurance” is amended by replacing “6(a)(iv)”
with 6(a)(iii)”.

 

The definition of “Qualified Institution” is deleted in its
entirety and replaced with the following:

 

“Qualified Institution”  means a  major U.S. commercial bank or a foreign
bank that is not an affiliate of any Party to this Agreement with a U.S. branch
office which is not the Pledgor (or a subsidiary or Affiliate of the Pledgor)
and with a Credit Rating of at least “A-” by S&P and “A3” by Moody’s.

 

The definition of “Reference
Market-maker” is deleted in its entirety and replaced with the following:

 

“Reference Market-maker” means a leading
broker, dealer or published index in the relevant market selected by a Party
determining its Exposure in a commercially reasonable manner.  Such leading dealers shall not be parties to
this Agreement or Affiliates of a Party to this Agreement.

 

The definition of “Secured
Party” is amended by replacing “3(b)” with “3(a)”.

 

Paragraph 5.  Reduction and
Substitution of Performance Assurance.

 

Subparagraph 5(a) shall be amended by adding the word “Local” before the
words “Business Day in line eighteen.

 

Paragraph 6.   Administration of
Performance Assurance.

 

 

[The following
subparagraph 6(a)(iv) shall be added following subparagraph 6(a)(iii):

 

(iv)          Distributions.  So long as no Event of Default or  Potential Event of Default with respect to
the Pledging Party has occurred and is continuing, and no Early Termination
Date for which any unsatisfied payment Obligations of the Pledging Party exist
has occurred or been designated as the result of an Event of Default with
respect to the Pledging Party, and to the extent that an obligation to Transfer
Performance Assurance would not be created or increased by the Transfer, in the
event that the Secured Party or its Custodian is holding Treasury Bills,
Treasury Notes, or Treasury Bonds (“Treasury PA”) and Secured Party receives or
is deemed to receive Distributions on a Local Business Day, the Secured Party
will Transfer (or caused to be Transferred) to the Pledging Party such Distributions
not later than the following Local Business Day.  On or after the occurrence of a Potential
Event of Default or an Event of Default with respect to the Pledging Party or
an Early Termination Date as a result of an Event of Default with respect to
the Pledging Party, the Secured Party or its Custodian shall retain any such
Distributions as additional Performance Assurance hereunder until the
obligations of the Pledging Party under the Agreement have been satisfied in
the case of an Early Termination Date or for so long as such Event of Default
is continuing in the case of an Event of Default. For purposes of this
paragraph, “Distributions” means with respect to Treasury PA, all principal,
interest and other payments and distributions of cash or other property with
respect thereto, regardless of whether the Secured Party has disposed of that
Treasury PA under Paragraph 6(ii). 
Distributions will not include any item of property acquired by the
Secured Party upon any disposition or liquidation of Treasury PA.] [Remove if
deleting negotiable debt obligations from Section II]

 

Subparagraph
6(b)(iii) is amended by deleting the words “occurrence thereof” and replacing
them with the words “Pledging Party’s receipt of notice hereunder” in the
fourth line.

 

                                                Subparagraph 6(c) shall be deleted in its
entirety and replaced with the following:

 

“SCHEDULE 1 to
Collateral Annex” shall be deleted in its entirety.

 

Demands and Notices.  All demands,
specifications and notices under this Annex will be made pursuant to the
Notices Section of this Agreement, unless otherwise specified here:

 

	
  Party A:

  	
   

  	
  Attn:  Credit
  Risk Management

  

  Street Address:

  1000 Main St., 11th Floor

  Houston, TX  77002

  

  Mailing Address:

  P O Box 4455

  Houston, TX 77210-4455

  

  

  

  

  With a copy to (other than copies of notices in respect of demands under
  Paragraphs 4 and 5):

  	
   

  	
  Telephone:

  Facsimile:

  

  

  

  

  

  

  

  

  

  

  

  Telephone:

  Facsimile:

  	
   

  	
  (713) 497-1052

  (713) 497-1058

  

  

  

  

  

  

  

  

  

  

  

  (713) 544-4975

  (713) 544-5551

  
	
   

  	
   

  	
   

  Merrill Lynch Commodities, Inc.

  20 East Greenway Plaza, 7th Floor

  Houston, Texas 77253-3327

  Attn:Legal

  	
   

  	
   

   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Party B:

  	
   

  	
   

  	
   

  	
  Telephone:

  Facsimile:

  	
   

  	
   

  

 

 

Addresses for Transfers.

 

	
  Party A:

  U. S. Dollars

  

  

  

  	
   

  	
  Payment to:

  

  For Account of:

  Account #:

  Federal ABA#:

  

  	
   

  	
  JP Morgan Chase Bank,

  New York, NY

  Merrill Lynch Commodities, Inc.

  066657474

  021000021

  

  
	
  Party B:

  U.S. Dollars

  	
   

  	
  Payment to:

  For Account of:

  Account #:

  Federal ABA#:

  	
   

  	
   

  

 

Other Provisions.

UCC.                    Each Party agrees that the provisions of this
Agreement supersede and replace in their entirety any requirements of law
relating to adequate assurance of future performance, including without
limitation Article 2 of the Uniform Commercial Code.  This Collateral Annex is a Security Agreement
under the provisions of the Uniform Commercial Code of the State of New York.

 

Credit Sleeve Provisions.

 

(i)                                     In connection with the Collateral
Assignment described in “Credit Sleeve Provisions” on the Cover Sheet, Party A,
Party B and MLCI agree that:

 

(A)                              Party B shall Transfer all Eligible
Collateral required to be Transferred hereunder by Party B directly to the
account provided above (“Addresses for Transfer”) for Party A and, any such
Transfer, to the extent thereof, shall satisfy Party B’s obligations to make
Transfers to Party A hereunder;

 

(B)                                MLCI shall Transfer all Eligible
Collateral required to be Transferred hereunder by Party A directly to the
account provided above (“Addresses for Transfer”) for Party B and, any such
Transfer, to the extent thereof, shall satisfy Party A’s obligations to make
Transfers to Party B hereunder;

 

(C)                                Party A hereby unconditionally and
irrevocably authorizes and directs MLCI to make and receive, on behalf of Party
A and the Merrill Parties, and MLCI hereby unconditionally agrees to make and
receive, on behalf of Party A and the Merrill Parties, the Transfers described
in clauses (A) and (B) above;

 

(D)                               Party A has pledged and assigned to the
Merrill Parties its rights under this Collateral Annex to receive, hold and use
the Eligible Collateral transferred to MLCI hereunder in accordance with the
terms of this Collateral Annex on behalf of Party A and on behalf of the
Merrill Parties in connection with the Collateral Assignment;

 

(E)                                 Party A and Party B consent to the
Collateral Assignment, and agree to perform their obligations, under the Cover
Sheet, “Credit Sleeve Provisions”, for the benefit of the Merrill Parties; and

 

(F)                                 Any amendment, supplement, waiver or
other modification of, or any forbearance from exercising any rights with
respect to the terms or provisions contained in this Collateral Annex requires
the express written consent of Party A, Party B and MLCI.

 

(ii)                                  MLCI agrees to comply with the
confidentiality obligations set forth in Section 10.11, as amended.

 

 

(iii)                               All information that is furnished in
writing by or on behalf of it to any of the other Parties hereto is, as of the
date of the information, true, accurate and complete in every material respect,
or, in the case of audited or unaudited financial statements, fairly present
the financial condition of the relevant entity and have been prepared in
accordance with generally accepted accounting principles, consistently applied,
except as otherwise indicated in the notes of such financial statements.

 

(iv)                              Paragraph 5.6 of the Agreement shall be
deleted in its entirety and replaced with the following:  “Party B shall make each payment due under
this Agreement without deduction, set-off or counterclaim, except (A) as
specifically provided in Article 6 of the Agreement, and (B) that Party B, if
it is the Non-defaulting Party shall be entitled to set off the Termination
Payment owed by Party B to Party A under this Agreement (whether pursuant to
Article 6 or under any other provision under this Agreement) against amounts
owed by Party A to Party B under this Agreement (whether pursuant to Article 6
or under any other provision under this Agreement).  Party A, or MLCI on its behalf, shall make
each payment due under this Agreement without deduction, set-off counterclaim,
except (A) as specifically provided in Article 6 of the Agreement, and (B) that
Party A, or MLCI on its behalf, if Party A is the Non-defaulting Party shall be
entitled to set off the Termination Payment owed by Party A to Party B under
this Agreement (whether pursuant to Article 6 or under any other provision
under this Agreement) against amounts owed by Party B to Party A under this
Agreement (whether pursuant to Article 6 or under any other provision under
this Agreement).  For the avoidance of
doubt:

 

                                                                                                (A)                              the term “Party A” means Reliant Energy
Power Supply, LLC (and any other Person that succeeds to all of the rights and
obligations of Reliant Energy Power Supply, LLC under this Agreement in
accordance with its terms), and Party A shall in no event include any of its
affiliates or any other Person except as stated above; and

 

                                                                                                (B)                                the term “Party B” means [insert legal
name of Party B] (and any other Person that succeeds to all of the rights and
obligations of [insert legal name of Party B] under this Agreement in
accordance with its terms), and Party B shall in no event include any of its
affiliates or any other Person except as stated above.

 

(v)                                 Except as provided in the Cover Sheet
under “Credit Sleeve Provisions”, the only rights, covenants and obligations in
the Agreement that shall be applicable to MLCI are those that are set forth in
provisions that either specifically refer to MLCI by name, or that specifically
refer to “each of the three parties”. 
All of the other provisions in the Agreement that refer to: “Pledging
Party”, “Secured Party”, “Defaulting Party”, “Affected Party”, “a Party”, “appropriate
party”, “other party”, “the parties”, “both parties”, “each Party”, “either
Party” or “neither Party” shall not be interpreted as references to MLCI, but
shall be interpreted as references to: Party A; Party B; both Party A and Party
B; each of Party A and Party B; either Party A or Party B; or neither Party A
nor Party B as is indicated by the context.

 

(vi)                              MLCI
Termination Right.  Each of MLCI’s rights and obligations
hereunder, including its rights and obligations to Transfer and receive
Performance Assurance, may be terminated at any time by notice by MLCI to Party
A and Party B given in accordance with the notice provisions of the Agreement,
effective upon receipt of such notice by Party A and Party B or such later date
as may be specified in such notice; provided that MLCI’s rights and obligations
hereunder shall continue in full force and effect, and shall be irrevocable,
with respect to any obligation, including its rights and obligations to
Transfer and receive Performance Assurance, arising under any Transaction under
and as defined in the Agreement entered into prior to the effectiveness of such
notice of termination.

 

 

IN WITNESS WHEREOF, the parties hereto have
executed this document as of the date specified on the first page hereof.

 

	
  RELIANT ENERGY POWER
  SUPPLY, LLC

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MERRILL LYNCH
  COMMODITIES, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
							

 

 

 

Exhibit D2

To Credit Sleeve
and Reimbursement Agreement

Form of ISDA Collateral Annex

PARAGRAPH
13

 

OF THE

 

CREDIT
SUPPORT ANNEX

 

DATED AS OF

 

[   T.B.D.    
]

 

BETWEEN

 

RELIANT
ENERGY POWER SUPPLY, LLC (“Party A”)

 

AND

 

                                                    
(“Party B”)

 

AND

 

MERRILL LYNCH COMMODITIES, INC. (“MLCI”)

 

 

Paragraph 13.  Elections and Variables

 

(a)                                 Security Interest. 
The term “Obligations” as used in this
Annex includes the following additional obligations:

 

With respect to Party A:  None

With respect to Party B:  None

 

(b)           Credit
Support Obligations.

 

(i)            Delivery Amount, Return Amount and Credit Support
Amount.

 

(A)          “Delivery Amount” has the
meaning specified in Paragraph 3(a).

 

(B)                                “Return
Amount”
has the meaning specified in Paragraph 3(b).

 

(C)                                “Credit
Support Amount” has the meaning specified in Paragraph 3.

 

(ii)                                  Eligible Collateral. The following items will qualify as “Eligible Collateral” for the
party specified:

 

 

	
   

  	
   

  	
  MLCI

  (on behalf of Party A

  and itself)

  	
   

  	
  Party B

  	
   

  	
  Valuation

  %

  
	
  (A) Cash

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  100%

  
	
  (B) Negotiable debt obligations issued by
  the U.S. Treasury Department having an original maturity at issuance of not
  more than one year (“Treasury Bills”)

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  99%

  
	
  (C) Negotiable debt obligations issued by
  the U.S. Treasury Department having an original maturity at issuance of more
  than one year but not more than ten years (“Treasury Notes”)

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  98%

  
	
  (D) Negotiable debt obligations issued by
  the U.S. Treasury Department having an original maturity at issuance of more
  than ten years (“Treasury Bonds”)

  	
   

  	
  [X]

  	
   

  	
  [X]

  	
   

  	
  95%

  

 

 

 

(iii)                               Other Eligible Support. The following items will qualify as “Other Eligible Support” for
the party specified:

 

Party A  Party
B

Letter of Credit
(as defined in Paragraph 13(j))                   [X]                         [X]

 

The Valuation
Percentage shall be 100% unless (i) a Letter of Credit Default shall apply with
respect to such Letter of Credit, or (ii) twenty (20) or fewer Business Days
remain prior to the expiration of such Letter of Credit, in either of which case
the Valuation Percentage shall be zero (0).

 

(iv)          Thresholds.

 

(A)                              “Independent
Amount”
means with respect to Party A:             None

“Independent
Amount” means
with respect to Party B:              None

 

(B)           “Threshold”

 

For Party A, “Threshold” shall mean the
amount (the “Credit Amount”) [delete highlighted language if Guaranty is
uncapped or no Guarantor equal to the lower of (i) the maximum amount payable
under guaranty provided by Party A’s Credit Support Provider guaranteeing Party
A’s payment obligations hereunder, if any, and (ii) the amount] set forth below
under the heading “Party A Threshold” opposite the Credit Rating for Party A’s
Credit Support Provider on the relevant date of determination, and if Party A’s
Credit Support Provider’s Credit Ratings shall not be equivalent, the
[lower/higher] Credit Rating shall govern; provided, however, that the
Threshold for Party A shall be zero if (i) [delete the following highlighted
language if no Guaranty provided for Party A 
no Guaranty has been provided,] (ii) on the relevant date of
determination Party A’s Credit Support Provider does not have a Credit Rating
from any rating agency specified below or (iii) an Event of Default or
Potential Event of Default with respect to Party A has occurred and is
continuing; and provided further that, in the event that, and on the
date that, Party A cures the Potential Event of Default on or prior to the date
that Party A is required to post a Credit Support Amount to Party B pursuant to
a demand made by Party B pursuant to the provisions of the Credit Support Annex
on or after the occurrence of such Potential Event of Default, (i) the
Threshold for Party A shall automatically increase from zero to the Credit
Amount and (ii) Party A shall be relieved of its obligation to post the Credit
Support Amount pursuant to such demand.

 

 

 

	
  Party A

  Threshold

  	
   

  	
  S&P Credit Rating

  	
   

  	
  Moody’s Credit Rating

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AA- (or above)

  	
   

  	
  Aa3 (or above)

  
	
   

  	
   

  	
  A+ thru A-

  	
   

  	
  A1 thru A3

  
	
   

  	
   

  	
  BBB+

  	
   

  	
  Baa1

  
	
   

  	
   

  	
  BBB

  	
   

  	
  Baa2

  
	
   

  	
   

  	
  BBB-

  	
   

  	
  Baa3

  
	
   

  	
   

  	
  BB+

  	
   

  	
  Ba1

  
	
   

  	
   

  	
  BB

  	
   

  	
  Ba2

  
	
   

  	
   

  	
  BB-

  	
   

  	
  Ba3

  
	
   

  	
   

  	
  B+

  	
   

  	
  B1

  
	
   

  	
   

  	
  B

  	
   

  	
  B2

  
	
   

  	
   

  	
  Below B

  	
   

  	
  Below B2

  
	
   

  	
   

  	
  Unrated

  	
   

  	
  Unrated

  

 

 

For Party B, “Threshold” shall mean the
amount (the “Credit Amount”) [Remove the following highlighted language if CP
Guaranty is uncapped or no Guarantor equal to the lower of (i) the maximum
amount payable under guaranty provided by Party B’s Credit Support Provider
guaranteeing Party B’s payment obligations hereunder, if any, and (ii) the
amount] set forth below under the heading “Party B Threshold” opposite the
Credit Rating for Party B’s Credit Support Provider on the relevant date of
determination, and if Party B’s Credit Support Provider’s Credit Ratings shall
not be equivalent, the [lower/higher] Credit Rating shall govern; provided,
however, that the Threshold for Party B shall be zero if (i) [delete the
following highlighted language if no Guaranty provided for Party B   no Guaranty has been provided,] (ii) on the
relevant date of determination Party B’s Credit Support Provider does not have
a Credit Rating from any rating agency specified below or (iii) an Event of
Default or Potential Event of Default with respect to Party B has occurred and
is continuing; and provided further that, in the event that, and on the
date that, Party B cures the Potential Event of Default on or prior to the date
that Party B is required to post a Credit Support Amount to Party A pursuant to
a demand made by Party A pursuant to the provisions of the Credit Support Annex
on or after the occurrence of such Potential Event of Default, (i) the
Threshold for Party B shall automatically increase from zero to the Credit
Amount and (ii) Party B shall be relieved of its obligation to post the Credit
Support Amount pursuant to such demand.

 

	
  Party B

  Threshold

  	
   

  	
  S&P Credit Rating

  	
   

  	
  Moody’s Credit Rating

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AA-
  (or above)

  	
   

  	
  Aa3
  (or above)

  
	
   

  	
   

  	
  A+
  thru A-

  	
   

  	
  A1
  thru A3

  
	
   

  	
   

  	
  BBB+

  	
   

  	
  Baa1

  
	
   

  	
   

  	
  BBB

  	
   

  	
  Baa2

  
	
   

  	
   

  	
  BBB-

  	
   

  	
  Baa3

  
	
   

  	
   

  	
  BB+

  	
   

  	
  Ba1

  
	
   

  	
   

  	
  BB

  	
   

  	
  Ba2

  
	
   

  	
   

  	
  BB-

  	
   

  	
  Ba3

  
	
   

  	
   

  	
  B+

  	
   

  	
  B1

  
	
   

  	
   

  	
  B

  	
   

  	
  B2

  
	
   

  	
   

  	
  Below B

  	
   

  	
  Below B2

  
	
   

  	
   

  	
  Unrated

  	
   

  	
  Unrated

  

 

(C)           “Minimum
Transfer Amount” means with respect to Party A: $1

                “Minimum
Transfer Amount” means with respect to Party B: $1

 

 

(D)                               “Rounding”. The Delivery Amount will be rounded up,
and the Return Amount will be rounded down, in each case to the nearest
integral multiple of $250,000.

 

(c)           Valuation and Timing.

 

(i)                                     “Valuation Agent”
means , for purposes of Paragraphs 3 and 5, the party making the demand under
Paragraph 3; for purposes of Paragraph 4(d), the Secured Party for purposes of
calculating the Value of the Substitute Credit Support and Posted Credit
Support involved in the substitution; and for purposes of Paragraph 6(d), the
Secured Party receiving or deemed to receive the Distributions or the Interest
Amount, as applicable; provided that in all cases, if an Event of Default or
Potential Event of Default has occurred and is continuing with respect to the
party designated as the Valuation Agent, then in such case, and for so long as
the Event of Default or Potential Event of Default continues, the other party
shall be the Valuation Agent

 

(ii)                                  “Valuation Date” means each day which is a Local Business
Day for Party A, Party B and MLCI.

 

(iii)                               “Valuation
Time”
means the close of business on the Local Business Day before the Valuation Date
or date of calculation, as applicable; provided that the calculations of Value
and Exposure will be made as of approximately the same time on the same date.

 

(iv)                              “Notification
Time”
means 12:00 p.m., Central time, on a Local Business Day.

 

(d)                                 Conditions Precedent and
Secured Party’s Rights and Remedies. There shall be no “Specified Condition” with respect
to Party A or Party B.

 

(e)           Dispute Resolution.

 

(i)                                     “Resolution
Time”
means 12:00 p.m., Central time, on second Local Business Day following the date
on which the notice is given that gives rise to a dispute under Paragraph 5.

 

(ii)                                  “Alternative”. 
The provisions of Paragraph 5 will apply, except that (i)(B) shall be
deleted and the following substituted therefor:

 

                                                            (B) calculating the Exposure for the
Transaction(s) in dispute by each party seeking quotations at mid-market from
four Reference Market-makers.  Each party
shall disregard the “highest” and the “lowest” quotations obtained and take the
arithmetic average of the remaining two, to come up with an average “Market
Price” for the disputed Transaction(s). Each party’s average Market Price shall
then be averaged to obtain an “Average Market Price” which shall be the price
used to calculate the Exposure related to the disputed Transaction(s). If less
than four (but at least one) quotations are available to a party with respect
to a disputed Transaction(s), then such party shall take the arithmetic average
of the obtained quotations to calculate such party’s average Market Price. If
no quotations are available for a particular Transaction(s), then the Valuation
Agent’s original calculations will be used for such Transaction(s);

 

(f)            Holding and Using Posted Collateral.

 

(i)                                     “Eligibility
to Hold Posted Collateral; Custodians”.

 

                                                            MLCI and its Custodian (if any) will be
entitled to hold Posted Collateral pursuant to Paragraph 6(b) on behalf of
Party A and the Merrill Parties; provided that the following conditions
applicable to it are satisfied:

 

(A)          Party A is not a Defaulting Party.

 

(B)                                Posted Collateral may be held only in the
United States.

 

Party B and its
Custodian (if any) will be entitled to hold Posted Collateral pursuant to
Paragraph 6(b); provided that the following conditions applicable to it are
satisfied:

 

 

(A)          Party B is not a Defaulting Party.

 

(B)           Posted Collateral may be held only in
the United States.

 

Notwithstanding the foregoing, MLCI, Party A and Party
B hereby covenant and agree that, except at such times as, in the case of Party
A, ML&Co., or, in the case of Party B, it or its Credit Support Provider,
as the case may be, has a Credit Rating of at least Baa2 (Moody’s) or BBB
(S&P), in the case of Party A, MLCI, and in the case of Party B, Party B
will cause all Posted Collateral received from the other party to be entered in
one or more accounts (each, a “CSA Collateral Account”) with a Qualified
Institution, each of which accounts may include property of other parties, but
will bear a title indicating the Pledgor’s interest in said account and the
Posted Collateral in said account.  In
the event the Credit Ratings shall not be equivalent, the lower Credit Rating
shall govern.  In addition, the Secured
Party may direct the Pledgor to deliver Eligible Collateral directly into the
Secured Party’s CSA Collateral Account(s). 
The Secured Party may move the CSA Collateral Accounts from one
Qualified Institution to another upon reasonable notice to the Pledgor.  The Secured Party shall cause statements
concerning the Posted Collateral to be sent to the Pledgor on request, which
may not be made more frequently than once in each calendar month.

 

(ii)                                  “Use of Posted Collateral”. Unless Posted Collateral is required to
be held in a CSA Collateral Account pursuant to clause (i) above, the
provisions of Paragraph 6(c) will apply to (A) MLCI as “Secured Party” on
behalf of Party A and the Merrill Parties and (B) Party B.

 

(g)           Distributions and Interest Amount.

 

(i)                                     “Interest
Rate”.  The “Interest Rate”
will be at a rate per annum equal to the one month London Interbank Offered
Rate for Dollar deposits as may from time to time be in effect as reported in
The Wall Street Journal.  Such interest
shall be calculated on the basis of the actual number of days elapsed and on
the basis of a year of 360 days.

 

(ii)                                  “Transfer of Interest
Amount”. The Transfer of the Interest Amount will be made on the
second Local Business Day following each calendar month, and on any Local
Business Day that Posted Collateral in the form of Cash is transferred to the
Pledgor pursuant to Paragraph 3(b), in either event upon receipt of an invoice
prior to such date, and, if no invoice is received before such date, within one
Local Business Day of receipt of such invoice.

 

(iii)          Alternative to Interest Amount.  The provisions of Paragraph 6(d)(ii) will
apply.

 

 

 (h)                              Other Eligible Support and
Other Posted Support.

 

 

(i)            “Transfer” with respect to Other Eligible Support and
Other Posted Support means:

 

(A)                              For purposes of Paragraph 3(a), delivery
of the Letter of Credit by the Pledgor or issuer of the Letter of Credit to the
Secured Party at the address of the Secured Party specified in the Notices
Section of this Agreement, or delivery of an executed amendment to such Letter
of Credit (extending the term or increasing the amount available to the Secured
Party thereunder) by the Pledgor or the issuer of the Letter of Credit to the
Secured Party at the address of the Secured Party specified in the Notices
Section of this Agreement; and,

 

                (B)           For purposes of Paragraph 3(b), by the return of an
outstanding Letter of Credit by the Secured Party to the issuing bank, at the
address of the issuing bank specified in the Letter of Credit or delivery to
the issuing bank at such address of an amendment to the Letter of Credit
executed by the Secured Party (reducing the amount available to the Secured
Party thereunder).

 

 

 

 

(ii)   “Letter of
Credit Provisions”.

 

Other Eligible
Support and Other Posted Support in the form of a Letter of Credit shall be
subject to the following provisions:

 

(A)                              Unless otherwise agreed in writing by the
parties, each Letter of Credit shall be Transferred in accordance with the
provisions of this Annex, and the Secured Party shall be the named beneficiary
under each Letter of Credit.  The Pledgor
shall (i)  if the issuer of a Letter of Credit previously Transferred to
the Secured Party has indicated its intent not to renew such Letter of Credit,
Transfer a substitute Letter of Credit or other Eligible Collateral having the
same Value, and (ii) if the issuer of a Letter of Credit shall commit a Letter
of Credit Default of the type specified in clause (i) or (ii) of the definition
thereof (including but not limited to such issuer’s failure to honor the
Secured Party’s properly documented request to draw thereon), Transfer for the
benefit of the Secured Party Eligible Collateral within one (1) Local Business
Day after the Pledgor receives notice of such dishonor, provided that, at the
time the Pledgor is required to perform in accordance with (i) or (ii) above,
the Delivery Amount applicable to the Pledgor equals or exceeds the Pledgor’s
Minimum Transfer Amount.

 

(B)                                The Pledgor may, at its option, Transfer
a Letter of Credit by (A) causing the issuing bank to execute an amendment
increasing the outstanding amount available for drawing under a previously
Transferred Letter of Credit or (B) establishing one or more additional Letters
of Credit.  If (i) the Pledgor shall
fail to cause the issuing bank to renew, substitute, or sufficiently increase
the amount of a Transferred Letter of Credit, Transfer one or more additional
Letters of Credit, or otherwise Transfer sufficient Eligible Credit Support and
(ii) the Delivery Amount applicable to the Pledgor equals or exceeds the
Pledgor’s Minimum Transfer Amount as a result of such failure, then the Secured
Party may draw on the entire, undrawn portion of any Transferred Letter of
Credit upon submission to the bank issuing such Letter of Credit an Letter of
Credit certificate specifying the amounts due and owing to the Secured Party in
accordance with the stated requirements of the Letter of Credit. The Pledgor
shall remain liable for any amounts due and owing to the Secured Party and
remaining unpaid after the application of the amounts so drawn by the Secured
Party.

 

(C)                                Upon the occurrence of a Letter of Credit
Default solely of the type specified in clause (i) of the definition thereof,
the Pledgor agrees to deliver a substitute Letter of Credit or other Eligible
Credit Support to the Secured Party in an amount at least equal to that of the
Letter of Credit to be substituted on or before the first (1st) Business Day
after written demand by the Secured Party.

 

(D)                               Notwithstanding Paragraph 10, in all
cases, the costs and expenses (including but not limited to the reasonable
costs, expenses, and external attorney’s fees of the Secured Party) of causing
an issuing bank to establish, renew, substitute, cancel, increase or reduce the
amount available for drawing under (as the case may be) one or more Letters of
Credit shall be borne by the Pledgor.

 

(iv)          “Certain
Rights and Remedies”.

 

Secured
Party’s Rights and Remedies. For purposes of Paragraph 8(a)(ii), the Secured
Party may draw on any Transferred Letter of Credit in an aggregate amount equal
to any amounts payable by the Pledgor with respect to any Obligations and hold
or apply the proceeds thereof in accordance with the Agreement.

 

(v)                                 “Additional Definitions”. 
As used in this Annex:

 

“Credit
Rating”
shall mean, with respect to a party or entity on any date of determination, the
respective rating then assigned to such party’s or entity’s unsecured, senior
long-term debt or deposit obligations (not supported by third-party credit
enhancement) by S&P or Moody’s, as applicable; and if no rating is assigned
to such party’s or entity’s unsecured, senior, long-term debt or deposit

 

 

obligations by any of S&P or Moody’s, the general
issuer credit rating or long-term issuer rating, as applicable, assigned by
such rating agencies to such party or entity.

 

“Letter of
Credit”
shall mean an irrevocable, transferable, standby Letter of Credit, issued by a
Qualified Institution,  in a form as the
issuing bank may require and which is reasonably acceptable to the party in
whose favor the Letter of Credit is issued.

 

“Letter of Credit Default” shall mean with respect to an outstanding Letter of
Credit, the occurrence of any of the following events: (i) the issuer of such
Letter of Credit shall fail to maintain a Credit Rating of at least “A-” by
S&P or “A3” by Moody’s; (ii) the issuer of the Letter of Credit shall fail
to comply with or perform its obligations under such Letter of Credit if such
failure shall be continuing after the lapse of any applicable grace period;
(iii) the issuer of such Letter of Credit shall disaffirm, disclaim, repudiate
or reject, in whole or in part, or challenge the validity of, such Letter of
Credit; (iv) such Letter of Credit shall expire or terminate, or shall fail or
cease to be in full force and effect, prior to the stated expiration date on
the Letter of Credit; or (v) any event analogous to an event specified in
Section 5(a)(vii) of this Agreement shall occur with respect to the issuer of
such Letter of Credit provided, however, that no Letter of Credit
Default shall occur in any event with respect to a Letter of Credit after the
time such Letter of Credit is required to be canceled or returned to the
Pledgor in accordance with the terms of this Annex.

 

“Moody’s” means Moody’s Investors Services, Inc. or its
successor.

 

“Qualified
Institution”  means a  major U.S. commercial bank or a foreign bank that is not an
affiliate of any party to this Agreement with a U.S. branch office which is not
the Pledgor (or a subsidiary or Affiliate of the Pledgor) and with a Credit
Rating of at least “A-” by S&P or “A3” by Moody’s.

 

“Reference Market-maker” means a leading broker, dealer or published index in
the relevant market selected by a party determining its Exposure in a
commercially reasonable manner.  Such
leading dealers shall not be parties to this Agreement or Affiliates of a party
to this Agreement.

 

“Security
Agreement” shall
mean an agreement which creates or provides for a security interest.

 

“S&P” means the Standard & Poor’s Rating Services, a
Division of The McGraw-Hill Companies, Inc., or its successor.

 

“Value” with respect to Other Eligible Support and Other Posted Support means
the undrawn currently available amount of any Letter of Credit maintained by
the Pledgor (or its Credit Support Provider) for the benefit of the Secured
Party, multiplied by the then applicable Valuation Percentage.

 

 

(j)                                  Demands and Notices. All demands, specifications and notices
under this Annex will be made pursuant to the Notices Section of this
Agreement, unless otherwise specified here:

 

	
  Party A:

  	
   

  	
  Attn: Credit Risk
  Management

  

  Street Address:

  

  1000 Main St., 11th Floor

  Houston, TX 77002

  	
   

  	
  Telephone:

  Facsimile:

  

  	
   

  	
  (713) 497-1052

  (713) 497-1058

  

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mailing Address:

  

  P O Box 4455

  Houston, TX 77210-4455

  

  With a copy to (other than copies of notices in respect of demands under
  Paragraph 3):

  

  Merrill Lynch Commodities, Inc.

  20 East Greenway Plaza, 7th Floor

  Houston, Texas 77253-3327

  Attn: Legal

  	
   

  	
   

  Telephone:

  Facsimile:

  	
   

  	
   

  (713) 544-4975

  (713) 544-5551

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Party B:

  	
   

  	
   

  	
   

  	
  Telephone:

  Facsimile:

  	
   

  	
   

  

 

(k)           Addresses for Transfers.

	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Party
  A:

  U. S. Dollars

  	
   

  	
  Payment to:

  

  For Account of:

  Account #:

  Federal ABA#:

  	
   

  	
  JP Morgan Chase Bank,

  New York, NY

  Merrill Lynch Commodities, Inc.

  066657474

  021000021

  
	
  Party B:

  U.S. Dollars

  	
   

  	
  Payment to:

  For Account of:

  Account #:

  Federal ABA#:

  	
   

  	
   

  

 

(l)            Other Provisions.

 

(i)                                  Paragraph 6(d)(i)is hereby amended by
adding the following sentence:

 

“Subject to Paragraph 4(a) and only to the extent
contemplated in the previous sentence, if a Secured Party receives or is deemed
to receive Distributions on a day that is not a Local Business Day, or after
its close of business on a Local Business Day, it will Transfer Distributions
to the Pledgor on the second following Local Business Day.”

 

(ii)                              Paragraph 7 is amended as follows: In
clause (i), the words “and/or Other Eligible Support” are inserted on line 1
after the words “of Eligible Collateral”.

 

(iii)                          UCC. Each party agrees that the provisions of this
Agreement supersede and replace in their entirety any requirements of law
relating to adequate assurance of future performance, including without
limitation Article 2 of the Uniform Commercial Code.

 

(iv)                            References throughout this Credit Support
Annex to “Swap Transactions” are deleted.

 

 (m)         Credit Sleeve Provisions.

 

(v)                                 In connection with the enhanced credit
structure provided by MLCI and Merrill Lynch & Co., Inc (together with
MLCI, the “Merrill Parties”) to Party A
described in Part 9 of the Schedule, Party A, Party B and MLCI agree that:

 

 

(A)                              Party B shall Transfer all Eligible
Credit Support required to be Transferred hereunder by Party B directly to the
account provided in paragraph 13(l) for Party A and, any such Transfer, to the
extent thereof, shall satisfy Party B’s obligations to make Transfers to Party
A hereunder;

 

(B)                                MLCI shall Transfer all Eligible Credit
Support required to be Transferred hereunder by Party A directly to the account
provided in paragraph 13(l) for Party B and, any such Transfer, to the extent
thereof, shall satisfy Party A’s obligations to make Transfers to Party B
hereunder;

 

(C)                                Party A hereby unconditionally and
irrevocably authorizes and directs MLCI to make and receive, on behalf of Party
A and the Merrill Parties, and MLCI hereby unconditionally agrees to make and
receive, on behalf of Party A and the Merrill Parties, the Transfers described
in clauses (A) and (B) above;

 

(D)                               Party A has pledged and assigned to the
Merrill Parties its rights under this Credit Support Annex to receive, hold and
use the Eligible Credit Support transferred to MLCI hereunder in accordance
with the terms of this Credit Support Annex on behalf of Party A and on behalf
of the Merrill Parties in connection with the Collateral Assignment;

 

(E)                                 Party A and Party B consent to the
Collateral Assignment, and agree to perform their obligations, under Part 9 of
the Schedule for the benefit of the Merrill Parties;

 

(F)                                 Any amendment, supplement, waiver or
other modification of, or any forbearance from exercising any rights with
respect to the terms or provisions contained in this Credit Support Annex
requires the express written consent of Party A, Party B and MLCI; and

 

(G)                                Each of MLCI and Party B makes the
representations to the other party set forth in Paragraph 9 of this Credit
Support Annex.

 

(vi)                              MLCI agrees to comply with the
confidentiality obligations described in Part 5(j) of the Schedule.

 

(vii)                           All information that is furnished in
writing by or on behalf of it to any of the other parties hereto is, as of the
date of the information, true, accurate and complete in every material respect,
or, in the case of audited or unaudited financial statements, fairly present
the financial condition of the relevant entity and have been prepared in
accordance with generally accepted accounting principles, consistently applied,
except as otherwise indicated in the notes of such financial statements. [Note:
This provision should be consistent with Section 3(d) of the ISDA Master
Agreement as modified by the Schedule.]

 

(viii)                        Set-off. Paragraph 6(f) of the Agreement shall
be deleted in its entirety and replaced with the following: “Party B shall make
each payment due under this Agreement without deduction, set-off or
counterclaim, except (A) as specifically provided in Section 2 of the
Agreement, and (B) that Party B, if it is the Non-defaulting or Non-affected
Party, shall be entitled to set off the Early Termination Amount owed by Party
B to Party A under this Agreement (whether pursuant to Section 6 or under any
other provision under this Agreement) against amounts owed by Party A to Party
B under this Agreement (whether pursuant to Section 6 or under any other provision
under this Agreement). Party A, or MLCI on its behalf, shall make each payment
due under this Agreement without deduction, set-off or counterclaim, except (A)
as specifically provided in Section 2 of the Agreement, and (B) that Party A,
or MLCI on its behalf, if Party A is the Non-defaulting or Non-affected Party,
shall be entitled to set off the Early Termination Amount owed by Party A to
Party B under this Agreement (whether pursuant Section 6 or under any other
provision under this Agreement) against amounts owed by Party B to Party A under
this Agreement (whether pursuant to Section 6 or under any other provision
under this Agreement). For the avoidance of doubt:

 

(A)                              the term “Party A” means Reliant Energy
Power Supply, LLC (and any other Person that succeeds to all of the rights and
obligations of Reliant Energy Power Supply, LLC under 

 

 

this Agreement in accordance with its terms), and ‘Party
A’ and shall in no event include any of its affiliates or any other Person
except as stated above; and

 

(B)                                the term “Party B” means [insert legal
name of Party B] (and any other Person that succeeds to all of the rights and
obligations of [insert legal name of Party B] under this Agreement in
accordance with its terms), and ‘Party B’ and shall in no event include any of
its affiliates or any other Person except as stated above.

 

(ix)                                Except as provided in Part 9(a) of the
Schedule, the only rights, covenants and obligations in the Agreement that
shall be applicable to MLCI are those that are set forth in provisions that
either specifically refer to MLCI by name, or that specifically refer to “each
of the three parties”. All of the other provisions in the Agreement that refer
to: “Pledgor”, “Secured Party”, “Valuation Agent”, “Defaulting Party”, “Affected
Party”, “Disputing Party”, “a party”, “appropriate party”, “other party”, “the
parties”, “both parties”, “each party”, “either party” or “neither party” shall
not be interpreted as references to MLCI, but shall be interpreted as
references to: Party A; Party B; both Party A and Party B; each of Party A and
Party B; either Party A or Party B; or neither Party A nor Party B as is
indicated by the context.

 

(x)                                   MLCI Termination Right. Each of MLCI’s rights and obligations
hereunder, including its rights and obligations to Transfer and receive
Eligible Credit Support, may be terminated at any time by notice by MLCI to
Party A and Party B given in accordance with the notice provisions of the
Agreement, effective upon receipt of such notice Party A and Party B or such
later date as may be specified in such notice; provided that MLCI’s rights and
obligations hereunder shall continue in full force and effect, and shall be
irrevocable, with respect to any obligation, including its rights and
obligations to Transfer and receive Eligible Credit Support, arising under any
Transaction under and as defined in the Agreement entered into prior to the
effectiveness of such notice of termination.

 

 

 

SIGNATURE PAGE

 

TO

 

PARAGRAPH 13

 

OF THE

 

CREDIT SUPPORT ANNEX

 

AMONG

 

RELIANT ENERGY POWER SUPPLY, LLC (PARTY “A”)

 

AND

 

                                                                              (PARTY
“B”)

 

AND

 

MERRILL LYNCH COMMODITIES, INC. (“Merrill”)

 

IN WITNESS WHEREOF, the parties hereto have
executed this document as of the date specified on the first page hereof.

 

	
  RELIANT
  ENERGY POWER SUPPLY, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MERRILL
  LYNCH COMMODITIES, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
						

 

 

 

Exhibit E1

To Credit Sleeve
and Reimbursement Agreement

Reliant Energy —
Retail Risk Policy

[***]

***   
The content of this
Exhibit E1 (consisting of 22 pages) has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

 

Exhibit E2

To Credit Sleeve
and Reimbursement Agreement

Hedge Limit
Calculations

[***]

***   
The content of this
Exhibit E2 (consisting of 2 pages) has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

 

Exhibit F

To Credit Sleeve
and Reimbursement Agreement

ERCOT Asset List

[***]

***     The content of this Exhibit F (consisting of 1 page)
has been omitted and filed separately with the Securities and Exchange
Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

 

 

Exhibit G

To Credit Sleeve
and Reimbursement Agreement

Joinder Agreement

 

FORM OF
JOINDER AGREEMENT

([Subsidiary])

 

This JOINDER AGREEMENT
dated as of [date] (this “Agreement”), is among the undersigned and the
other parties to each of the agreements listed on Schedule A attached
hereto (each a “Joined Agreement” and together the “Joined Agreements”).
With respect to each Joined Agreement, the undersigned hereby agrees with the
parties hereto as follows:

Effective as of the date
hereof, the undersigned by its signature
below hereby becomes a party to each Joined Agreement in the capacity
indicated on Schedule A attached hereto, in each case in accordance with
the applicable provisions of such Joined Agreement for parties joining such
Joined Agreement, if any, and, without limiting the joinder requirements of any
Joined Agreement, the undersigned hereby (a) assumes all the obligations under
each Joined Agreement applicable to the undersigned in the capacity in which it
is joining thereunder, (b) agrees to be bound by the provisions of each Joined
Agreement applicable to the undersigned in the capacity in which it is joining
thereunder as if the undersigned had been an original party thereto, and (c)
confirms that, after joining each Joined Agreement as set forth above, the
representations and warranties set forth in each Joined Agreement applicable to
the undersigned in the capacity in which it is joining thereunder are true and
correct in all material respects as of the date hereof; provided however,
that the undersigned shall have no liability for the observance and performance
of the terms, conditions, and obligations under any Joined Agreement applicable
to the undersigned in its capacity thereunder which accrue prior to the date
hereof to the extent the same is expressly set forth on Schedule A attached
hereto with respect to such Joined Agreement.

To the extent required by
the terms of each Joined Agreement, the joinder of the undersigned to such
Joined Agreement as provided herein is acknowledged and agreed below by the
applicable parties hereto. This Agreement shall be construed as a separate
agreement with the parties to each Joined Agreement, and no party to this
Agreement that is not a party to such Joined Agreement shall have any rights
with respect to such Joined Agreement by virtue of this Agreement.

This Agreement may be
executed by one or more of the parties hereto on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. As expressly supplemented hereby, each
Joined Agreement shall remain in full force and effect.

THIS JOINDER AGREEMENT
AND THE JOINED AGREEMENTS REPRESENT THE FINAL AGREEMENT AMONG THE APPLICABLE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES TO ANY JOINED AGREEMENT.

[signatures
follow]

 

 

IN WITNESS WHEREOF this Joinder Agreement is executed
and delivered as of the          day of
                   ,
             .

	
  [SUBSIDIARY]

  	
   

  
	
  By:

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
			

 

	
  Acknowledged and Agreed:

  
	
   

  
	
  [                                     ]

  
	
   

  	
   

  
	
  By:

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

 

 

Schedule A

 

Joined
Agreements

 

	
  Counterparties

  	
   

  	
  Agreement

  	
   

  	
  Capacity Joined

  	
   

  	
  Liability

  
	
  Merrill Lynch &
  Co., Inc. (“ML&Co”), a Delaware corporation, and Merrill Lynch
  Commodities, Inc. (“MLCI”), a Delaware corporation.

  	
   

  	
  Credit Sleeve and
  Reimbursement Agreement dated as of September 24, 2006 (the “CSRA”), among
  Reliant Energy Power Supply, LLC, and the Other Reliant Retail Obligors
  listed on the signature pages thereto, on one hand, and ML&Co and MLCI,
  on the other hand, as the same may be amended, supplemented, restated,
  renewed, replaced, waived or otherwise modified from time to time .

  	
   

  	
  Other Reliant Retail
  Obligor

  	
   

  	
  The undersigned shall
  have no liability for the observance and performance of the terms,
  conditions, and obligations under applicable to the undersigned in its
  capacity under the CSRA which accrue prior to the date hereof.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Merrill Lynch Capital
  Corporation, a Delaware corporation (“MLCC”).

  

  

  	
   

  	
  Working Capital
  Facility dated as of September 24, 2006 (the “WCF”), among MLCC, as Lender, REPS,
  as Borrower, and the Other Reliant Retail Obligors, as Guarantors, as the
  same may be amended, supplemented, restated, renewed, replaced, waived or
  otherwise modified from time to time.

  	
   

  	
  Additional Guarantor

  	
   

  	
  The undersigned shall
  have no liability for the observance and performance of the terms,
  conditions, and obligations under applicable to the undersigned in its
  capacity under the WCF which accrue prior to the date hereof.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reliant Energy, Inc., a
  Delaware corporation (“REI”), Reliant Energy Corporate Services, LLC, a
  Delaware limited liability company) (“RECS”), Reliant Energy Solutions East,
  LLC, a Delaware limited liability company (“RESE” and together with REI and
  RECS, the “Reliant Counterparties”),

  	
   

  	
  Master Services
  Agreement dated as of September 24, 2006 (the “MSA”), among the Reliant
  Counterparties and the Retail Companies listed on the signature pages
  thereto, as the same may be amended, supplemented, restated, renewed,
  replaced, waived or otherwise modified from time to time.

  	
   

  	
  Retail Company

  	
   

  	
  The undersigned shall
  have no liability for the observance and performance of the terms,
  conditions, and obligations under applicable to the undersigned in its
  capacity under the MSA which accrue prior to the date hereof.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reliant Counterparties

  	
   

  	
  Transition Agreement
  dated as of December 1, 2006 (the “Transition Agreement”), among the Reliant
  Counterparties and the Retail Companies listed on the signature pages
  thereto, as the same may be amended, supplemented, restated, renewed, replaced,
  waived or otherwise modified from time to time.

  	
   

  	
  Retail Company

  	
   

  	
  The undersigned shall
  have no liability for the observance and performance of the terms,
  conditions, and obligations under applicable to the undersigned in its
  capacity under the Transition Agreement which accrue prior to the date
  hereof.

  

 

 

Exhibit H

To Credit Sleeve
and Reimbursement Agreement

Form
of Compliance Certificate

 

 

FORM OF
COMPLIANCE CERTIFICATE

 

To:          Merrill Lynch
Commodities, Inc., a Delaware corporation, as Sleeve Provider 

 

                This Compliance
Certificate is furnished pursuant to that certain Credit Sleeve and
Reimbursement Agreement, dated as of September 24, 2006, as amended and
restated in connection with the occurrence of the Effective Date as of December
1, 2006 (as the same may be further amended or otherwise modified from time to
time, the “Agreement”), among Reliant Energy Power Supply, LLC, a
Delaware limited liability company (“REPS”), the Other Reliant Retail
Obligors specified therein (together with REPS, the “Reliant Retail Obligors”),
Merrill Lynch Commodities Inc., a Delaware corporation, as Sleeve Provider, and Merrill Lynch
& Co., Inc., a Delaware corporation (“ML&Co.”, and together with
the Sleeve Provider, the “Merrill Parties”).  Capitalized terms used herein but not
otherwise defined shall have the meanings given to such terms in the Agreement.

 

                THE UNDERSIGNED
HEREBY CERTIFIES THAT:

 

1.                                       I am the duly elected                
of RERH Holdings, LLC.

 

2.             I have reviewed the terms of the
Agreement and I have made, or have caused to be made under my supervision, a
detailed review of the transactions and conditions of the Reliant Retail
Obligors during the accounting period covered by the attached financial
statements.

 

3.             The examinations described in
paragraph 2 did not disclose, and I have no knowledge of, the existence of any
condition or event constituting a Default with respect to a Reliant Event of
Default, as such term is defined under the Agreement.

 

4.             Exhibit A attached hereto includes
certain financial statements required under the terms of the Agreement, all of
which financial statements are true, complete and correct in all material
respects. 

 

5.             The
aggregate amount of all individual asset sales with gross cash proceeds in an
amount greater than $500,000, but less than $5,000,000, is $                           
for the quarter ending                           .
The aggregate amount of all such individual asset sales since December 1, 2006,
is $                                 .

 

        The foregoing certifications, together
with the financial statements attached as Exhibit A hereto, are made and
delivered this                    
day of                  ,
20     .

 

	
   

  	
  RERH Holdings, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

Exhibit I1

To Credit Sleeve and
Reimbursement Agreement

Sleeve Provider’s
Employees with Access to Certain Reliant Retail Obligor Information

 

 [***]

***  The
content of this Exhibit I1 (consisting of 2 pages) has been omitted and filed
separately with the Securities and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

Exhibit I2

To Credit Sleeve and Reimbursement Agreement

Reliant Retail Obligor’s Employees with Access to Certain Merrill Party
Information

[***]

***  The
content of this Exhibit I2 (consisting of 7 pages) has been omitted and filed
separately with the Securities and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.

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