PARTICIPATING PREFERRED STOCK PURCHASE AGREEMENT

PARTICIPATING PREFERRED STOCK PURCHASE AGREEMENT

by and between

RELIANT ENERGY, INC.

and

FR RELIANT HOLDINGS LP
October 10, 2008Table of Contents

Page

1.

Definitions 1

 

2.

Authorization, Purchase and Sale of Stock 6

 

2.1

Authorization 6

 

2.2

Purchase and Sale of the Participating Preferred Stock 6

 

2.3

Closing 6

 

2.4

Certificate of Designation . 6

 

2.5

Termination of Letter Agreement 6

 

2.6

Strategic Review 6

 

3.

Representations and Warranties of the Company 7

 

3.1

Corporate Existence and Power 7

 

3.2

Capitalization . 7

 

3.3

Authorization 9

 

3.4

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

 

3.5

No Regulatory Approvals; No Conflict 10

 

3.6

SEC Reports; Financial Statements . 11

 

3.7

Undisclosed Liabilities . 12

 

3.8

Contracts . 12

 

3.9

Affiliate Transactions . 13

 

3.10

No Adverse Changes. 13

 

3.11

Title . 13

 

3.12

Compliance with Law; Permits . 13

 

3.13

Litigation . 14

 

3.14

Tax Matters . 14

 

3.15

Broker; Fees . 15

 

3.16

Anti-Takeover Provisions Not Applicable . 15

 

3.17

Rights Agreement . 15

 

3.18

Trading in Common Stock . 15

 

4.

Representations and Warranties of the Purchaser 16

 

4.1

Organization 16

 

4.2

Authorization 16

 

4.3

No Conflict 16

 

4.4

Purchase Entirely for Own Account 16

 

4.5

Investment Company 16

 

4.6

Investor Status 17

 

4.7

Securities Not Registered 17

 

4.8

Trading in Company Securities 17

 

4.9

Broker; Fees 17

 

4.10

Funds 17

 

5.

Covenants 18

 

5.1

Commercially Reasonable Efforts 18

 

5.2

Interim Actions 18

 

5.3

Notification of Certain Matters . 18

 

5.4

Confidentiality . 19

 

5.5

Treatment of the Participating Preferred Stock by the Company . 19

 

5.6

Trading in Company Securities . 19

 

5.7

Board of Directors Representation 19

 

5.8

Commitment Letter . 19

 

5.9

Exclusivity 19

 

5.10

Investor Rights Agreement . 20

 

5.11

Access to Information . 20

 

6.

Conditions Precedent 21

 

6.1

Conditions to the Obligations of Each Party 21

 

6.2

Conditions to the Obligations of the Company 21

 

6.3

Conditions to the Obligations of the Purchaser 22

 

7.

Termination 23

 

7.1

Conditions of Termination 23

 

7.2

Effect of Termination 24

 

8.

Miscellaneous Provisions 24

 

8.1

Public Statements or Releases 24

 

8.2

Interpretation 25

 

8.3

Notices 25

 

8.4

Severability 26

 

8.5

Governing Law . 26

 

8.6

Waiver 27

 

8.7

Expenses; Termination Fee 27

 

8.8

Successors and Assigns 28

 

8.9

Third Parties 28

 

8.10

Counterparts 28

 

8.11

Entire Agreement; Amendments 28

 

8.12

Survival 28

 

8.13

Specific Performance . 28

 

8.14

Representation by Counsel; Mutual Drafting 28

Exhibits

 

1

Table of Defined Terms

 

2

PARTICIPATING PREFERRED STOCK PURCHASE AGREEMENT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2.  Authorization, Purchase and Sale of Stock.

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

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

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

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

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

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

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

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

3.2 Capitalization .

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

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

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

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

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

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

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

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

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

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

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

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

3.6 SEC Reports; Financial Statements .

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

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

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

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

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

3.8 Contracts .

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

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

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

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

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

3.12 Compliance with Law; Permits .

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

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

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

3.14 Tax Matters .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5.  Covenants .

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

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

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

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

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

5.6 Trading in Company Securities .

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

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

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

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

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

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

5.11 Access to Information .

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

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

6.  Conditions Precedent .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

7.  Termination .

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

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

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

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

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

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

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

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

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

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

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

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

8.  Miscellaneous Provisions .

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

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

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

(a) If to the Company, to:

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

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

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

(b) If to the Purchaser, to:

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

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

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

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

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

8.5 Governing Law .

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

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

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

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

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

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

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

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

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

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

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

*        *        *        *

3

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

RELIANT ENERGY, INC.

By:
Name:
Title:

FR RELIANT HOLDINGS LP

By:
Name:
Title:

4

EXHIBIT A

FORM OF CERTIFICATE OF DESIGNATION

OF

SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK

OF

RELIANT ENERGY, INC.

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

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

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

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

1.  Number; Designation; Rank.

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

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

2. Dividends.

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

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

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

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

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

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

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

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

3. Liquidation Preference.

3.1 Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, each share of Series B Preferred Stock entitles the holder thereof to receive and to be paid out of the assets of the Company available for distribution, before any distribution or payment may be made to a holder of any Junior Securities, an amount in cash per share equal to the greater of (i) the sum of (A) the Original Purchase Price per share plus (B) all accrued, accumulated and unpaid Dividends on such share of Series B Preferred Stock, in each case as adjusted for any stock dividends, splits, combinations and similar events (such sum, as adjusted, the “ Regular Liquidation Preference ”) and (ii) an amount equal to the amount the holders of Series B Preferred Stock would have received upon liquidation, dissolution or winding up of the Company had such holders converted their shares of Series B Preferred Stock into shares of Common Stock immediately prior to such liquidation, dissolution or winding up (the “ Participating Liquidation Preference ”, and such greater amount, the “ Liquidation P