EXHIBIT 10.2
AMENDMENT NO. 2
Dated as of December 19, 2005
TO
CREDIT AND GUARANTY AGREEMENT
Dated as of October 7, 2005,
among
RELIANT ENERGY, INC.,
as the Borrower,
The Other Loan Parties Referred To Herein,
as Guarantors,
The Other Lenders Party Thereto,
DEUTSCHE BANK AG, NEW YORK BRANCH,
as Administrative Agent,
and
DEUTSCHE BANK SECURITIES INC.,
as Sole Lead Arranger, Sole Bookrunner and Sole Syndication Agent

 

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

 

AMENDMENT NO. 2
     This Amendment No. 2 dated as of December 19, 2005 (this “Amendment”) is
among RELIANT ENERGY, INC., a Delaware corporation (the “Borrower”), the other
LOAN PARTIES referred to herein, as Guarantors, and each of the Lenders listed
on the signature pages to this Amendment.
INTRODUCTION
     A. The Borrower, the other Loan Parties referred to therein, DEUTSCHE BANK
AG, NEW YORK BRANCH, as Administrative Agent, and DEUTSCHE BANK SECURITIES,
INC., as Sole Lead Arranger, Sole Bookrunner, and Sole Syndication Agent
(collectively, the “Agents”) and certain banks, financial institutions and other
Persons (collectively, the “Lenders”) are parties to the Credit and Guaranty
Agreement, dated as of October 7, 2005 (as amended to date, the “Credit
Agreement”).
     B. The Borrower, such other Loan Parties and the Lenders wish to amend the
Credit Agreement in certain respects as provided herein.
     THEREFORE, the Borrower, such other Loan Parties and the Lenders hereby
agree as follows:
     Section 1. Definitions. Unless otherwise defined in this Amendment, terms
used in this Amendment which are defined in the Credit Agreement shall have the
meanings assigned to such terms in the Credit Agreement.
     Section 2. Amendments to Definitions. (a) The definitions of “Consolidated
EBITDAR,” “Consolidated Interest Charges,” “Debt”, and “Excluded Proceeds” are
amended and restated in their entirety to read as follows:
     “Consolidated EBITDAR” means, for any Person for any period determined on a
consolidated basis in accordance with GAAP, an amount equal to, without any
duplication, (a) net income (before giving effect to the cumulative effect of
changes in accounting principles and discontinued operations (including Liberty
Electric Power LLC, a Delaware limited liability company) and before income
taxes and franchise taxes to the extent based on the income of such Person and
its Subsidiaries) for such period, plus (b) Consolidated Interest Charges for
such period, plus (c) depreciation, depletion, impairment, abandonment and
amortization expense for such period, plus (d) the book accounting lease expense
under the REMA Lease for such period, plus (e) interest and fees expensed under
any receivables monetization or securitization during such period (other than
interest and fees arising out of a securitization or monetization of the
California Receivables), plus (f) net unrealized losses related to trading or
non-trading energy derivatives, plus (g) cash dividends or distributions
actually received during such period from an entity which is not a consolidated
Subsidiary of such Person other than El Dorado Energy, LLC, plus (h) the
Borrower’s pro rata share of the EBITDAR of El Dorado Energy, LLC, and minus
(i) net unrealized gains related to trading or non-trading energy derivatives;

 

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

 

provided, however, for purposes of this definition, (i) gains and losses on the
disposition of assets not in the ordinary course of business, (ii) any other
noncash charge or gain, and (iii) any extraordinary or other non-recurring item
or expense, including severance costs, shall be excluded to the extent incurred
or realized during such period in accordance with GAAP from the calculation of
Consolidated EBITDAR.
If during any period for which Consolidated EBITDAR is being determined, the
Borrower or any Subsidiary shall have (a) made or consummated any Acquisition
for gross consideration of $3,000,000 or more (including Indebtedness assumed),
then Consolidated EBITDAR shall be determined on a pro forma basis for such
period as if such Acquisition had been made or consummated as of the beginning
of the first day of such period or (b) made or consummated any Asset Sale that
is not fully included in discontinued operations, then Consolidated EBITDAR
shall, to the extent such Asset Sale is not excluded from Consolidated EBITDAR
pursuant to the foregoing proviso, be determined on a pro forma basis for such
period as if such Asset Sale had been made or consummated as of the beginning of
the first day of such period.
     “Consolidated Interest Charges” means, without duplication, for any period
for the Borrower and its Subsidiaries on a consolidated basis, (a) the total
interest expense for such period, plus (b) the interest expense during such
period attributable to (i) the REMA Lease, (ii) the fees and yield paid in
connection with, or interest expense attributable to, any account receivables
securitization or monetization permitted hereunder (other than with respect to
the California Receivables), (iii) the Borrower’s pro rata share of the net
interest expense of El Dorado Energy, LLC, and (iv) any capitalized interest
during such period, plus (c) all cash dividends and distributions paid on
preferred or preference stock, plus (d) to the extent deducted in determining
total interest expense, net unrealized gains of any Hedging Agreements permitted
hereunder and existing on or prior to the Closing Date (excluding any ongoing
settlement payments in connection with permitted interest rate swap agreements),
minus (e) (i) the total interest income of such Person and its Subsidiaries,
including interest income from any escrow or trust account, but excluding any
interest income attributable to the California Receivables, including any
settlement and collection of the California Receivables for such period, (ii) in
all cases whether expensed or amortized, any interest expense attributable to
(A) any makewhole or premium paid in connection with the repayment of any Debt
permitted hereunder, (B) any upfront direct or indirect costs, expenses, or fees
incurred in connection with, including those arising out of the preparation for
the maturity of, (1) the Existing Credit Agreement, this Agreement and other
Debt, and the restructuring or payoff of the Debt of OPC and its Subsidiaries or
(2) the incurrence of any Debt after the Closing Date, (C) to the extent added
in determining total interest expense, the upfront cost and net unrealized
losses of any Hedging Agreements permitted hereunder and existing on or prior to
the Closing Date (excluding ongoing settlement payments in connection with
permitted interest rate swap agreements), and (D) any of the RRI Warrants;
(iii) any interest expense attributable to the Liberty Project Financing,
(iv) any interest expense attributable to the California Receivables, including
any settlement or collection thereof, (v) all non-recurring interest expense
with respect to items not constituting Indebtedness, and (vi) interest expense
attributable to Indebtedness repaid or required to be repaid under this
Agreement or otherwise or Indebtedness for which the

2

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

 

Borrower has notified the Administrative Agent in writing that it agrees it will
not designate the Net Asset Sale Proceeds as Excluded Proceeds, in each case in
connection with an Asset Sale.
     “Debt” means, as of any date of determination with respect to the Borrower
and its Subsidiaries, without duplication, in accordance with GAAP the
following: (a) the total amount of indebtedness, including any fair value
adjustments, and other obligations of the Borrower and its Subsidiaries for
borrowed money (whether by loan or the issuance of debt securities), including
the unreimbursed amount of any drawings under letters of credit issued for the
account of the Borrower or any of its Subsidiaries, but excluding the amount of
indebtedness for borrowed money that is either (i) required to be repaid under
this Agreement or otherwise or (ii) for which the Borrower has notified the
Administrative Agent in writing that it agrees it will not designate the Net
Asset Sale Proceeds as Excluded Proceeds, in each case in connection with an
Asset Sale, (b) all Capital Lease Obligations and, except for the REMA Lease,
Attributable Debt in respect of sale and leaseback transactions, Synthetic Lease
Obligations or financing leases, (c) the unpaid balance owed to the certificate
holders under the REMA Lease, (d) obligations under any accounts securitization
or monetization arrangement permitted hereunder and not recorded on the Borrower
balance sheet for that period (other than with respect to any securitization or
monetization of the California Receivables), (e) all guaranties of payment or
collection of any obligations described in clauses (a) through (d) of this
definition of any other Person, and (f) the Borrower’s pro rata share of the net
outstanding bank debt of El Dorado Energy, LLC;
provided, however, that Debt shall not include: (i) any guaranties that may be
incurred by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business or similar transactions, (ii) any Obligations or
guaranties of performance of Obligations under performance bonds, (iii) trade
accounts payable in the ordinary course of business, (iv) customer advance
payments and customer deposits arising in the ordinary course of business,
(v) the liability of any Person as a general partner of a partnership for Debt
of such partnership, if the partnership is not a Subsidiary of such Person, and
(vi) any completion or performance guarantees (or similar guarantees that a
project or a Subsidiary perform as planned).
In determining the outstanding amount of any Debt: (a) the amount of money
borrowed shall be the outstanding principal amount thereof, (b) the amount of
all unreimbursed letters of credit shall be the unreimbursed amount thereof,
(c) the amount of any accounts monetization or securitization shall be the
amount invested by the investor therein, and (d) the amount of guaranties shall
be the amount of the guaranteed obligations determined as provided above in this
sentence.
     “Excluded Proceeds” means any Net Asset Sale Proceeds that are designated
by the Borrower as Excluded Proceeds; provided, that (a) not more than
$300,000,000 of such Net Asset Sale Proceeds may be designated as Excluded
Proceeds during any single calendar year, (b) not more than $750,000,000 of such
Net Asset Sale Proceeds may be designated as Excluded Proceeds on or after the
Closing Date, and (c) Net Asset Sale Proceeds from Asset Sales of generation
assets or other businesses, in each case acquired

3

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

 

by the Borrower or any Restricted Subsidiary after the Closing Date pursuant to
an Acquisition may not be designated as Excluded Proceeds and (d) OPH Net Asset
Sale Proceeds from the OPH Ceredo/NYC Sale may not be designated as Excluded
Proceeds.
     (b) The following definition of “OPH Ceredo/NYC Sale” are added to
Section 1.1 of the Credit Agreement in alphabetical order:
     “OPH Ceredo/NYC Sale” means the Asset Sales to be consummated under
(1) that certain Purchase and Sale Agreement dated as of August 10, 2005 by and
between Twelvepole Creek, LLC, as Seller, and Appalachian Power Company, as
Buyer, resulting in the transfer of the Ceredo plant and (2) that certain
Purchase and Sale Agreement dated as of September 30, 2005 by and among Orion
Power Holdings, Inc., as Seller, Reliant Energy, Inc., as Guarantor, and Astoria
Generating Company Acquisitions, L.L.C., as Buyer, resulting in the transfer of
the Astoria, Gowanus and Narrows plants.
     Section 3. Amendment to Section 7.11. Section 7.11 is amended by amending
and restating the table in subsection (a) thereof in its entirety as follows:

              Minimum     Consolidated     Interest Coverage Four Fiscal
Quarters Ending   Ratio
Closing Date through December 31, 2005
    1.8:1.0  
March 31, 2006 through December 31, 2006
    1.5:1.0  
March 31, 2007 through September 30, 2007
    1.8:1.0  
December 31, 2007 and each Fiscal Quarter thereafter
    2.0:1.0  

     Section 4. Amendment to Section 7.17. Section 7.17 is amended by adding a
new subsection (d) thereto as follows:
          (d) The Borrower shall designate as “Excluded Proceeds” under and as
defined in the Secured Notes indentures any OPH Asset Sale Proceeds resulting
from the OPH Ceredo/NYC Sale which would otherwise be required to be prepaid
pursuant to the Secured Notes.
     Section 5. Amendment to Compliance Certificate. The Borrower, the Loan
Parties and the Lenders agree that the Compliance Certificate is hereby amended
to include a new item 6, which shall include a description of Asset Sales
consummated since the Closing Date including reference to the assets sold, the
date of such Asset Sale, the aggregate Net Asset Sale Proceeds and the amount of
Excluded Proceeds elected by the Borrower from such Net Asset

4

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

 

Sale Proceeds (both singly and in the aggregate for the current fiscal year and
since the Closing Date).
     Section 6. Representations and Warranties. The Borrower represents and
warrants to the Agents and the Lenders that:
     (a) The representations and warranties of the Borrower and each other Loan
Party contained in Article V of the Credit Agreement or any other Loan Document,
or which are contained in any document furnished at any time under or in
connection herewith or therewith, are true and correct in all material respects
on and as of the date of this Amendment, except to the extent that such
representations and warranties specifically refer to an earlier date, in which
case they were true and correct in all material respects as of such earlier date
(provided, that representations and warranties which have Material Adverse
Effect qualifiers shall be true and correct in all respects to the extent such
Material Adverse Effect qualifier is applicable thereto), and except that for
purposes of this clause, the representations and warranties contained in clauses
(a) and (b) of Section 5.5 of the Credit Agreement shall be deemed to refer to
the most recent statements furnished pursuant to clauses (a) and (b),
respectively, of Section 6.1 of the Credit Agreement;
     (b) (i) this Amendment has been duly executed and delivered by each Loan
Party that is party thereto, (ii) this Amendment constitutes a legal, valid and
binding obligation of such Loan Party, enforceable against such Loan Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors’
rights generally and by general principles of equity, whether such
enforceability is considered in a proceeding at law or in equity, and (iii) the
execution, delivery and performance by each Loan Party of this Amendment have
been duly authorized by all necessary corporate or other organizational action,
and do not and will not (a) contravene the terms of any of such Person’s
Organization Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, or require any payment to
be made under (i) any Contractual Obligation to which such Person is a party or
affecting such Person or the properties of such Person or any of its
Subsidiaries, where such Contractual Obligation (x) evidences Indebtedness of
the Borrower or any of its Subsidiaries or (y) is identified in the exhibit list
from time to time in filings made by the Borrower with the SEC as material to
the Borrower, or (ii) any order, injunction, writ or decree of any Governmental
Authority or any arbitral award to which such Person or its property is subject
that could reasonably be expected to have a Material Adverse Effect; (c) violate
any Law that could reasonably be expected to have a Material Adverse Effect; or
(d) result in the creation of any Lien other than a Permitted Lien; and
     (c) as of the date of this Amendment, no Default or Event of Default has
occurred and is continuing.
     Section 7. Effectiveness. This Amendment shall become effective as of the
date set forth above, and the Credit Agreement shall be amended as provided in
this Amendment, when each of the following conditions are met:

5

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

 

     (a) the Borrower and each other Loan Party shall have delivered to the
Administrative Agent originals of this Amendment, duly and validly executed by
the Borrower and each such Loan Party,
     (b) the Required Lenders shall have approved this Amendment as a result of
(i) approving Amendment No. 2 to the Existing Credit Agreement (as defined
below) and/or (ii) executing and delivering this Amendment to the Administrative
Agent and the Borrower; and
     (c) Amendment No. 2 dated as of December      , 2005 to the Existing Credit
Agreement (as amended, restated, supplemented or otherwise modified prior to the
date hereof) (“Amendment No. 2 to the Existing Credit Agreement”) has become
effective by its terms. .
     The Administrative Agent will confirm in writing to the Borrower when
conditions (a) and/or (b)(ii) have been satisfied. The Borrower will confirm in
writing to the Administrative Agent when conditions (b)(i) and/or (c) have been
satisfied.
     Section 8. Effect on Loan Documents.
     (a) Except as amended herein, the Credit Agreement and the Loan Documents
remain in full force and effect as originally executed. Nothing herein shall act
as a waiver of any of the Agents’ or Lenders’ rights under the Loan Documents,
as amended.
     (b) This Amendment is a Loan Document for the purposes of the provisions of
the other Loan Documents.
     Section 9. Choice of Law. This Amendment shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
     Section 10. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement. Delivery of an
executed counterpart of a signature page to this Amendment by telecopier shall
be effective as delivery of a manually executed counterpart of this Amendment.
Remainder of page intentionally left blank

6

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

 

     EXECUTED to be effective as of the date first above written.

                      RELIANT ENERGY, INC.  
 
               
 
  By:                               Name:    
 
                    Title:    
 
               

     
 
  RELIANT ENERGY ASSET MANAGEMENT, LLC
 
  RELIANT ENERGY BROADBAND, INC.
 
  RELIANT ENERGY CALIFORNIA HOLDINGS, LLC
 
  RELIANT ENERGY COMMUNICATIONS, INC.
 
  RELIANT ENERGY COOLWATER, INC.
 
  RELIANT ENERGY CORPORATE SERVICES, LLC
 
  RELIANT ENERGY ELLWOOD, INC.
 
  RELIANT ENERGY ETIWANDA, INC.
 
  RELIANT ENERGY FLORIDA, LLC
 
  RELIANT ENERGY FLORIDA HOLDINGS, LLC
 
  RELIANT ENERGY KEY/CON FUELS, LLC
 
  RELIANT ENERGY MANDALAY, INC.
 
  RELIANT ENERGY NET VENTURES, INC.
 
  RELIANT ENERGY NORTHEAST GENERATION, INC.
 
  RELIANT ENERGY NORTHEAST HOLDINGS, INC.
 
  RELIANT ENERGY ORMOND BEACH, INC.
 
  RELIANT ENERGY POWER GENERATION, INC.
 
  RELIANT ENERGY RETAIL HOLDINGS, LLC
 
  RELIANT ENERGY SABINE (TEXAS), INC.
 
  RELIANT ENERGY SERVICES DESERT BASIN, LLC
 
  RELIANT ENERGY SERVICES MID-STREAM, LLC
 
  RELIANT ENERGY SEWARD, LLC
 
  RELIANT ENERGY TRADING EXCHANGE, INC.
 
  RELIANT ENERGY VENTURES, INC.
 
  RELIANT ENERGY WHOLESALE GENERATION, LLC

         
 
  By:    
 
       
 
  Name:   Andrew Johannesen
 
  Title:   Assistant Treasurer of the corporations and limited liability
companies, and of the general partners of the limited partnerships, listed above

7

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

 

                  RELIANT ENERGY SERVICES, INC.
 
           
 
  By:        
 
           
 
  Name:   Andrew C. Johannesen    
 
  Title:   Vice President and Treasurer    
 
                RELIANT ENERGY RETAIL SERVICES, LLC     RELIANT ENERGY ELECTRIC
SOLUTIONS, LLC     RELIANT ENERGY SOLUTIONS EAST, LLC
 
           
 
  By:        
 
                Name: Lloyd A. Whittington     Title:   Vice President and
Treasurer of the limited liability companies listed above
 
                RELIANT ENERGY CAPTRADES HOLDING CORP.     RELIANT ENERGY SABINE
(DELAWARE), INC.
 
           
 
  By:        
 
                Name: Patricia F. Genzel     Title: President
 
                [INSERT NAME OF LENDER]
 
           
 
  By:        
 
                Name:     Title:

8