Document:

Exhibit
10.1

 

RELIANT ENERGY, INC.,

as guarantor

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING
AUTHORITY

EXEMPT FACILITIES REVENUE BONDS

(Reliant Energy Seward, LLC Project)

SERIES 2001A

SECOND SUPPLEMENTAL GUARANTEE AGREEMENT

Dated as of December 1, 2006

to

GUARANTEE AGREEMENT

Dated as of December 22, 2004

The Bank of New York Trust Company, N.A.,

as Trustee

 

 

GUARANTEE
AGREEMENT

SECOND SUPPLEMENTAL GUARANTEE AGREEMENT dated as of December
1, 2006 (this “Supplemental Guarantee Agreement”) to the Guarantee
Agreement dated as of December 22, 2004 (the “Guarantee Agreement”) by
and among Reliant Energy, Inc., a Delaware corporation (the “Company”),
the Subsidiary Guarantors (as defined therein), and The Bank of New York Trust
Company, N.A., as trustee (the “Trustee”) (as successor to J.P. Morgan
Trust Company, National Association) relating to the Pennsylvania Economic
Development Financing Authority Exempt Facilities Revenue Bonds (Reliant Energy
Seward, LLC Project) Series 2001A, as supplemented by the Supplemental
Guarantee Agreement dated as of September 21, 2006 among the Company, Reliant
Energy Power Supply, LLC and the Trustee. 
Capitalized terms used in this Supplemental Guarantee Agreement, but not
defined herein, shall have the respective meanings given to such terms in the
Guarantee Agreement.

WITNESSETH:

WHEREAS, Section 9.02 of the Guarantee Agreement
provides, among other things, that the Company and the Trustee may amend or
supplement the Guarantee Agreement with the consent of the Holders of at least
a majority in aggregate principal amount of the Series 2001A Bonds then
Outstanding; and

WHEREAS, the Company has solicited the consent of the
Holders to certain amendments to the Guarantee Agreement described in the
Second Amended and Restated Consent Solicitation Statement dated November 8,
2006 (the “Consent Solicitation Statement”) and which have been
reflected herein (the “Amendments”); and

WHEREAS, the Company has received and filed with the
Trustee, in the manner contemplated by the Guarantee Agreement, evidence of the
consent of the Holders of at least a majority in aggregate principal amount of
the outstanding Series 2001A Bonds, consenting to the Amendments to be effected
in the form of this Supplemental Guarantee Agreement; and

NOW, THEREFORE, in consideration of the mutual
agreements herein set forth, the parties hereto agree as follows:

1.             Amendments to the
Guarantee Agreement.

The following amendments are made to the Guarantee
Agreement effective as of the date specified in Section 2 below:

(a)           In Section 1.01:

(1)           The definition of “Excluded
Securities” is amended in its entirety to read as follows:

“Excluded Securities” means debt or equity securities issued by
any Subsidiary of the Company other than RERH Holdings, LLC, IP Trust, IT
Trust, Orion Power Holdings, Inc. and REMA (or their successors); provided,
however, that “Excluded Securities” shall include beneficial interests in the
IP Trust or the IT Trust that are held by RERH Holdings, LLC or its
Subsidiaries.

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(2)           The definition of “Excluded
Subsidiaries” is amended to delete the reference to “RE Retail Receivables,
LLC.”

(3)           The following definition is added:

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

(4)           The following definition is added:

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

(5)           The definition of “Permitted
Liens” is amended:

(i)            to amend clause (24)
in its entirety to read as follows:

(24)         [Reserved];

(ii)           to delete “and” at the
end of clause (33);

(iii)          to add the following new
clause (34) after clause (33):

(34)         Liens on assets of RERH
Holdings, LLC and its Subsidiaries securing obligations of RERH Holdings, LLC
or any of its Subsidiaries under (a) Credit Facilities in an aggregate
principal amount not to exceed $300,000,000 plus all other obligations due
under such Credit Facilities and (b) any agreement for or in support of the
supply or sales of energy or products or services related or incidental to the
supply or sales of energy or any activities related to the supply or sales of
energy or products or services related or incidental to the supply or sales of energy
of RERH Holdings, LLC or any of its Subsidiaries, including any agreement
providing for the reimbursement of guarantees or collateral postings made on
behalf of RERH Holdings, LLC or any of its Subsidiaries; and

; and

(iv)          to renumber existing
clause “(34)” as clause “(35).”

(6)           The definition of “Permitted
Prior Liens” is amended to substitute “and (33)” with “, (33)

and (34).”

(b)           Section 4.08(b) is
amended:

(1)           to delete “and” at the
end of clause (18);

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(2)           to substitute “; and”
for the period at the end of clause (19); and

(3)           to add the following
new clause (20) after clause (19):

(20)         restrictions
on RERH Holdings, LLC or any of its Subsidiaries contained in (a) the Working
Capital Facility dated as of September 24, 2006 among Reliant Energy Power
Supply, LLC (“REPS”), the guarantors party thereto, and Merrill Lynch Capital
Corporation, (b) the Credit Sleeve and Reimbursement Agreement dated as of
September 24, 2006 among REPS, the guarantors party thereto, Merrill Lynch
Commodities, Inc., and Merrill Lynch & Co., Inc., and (c) any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the agreements referred to in the preceding
clauses (a) and (b), provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not materially more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
those agreements as reasonably determined by the Company.

(c)           The following
Subsection (c) is added to Section 4.08:

(c)           Promptly following the last day of each month
and so long as such payment is permitted under the terms of the agreements
referred to in Section 4.08(b)(20), the Company shall cause RERH Holdings, LLC
to pay cash dividends or distributions to the Company in an amount equal to (i)
the amount which is permitted under the terms of the agreements referred to in
Section 4.08(b)(20) on such day minus (ii)(A) amounts reasonably estimated by
the Company to be due and payable by RERH Holdings, LLC and its Subsidiaries on
or before the 20th day of the month next occurring plus (B) the lesser of (1)
$100,000,000 and (2) the amount permitted under the Credit Agreement on the
date the agreements referred to in Section 4.08(b)(20) become effective.

(d)           In Section 4.09(b):

(1)           Subsection (b)(1) of
Section 4.09 is amended in its entirety to read as follows:

(1)           the
incurrence (A) by the Company and the guarantee by the Guarantors of additional
Indebtedness and letters of credit under Credit Facilities, (B) by
Securitization Entities of Indebtedness in Qualified Securitization
Transactions, and (C) by RERH Holdings, LLC and its Subsidiaries of additional
Indebtedness and letters of credit under Credit Facilities (including

 3
 

 

guarantees of such
Indebtedness) (provided, however, that (I) the aggregate principal amount of
Indebtedness incurred under this clause (C) at any one time outstanding shall
not exceed $310,000,000, and (II) the proceeds of Indebtedness incurred under
this clause (C) shall be used only for the repayment of Indebtedness and other
Obligations of RERH Holdings, LLC and its Subsidiaries or to finance working
capital needs of RERH Holdings, LLC and its Subsidiaries, including the payment
of sales, general and administrative, and operations and maintenance expenses
(including capital expenditures) and all other expenses in the ordinary course
of business of RERH Holdings, LLC and its Subsidiaries) in an aggregate principal
amount at any one time outstanding under this clause (1) (with letters of
credit being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Restricted Subsidiaries thereunder), including
all Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (1), not to exceed $2.5
billion;

(2)           The following paragraph
is added to the end of the section:

Notwithstanding anything
in this Section 4.09(b) to the contrary, the aggregate principal amount of
Indebtedness of RERH Holdings, LLC and its Subsidiaries at any one time
outstanding, other than Indebtedness incurred pursuant to clause (14) of this
Section 4.09(b), may not exceed $310,000,000.

(e)           Section 4.10 is amended
in its entirety to read as follows:

Section 4.10  Asset Sale Offers.

(a)           Within five Business
Days after the receipt of any Net Proceeds from an Asset Sale of the Equity
Interests of RERH Holdings, LLC (and its successors), of all or substantially
all of the assets of RERH Holdings, LLC and its Subsidiaries (and their
successors), or of all or substantially all of the assets of the Company and
its Subsidiaries (other than RERH Holdings, LLC and its Subsidiaries (and their
successors)), the Company shall make an Asset Sale Offer to all Holders of each
Series of Bonds and all holders of other Indebtedness (including the 2014
Notes, the Existing 2010 Notes, and the Existing 2013 Notes) that is pari passu
with the Seward Guarantees (other than Credit Agreement Debt) (and so long as
this Guarantee Agreement is Equally and Ratably secured with such other pari
passu Indebtedness) containing provisions similar to those set forth in this
Guarantee Agreement with respect to offers to purchase or redeem with the
proceeds of sales of assets, to purchase (or repay, prepay or redeem, as
applicable) an aggregate principal amount of each Series of

 4
 

 

Bonds and such
other pari passu Indebtedness that may be purchased (or repaid, prepaid or
redeemed) equal to the aggregate of such Net Proceeds multiplied by a fraction,
the numerator of which consists of (A) the aggregate principal amount then
outstanding on each Series of Bonds and all such other pari passu Indebtedness
containing such provisions (not including Credit Agreement Debt) and the
denominator of which is (B) the sum of (i) such aggregate amount in the
preceding clause (A) and (ii) the Credit Agreement Debt then outstanding (an “Asset
Sale Offer”). The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest to the date of purchase, and
shall be payable in cash.  If any such
Net Proceeds remain after consummation of an Asset Sale Offer, the Company may
use such Net Proceeds for any purpose not otherwise prohibited by this
Guarantee Agreement.  If the aggregate
principal amount of each Series of Bonds and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of such Net Proceeds,
the Company shall select the Series of Bonds and such other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of Series of Bonds and such other pari passu Indebtedness tendered.

(b)           In the event that,
pursuant to Section 4.10 hereof, the Company is required to commence an Asset
Sale Offer, it shall follow the procedures specified below.

(c)           The Asset Sale Offer
shall be made to all holders of each Series of Bonds and all holders of other
Parity Secured Debt (other than Credit Agreement Debt) containing provisions
similar to those set forth in this Guarantee Agreement with respect to offers
to purchase or redeem with the proceeds of sales of assets.  The Asset Sale Offer shall remain open for a
period of at least 20 Business Days following its commencement and not more
than 30 Business Days, except to the extent that a longer period is required by
applicable law (the “Offer Period”).  No
later than three Business Days after the termination of the Offer Period (the “Purchase
Date”), the Company shall apply a portion of the Net Proceeds as calculated
pursuant to the first sentence of Section 4.10(a) hereof (the “Offer Amount”) to the purchase of
Notes and such other Parity Secured
Debt (on a pro rata basis, if applicable) or, if less than the Offer
Amount has been tendered, all Series of Bonds and other Indebtedness tendered
in response to the Asset Sale Offer. 
Payment for any bond in a Series of Bonds (each a “Bond”) so purchased
shall be made in the same manner as interest payments are made.

(d)           If the Purchase Date is
on or after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the Person in
whose name a Bond is registered at the close of business on such record date,
and no additional interest will be payable to Holders who tender Bonds pursuant
to the Asset Sale Offer.

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(e)           Upon the commencement
of an Asset Sale Offer, the Company shall send, by first class mail, a notice
to the Trustee and each of the Holders. 
The notice will contain all instructions and materials necessary to
enable such Holders to tender Bonds pursuant to the Asset Sale Offer.  The notice, which will govern the terms of
the Asset Sale Offer, will state:

(i)            that
the Asset Sale Offer is being made pursuant to Section 4.10 hereof and the
length of time the Asset Sale Offer will remain open;

(ii)           the
Offer Amount, the purchase price and the Purchase Date;

(iii)          that
any Bond not tendered or accepted for payment will continue to accrue interest;

(iv)          that,
unless the Company defaults in making such payment, any Bond accepted for
payment pursuant to the Asset Sale Offer shall cease to accrue interest;

(v)           that
Holders electing to have a Bond purchased pursuant to an Asset Sale Offer may
elect to have Bond purchased in integral multiples of $1,000 only;

(vi)          that
Holders electing to have a Bond purchased pursuant to any Asset Sale Offer
shall be required to surrender the Bond endorsed or assigned as the Trustee may
require or transfer by book-entry transfer, to the Company or a Paying Agent at
the address specified in the notice at least three days before the Purchase
Date;

(vii)         that
Holders shall be entitled to withdraw their election if the Company or the
Paying Agent, as the case may be, receives, not later than the expiration of
the Offer Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Bond the Holder
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Bond purchased;

(viii)        that,
if the aggregate principal amount of Bonds and other Parity Secured Debt surrendered in connection with the Asset
Sale Offer exceeds the Offer Amount, the Company shall select the Bonds and
other Parity Secured Debt to be
purchased on a pro rata basis based on the principal amount of Bonds and such
other Parity Secured Debt
surrendered (with such adjustments as may be deemed appropriate by the Company
so that only Bonds in denominations of $1,000, or integral multiples thereof,
will be purchased); and

(ix)           that
Holders whose Bonds were purchased only in part will be issued new Bonds equal
in principal amount to the

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unpurchased portion of the Bonds surrendered (or transferred by
book-entry transfer).

On or before the Purchase Date, the Company shall, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Offer Amount of Bonds or portions thereof tendered pursuant to
the Asset Sale Offer, or if less than the Offer Amount has been tendered, all
Bonds tendered, and shall deliver to the Trustee an Officer’s Certificate
stating that such Bonds or portions thereof were accepted for payment by the
Company in accordance with the terms of this Section 4.10.  The Company or the Paying Agent, as the case
may be, shall promptly (but in any case not later than five days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
purchase price of the Bonds tendered by such Holder and accepted by the Company
for purchase, and the Company shall promptly cause the issuance of a new Bond,
and the Trustee, upon written request from the Company shall authenticate and
mail or deliver such new Bond to such Holder, in a principal amount equal to
any unpurchased portion of the Bond surrendered.  Any Bond not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof.  The Company shall publicly announce the
results of the Asset Sale Offer on or as soon as practicable after the Purchase
Date.

(f)            The foregoing shall be
made in accordance with the terms of the Indenture and, to the extent
inconsistent with any terms of the Indenture, the terms of the Indenture shall
control.

(g)           If a Holder of a bond
in Series of Bonds’ acceptance of any Asset Sale Offer results in the inclusion
of the interest on such Holder’s bonds in the gross income of such Holder for
federal income tax purposes, the Company shall pay such Holder on the date each
interest payment is due for such Holder’s Series of Bonds an amount equal to the
interest then due and payable divided by (1 minus the highest effective federal
tax rate at such time) less the amount of interest otherwise paid to the
Holder.

(f)            Section 4.24 is added
to read in its entirety as follows:

Section 4.24  Early Redemption.

The Company and the Subsidiary Guarantors agree that,
notwithstanding the terms of the Series 2001A Bonds, (1) the Company and the
Subsidiary Guarantors will cause the Series 2001A Bonds not to be redeemed
before June 1, 2011 and (2) upon any optional redemption of the Series 2001A
Bonds during the period beginning June 1, 2011 and ending May 31, 2014, the
Company and the Subsidiary Guarantors will cause an additional amount to be
paid to the Holders of the Series 2001A Bonds being redeemed such that the aggregate
amount received by such Holders upon redemption is equal to the amounts
expressed as a percentage of principal amount set forth below (plus accrued
interest, if

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any, to the redemption
date) for a redemption of the Series 2001A Bonds during the periods set forth
below:

	
  Optional Redemption Dates

  	
   

  	
  Redemption Prices

  	
   

  
	
  June 1, 2011
  through May 31, 2012

  	
   

  	
  103

  	
  %

  
	
  June 1, 2012
  through May 31, 2013

  	
   

  	
  102

  	
  %

  
	
  June 1, 2013 through
  May 31, 2014

  	
   

  	
  101

  	
  %

  

 

(g)           The following
Subsection (h) is added to Section 10.06:

(h)           Notwithstanding
anything herein to the contrary, the Company agrees that, without the prior
consent of the holders of at least a majority in aggregate principal amount of
the Guarantee Obligations with respect to each Series of Bonds, the Collateral
Trustee’s Liens in the Equity Interests of RERH Holdings, LLC (or its
successor) or, if any, in all or substantially all of the assets of RERH
Holdings, LLC and its Subsidiaries (or their successors) (the “Retail Assets”)
or in all or substantially all of the Company and its Subsidiaries’ (other than
RERH Holdings, LLC and its Subsidiaries’ (or their successors)) assets,
including Equity Interests (the “Wholesale Assets”) may not be released, except
no such consent shall be required (i) in the case of an Asset Sale of the
Equity Interests of RERH Holdings, LLC (or its successor), the Retail Assets or
the Wholesale Assets or (ii) on and after the date on which, as of the last day
of two consecutive Fiscal Quarters, both (A) the Consolidated Leverage Ratio
for the applicable immediately preceding four Fiscal Quarters was 2.75:1 or
less and (B) the Consolidated Interest Coverage Ratio for the applicable
immediately preceding four Fiscal Quarters was 3.25:1 or more (the “Ratio Test”).  The Company agrees to file a current report
on Form 8-K with the SEC showing the calculation of the Ratio Test within 60
days (or 90 days if end of the period is also the end of a fiscal year) (i)
after the end of first four-quarter period in which it meets the Ratio Test and
for which it proposes to use the Ratio Test to implement the foregoing Lien
release and (ii) after the end of the second consecutive four-quarter period in
which it meets the Ratio Test and for which it proposes to use the Ratio Test
to implement the foregoing Lien release. 
The Company also agrees to promptly notify the Trustee of the filing of
the Form 8-K and to deliver to the Trustee the calculations of the Ratio Test
certified by the Company’s chief financial officer and that the Company may not
implement a Lien release without consent on account of the Ratio Test without
first complying with this sentence and the immediately preceding sentence.

The following terms shall
have the following meanings when used in this paragraph (h):

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“Acquisition”
means any transaction or any series of related transactions by which a Person
(a) acquires any going business (including a power generation facility) or all
or substantially all of the assets of any other Person, or division thereof,
whether through purchase of assets, merger, or otherwise or (b) directly or
indirectly acquires greater than 50% of the Voting Stock of any other Person.

“Consolidated EBITDAR”
means, for any period for the Company and its Subsidiaries 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 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, 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, minus (h) 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 Company 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 Company and its
Subsidiaries on a consolidated basis in accordance with GAAP, (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, and
(iii) any capitalized interest during such period, plus (c) all cash
dividends and distributions paid on preferred or

 9
 

 

preference stock, plus (d) to the extent deducted
in determining total interest expense, net unrealized gains under any agreement
described in the definition of “Hedging Obligations” permitted hereunder and
existing on or prior to December 22, 2004 (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, (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, (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)
any Debt, (2) the incurrence of any Debt after December 22, 2004, or (3) the
amendment of any Debt, (C) to the extent added in determining total
interest expense, the upfront cost and net unrealized losses under any agreement
described in the definition of “Hedging Obligations” permitted hereunder and
existing on or prior to December 22, 2004 (excluding ongoing settlement
payments in connection with permitted interest rate swap agreements), and
(D) any of the RRI Warrants; (iii)  all non-recurring interest
expense with respect to items not constituting Indebtedness, and (iv) interest
expense attributable to Indebtedness repaid or required to be repaid under any
Indebtedness for which the Company has notified the Credit Agreement Agent in
writing that it agrees it will not designate the Net Proceeds as Excluded
Proceeds, in each case in connection with an Asset Sale.

“Consolidated Interest
Coverage Ratio” means, as of any date of determination, the ratio of (a)
Consolidated EBITDAR for the period of the four prior Fiscal Quarters ending on
such date to (b) Consolidated Interest Charges for such period.

“Consolidated Leverage
Ratio” means, as of any date of determination, the ratio of (a)
Consolidated Total Debt as of such date to (b) Consolidated EBITDAR for the
period of the four Fiscal Quarters most recently ended.

“Consolidated Total
Debt” means, as of any date of determination, for the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP, (i) all outstanding
Debt of the Company and its Subsidiaries on such date, minus (ii) without
duplication, all (a) cash and short-term investments, in an aggregate amount
not to exceed $300,000,000 at any time, (b) restricted cash, in an amount not
to exceed the aggregate amount of Indebtedness of the Company or any of its
Subsidiaries, the terms of which Indebtedness cause such cash to appear as
restricted cash on the consolidated balance sheet of the Company and its
Subsidiaries, and (c) broker, counterparty, and customer margin/collateral
assets and deposits advanced to or held on behalf of such broker, counterparty
or customer, as each of the foregoing appears on the consolidated balance sheet
of the Company and its Subsidiaries.

 10
 

 

“Debt” means, as
of any date of determination with respect to the Company 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 Company 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 Company or
any of its Subsidiaries, but excluding the amount of indebtedness for borrowed
money that is either (i) required to be repaid or (ii) for which the Company
has notified the Credit Agreement Agent in writing that it agrees it will not
designate the Net 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 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 Company
balance sheet for that period, and (e) all guaranties of payment or collection
of any obligations described in clauses (a) through (d) of this definition of
any other Person; 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.

“RRI Warrants”
means the warrants issued by the Company and outstanding on

December 22, 2004.

(h)           Subsection (a)(2) of
Section 13.01 is amended in its entirety to read as follows:

(2)           the Seward Subsidiary
and the Seward Collateral Trustee shall file a mortgage on the Seward Collateral
substantially in the form of Exhibit B hereto for the benefit of the present
and future holders of the Series 2001A Bonds and any other Permitted Secured
PEDFA Bond Indebtedness on an Equal and Ratable Basis on or before the date on
which the Seward Security Event occurs, and the Series 2001A Bonds will

 11
 

 

thereafter be secured by Liens upon the Seward
Subsidiary’s rights in the Seward Collateral;

2.             Effectiveness of
Amendments.

The Amendments shall become effective on the date of
this Supplemental Guarantee Agreement.

3.             Ratification of
Guarantee Agreement.

The Guarantee Agreement, as supplemented and amended
by this Supplemental Guarantee Agreement, is in all respects ratified and confirmed,
and this Supplemental Guarantee Agreement shall be deemed part of the Guarantee
Agreement in the manner and to the extent herein and therein provided.

4.             Trustee Not
Responsible for Recitals.

The recitals herein contained are made by the Company and
not by the Trustee, and the Trustee assumes no responsibility for the
correctness thereof.  The Trustee makes
no representation as to the validity or sufficiency of this Supplemental
Guarantee Agreement.

5.             Governing Law.

THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN
THIS SUPPLEMENTAL GUARANTEE AGREEMENT.

6.             Separability.

In case any one or more of the provisions contained in
this Supplemental Guarantee Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, then, to the extent permitted
by law, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Supplemental Guarantee Agreement, but this
Supplemental Guarantee Agreement shall be construed as if such invalid or illegal
or unenforceable provision had never been contained herein.

7.             Counterparts.

This Supplemental Guarantee Agreement may be executed
in any number of counterparts each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.

 12
 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Supplemental Guarantee Agreement to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first above written.

	
   

  	
   

  	
  RELIANT ENERGY, INC.,

  
	
   

  	
   

  	
  as Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Andrew Johannesen

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Andrew
  Johannesen

  	
   

  
	
   

  	
   

  	
  Title:

  	
   Vice
  President and Assistant Treasurer

  	
   

  
							

 

 13
 

 

 

	
   

  	
  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
  KEY/CON FUELS, LLC

  
	
   

  	
  RELIANT ENERGY
  MANDALAY, INC.

  
	
   

  	
  RELIANT ENERGY
  NORTHEAST GENERATION, INC.

  
	
   

  	
  RELIANT ENERGY
  NORTHEAST HOLDINGS, INC.

  
	
   

  	
  RELIANT ENERGY
  ORMOND BEACH, INC.

  
	
   

  	
  RELIANT ENERGY
  POWER GENERATION, INC.

  
	
   

  	
  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:

  	
  /s/ Andrew
  Johannesen

  	
   

  
	
   

  	
  Name:

  	
  Andrew
  Johannesen

  
	
   

  	
  Title:

  	
  Assistant
  Treasurer of the corporations and limited

  
	
   

  	
   

  	
  liability
  companies listed above

  
					

 

 14
 

 

 

	
  

  	
  RELIANT ENERGY SERVICES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Andrew C. Johannesen

  	
   

  
	
   

  	
  Name:   Andrew
  C. Johannesen

  
	
   

  	
  Title: Vice President and Treasurer

  
	
   

  	
   

  
	
  

  	
  RELIANT ENERGY ELECTRIC
  SOLUTIONS, LLC

  
	
   

  	
  RELIANT ENERGY POWER
  SUPPLY, LLC

  
	
   

  	
  RELIANT ENERGY RETAIL
  SERVICES, LLC

  
	
   

  	
  RELIANT ENERGY SOLUTIONS
  EAST, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lloyd A. Whittington

  	
   

  
	
   

  	
  Name:

  	
  Lloyd A. Whittington

  
	
   

  	
  Title:

  	
  Vice President and Treasurer of the limited

  
	
   

  	
  liability companies listed above

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RELIANT ENERGY RETAIL HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lloyd A. Whittington

  	
   

  
	
   

  	
  Name:

  	
  Lloyd A. Whittington

  
	
   

  	
  Title:

  	
  Assistant Treasurer

  
							

 

 15
 

 

 

	
  

  	
  RELIANT ENERGY CAPTRADES HOLDING CORP.

  
	
   

  	
  RELIANT ENERGY SABINE (DELAWARE), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  By:

  	
  /s/ Patricia F. Genzel

  	
   

  
	
   

  	
  Name:

  	
    Patricia F.
  Genzel

  
	
   

  	
  Title:

  	
  President and Secretary

  
					

 

 16
 

 

 

	
  

  	
  THE BANK OF NEW YORK TRUST COMPANY,

  N.A., as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Michael
  J. Judge

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  	
   

  

 

 17Exhibit
10.2

 

RELIANT ENERGY, INC.,

as guarantor

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING
AUTHORITY

EXEMPT FACILITIES REVENUE BONDS

(Reliant Energy Seward, LLC Project)

SERIES 2002A

SECOND SUPPLEMENTAL GUARANTEE AGREEMENT

Dated as of December 1, 2006

to

GUARANTEE AGREEMENT

Dated as of December 22, 2004

The Bank of New York Trust Company, N.A.,

as Trustee

 

 

GUARANTEE AGREEMENT

SECOND
SUPPLEMENTAL GUARANTEE AGREEMENT dated as of December 1, 2006 (this “Supplemental
Guarantee Agreement”) to the Guarantee Agreement dated as of December 22,
2004 (the “Guarantee Agreement”) by and among Reliant Energy, Inc., a
Delaware corporation (the “Company”), the Subsidiary Guarantors (as
defined therein), and The Bank of New York Trust Company, N.A., as trustee (the
“Trustee”) (as successor to J.P. Morgan Trust Company, National
Association), relating to the Pennsylvania Economic Development Financing
Authority Exempt Facilities Revenue Bonds (Reliant Energy Seward, LLC Project)
Series 2002A, as supplemented by the Supplemental Guarantee Agreement dated as
of September 21, 2006 among the Company, Reliant Energy Power Supply, LLC and
the Trustee.  Capitalized terms used in
this Supplemental Guarantee Agreement, but not defined herein, shall have the
respective meanings given to such terms in the Guarantee Agreement.

WITNESSETH:

WHEREAS, Section
9.02 of the Guarantee Agreement provides, among other things, that the Company
and the Trustee may amend or supplement the Guarantee Agreement with the
consent of the Holders of at least a majority in aggregate principal amount of
the Series 2002A Bonds then Outstanding; and

WHEREAS, the
Company has solicited the consent of the Holders to certain amendments to the
Guarantee Agreement described in the Second Amended and Restated Consent
Solicitation Statement dated November 8, 2006 (the “Consent Solicitation
Statement”) and which have been reflected herein (the “Amendments”);
and

WHEREAS, the
Company has received and filed with the Trustee, in the manner contemplated by
the Guarantee Agreement, evidence of the consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Series 2002A Bonds,
consenting to the Amendments to be effected in the form of this Supplemental
Guarantee Agreement; and

NOW, THEREFORE, in
consideration of the mutual agreements herein set forth, the parties hereto
agree as follows:

1.             Amendments to the Guarantee Agreement.

The following
amendments are made to the Guarantee Agreement effective as of the date
specified in Section 2 below:

(a)           In Section 1.01:

(1)           The definition of “Excluded
Securities” is amended in its entirety to read as follows:

“Excluded Securities” means debt or equity securities issued by
any Subsidiary of the Company other than RERH Holdings, LLC, IP Trust, IT
Trust, Orion Power Holdings, Inc. and REMA (or their successors); provided,
however, that “Excluded Securities” shall include beneficial interests in the
IP Trust or the IT Trust that are held by RERH Holdings, LLC or its
Subsidiaries.

 1
 

 

(2)           The definition of “Excluded
Subsidiaries” is amended to delete the reference to “RE Retail Receivables,
LLC.”

(3)           The following definition is added:

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

(4)           The following definition is added:

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

(5)           The definition of “Permitted
Liens” is amended:

(i)            to amend clause (24)
in its entirety to read as follows:

(24)         [Reserved];

(ii)           to delete “and” at the
end of clause (33);

(iii)          to add the following new
clause (34) after clause (33):

(34)         Liens on assets of RERH
Holdings, LLC and its Subsidiaries securing obligations of RERH Holdings, LLC
or any of its Subsidiaries under (a) Credit Facilities in an aggregate
principal amount not to exceed $300,000,000 plus all other obligations due
under such Credit Facilities and (b) any agreement for or in support of the
supply or sales of energy or products or services related or incidental to the
supply or sales of energy or any activities related to the supply or sales of
energy or products or services related or incidental to the supply or sales of
energy of RERH Holdings, LLC or any of its Subsidiaries, including any
agreement providing for the reimbursement of guarantees or collateral postings
made on behalf of RERH Holdings, LLC or any of its Subsidiaries; and

; and

(iv)          to renumber existing
clause “(34)” as clause “(35).”

(6)           The definition of “Permitted
Prior Liens” is amended to substitute “and (33)” with “, (33) and (34).”

(b)           Section 4.08(b) is
amended:

(1)           to delete “and” at the
end of clause (18);

 2
 

 

(2)           to substitute “; and”
for the period at the end of clause (19); and

(3)           to add the following
new clause (20) after clause (19):

(20)         restrictions
on RERH Holdings, LLC or any of its Subsidiaries contained in (a) the Working
Capital Facility dated as of September 24, 2006 among Reliant Energy Power
Supply, LLC (“REPS”), the guarantors party thereto, and Merrill Lynch Capital
Corporation, (b) the Credit Sleeve and Reimbursement Agreement dated as of
September 24, 2006 among REPS, the guarantors party thereto, Merrill Lynch
Commodities, Inc., and Merrill Lynch & Co., Inc., and (c) any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of the agreements referred to in the preceding
clauses (a) and (b), provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are not materially more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
those agreements as reasonably determined by the Company.

(c)           The following
Subsection (c) is added to Section 4.08:

(c)         Promptly following the last day of each month
and so long as such payment is permitted under the terms of the agreements
referred to in Section 4.08(b)(20), the Company shall cause RERH Holdings, LLC
to pay cash dividends or distributions to the Company in an amount equal to (i)
the amount which is permitted under the terms of the agreements referred to in
Section 4.08(b)(20) on such day minus (ii)(A) amounts reasonably estimated by
the Company to be due and payable by RERH Holdings, LLC and its Subsidiaries on
or before the 20th day of the month next occurring plus (B) the lesser of (1)
$100,000,000 and (2) the amount permitted under the Credit Agreement on the
date the agreements referred to in Section 4.08(b)(20) become effective.

(d)           In Section 4.09(b):

(1)           Subsection (b)(1) of
Section 4.09 is amended in its entirety to read as follows:

(1)           the
incurrence (A) by the Company and the guarantee by the Guarantors of additional
Indebtedness and letters of credit under Credit Facilities, (B) by
Securitization Entities of Indebtedness in Qualified Securitization
Transactions, and (C) by RERH Holdings, LLC and its Subsidiaries of additional
Indebtedness and letters of credit under Credit Facilities (including

 3
 

 

guarantees of such
Indebtedness) (provided, however, that (I) the aggregate principal amount of
Indebtedness incurred under this clause (C) at any one time outstanding shall
not exceed $310,000,000, and (II) the proceeds of Indebtedness incurred under
this clause (C) shall be used only for the repayment of Indebtedness and other
Obligations of RERH Holdings, LLC and its Subsidiaries or to finance working
capital needs of RERH Holdings, LLC and its Subsidiaries, including the payment
of sales, general and administrative, and operations and maintenance expenses
(including capital expenditures) and all other expenses in the ordinary course
of business of RERH Holdings, LLC and its Subsidiaries) in an aggregate principal
amount at any one time outstanding under this clause (1) (with letters of
credit being deemed to have a principal amount equal to the maximum potential
liability of the Company and its Restricted Subsidiaries thereunder), including
all Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (1), not to exceed $2.5
billion;

(2)           The following paragraph
is added to the end of the section:

Notwithstanding anything
in this Section 4.09(b) to the contrary, the aggregate principal amount of
Indebtedness of RERH Holdings, LLC and its Subsidiaries at any one time
outstanding, other than Indebtedness incurred pursuant to clause (14) of this
Section 4.09(b), may not exceed $310,000,000.

(e)           Section 4.10 is amended
in its entirety to read as follows:

Section 4.10  Asset Sale Offers.

(a)           Within five Business
Days after the receipt of any Net Proceeds from an Asset Sale of the Equity
Interests of RERH Holdings, LLC (and its successors), of all or substantially
all of the assets of RERH Holdings, LLC and its Subsidiaries (and their
successors), or of all or substantially all of the assets of the Company and
its Subsidiaries (other than RERH Holdings, LLC and its Subsidiaries (and their
successors)), the Company shall make an Asset Sale Offer to all Holders of each
Series of Bonds and all holders of other Indebtedness (including the 2014
Notes, the Existing 2010 Notes, and the Existing 2013 Notes) that is pari passu
with the Seward Guarantees (other than Credit Agreement Debt) (and so long as
this Guarantee Agreement is Equally and Ratably secured with such other pari
passu Indebtedness) containing provisions similar to those set forth in this
Guarantee Agreement with respect to offers to purchase or redeem with the
proceeds of sales of assets, to purchase (or repay, prepay or redeem, as
applicable) an aggregate principal amount of each Series of

 4
 

 

Bonds and such other pari
passu Indebtedness that may be purchased (or repaid, prepaid or redeemed) equal
to the aggregate of such Net Proceeds multiplied by a fraction, the numerator
of which consists of (A) the aggregate principal amount then outstanding on
each Series of Bonds and all such other pari passu Indebtedness containing such
provisions (not including Credit Agreement Debt) and the denominator of which
is (B) the sum of (i) such aggregate amount in the preceding clause (A) and
(ii) the Credit Agreement Debt then outstanding (an “Asset Sale Offer”). The
offer price in any Asset Sale Offer will be equal to 100% of principal amount
plus accrued and unpaid interest to the date of purchase, and shall be payable
in cash.  If any such Net Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Net
Proceeds for any purpose not otherwise prohibited by this Guarantee
Agreement.  If the aggregate principal
amount of each Series of Bonds and such other pari passu Indebtedness tendered
into such Asset Sale Offer exceeds the amount of such Net Proceeds, the Company
shall select the Series of Bonds and such other pari passu Indebtedness to be
purchased on a pro rata basis based on the principal amount of Series of Bonds
and such other pari passu Indebtedness tendered.

(b)           In the event that,
pursuant to Section 4.10 hereof, the Company is required to commence an Asset
Sale Offer, it shall follow the procedures specified below.

(c)           The Asset Sale Offer
shall be made to all holders of each Series of Bonds and all holders of other
Parity Secured Debt (other than Credit Agreement Debt) containing provisions
similar to those set forth in this Guarantee Agreement with respect to offers
to purchase or redeem with the proceeds of sales of assets.  The Asset Sale Offer shall remain open for a
period of at least 20 Business Days following its commencement and not more
than 30 Business Days, except to the extent that a longer period is required by
applicable law (the “Offer Period”).  No
later than three Business Days after the termination of the Offer Period (the “Purchase
Date”), the Company shall apply a portion of the Net Proceeds as calculated
pursuant to the first sentence of Section 4.10(a) hereof (the “Offer Amount”) to the purchase of
Notes and such other Parity Secured
Debt (on a pro rata basis, if applicable) or, if less than the Offer
Amount has been tendered, all Series of Bonds and other Indebtedness tendered
in response to the Asset Sale Offer. 
Payment for any bond in a Series of Bonds (each a “Bond”) so purchased
shall be made in the same manner as interest payments are made.

(d)           If the Purchase Date is
on or after an interest record date and on or before the related interest
payment date, any accrued and unpaid interest shall be paid to the Person in
whose name a Bond is registered at the close of business on such record date,
and no additional interest will be payable to Holders who tender Bonds pursuant
to the Asset Sale Offer.

 5
 

 

(e)           Upon the commencement
of an Asset Sale Offer, the Company shall send, by first class mail, a notice
to the Trustee and each of the Holders. 
The notice will contain all instructions and materials necessary to
enable such Holders to tender Bonds pursuant to the Asset Sale Offer.  The notice, which will govern the terms of
the Asset Sale Offer, will state:

(i)            that the Asset Sale Offer is being made
pursuant to Section 4.10 hereof and the length of time the Asset Sale Offer
will remain open;

(ii)           the Offer Amount, the purchase price and the
Purchase Date;

(iii)          that any Bond not tendered or accepted for
payment will continue to accrue interest;

(iv)          that, unless the Company defaults in making
such payment, any Bond accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest;

(v)           that Holders electing to have a Bond
purchased pursuant to an Asset Sale Offer may elect to have Bond purchased in
integral multiples of $1,000 only;

(vi)          that Holders electing to have a Bond
purchased pursuant to any Asset Sale Offer shall be required to surrender the
Bond endorsed or assigned as the Trustee may require or transfer by book-entry
transfer, to the Company or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;

(vii)         that Holders shall be entitled to withdraw
their election if the Company or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Bond the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Bond purchased;

(viii)        that, if the aggregate principal amount of
Bonds and other Parity Secured Debt
surrendered in connection with the Asset Sale Offer exceeds the Offer Amount,
the Company shall select the Bonds and other Parity Secured Debt to be purchased on a pro rata basis based on
the principal amount of Bonds and such other Parity Secured Debt surrendered (with such adjustments as may be
deemed appropriate by the Company so that only Bonds in denominations of
$1,000, or integral multiples thereof, will be purchased); and

(ix)           that Holders whose Bonds were purchased only
in part will be issued new Bonds equal in principal amount to the

 6
 

 

unpurchased portion of the Bonds surrendered (or transferred by
book-entry transfer).

On or before the
Purchase Date, the Company shall, to the extent lawful, accept for payment, on
a pro rata basis to the extent necessary, the Offer Amount of Bonds or portions
thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer
Amount has been tendered, all Bonds tendered, and shall deliver to the Trustee
an Officer’s Certificate stating that such Bonds or portions thereof were
accepted for payment by the Company in accordance with the terms of this
Section 4.10.  The Company or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an
amount equal to the purchase price of the Bonds tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly cause the
issuance of a new Bond, and the Trustee, upon written request from the Company
shall authenticate and mail or deliver such new Bond to such Holder, in a
principal amount equal to any unpurchased portion of the Bond surrendered.  Any Bond not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof.  The Company shall publicly announce the
results of the Asset Sale Offer on or as soon as practicable after the Purchase
Date.

(f)            The foregoing shall be
made in accordance with the terms of the Indenture and, to the extent
inconsistent with any terms of the Indenture, the terms of the Indenture shall
control.

(g)           If a Holder of a bond
in Series of Bonds’ acceptance of any Asset Sale Offer results in the inclusion
of the interest on such Holder’s bonds in the gross income of such Holder for
federal income tax purposes, the Company shall pay such Holder on the date each
interest payment is due for such Holder’s Series of Bonds an amount equal to the
interest then due and payable divided by (1 minus the highest effective federal
tax rate at such time) less the amount of interest otherwise paid to the
Holder.

(f)            Section 4.24 is added
to read in its entirety as follows:

Section 4.24  Early Redemption.

The Company and the Subsidiary Guarantors agree that, notwithstanding
the terms of the Series 2002A Bonds, (1) the Company and the Subsidiary
Guarantors will cause the Series 2002A Bonds not to be redeemed before June 1,
2011 and (2) upon any optional redemption of the Series 2002A Bonds during the
period beginning June 1, 2011 and ending May 31, 2014, the Company and the
Subsidiary Guarantors will cause an additional amount to be paid to the Holders
of the Series 2002A Bonds being redeemed such that the aggregate amount
received by such Holders upon redemption is equal to the amounts expressed as a
percentage of principal amount set forth below (plus accrued interest, if

 7
 

 

any, to the redemption date) for a redemption of the
Series 2002A Bonds during the periods set forth below:

	
  Optional Redemption Dates

  	
   

  	
  Redemption Prices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 1, 2011
  through May 31, 2012

  	
   

  	
  103

  	
  %

  
	
  June 1, 2012
  through May 31, 2013

  	
   

  	
  102

  	
  %

  
	
  June 1, 2013 through
  May 31, 2014

  	
   

  	
  101

  	
  %

  

(g)           The following
Subsection (h) is added to Section 10.06:

(h)           Notwithstanding
anything herein to the contrary, the Company agrees that, without the prior
consent of the holders of at least a majority in aggregate principal amount of
the Guarantee Obligations with respect to each Series of Bonds, the Collateral
Trustee’s Liens in the Equity Interests of RERH Holdings, LLC (or its
successor) or, if any, in all or substantially all of the assets of RERH
Holdings, LLC and its Subsidiaries (or their successors) (the “Retail Assets”)
or in all or substantially all of the Company and its Subsidiaries’ (other than
RERH Holdings, LLC and its Subsidiaries’ (or their successors)) assets,
including Equity Interests (the “Wholesale Assets”) may not be released, except
no such consent shall be required (i) in the case of an Asset Sale of the
Equity Interests of RERH Holdings, LLC (or its successor), the Retail Assets or
the Wholesale Assets or (ii) on and after the date on which, as of the last day
of two consecutive Fiscal Quarters, both (A) the Consolidated Leverage Ratio
for the applicable immediately preceding four Fiscal Quarters was 2.75:1 or
less and (B) the Consolidated Interest Coverage Ratio for the applicable
immediately preceding four Fiscal Quarters was 3.25:1 or more (the “Ratio Test”).
 The Company agrees to file a current
report on Form 8-K with the SEC showing the calculation of the Ratio Test
within 60 days (or 90 days if end of the period is also the end of a fiscal
year) (i) after the end of first four-quarter period in which it meets the
Ratio Test and for which it proposes to use the Ratio Test to implement the
foregoing Lien release and (ii) after the end of the second consecutive
four-quarter period in which it meets the Ratio Test and for which it proposes
to use the Ratio Test to implement the foregoing Lien release.  The Company also agrees to promptly notify
the Trustee of the filing of the Form 8-K and to deliver to the Trustee the
calculations of the Ratio Test certified by the Company’s chief financial
officer and that the Company may not implement a Lien release without consent
on account of the Ratio Test without first complying with this sentence and the
immediately preceding sentence.

The following terms shall
have the following meanings when used in this paragraph (h):

“Acquisition”
means any transaction or any series of related transactions by which a Person
(a) acquires any going business (including a power generation facility) or all
or substantially all of the assets of any

 8
 

 

other Person, or division thereof, whether through
purchase of assets, merger, or otherwise or (b) directly or indirectly acquires
greater than 50% of the Voting Stock of any other Person.

“Consolidated EBITDAR”
means, for any period for the Company and its Subsidiaries 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 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, 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, minus (h) 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 Company 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 Company and its
Subsidiaries on a consolidated basis in accordance with GAAP, (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, and
(iii) 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 under any agreement described in the definition of “Hedging
Obligations” permitted hereunder and existing

 9
 

 

on or prior to December 22, 2004 (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,
(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, (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) any Debt, (2) the incurrence of any Debt
after December 22, 2004, or (3) the amendment of any Debt, (C) to the
extent added in determining total interest expense, the upfront cost and net
unrealized losses under any agreement described in the definition of “Hedging
Obligations” permitted hereunder and existing on or prior to December 22, 2004
(excluding ongoing settlement payments in connection with permitted interest
rate swap agreements), and (D) any of the RRI Warrants;
(iii)  all non-recurring interest expense with respect to items not
constituting Indebtedness, and (iv) interest expense attributable to
Indebtedness repaid or required to be repaid under any Indebtedness for which
the Company has notified the Credit Agreement Agent in writing that it agrees
it will not designate the Net Proceeds as Excluded Proceeds, in each case in
connection with an Asset Sale.

“Consolidated Interest
Coverage Ratio” means, as of any date of determination, the ratio of (a)
Consolidated EBITDAR for the period of the four prior Fiscal Quarters ending on
such date to (b) Consolidated Interest Charges for such period.

“Consolidated Leverage
Ratio” means, as of any date of determination, the ratio of (a)
Consolidated Total Debt as of such date to (b) Consolidated EBITDAR for the
period of the four Fiscal Quarters most recently ended.

“Consolidated Total
Debt” means, as of any date of determination, for the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP, (i) all
outstanding Debt of the Company and its Subsidiaries on such date, minus (ii)
without duplication, all (a) cash and short-term investments, in an aggregate
amount not to exceed $300,000,000 at any time, (b) restricted cash, in an
amount not to exceed the aggregate amount of Indebtedness of the Company or any
of its Subsidiaries, the terms of which Indebtedness cause such cash to appear
as restricted cash on the consolidated balance sheet of the Company and its
Subsidiaries, and (c) broker, counterparty, and customer margin/collateral
assets and deposits advanced to or held on behalf of such broker, counterparty
or customer, as each of the foregoing appears on the consolidated balance sheet
of the Company and its Subsidiaries.

“Debt” means, as
of any date of determination with respect to the Company and its Subsidiaries,
without duplication, in accordance with GAAP the following: (a) the total
amount of indebtedness, including any

 10
 

 

fair value adjustments, and other obligations of the
Company 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 Company or any of its
Subsidiaries, but excluding the amount of indebtedness for borrowed money that
is either (i) required to be repaid or (ii) for which the Company has notified
the Credit Agreement Agent in writing that it agrees it will not designate the
Net 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 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 Company balance sheet
for that period, and (e) all guaranties of payment or collection of any
obligations described in clauses (a) through (d) of this definition of any
other Person; 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.

RRI Warrants”
means the warrants issued by the Company and outstanding on December 22, 2004.

(h)           Subsection (a)(2) of
Section 13.01 is amended in its entirety to read as follows:

(2)           the Seward Subsidiary
and the Seward Collateral Trustee shall file a mortgage on the Seward Collateral
substantially in the form of Exhibit B hereto for the benefit of the present
and future holders of the Series 2002A Bonds and any other Permitted Secured
PEDFA Bond Indebtedness on an Equal and Ratable Basis on or before the date on
which the Seward Security Event occurs, and the Series 2002A Bonds will
thereafter be secured by Liens upon the Seward Subsidiary’s rights in the
Seward Collateral;

 11
 

 

2.             Effectiveness of
Amendments.

The Amendments
shall become effective on the date of this Supplemental Guarantee Agreement.

3.             Ratification of
Guarantee Agreement.

The Guarantee
Agreement, as supplemented and amended by this Supplemental Guarantee
Agreement, is in all respects ratified and confirmed, and this Supplemental
Guarantee Agreement shall be deemed part of the Guarantee Agreement in the
manner and to the extent herein and therein provided.

4.             Trustee Not
Responsible for Recitals.

The recitals
herein contained are made by the Company and not by the Trustee, and the
Trustee assumes no responsibility for the correctness thereof.  The Trustee makes no representation as to the
validity or sufficiency of this Supplemental Guarantee Agreement.

5.             Governing Law.

THE INTERNAL LAW
OF THE STATE OF NEW YORK SHALL GOVERN THIS SUPPLEMENTAL GUARANTEE AGREEMENT.

6.             Separability.

In case any one or
more of the provisions contained in this Supplemental Guarantee Agreement shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
then, to the extent permitted by law, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Supplemental
Guarantee Agreement, but this Supplemental Guarantee Agreement shall be
construed as if such invalid or illegal or unenforceable provision had never
been contained herein.

7.             Counterparts.

This Supplemental
Guarantee Agreement may be executed in any number of counterparts each of which
shall be an original, but such counterparts shall together constitute but one
and the same instrument.

 12
 

 

IN WITNESS
WHEREOF, the parties hereto have caused this Supplemental Guarantee Agreement
to be duly executed by their respective officers thereunto duly authorized, as
of the day and year first above written.

	
   

  	
  RELIANT ENERGY, INC.,

  
	
   

  	
  as Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Andrew Johannesen

  	
   

  
	
   

  	
  Name:

  	
  Andrew Johannesen

  	
   

  
	
   

  	
  Title: 

  	
  Vice President and Assistant Treasurer

  	
   

  
								

 

 13
 

 

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 KEY/CON FUELS, LLC

RELIANT
ENERGY MANDALAY, INC.

RELIANT
ENERGY NORTHEAST GENERATION, INC.

RELIANT
ENERGY NORTHEAST HOLDINGS, INC.

RELIANT
ENERGY ORMOND BEACH, INC.

RELIANT
ENERGY POWER GENERATION, INC.

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:

  	
  /s/ Andrew Johannesen

  	
   

  
	
   

  	
  Name:

  	
  Andrew
  Johannesen

  
	
   

  	
  Title:

  	
  Assistant Treasurer of the corporations and limited

  
	
   

  	
   

  	
  liability companies listed above

  
					

 

 14
 

 

 

	
   

  	
  RELIANT ENERGY SERVICES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew
  Johannesen

  	
   

  
	
   

  	
  Name: Andrew C.
  Johannesen

  
	
   

  	
  Title: Vice
  President and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RELIANT ENERGY
  ELECTRIC SOLUTIONS, LLC

  
	
   

  	
  RELIANT ENERGY
  POWER SUPPLY, LLC

  
	
   

  	
  RELIANT ENERGY
  RETAIL SERVICES, LLC

  
	
   

  	
  RELIANT ENERGY
  SOLUTIONS EAST, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lloyd A.
  Whittington

  	
   

  
	
   

  	
  Name:

  	
  Lloyd A.
  Whittington

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Treasurer of the limited

  	
   

  
	
   

  	
  liability companies listed above

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RELIANT ENERGY
  RETAIL HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lloyd A.
  Whittington

  	
   

  
	
   

  	
  Name:

  	
  Lloyd A.
  Whittington

  	
   

  
	
   

  	
  Title:

  	
  Assistant
  Treasurer

  	
   

  
							

 

 15
 

 

 

	
  

  	
  RELIANT ENERGY
  CAPTRADES HOLDING CORP.

  
	
   

  	
  RELIANT ENERGY
  SABINE (DELAWARE), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Patricia F. Genzel

  	
   

  
	
   

  	
  Name: Patricia
  F. Genzel

  
	
   

  	
  Title: President
  and Secretary

  

 

 16
 

 

 

	
  

  	
  THE BANK OF NEW
  YORK TRUST COMPANY,

  
	
   

  	
  N.A., as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael J.
  Judge

  	
   

  
	
   

  	
  Authorized Signatory

  

 

 17

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