FIRST AMENDMENT to Third Amended and Restated Master System Lease Agreement (McAllen System) November 9, 2017

Exhibit 10.5

FIRST AMENDMENT

to

Third Amended and Restated Master System Lease Agreement (McAllen System)

November 9, 2017

This First Amendment (this “First Amendment”) to the Third Amended and Restated Master System Lease Agreement (McAllen System) between Sharyland Distribution & Transmission Services, L.L.C. (“Lessor”) and Sharyland Utilities, L.P. (“Lessee”) is effective as of November 9, 2017. Capitalized terms used herein that are not otherwise defined will have the meanings assigned to such terms in the McAllen Lease (as defined below).

WHEREAS, Lessor and Lessee are Parties to a Third Amended and Restated Master System Lease Agreement (McAllen System) dated as of December 1, 2014 (as amended from time to time in accordance with its terms, the “McAllen Lease”);

WHEREAS, on or around the date hereof, pursuant to an Agreement and Plan of Merger among Lessor, Lessee, Oncor Electric Delivery Company LLC (“Oncor”) and certain other parties thereto, Lessor is disposing of certain transmission and distribution assets that are subject to the McAllen Lease and the ▇▇▇▇▇▇▇/▇▇▇▇▇/▇▇▇▇▇▇▇ Lease and, in exchange therefor, is acquiring certain transmission assets and cash from Oncor; and

WHEREAS, in connection therewith, the Parties now desire to amend the McAllen Lease as set forth herein.

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties hereby agree as follows:

1. Amendment of McAllen Lease.

 

a.

Section 4.13 of the McAllen Lease is hereby amended and restated in its entirety as follows:

4.13 Financing.

(a) Lessee acknowledges that Lessor has advised Lessee that Lessor has obtained financing secured by, among other things, the System and this Agreement. In connection with such financing, Lessor made certain representations, warranties and covenants set forth in that certain (i) Amended and Restated Note Purchase Agreement entered into by Lessor and dated as of September 14, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “2009 Note Purchase Agreement”), a copy of which has been provided to and reviewed by Lessee; (ii) Amended and Restated Note Purchase Agreement entered into by Lessor and dated as of July 13, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “2010 Note Purchase Agreement”), a copy of which has been provided to and reviewed by Lessee; (iii) Note Purchase Agreement entered into by Lessor and dated as of December 3, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “2015 Note Purchase Agreement”), a copy of which has been provided to and reviewed by Lessee; (iv) Third Amended and Restated Credit Agreement entered into by Lessor and dated as of December 10, 2014 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the

 

				MCALLEN LEASE

---

“2014 Credit Agreement”), a copy of which has been provided to and reviewed by Lessee; (v) Amended and Restated Credit Agreement entered into by Lessor and dated as of December 3, 2015 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “2015 Credit Agreement”), a copy of which has been provided to and reviewed by Lessee; and (vi) Term Loan Credit Agreement entered into by Lessor and dated as of June 5, 2017 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Term Loan Agreement”), a copy of which has been provided to and reviewed by Lessee.

(b) Lessee agrees with Lessor that, to the extent not otherwise covered by the terms of this Agreement, Lessee hereby makes on a continuous and ongoing basis the same representations and warranties to Lessor as Lessor makes to the Lender (as defined in the 2014 Credit Agreement) in Sections 6.3 (Disclosure), 6.5 (Financial Condition; Financial Instruments), 6.6 (Compliance with Laws, Other Instruments, Etc.), 6.7 (Governmental Authorizations, Etc.), 6.8 (Litigation; Observance of Agreements, Statutes and Orders), 6.9 (Taxes), 6.10 (Title to Property; Leases), 6.11 (Insurance), 6.12 (Licenses, Permits, Etc.; Material Project Documentation), 6.16 (Foreign Assets and Control Regulations, Etc.), 6.17 (Status under Certain Statutes), 6.18 (Environmental Matters), 6.19 (Force Majeure Events; Employees) and 6.20 (Collateral) of the 2014 Credit Agreement (or equivalent provisions), to the extent that such representations and warranties relate to (i) Lessee, whether in its capacity as Lessee or otherwise, including, without limitation, Lessee’s status or operations as a public utility, or (ii) Lessee’s ownership of the System on or before the date hereof.

(c) Lessee agrees with Lessor that, to the extent not otherwise covered by the terms of this Agreement, Lessee hereby makes on a continuous and ongoing basis the same representations and warranties to Lessor as Lessor makes to the Lender (as defined in the Term Loan Agreement) in Sections 6.3 (Disclosure), 6.5 (Financial Condition; Financial Instruments), 6.6 (Compliance with Laws, Other Instruments, Etc.), 6.7 (Governmental Authorizations, Etc.), 6.8 (Litigation; Observance of Agreements, Statutes and Orders), 6.9 (Taxes), 6.10 (Title to Property; Leases), 6.11 (Insurance), 6.12 (Licenses, Permits, Etc.; Material Project Documentation), 6.16 (Foreign Assets and Control Regulations, Etc.), 6.17 (Status under Certain Statutes), 6.18 (Environmental Matters), 6.19 (Force Majeure Events; Employees) and 6.20 (Collateral) of the Term Loan Agreement (or equivalent provisions), to the extent that such representations and warranties relate to (i) Lessee, whether in its capacity as Lessee or otherwise, including, without limitation, Lessee’s status or operations as a public utility, or (ii) Lessee’s ownership of the System on or before the date hereof.

(d) Lessee covenants and agrees with Lessor that:

(i) during the term of the 2009 Note Purchase Agreement, Lessee will comply with the covenants set forth in Sections 9.08 (Material Project Documents), 10.04 (Terrorism Sanctions Regulations), 10.10 (Sale of Assets, Etc.), 10.11 (Sale or Discount of Receivables), 10.12 (Amendments to Organizational Documents), 10.16 (Project Documents) and 10.17 (Regulation) of the 2009 Note Purchase Agreement;

(ii) during the term of the 2010 Note Purchase Agreement, Lessee will comply with the covenants set forth in Sections 9.8 (Material Project Documents), 10.4 (Terrorism Sanctions Regulations), 10.10 (Sale of Assets, Etc.), 10.11 (Sale or Discount of Receivables), 10.12 (Amendments to Organizational Documents), 10.16 (Project Documents) and 10.17 (Regulation) of the 2010 Note Purchase Agreement;

(iii) during the term of the 2015 Note Purchase Agreement, Lessee will comply with the covenants set forth in Sections 9.8 (Material Project Documents), 10.4 (Terrorism Sanctions Regulations), 10.6 (Sale of Assets, Etc.), 10.9 (Regulation), 10.10 (Amendments to Organizational Documents) and 10.11 (Project Documents) of the 2015 Note Purchase Agreement;

 

				MCALLEN LEASE

---

(iv) during the term of the 2014 Credit Agreement, Lessee will comply with the covenants set forth in Sections 7.10 (Material Project Documents), 8.4 (Terrorism Sanctions Regulations), 8.10 (Sale of Assets, Etc.), 8.11 (Sale or Discount of Receivables), 8.12 (Amendments to Organizational Documents), 8.16 (Material Projects Documents) and 8.17 (Regulation) of the 2014 Credit Agreement (or equivalent provisions);

(v) during the term of the 2015 Credit Agreement, Lessee will comply with the covenants set forth in Sections 6.10 (Material Project Documents), 7.4 (Terrorism Sanctions Regulations), 7.10 (Sale of Assets, Etc.), 7.11 (Sale or Discount of Receivables), 7.12 (Amendments to Organizational Documents), 7.16 (Project Documents) and 7.17 (Regulation) of the 2015 Credit Agreement (or equivalent provisions); and

(vi) during the term of the Term Loan Agreement, Lessee will comply with the covenants set forth in Sections 7.10 (Material Project Documents), 8.4 (Terrorism Sanctions Regulations), 8.10 (Sale of Assets, Etc.), 8.11 (Sale or Discount of Receivables), 8.12 (Amendments to Organizational Documents), 8.16 (Material Projects Documents) and 8.17 (Regulation) of the Term Loan Agreement (or equivalent provisions);

in each case to the extent that such covenants relate to (x) Lessee, whether in its capacity as Lessee or otherwise, including, without limitation, Lessee’s status or operations as a public utility, or (y) Lessee’s ownership of the System on or before the date hereof.

(e) Lessee may not lease, or agree or otherwise commit to lease, any transmission or distribution facilities other than pursuant to a Lease. Further, Lessee shall not permit Persons other than ▇▇▇▇ Family Members to acquire any interest in Lessee, directly or indirectly, in a manner that would result in a Change of Control of Lessee.

(f) The Parties agree to amend, alter or supplement this Section 4.13, Section 6.2 or Exhibit C hereto from time to time, including through the delivery of a representation letter from Lessee or other form to which the Parties may agree, to give effect to the obligations under Lessor’s then-current Debt Agreements, including the credit arrangements of any successor to Lessor’s interest in this Agreement. Provided that the obligations or restrictions on Lessee are not materially increased from those provided for by Lessor’s then-current credit arrangements, such an amendment to this Agreement shall become automatically effective upon the delivery by Lessor to Lessee of a revised version of Section 4.13 and copies of the pertinent portions of the applicable Debt Agreements referenced therein.

 

b.

The following definitions in Appendix A of the McAllen Lease are hereby amended and restated in their entirety as follows:

“2009 Note Purchase Agreement” has the meaning set forth in Section 4.13(a).

“2010 Note Purchase Agreement” has the meaning set forth in Section 4.13(a).

“Debt Agreements” means the 2009 Note Purchase Agreement, the 2010 Note Purchase Agreement, the 2015 Note Purchase Agreement, the 2014 Credit Agreement, the 2015 Credit Agreement, the Term Loan Agreement and any other financing arrangement or agreement pursuant to which Lessor incurs Indebtedness from time to time.

 

				MCALLEN LEASE

---

“Footprint Projects” means T&D Projects that (i) are located in the McAllen Service Territory, (ii) are added as part of an existing transmission substation that comprises a part of the System or hang from transmission towers that comprise a part of the System or (iii) constitute Reclassified Projects; provided that such T&D Projects are funded by expenditures that are or are expected to be capitalized under GAAP and are within the items described in Section 1.1(b)(i)-(vii) (specifically excluding Section 1.1(b)(viii)).

“Reclassified Projects” means any T&D Project that does not otherwise meet the definition of Footprint Project but Lessee and Lessor jointly agree, in their sole discretion, to classify such T&D Project as a Footprint Project based upon such factors that the Parties deem relevant, including (i) the expected Rate Base of the T&D Project, it being understood that the Parties generally expect that only T&D Projects with an expected Rate Base of less than $25 million could constitute a Reclassified Project; (ii) whether the T&D Project is physically connected to System; and (iii) whether the T&D Project is necessary to serve distribution customers situated in the McAllen Service Territory.

 

c.

The definition of “Change in Control” in Appendix A of the McAllen Lease is hereby deleted in its entirety and the following new definition is added, in the appropriate alphabetical order, to Appendix A of the McAllen Lease:

“Change of Control” means ▇▇▇▇ Family Members cease to possess, directly or indirectly, the power to direct or cause the direction of the management or policies of Lessee, whether through the ability to exercise voting power, by contract or otherwise.

 

d.

The following new definitions are added, in the appropriate alphabetical order, to Appendix A of the McAllen Lease to read as follows:

“2014 Credit Agreement” has the meaning set forth in Section 4.13(a).

“2015 Credit Agreement” has the meaning set forth in Section 4.13(a).

“2015 Note Purchase Agreement” has the meaning set forth in Section 4.13(a).

“Exchange Transaction” means the transaction contemplated by the Agreement and Plan of Merger among Lessor, Lessee, Oncor and certain other parties thereto, pursuant to which, on or around the date hereof, Lessor is disposing of certain transmission and distribution assets that are subject to this Agreement and ▇▇▇▇▇▇▇/▇▇▇▇▇/▇▇▇▇▇▇▇ Lease and, in exchange therefor, is acquiring certain transmission assets and cash from Oncor.

“McAllen Service Territory” means (i) the distribution service territory of the System, as in existence at the time of determination hereunder and (ii) the distribution service territory of the System, as in existence immediately prior to the consummation of the Exchange Transaction.

“Oncor” means Oncor Electric Delivery Company LLC.

“Term Loan Agreement” has the meaning set forth in Section 4.13(a).

 

				MCALLEN LEASE

---

2. Continuing Effect. Except as expressly amended by this First Amendment, the provisions of the McAllen Lease are and shall remain in full force and effect.

[Signatures on Following Page]

 

				MCALLEN LEASE

---

The Parties have executed this First Amendment as of the date set forth above.

 

[Signature Page to First Amendment]

 

				MCALLEN LEASE