EXHIBIT 4.15
EXECUTION VERSION
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FIRST SUPPLEMENTAL INDENTURE
between
MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC
and
JPMORGAN CHASE BANK
Trustee
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Dated as of December 10, 2003
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Supplementing the First Mortgage Indenture
Dated as of December 10, 2003
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FIRST SUPPLEMENTAL INDENTURE (this "FIRST SUPPLEMENTAL INDENTURE"),
dated as of December 10, 2003, between MICHIGAN ELECTRIC TRANSMISSION COMPANY,
LLC, a limited liability company organized and existing under the laws of the
State of Michigan (herein called the "Company"), having its principal office at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and JPMORGAN CHASE BANK, a
New York banking corporation duly organized and existing under the laws of the
State of New York, as trustee (herein called the "Trustee"), the office of the
Trustee at which on the date hereof its corporate trust business is administered
being ▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
RECITALS OF THE COMPANY
WHEREAS, the Company has heretofore executed and delivered to the
Trustee a First Mortgage Indenture dated as of December 10, 2003 (the "Mortgage
Indenture") encumbering the real property as more particularly described on
Exhibit A and Exhibit B attached hereto and providing for (i) the issuance by
the Company from time to time of its bonds, notes or other evidences of
indebtedness (in the Mortgage Indenture and herein called the "Debt Securities")
to be issued in one or more series and to provide security for the payment of
the principal of and premium (including any Make-Whole Amount), if any, and
interest, if any, on the Debt Securities and (ii) the issuance from time to time
of Collateral Securities (as defined in the Mortgage Indenture) (together with
the Debt Securities, in the Mortgage Indenture and herein called the
"Securities"); and
WHEREAS, the Company, in the exercise of the power and authority
conferred upon and reserved to it under the provisions of the Mortgage Indenture
and pursuant to appropriate resolutions of the Manager, has duly determined to
make, execute and deliver to the Trustee this First Supplemental Indenture to
the Mortgage Indenture as permitted by Sections 201, 301 and 1201 of the
Mortgage Indenture in order to establish the form and terms of, and to provide
for the creation and issuance of, a first series of Securities under the
Mortgage Indenture in an initial aggregate principal amount of $175,000,000 and
to amend and supplement the Mortgage Indenture as herein provided; and
WHEREAS, all things necessary to make the Notes (as defined herein),
when executed by the Company and authenticated and delivered by the Trustee or
any Authenticating Agent and issued upon the terms and subject to the conditions
hereinafter and in the Mortgage Indenture set forth against payment therefor the
valid, binding and legal obligations of the Company and to make this First
Supplemental Indenture a valid, binding and legal agreement of the Company, have
been done;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH that, in
order to establish the terms of a series of Securities, and for and in
consideration of the premises and of the covenants contained in the Mortgage
Indenture and in this First Supplemental Indenture and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, it is mutually covenanted and agreed as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
(a) Mortgage Indenture Definitions. Each capitalized term that is used
herein and is defined in the Mortgage Indenture shall have the meaning specified
in the Mortgage Indenture unless such term is otherwise defined herein;
provided, however, that any reference to a "Section" or "Article" refers to a
Section or Article, as the case may be, of this First Supplemental Indenture,
unless otherwise expressly stated.
(b) Additional Definitions. For purposes of this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires, the following capitalized terms shall have the meanings set
forth below:
"Amended Management Services Agreement" means the Amended and Restated
Management Services Agreement, dated as of March 11, 2003, between the Company
and Trans-Elect, as may be amended or replaced by an agreement between the
Company and Trans-Elect or any Affiliate thereof, in each case, to reflect
changes required to be reflected as a result of any future registration of
Trans-Elect as a holding company under PUHCA.
"Change of Control" means the failure by Trans-Elect (or any permitted
assignee or successor thereto) to own, directly or indirectly, 100% of the
voting securities of the sole general partner of Holdco (or any permitted
assignee or successor thereto), and to have the authority, subject to
limitations set forth from time to time in the Holdco Limited Partnership
Agreement, to direct the operations and management of the Company. For the
avoidance of doubt, any transfer of a limited partnership interest of Holdco
does not constitute a Change of Control.
"Closing Capital Contribution" means the capital contribution from
Holdco received by the Company on the Closing Date in the amount of $43,100,000
and used to prepay in part the Existing Credit Facility.
"Closing Date" has the meaning assigned to that term in Schedule B to
the Note Agreement.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Dispose" or "Disposition" means a sale, lease, transfer or other
disposition of any assets of the Company.
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"EBITDA" means, with reference to any period, the total of the
following calculated without duplication for the Company for such period: (a)
Net Income; plus (b) (i) Interest Expense, (ii) Federal, state and provincial
income taxes and (iii) depreciation and amortization, in each case, only to the
extent deducted in the determination of Net Income for such period. If, during
any period for which EBITDA is being determined, the Company has acquired or
disposed of productive assets or a group of productive assets, EBITDA for such
period shall be determined to include or exclude, as applicable, the actual
historical results of such productive assets on a pro forma basis.
"Environmental Laws" means any Law relating to the environment,
natural resources, or safety or health of humans or other living organisms,
including the release, emission, discharge, deposit, disposal, keeping,
treatment, importation, exportation, production, transportation, handling,
processing, carrying, manufacture, collection, sorting or presence of any
Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and the regulations promulgated thereunder.
"ERISA Affiliate" means, with respect to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
such Person is a member and which is treated as a single employer with such
Person under Section 414 of the Code.
"ERISA Event" means:
(a) the occurrence of a reportable event, within the meaning of
Section 4043 of ERISA, with respect to any Plan unless the notice requirement
with respect to such event has been waived;
(b) the application for a minimum funding waiver with respect to a
Plan;
(c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan, pursuant to Section 4041(c) of ERISA;
(d) the withdrawal by the Company or any ERISA Affiliate from a
Multiple Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA;
(e) the conditions for the imposition of a lien under Section 302(f)
of ERISA shall have been met with respect to any Plan;
(f) the adoption of an amendment to a Plan requiring the provision of
security to such Plan pursuant to Section 307 of ERISA;
(g) the institution by the PBGC of proceedings to terminate, or cause
a trustee to be appointed to administer, a Plan pursuant to Section 4042 of
ERISA; or
(h) the incurrence of withdrawal liability under Title IV of ERISA by
the Company or any of its ERISA Affiliates upon the withdrawal by the Company or
any of its
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ERISA Affiliates from a Multiemployer Plan or the incurrence of liability by the
Company or any of its ERISA Affiliates upon the termination of a Multiemployer
Plan.
"Event of Default" has the meaning assigned to that term in Article
Four of this First Supplemental Indenture.
"Existing Credit Facility" means that certain Credit Agreement, dated
as May 1, 2002, among the Company, the several lenders from time to time parties
thereto, Deutsche Bank Securities Inc., as syndication agent, Union Bank of
California, as documentation agent, and Canadian Imperial Bank of Commerce, as
administrative agent.
"FERC Delay" means the failure by FERC to accept or approve of, or to
issue a final order in connection with, on or before March 31, 2006, the
increase in Current Revenue Requirement that the Company, as of the date hereof,
is expected to seek in connection with the Final Rate Case Determination Date,
and such failure is not the fault of the Company, or any of its Affiliates, or a
result of the Company's, or any of its Affiliate's, actions or inactions;
provided that the Company has made diligent and documented good faith efforts to
expedite FERC's review and evaluation process.
"Financing Agreements" means the Mortgage Indenture, this First
Supplemental Indenture, the Note Agreement, the Notes and the Consumers Consent.
"First Supplemental Indenture" has the meaning assigned to that term
in the introductory paragraph hereof.
"Hazardous Substance" means any substance, waste, pollutant,
contaminant or material subject to regulation under any Environmental Law.
"Holdco Financing Agreements" means the Holdco Mortgage Indenture, the
Holdco Supplemental Indenture, the Holdco Note Agreement and the Holdco Notes.
"Holdco Limited Partnership Agreement" means the Second Amended and
Restated Agreement of Limited Partnership dated as of March 11, 2003 between
Trans-Elect Michigan, LLC, a Michigan limited liability company, and SFG V-A
Inc., a Delaware corporation, as amended by the First Amendment dated as of
August 15, 2003 between Trans-Elect Michigan, LLC and the Purchasers (as defined
in the Note Agreement), which Second Amended and Restated Agreement of Limited
Partnership is amended and restated in its entirety as of December 10, 2003, by
a Third Amended and Restated Agreement of Limited Partnership.
"Holdco Mortgage Indenture" means that certain Mortgage Indenture,
dated as of December 10, 2003, between Holdco and the Trustee.
"Holdco Note Agreement" means that certain Note Purchase Agreement,
dated as of December 10, 2003, between Holdco and the Initial Noteholders.
"Holdco Notes" means the $90 million senior secured notes issued by
Holdco on the Closing Date pursuant to the Holdco Mortgage Indenture and the
Holdco Supplemental Indenture.
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"Holdco Senior Secured Debt" means (i) the Holdco Notes and (ii) any
permitted additional Holdco senior secured debt in accordance with the terms of
the Holdco Financing Agreements.
"Holdco Supplemental Indenture" means that certain First Supplemental
Indenture, dated as of December 10, 2003, between Holdco and the Trustee.
"Indenture" means the Mortgage Indenture, as supplemented and modified
by this First Supplemental Indenture.
"Initial Noteholder" means each Noteholder listed on Schedule A to the
Note Agreement purchasing any Notes on the Closing Date.
"Institutional Investor" means (a) any Initial Noteholder, (b) any
holder of more than $5,000,000 of the aggregate principal amount of the Notes
and (c) any bank, trust company, other financial institution, pension plan,
investment company, insurance company, or similar financial institution.
"Interest Expense" means interest on the Company's Debt (other than
Subordinated Debt), excluding (i) the amortization of financing fees and (ii)
for the period from the Closing Date to, but excluding, the Final Rate Case
Determination Date only, interest payable or creditable to independent power
producers with respect to deposits held on their behalf for purposes of
interconnection and transmission system upgrades.
"Investment" or "Invest" means (a) a purchase or acquisition of, or an
investment or reinvestment in, Rate Base Assets or (b) without duplication, the
making of a firm, good faith contractual commitment, in the ordinary course of
business and not subject to any conditions in the Company's control, to purchase
or acquire, or invest or reinvest in, Rate Base Assets.
"Limited Equipment Indebtedness" means Debt (including, without
limitation, Capital Lease Obligations) secured by Liens permitted by clause (7)
of the definition of "Permitted Liens" set forth in the Mortgage Indenture in an
aggregate principal amount not to exceed $5,000,000 at any one time outstanding.
"Make-Whole Amount" means, with respect to any Note, an amount, as
determined by the Company, equal to the excess, if any, of the Discounted Value
of the Remaining Scheduled Payments with respect to the Called Principal of such
Note over the amount of such Called Principal; provided that the Make-Whole
Amount may in no event be less than zero. For the purposes of determining the
Make-Whole Amounts, the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal
of such Note that is to be redeemed pursuant to Section 2.03 or
2.04 or has become or is declared to be immediately due and
payable pursuant to Section 802 of the Mortgage Indenture, as the
context requires.
"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining
Scheduled
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Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable)
equal to the Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" means, with respect to the Called Principal
of any Note, 0.50% over the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to
such Called Principal, on the display designated as "Page PX1" on
the Bloomberg Financial Markets Services Screen (or such other
display as may replace Page PX1 on the Bloomberg Financial
Markets Services Screen) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life
of such Called Principal as of such Settlement Date, or (ii) if
such yields are not reported as of such time or the yields
reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second Business
Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or
any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the
Remaining Average Life of such Called Principal as of such
Settlement Date. The implied yield will be determined, if
necessary, by (a) converting U.S. Treasury ▇▇▇▇ quotations to
bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively
traded U.S. Treasury security with the maturity closest to and
greater than the Remaining Average Life and (2) the actively
traded U.S. Treasury security with the maturity closest to and
less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal
into (ii) the sum of the products obtained by multiplying (a) the
principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years
(calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date; provided
that if such Settlement Date is not a date on which interest
payments are due to be made under the terms of the Notes, then
the amount of the next succeeding scheduled interest payment
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will be reduced by the amount of interest accrued to such
Settlement Date and required to be paid on such Settlement Date
pursuant to Section 2.03 or 2.04 or Section 802 of the Mortgage
Indenture.
"Settlement Date" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be
redeemed pursuant to Section 2.03 or 2.04 or has become or is
declared to be immediately due and payable pursuant to Section
802 of the Mortgage Indenture, as the context requires.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, prospects or properties of the Company.
"Mortgage Indenture" has the meaning assigned to that term in the
first Recital.
"MPPA Agreement" means the agreement among Trans-Elect, the Michigan
South Central Power Agency and the Michigan Public Power Agency, dated as of
August 3, 2001, as amended by Amendment No. 1, and in effect on the date hereof.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Company or any of its ERISA Affiliates is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions,
such plan being maintained pursuant to one or more collective bargaining
agreements.
"Net Income" means, with reference to any period, the net income (or
loss) of the Company for such period determined in accordance with GAAP.
"Net Proceeds" means, with respect to any Disposition of assets, the
gross proceeds thereof (including any such proceeds received by way of deferred
payment, installment, price adjustment or otherwise), whether in cash or
otherwise, net of any taxes paid or reasonably estimated to be paid as a result
thereof (after taking into account any available tax credits or deductions
applicable thereto).
"Note" has the meaning assigned to that term in Section 2.01(a).
"Note Agreement" means that certain Note Purchase Agreement, dated as
of December 10, 2003, between the Company and the Initial Noteholders.
"Noteholders" means (a) the Initial Noteholders and (b) each
subsequent holder of a Note as shown on the register maintained by the Company
pursuant to Section 305 of the Mortgage Indenture.
"Payment Event of Default" means an Event of Default under subsections
(a) or (b) of Section 801 of the Mortgage Indenture, or, with respect to
failures to make payment only, Section 4.01(d).
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"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any successor.
"Plan" means an "employee benefit plan" as defined in Section 3(3) of
ERISA that is subject to Title IV of ERISA or is subject to Section 412 of the
Code, other than a Multiemployer Plan, which is maintained, sponsored or
contributed to, by the Company or any of its ERISA Affiliates.
"Pro Forma Basis" means, (a) with respect to the calculation of
EBITDA/Interest Expense, upon the incurrence of any additional Debt in
accordance with Section 3.02(e), the calculation of such ratio shall be based
upon (i) the EBITDA determined for the applicable period ending as of the last
day of the fiscal quarter most recently ended for which compliance with Sections
3.02(c) and (d) shall have been determined and (ii) the Interest Expense
determined for the applicable period ending as of such day, adjusted to take
into account the incurrence of such Debt as if such Debt was incurred on the
first day of the period for which such Interest Expense was so determined
(assuming, if such additional Debt bears interest at a floating rate, that the
rate of interest on the date of incurrence thereof was in effect throughout the
related calculation period after taking into account the effect of any Hedging
Agreements entered into in connection with the incurrence of such Debt), and (b)
with respect to the calculation of Debt/EBITDA, upon the incurrence of any
additional Debt in accordance with Section 3.02(e), the calculation of such
ratio shall be based upon (i) Debt as of the last day of the fiscal quarter most
recently ended for which compliance with Sections 3.02(c) and (d) shall have
been determined after giving effect to the incurrence of such additional Debt as
if such Debt was incurred on such day and (ii) EBITDA determined for the
applicable period ending as of such day.
"PUHCA" means the United States Public Utility Holding Company Act of
1935, as amended from time to time, and the rules and regulations of the
Commission promulgated thereunder.
"Rate Base Assets" means assets of the Company which are included in
FERC's determination of the Company's revenue requirement under the OATT.
"Ratings Reaffirmation" means, for any point in time, that the ratings
on the Notes, as existing at such point in time, are reaffirmed, by each of the
rating agencies then rating the Notes (including Moody's) (without the addition
of any negative qualification, such as "having a negative outlook" or "being on
negative watch"), after consideration of the then existing facts and
circumstances and the effect of a proposed applicable event as being equal to or
higher than the then current ratings on the Notes, no earlier than 30 days prior
to the proposed applicable event.
"Reputable Insurer" means any financially sound and responsible
insurance provider permitted to do business in the State of Michigan rated "A"
or better by A.M. Best Company (or if such ratings cease to be published
generally for the insurance industry, meeting comparable financial standards
then applicable to the insurance industry).
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"Responsible Officer", when used with respect to the Company, means
any Senior Financial Officer and any other officer of the Company with
responsibility for the administration of the relevant Financing Agreement, or
portion thereof.
"Restricted Payments" means (a) any payment or distribution of assets,
properties, cash, rights, obligations or securities on account of any Capital
Stock of the Company, (b) any payment on account of, or the setting apart of
assets for a sinking or other analogous fund for, the purchase, redemption,
retirement, or other acquisition for value of any Capital Stock of the Company
or the distribution of any warrants, rights, or options to acquire any such
Capital Stock, now or hereafter outstanding, or (c) any distribution of assets
or any payments (whether principal, interest or otherwise) on or with respect to
Subordinated Debt.
"Senior Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"Subordinated Debt" means unsecured Debt of the Company fully
subordinated in right of payment to the Notes and other Senior Secured Debt
substantially on the terms set forth in Exhibit C attached hereto.
"Subsidiary" means, as to any Person, any Corporation or other
business entity in which such Person beneficially owns, directly or indirectly,
a majority of the outstanding voting securities thereof.
"Trans-Elect" means Trans-Elect, Inc., a Michigan corporation.
ARTICLE TWO
TITLE, FORM AND TERMS AND CONDITIONS OF THE NOTES
Section 2.01. The Notes.
(a) The Securities of this series to be issued under the Mortgage
Indenture pursuant to this First Supplemental Indenture shall be designated as
"5.75% Senior Secured Notes due 2015" (the "Notes") and shall be Debt Securities
issued under the Mortgage Indenture.
(b) The Trustee shall authenticate and deliver the Notes for original
issue on the Closing Date in the aggregate principal amount of $175,000,000,
upon a Company Order for the authentication and delivery thereof pursuant to
Section 401 of the Mortgage Indenture.
(c) Interest on the Notes shall be payable to the Persons in whose
names such Notes are registered at the close of business on the Regular Record
Date for such interest (as specified in subsection (e) below), except as
otherwise expressly provided in the form of such Notes attached hereto as
Exhibit D.
(d) The Notes shall mature and the principal thereof shall be due and
payable together with all accrued and unpaid interest thereon on December 10,
2015.
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(e) The Notes shall bear interest at the rate of 5.75% per annum.
Interest shall accrue on the Notes from the Closing Date, or the most recent
date to which interest has been paid or duly provided for. The Interest Payment
Dates for the Notes shall be June 30 and December 30 in each year, commencing
June 30, 2004, and the Regular Record Dates with respect to the Interest Payment
Dates for the Notes shall be the 15th calendar day preceding each Interest
Payment Date (whether or not a Business Day); provided, however that interest
payable at Maturity will be payable to the Noteholder to whom principal is
payable.
(f) Subject to Section 2.02, the Corporate Trust Office of JPMorgan
Chase Bank in New York, New York shall be the place at which the principal of
and Make-Whole Amount, if any, and interest on the Notes shall be payable. The
Corporate Trust Office of JPMorgan Chase Bank in New York, New York shall be the
place at which registration of transfer of the Notes may be effected; and
JPMorgan Chase Bank shall be the Security Registrar and the Paying Agent for the
Notes; provided, however, that the Company reserves the right to designate, by
one or more Officer's Certificates, its principal office in Ann Arbor, Michigan
as any such place or itself as the Security Registrar; provided, however, that
there shall be only a single Security Registrar for the Notes.
(g) The Notes shall be issuable in registered form in denominations of
at least $250,000 or any integral multiple thereof.
(h) The Notes shall have such other terms and provisions as are
provided in the form thereof attached hereto as Exhibit D, and shall be issued
in substantially such form.
Section 2.02. Payment on the Notes.
(a) Subject to Section 2.02(b), payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be made
at the Place of Payment designated in Section 2.01(f) or such place as the
Company may at any time, by notice, specify to each Noteholder, so long as such
Place of Payment shall be either the principal office of the Company or the
principal office of a bank or trust company in New York, New York.
(b) So long as any Initial Noteholder or its nominee shall be a
Noteholder, and notwithstanding anything contained in the Mortgage Indenture,
Section 2.02(a) or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and interest
by the method and at the address specified for such purpose below such Initial
Noteholder's name in Schedule A to the Note Agreement, or by such other method
or at such other address as such Initial Noteholder shall have from time to time
specified to the Company and the Trustee in writing for such purpose in
accordance with the Note Agreement, without the presentation or surrender of
such Note or the making of any notation thereon, except that concurrently with
or reasonably promptly after payment or redemption in full of any Note, such
Initial Noteholder shall surrender such Note for cancellation to the Company at
its principal office or at the Place of Payment most recently designated by the
Company pursuant to Section 2.02(a). Prior to any sale or other disposition of
any Note held by such Initial Noteholder or its nominee such Initial Noteholder
will, at its election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Note to the Company in exchange for a new Note or Notes pursuant to
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Section 305 of the Mortgage Indenture; provided, that a transfer by endorsement
shall not constitute a registration of transfer for purposes of the Indenture
and the Trustee and any agent of the Trustee shall be entitled to the
protections of Section 308 of the Indenture with respect to any Note, the
transfer of which has not been so registered. The Company will afford the
benefits of this Section 2.02(b) to any Institutional Investor that is the
direct or indirect transferee of any Note purchased by such Initial Noteholder
under the Mortgage Indenture. The Company agrees and acknowledges that the
Trustee shall not be liable for any Noteholder's failure to perform its
obligations under this Section 2.02(b). Each Initial Noteholder and any such
Institutional Investor by its purchase of its Note agrees to indemnify the
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence, willful misconduct or bad faith on its part,
arising out of or in connection with such Noteholder's or Institutional
Investor's failure to comply with the provisions of this Section 2.02(b),
including the costs and expenses of defending itself against any claim or
liability in connection therewith, such indemnity to survive the payment of such
Notes and the resignation or removal of the Trustee.
(c) Notwithstanding anything to the contrary in Section 113 of the
Mortgage Indenture, if the Stated Maturity or any Redemption Date of the Notes
shall not be a Business Day at any Place of Payment, then (notwithstanding any
other provision of the Mortgage Indenture or this First Supplemental Indenture)
payment of interest on or principal (and premium, if any) of the Notes due at
the Stated Maturity or on any Redemption Date thereof need not be made at such
Place of Payment on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if made on the
Stated Maturity or on any Redemption Date thereof, provided that interest shall
accrue on the outstanding principal amount of the Notes due at the Stated
Maturity or on any Redemption Date thereof at the rate set forth in the Notes
until the date of actual payment.
Section 2.03. Mandatory Redemption of the Notes.
In addition to the mandatory redemption required by Section 501(a) of
the Mortgage Indenture, which Section 501(a) shall apply to the Notes, in the
event that any one or more Dispositions during any consecutive 12 month period
(except Dispositions permitted under Section 3.02(b)(i), (ii) or (iii)) yield
Net Proceeds in excess of $5,000,000, in the aggregate, the Net Proceeds of such
Disposition or Dispositions shall be used for the mandatory redemption of the
Notes, and/or the redemption or prepayment of other Senior Secured Debt in
accordance with its terms, on a date which is no more than nine months following
a Disposition that, when aggregated with any other Dispositions, requires
compliance with this Section 2.03 unless (x) during the nine month period
immediately preceding the date of such Disposition, the Company Invested in any
Rate Base Assets in which case an amount of such Net Proceeds equal to the
excess, if any, of (A) the total aggregate amount of all such Investments made
during such preceding nine month period (excluding, however, the amount of any
Investments made pursuant to clause (b) of the definition of "Investment" that
were not expended for Rate Base Assets during such nine month period) over (B)
the aggregate amount of Debt incurred by the Company (which, with respect to any
Debt incurred under the Revolving Facility or any other permitted credit
facility of a revolving nature, shall be calculated on a net basis after taking
into account any borrowings, prepayments, repayments, reborrowings or other
extensions of credit made by
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or in favor of the Company thereunder), in each case, during such preceding nine
month period, need not be applied to such redemption or prepayment, as the case
may be, or (y) during the nine month period following the date of such
Disposition, the Company shall Invest in Rate Base Assets, in which case an
amount of such Net Proceeds so Invested during such following nine month period
need not be applied to such redemption or prepayment, as the case may be;
provided, however, that in the event that any such amounts referred to in this
clause (y) Invested pursuant to clause (b) of the definition of "Investment" are
not expended for Rate Base Assets within a period of six months from the end of
such following nine month period, any such amounts not so expended shall be used
for the mandatory redemption of the Notes, and/or the redemption or prepayment
of other Senior Secured Debt in accordance with its terms, on a date not later
than the last day of such six month period. Any redemption of the Notes pursuant
to this Section 2.03 shall be made (i) at a redemption price equal to the
principal amount of the Notes being redeemed and shall be accompanied by payment
of accrued and unpaid interest on the principal amount of the Notes so redeemed
to the redemption date and a Make-Whole Amount and (ii) in accordance with the
procedures for optional redemption set forth in Section 2.04(b) below.
Notwithstanding anything to the contrary in this Section 2.03, any amounts
utilized pursuant to clauses (x) or (y) above to reduce the amount of Net
Proceeds required to be applied to redemption of the Notes and/or redemption or
prepayment of other Senior Secured Debt in accordance with its terms may be
utilized no more than once with respect to the Net Proceeds of any one or more
Dispositions occurring in any consecutive twelve month period.
Section 2.04. Optional Redemption.
(a) Pursuant to Section 501(b) of the Mortgage Indenture, the Notes
may be redeemed at the option of Company, in whole or in part, at any time or
from time to time at a redemption price equal to the principal amount of such
Notes plus the Make-Whole Amount plus accrued and unpaid interest thereon to the
redemption date; provided, however, that if the Notes are redeemed in part, the
Notes shall not be redeemed in an amount less than $5,000,000 of the aggregate
principal amount of the Notes then Outstanding.
(b) Notwithstanding anything to the contrary in Article Five of the
Mortgage Indenture, the redemption of the Notes shall take place in accordance
with the procedures and requirements set forth in this Section 2.04(b), without
prejudice to the requirements of Section 502 (which shall for purposes of this
First Supplemental Indenture also be applicable to a redemption under Section
2.03) and Sections 505 through 507 of the Mortgage Indenture. The Company (or
the Trustee, if so requested pursuant to Section 504 of the Mortgage Indenture)
shall give each Noteholder written notice of each optional redemption under this
Section 2.04, or a mandatory redemption under Section 2.03, as the case may be,
not less than 30 days and not more than 60 days prior to the date fixed for such
redemption. Each such notice shall specify such date, the aggregate principal
amount of the Notes to be redeemed on such date, the principal amount of each
Note held by such Noteholder to be redeemed (determined in accordance with
Section 2.04(c)) and the interest to be paid on the redemption date with respect
to such principal amount being redeemed, and shall be accompanied by a
certificate of a Senior Financial Officer as to the estimated Make-Whole Amount
due in connection with such redemption (calculated as if the date of such notice
were the date of the redemption), setting forth the details of such computation.
Two Business Days prior to such redemption, the Company shall deliver to each
Noteholder and the Trustee a certificate of a Senior Financial Officer
specifying the calculation
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of such Make-Whole Amount as of the specified redemption date. The Trustee shall
have no responsibility for such calculation.
(c) Notwithstanding anything to the contrary in Article Five of the
Mortgage Indenture, in the case of each partial redemption of the Notes pursuant
to Section 2.04(b), the principal amount of the Notes to be redeemed shall be
allocated by the Trustee among all of the Notes at the time Outstanding in
proportion, as nearly as practicable, to the respective unpaid principal amounts
thereof not theretofor called for redemption, with such adjustments as may be
deemed appropriate so that only Notes in denominations of $250,000, or integral
multiples thereof, will be redeemed.
Section 2.05. Purchase of Notes.
Except as may be agreed to by a Noteholder or Noteholders in
connection with an offer made to all Noteholders on the same terms and
conditions, the Company shall not and shall not permit any Affiliate to
purchase, redeem or otherwise acquire, directly or indirectly, any of the
Outstanding Notes except upon the payment or redemption of the Notes in
accordance with the terms of the Indenture. The Company will promptly cause the
Trustee to cancel all Notes acquired by it or any Affiliate pursuant to any
payment, redemption or purchase of Notes pursuant to any provision of the
Indenture and no Notes may be issued in substitution or exchange for any such
Notes.
Section 2.06. Payment upon Event of Default.
Upon any Notes becoming due and payable under Section 802 of the
Mortgage Indenture, whether automatically or by declaration, such Notes will
forthwith mature and the entire unpaid principal amount of such Notes, plus (x)
all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined
in respect of such principal amount (to the full extent permitted by applicable
Law), shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
The Company acknowledges that each holder of a Note has the right to maintain
its investment in the Notes free from repayment by the Company (except as herein
specifically provided for) and that the provision for payment of a Make-Whole
Amount by the Company in the event that the Notes have become due and payable
under Section 802 of the Mortgage Indenture, whether automatically or by
declaration, as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 2.07. Transfers.
In registering the transfer of any Note in accordance with Section 305
of the Mortgage Indenture, the Security Registrar and the Trustee shall have no
responsibility to monitor securities law compliance in connection with any such
transfer.
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ARTICLE THREE
ADDITIONAL COVENANTS
Section 3.01. Affirmative Covenants of the Company.
For purposes of the Notes, pursuant to Section 301(20) of the Mortgage
Indenture, Article Six of the Mortgage Indenture is hereby supplemented by
incorporating therein the following additional affirmative covenants which the
Company shall observe solely for the benefit of the Noteholders for so long as
any Note is Outstanding:
(a) Maintenance and Operation of Properties. The Company shall
maintain and preserve, develop, and operate in substantial conformity with all
Transmission Documents, applicable Law, Good Utility Practices, and all material
Governmental Approvals, all elements of the Transmission System which are used
or necessary in the conduct of its businesses in good working order and
condition, ordinary wear and tear excepted, except where the failure to so
maintain and preserve, develop and operate the Transmission System could not
reasonably be expected to have a Material Adverse Effect.
(b) Maintenance of Insurance. At any time and from time to time, the
Company shall provide or cause to be provided, for itself and its assets
(including the Transmission System and related equipment), insurance with
Reputable Insurers in amounts and within the limits and coverages customarily
obtained for comparable businesses under similar circumstances; provided,
however, that in no event shall such amounts, limits and coverages be less than
the insurance described in the certificate from the Insurance Broker (as defined
in the Note Agreement) delivered pursuant to Section 4.19 of the Note Agreement,
unless (i) such amounts, limits and coverages are no longer available on
commercially reasonable terms or (ii) the Company receives a certificate from a
reputable insurance broker certifying that a step-down in the amounts, limits
and coverages of its insurance is reasonable based on the amounts, limits and
coverages customarily obtained for comparable businesses under similar
circumstances. The Company will deliver to the Trustee the certificate required
to be delivered pursuant to Section 7.1(h) of the Note Agreement.
(c) Use of Proceeds. The Company shall apply the net proceeds from the
issuance and sale of the Notes to (i) repay certain amounts outstanding under
the Existing Credit Facility (the remainder of such amounts shall be repaid with
the Closing Capital Contribution), (ii) pay any breakage costs incurred under
its existing Hedging Agreements, and (iii) pay reasonable fees and expenses
associated with the refinancing of the Existing Credit Facility.
(d) Distributions. The Company shall adopt and comply with a
distribution policy that, subject to applicable Law, available cash flow and the
need to maintain a prudent level of reserves, allows periodic distributions to
be made to Holdco in an amount at least sufficient to enable Holdco to pay its
debt service under the Holdco Notes and other Holdco Senior Secured Debt and to
pay corporate overhead and administrative expenses; provided, however, that any
such distribution shall be made in accordance with Section 3.02(g).
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(e) Compliance with Laws and Regulations. The Company shall comply
with all Laws (including Environmental Laws) to which its Property or assets may
be subject, except where failure to comply could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect. In
addition, the Company shall immediately pay or cause to be paid when due all
costs and expenses incurred in such compliance, except to the extent that the
same is being contested in good faith by the Company through appropriate means
under circumstances where none of the Mortgaged Property or the Liens thereon
will be endangered.
(f) Permits; Approvals. The Company shall obtain in a timely manner
and maintain all Governmental Approvals which are necessary or desirable for the
ownership or operation of its Property or the conduct of its business as so
conducted, except where failure to obtain or maintain such Governmental
Approvals could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(g) Real Estate Filings. To the extent that any filing required to
perfect any security interest in real property or fixtures constituting
Mortgaged Property is not made on or prior to the Closing Date, the Company
shall undertake to present all such documents for filing with the appropriate
registers of deeds as soon as practicable after the Closing Date, but in no
event shall any such presentation for filing take place more than five (5)
Business Days after the Closing Date; provided that the Company shall confirm by
an Officer's Certificate delivered to the Trustee within six (6) weeks after the
Closing Date that each such document has been recorded with the applicable
registers of deeds and the security interests created or purported to be created
in real property or fixtures by such documents have been fully perfected by
recording in the land records, except for documents to be recorded in the
registers of deeds in the Counties of Oakland, Kent and Genesee in the State of
Michigan, in which case the Company shall confirm by an Officer's Certificate
delivered to the Trustee no more than three (3) months after the Closing Date
with respect to the Counties of Kent and Genesee, and no more than five (5)
months after the Closing Date with respect to the County of Oakland, that such
documents have been so recorded.
(h) Compliance with ERISA. With respect to each Plan, the Company
shall comply with ERISA and the Code, except where such failure could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(i) Delivery of Opinions of Counsel. The Company shall deliver, or
cause to be delivered, to the Trustee the opinions of counsel required pursuant
to Section 4.4(a) of the Note Agreement.
(j) Continuance of Rating of the Notes. The Company, at least once
annually, shall request ▇▇▇▇▇'▇ to update the rating issued by ▇▇▇▇▇'▇ on the
Notes and shall furnish to ▇▇▇▇▇'▇ the information referred to in Section 7.1 of
the Note Agreement, together with such other information as ▇▇▇▇▇'▇ may
reasonably request in connection with its continued rating of the Notes.
15
Section 3.02. Negative Covenants of the Company.
For purposes of the Notes, pursuant to Section 301(20) of the Mortgage
Indenture, Article Six of the Mortgage Indenture is hereby supplemented by
incorporating therein the following negative covenants which the Company shall
observe solely for the benefit of the Noteholders for so long as any Note is
Outstanding:
(a) Restrictions on the Establishment of Subsidiaries. The Company
shall not create, acquire or suffer to exist, directly or indirectly, any
Subsidiaries or acquire or invest in any other Capital Stock in any Person.
(b) Limitations on Asset Sales. The Company shall not Dispose of all
or any substantial part of its assets during any fiscal year, other than:
(i) Subject to compliance with Section 610 of the Mortgage
Indenture, Dispositions in the ordinary course of business of obsolete or
worn out Property and real estate interests not needed for the Company for
its Transmission System or for the conduct of its business;
(ii) Dispositions of assets that would be permitted under Article
Eleven of the Mortgage Indenture;
(iii) Subject to compliance with Section 610 of the Mortgage
Indenture, Dispositions of undivided interests in segments of the
Transmission System as may be required pursuant to Sections 6,7 or 8 of the
MPPA Agreement; or
(iv) Subject to compliance with Section 610 of the Mortgage
Indenture, any other Disposition of assets; provided, that in the event the
Net Proceeds of all such Dispositions during any consecutive 12-month
period are in excess of $5,000,000, in the aggregate, such Net Proceeds
shall be applied in accordance with the terms and conditions of Section
2.03.
(c) EBITDA / Interest Expense. The Company shall not permit, as of the
end of any fiscal quarter (beginning with the fiscal quarter ending March 31,
2004), the ratio of (i) EBITDA for the period of four consecutive fiscal
quarters ending on such quarter-end date, to (ii) Interest Expense for such
period, to be less than 3.0 to 1.0; provided, however, that for the quarterly
calculation dates occurring on March 31, 2004, June 30, 2004 and September 30,
2004, the calculation of the above ratio shall be adjusted as follows:
(A) with regard to EBITDA, the EBITDA to be included in the
calculation shall be the sum of EBITDA for the period of four consecutive
fiscal quarters ending on such calculation date, multiplied by: (1) in the
case of the March 31, 2004 calculation date, 0.25, (2) in the case of the
June 30, 2004 calculation date, 0.50 and (3) in the case of the September
30, 2004 calculation date, 0.75; and
(B) with regard to Interest Expense, the Interest Expense to be
included in the calculation on such calculation date shall be: (1) in the
case of the March 31, 2004 calculation date, the Interest Expense for the
fiscal quarter ending on such
16
calculation date, (2) in the case of the June 30, 2004 calculation date,
the Interest Expense for the two consecutive fiscal quarters ending on such
calculation date, and (3) in the case of the September 30, 2004 calculation
date, the Interest Expense for the three consecutive fiscal quarters ending
on such calculation date.
Notwithstanding the foregoing, for purposes of calculating the EBITDA/Interest
Expense ratio referred to above at the end of any fiscal quarter occurring prior
to the Final Rate Case Determination Date only, "EBITDA", for any applicable
calculation period, may include equity contributions made to the Company by
Holdco, solely from equity contributions made to Holdco by its partners for
purposes of making such equity contribution to the Company, during such
calculation period (or after such period, but only if prior to the earlier of
the date on which the Company (i) submits its compliance certificate for such
calculation period in accordance with Section 7.2(a) of the Note Agreement and
(ii) is required to submit such compliance certificate for such calculation
period), which equity contributions are not used in connection with any
investments, distributions or other discretionary expenditures by the Company
during such calculation period, provided, however, that the aggregate amount of
any such equity contributions to be taken into account for purposes of any such
calculation does not equal an amount which is more than 20% of the EBITDA for
such calculation period, determined without giving effect to such equity
contributions. In the event the credit for any such equity contribution is not
needed for the Company to be in compliance with this Section 3.02(c) on any
subsequent quarterly calculation date, such funds may be invested, distributed
or otherwise used at the discretion of the Company not in contravention of any
of the Financing Agreements.
(d) Debt / EBITDA. The Company shall not permit, as of the end of any
fiscal quarter (beginning with the first full fiscal quarter beginning and
ending after the earlier of (x) the fiscal quarter in which the Final Rate Case
Determination Date occurs and (y) March 31, 2006, or, in the event that the
Final Rate Case Determination Date occurs after March 31, 2006 solely as a
result of a FERC Delay, September 30, 2006), the ratio of (i) Debt (other than
Subordinated Debt) outstanding on such quarter-end date to (ii) EBITDA for the
period of four consecutive fiscal quarters ending on such quarter-end date, to
exceed 3.5 to 1.0; provided, however, that for each of the first three quarterly
calculation dates, the calculation of the above ratio shall be adjusted as
follows:
(i) with regard to Debt, the Debt (other than Subordinated Debt)
outstanding on such calculation date shall be multiplied by: (1) in the
case of the first quarterly calculation date, 0.25, (2) in the case of the
second quarterly calculation date, 0.50 and (3) in the case of the third
quarterly calculation date, 0.75; and
(ii) with regard to EBITDA, the EBITDA to be included in the
calculation on such calculation date shall be: (1) in the case of the first
quarterly calculation date, the EBITDA for the fiscal quarter ending on
such calculation date, (2) in the case of the second quarterly calculation
date, the EBITDA for the two consecutive fiscal quarters ending on such
calculation date, and (3) in the case of the third quarterly calculation
date, the EBITDA for the three consecutive fiscal quarters ending on such
calculation date.
17
(e) Limitation on Debt. Prior to the Final Rate Case Determination
Date, the Company shall not incur any additional Debt (other than Debt incurred
under the Revolving Facility and other than Limited Equipment Indebtedness).
After the Final Rate Case Determination Date, the Company shall not incur any
additional Debt (other than Subordinated Debt ) unless (i) no Default or Event
of Default has occurred and is continuing, or would exist immediately after
giving effect to, the incurrence of such Debt and (ii) it is in full compliance
with Sections 3.02(c) and (d), both immediately prior, and immediately after
giving effect, to the incurrence of any such Debt, and the use of proceeds from
such incurrence (calculated, in each case, on a Pro Forma Basis as of the last
day of the fiscal quarter most recently ended for which compliance with such
Sections shall have been determined); provided that (A) if a Default or an Event
of Default shall have occurred and is continuing at the time of the incurrence
of any Subordinated Debt, the net proceeds from the incurrence of such
Subordinated Debt shall be applied to cure such Default or Event of Default to
the extent such Default or Event of Default, after giving pro forma effect to
the incurrence of such Subordinated Debt, can be so cured, and (B) if a Payment
Event of Default shall have occurred and be continuing, no such Subordinated
Debt shall be incurred. Any such additional Debt permitted by the preceding
sentence (other than (i) any bank or other credit facilities (whether of a
revolving nature or not) between the Company and any lenders under which
facilities the borrowings outstanding, the face amount of any letters of credit
outstanding and any unfunded commitments to extend credit exceed, in the
aggregate, $70,000,000 or (ii) any Subordinated Debt, each of which in case of
clause (i) and (ii) shall be unsecured) may be secured on a pari passu basis
with the Notes pursuant to the terms and conditions of the Mortgage Indenture
(any such secured Debt, "Permitted Additional Senior Secured Debt"). Further,
the Company shall not, at any time, enter into (i) any Hedging Agreement for
speculative purposes or (ii) any Hedging Agreement if the obligations of the
Company relating thereto would not be reflected in the calculation of the
Company's revenue requirement to be collected under the OATT.
(f) Limitations on Liens. The Company shall not create, incur, assume
or suffer to exist any Lien upon any of the Company's Property, whether now
owned or hereafter acquired, other than Permitted Liens.
(g) Restricted Payments. The Company shall not make any Restricted
Payments so long as any Default or Event of Default shall have occurred and be
continuing at the time of, or would exist immediately after giving effect to,
such Restricted Payment; provided, however, that so long as no Payment Event of
Default has occurred or is continuing, or would result from the making of such
Restricted Payment, the Company shall be entitled to make Restricted Payments to
Holdco to pay:
(i) any scheduled interest payments that are due and payable
under the Holdco Notes or other Holdco Senior Secured Debt, but only to the
extent that Holdco does not have cash available for such purpose and such
funds are used, immediately following receipt thereof by Holdco, solely for
such purpose, and
(ii) corporate overhead and administrative expenses incurred by
Holdco in the ordinary course of business not to exceed $250,000 in any
fiscal year;
18
provided, further, however, that, after the creation or acquisition of any
Subsidiary by Holdco after the Closing Date, the Company shall only be permitted
to make Restricted Payments in accordance with the foregoing proviso in an
amount equal to no more than the sum of (x) any amount then required to pay
corporate overhead and administrative expenses (not to exceed $250,000 for any
given fiscal year) and (y) the scheduled interest due and payable on the Holdco
Notes and any other Holdco Senior Secured Debt incurred prior to, and not in
connection with, the creation or acquisition of the first of any such
Subsidiary, less any funds Holdco has available for the payment of such
corporate overhead and administrative expenses and such interest on the Holdco
Notes and other Holdco Senior Secured Debt.
(h) Restrictions on Investments. Unless permitted by Article Eleven of
the Mortgage Indenture, the Company shall not make any advance, loan, extension
of credit (by way of guarantee or otherwise) or capital contribution to, or
purchase any Capital Stock, bonds, notes, debentures or other debt securities
of, or any assets constituting a business unit of, or make any other investment
in, any Person, except:
(i) extensions of trade credit in the ordinary course of
business;
(ii) investments in Cash Equivalents;
(iii) loans and advances to employees of the Company in the
ordinary course of business (including for travel, entertainment and
relocation expenses) in an aggregate amount not to exceed $300,000 at any
one time outstanding;
(iv) loans to Holdco to pay corporate overhead and administrative
expenses incurred by Holdco in the ordinary course of business not to
exceed $200,000 at any one time outstanding; and
(v) investments in Rate Base Assets.
(i) Limitation on Lines of Business. As of the Closing Date, the
Company is in the business of owning transmission facilities and providing
transmission service over such facilities. From the Closing Date onward, the
Company shall not engage in any business, if as a result, the general nature of
the business engaged in by the Company taken as a whole would be substantially
changed from the general nature of the business the Company is engaged in on the
Closing Date.
(j) Limitation on Transactions with Affiliates. The Company shall not
enter into any Material transaction with any Affiliate (other than the Amended
Management Services Agreement), except (i) in the ordinary course of business
and (ii) on terms and conditions (A) no less favorable than would be obtainable
in a comparable arms-length transaction negotiated in good faith with a Person
that is not an Affiliate and (B) consistent with applicable FERC policy
regarding Affiliate transactions.
(k) Limitation on Capital Expenditures. The Company shall not make any
Material capital expenditures for, or in, assets that are not Rate Base Assets.
In addition, the Company shall not make any capital expenditures prior to the
Final Rate Case Determination Date in excess of $50 million in the aggregate;
provided, however, that, notwithstanding such
19
limitation, (i) in the event of a FERC Delay, the Company may, during calendar
year 2006, make additional Capital Expenditures in excess of the limit specified
above in an aggregate amount not to exceed $25,000,000, so long as such
additional capital expenditures for such calendar year are budgeted by the
Company in its budget as of December 31, 2005, and (ii) the Company may make
capital expenditures that it reasonably believes are necessary to comply with
its obligations as a regulated electric transmission system owner/operator.
(l) Limitation on Sale-Lease and Lease-Lease Back Transactions. The
Company shall not enter into any sale-leaseback or lease-leaseback transaction
involving any of its Properties whether now owned or hereafter acquired, whereby
the Company sells, otherwise transfers or leases such Properties and then or
thereafter leases or subleases such Properties or any part thereof or any other
Properties which the Company intends to use for substantially the same purpose
or purposes as the Properties sold, otherwise transferred or leased.
(m) Transmission Documents. The Company shall not terminate, assign,
modify, supplement or waive, or agree or consent to any termination, assignment,
modification, supplement or waiver of, any Transmission Document, if such
termination, assignment, modification, supplement or waiver of any such
Transmission Document could, individually or collectively with all other such
terminations, assignments, modifications, supplements or waivers, reasonably be
expected to have a Material Adverse Effect.
(n) Amendments to Exhibit C Hereto. The Company shall not make any
amendments or changes to the subordination terms and conditions set forth in
Exhibit C hereto that adversely affect the Noteholders without the prior consent
of the Noteholders of all the Outstanding Notes.
ARTICLE FOUR
ADDITIONAL EVENTS OF DEFAULT
Section 4.01. Events of Default.
For purposes of the Notes, pursuant to Section 301(21) of the Mortgage
Indenture, Section 801 of the Mortgage Indenture shall be supplemented to
include as "Events of Default" thereunder the occurrence of any of the following
events (each such event, together with those "Events of Default" in Section 801
of the Mortgage Indenture, an "Event of Default"):
(a) Material Covenants. The Company shall fail to perform or observe
any covenant set forth in Section 3.02 or its obligation to provide notice to
the Noteholders under Section 7.1(c) of the Note Agreement;
(b) Other Covenants. The Company shall fail to perform or observe any
of its obligations or covenants (other than the covenants described in Section
4.01(a) or in Section 801(a), 801(b) or 801(e) of the Mortgage Indenture)
contained in any of the Financing Agreements, including Section 7 of the Note
Agreement (or in any modification or supplement thereto), and such failure is
not cured within 30 days after the earlier to occur of (i) a Responsible Officer
of the Company obtaining actual knowledge of such failure and (ii) the
20
Company receiving notice of such failure from the Trustee or any Noteholder in
accordance with the terms of the Mortgage Indenture or the Note Agreement;
(c) Representations. Any representation, warranty or certification by
the Company in any of the Financing Agreements or in any certificate furnished
to the Trustee or any Noteholder pursuant to the provisions of this First
Supplemental Indenture or any other Financing Agreement shall prove to have been
false in any Material respect as of the time made or furnished, as the case may
be;
(d) Debt.
(i) The Company shall be in default in the payment of any
principal, premium, including any make-whole amount, if any, or interest or
other fees on any Debt under the Revolving Facility beyond the expiration
of any applicable grace or cure period relating thereto;
(ii) The Company shall be in default in the performance or
compliance with any term under the Revolving Facility (other than those
referred to in Section 4.01(d)(i)) beyond the expiration of any applicable
grace or cure period relating thereto and as a consequence, such Debt
thereunder has become or has been declared due and payable;
(iii) The Company shall be in default in the payment of any
principal, premium, including any make-whole amount, if any, or interest on
any Debt (other than Subordinated Debt) in the aggregate principal amount
of $5,000,000 or more (other than the Revolving Facility which is addressed
in Section 4.01(d)(i))beyond the expiration of any applicable grace or cure
period relating thereto;
(iv) The Company shall be in default in the performance or
compliance with any term (other than those referred to in Section
4.01(d)(iii)) of any agreement or instrument evidencing any Debt (other
than Subordinated Debt and Debt incurred under the Revolving Facility) in
the aggregate principal amount of $5,000,000 or more or any other document
relating thereto or any condition exists and, as a consequence, such Debt
has become or has been declared (or the holder or beneficiary of such Debt
or a trustee or agent on behalf of such holder or beneficiary is entitled
to declare such Debt to be) due and payable before its stated maturity or
before its regularly scheduled dates of payment; or
(v) As a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the right of the
holder of Debt to convert such Debt into equity interests), other than as
provided in Section 2.03 or Section 2.04 or Section 501(a) or (b) of the
Mortgage Indenture, (x) the Company shall have become obligated to purchase
or repay any Debt before its regularly scheduled maturity date in the
aggregate principal amount of $5,000,000 or more or (y) one or more Persons
have the right to require such Debt to be purchased or repaid;
(e) Judgments. Any judgment or judgments for the payment of money in
excess of $5,000,000 (or its equivalent in any other currency) in the aggregate
by the Company,
21
which is, or are, not covered in full by insurance, shall be rendered by one or
more courts, administrative tribunals or other bodies having jurisdiction over
the Company and the same shall not be discharged (or provision shall not be made
for such discharge), bonded or a stay of execution thereof shall not be
procured, within 60 days from the date of entry thereof and the Company shall
not, within said period of 60 days, or such longer period during which execution
of the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal;
(f) Abandonment. (i) The Company shall file with FERC or such other
applicable Governmental Authority for the abandonment or termination of
transmission service over all or a significant portion of the Transmission
System, (ii) FERC or such other applicable Governmental Authority shall issue a
final, non-appealable order for the abandonment or termination of transmission
service over all or a significant portion of the Transmission System, or (iii)
the Company shall otherwise directly or indirectly abandon or terminate
transmission service over all or a significant portion of the Transmission
System or cease to pursue the operation of the Transmission System for a period
in excess of 30 days;
(g) Transmission Documents. Any Transmission Document shall have been
terminated prior to its stated termination date and such termination has, or
could reasonably be expected to have, a Material Adverse Effect;
(h) Security Interests. Subject to Section 611(2) of the Mortgage
Indenture and Section 3.01(g), the Company shall fail to perfect and maintain a
valid and perfected first priority Lien in any part of the Mortgaged Property,
to the extent such perfection can be accomplished by filing;
(i) Repudiation. Any provision of any Financing Agreement shall (i) be
repudiated by the Company or (ii) for any reason other than the express terms
thereof cease to be enforceable and such repudiation or unenforceability shall
not be remedied within 30 days;
(j) Total Loss. There shall occur a Total Loss;
(k) Change of Control. A Change of Control shall have occurred, unless
a Ratings Reaffirmation is obtained prior to, and taking into account, such
Change of Control;
(l) ERISA. Any ERISA Event shall have occurred and the liability of
the Company and the ERISA Affiliates related to such ERISA Event, when
aggregated with all other ERISA Events (determined as of the date of occurrence
of such ERISA Event), has resulted in or could reasonably be expected to result
in a Material Adverse Effect; or
(m) Holdco Ownership. Holdco, or a successor, as permitted by Article
Eleven of the Holdco Mortgage Indenture, shall cease to own 100% of the Capital
Stock in the Company.
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ARTICLE FIVE
MISCELLANEOUS PROVISIONS
Section 5.01. Execution of First Supplemental Indenture.
Except as expressly amended and supplemented hereby, the Mortgage
Indenture shall continue in full force and effect in accordance with the
provisions thereof and the Mortgage Indenture is in all respects hereby ratified
and confirmed. This First Supplemental Indenture and all of its provisions shall
be deemed a part of the Mortgage Indenture in the manner and to the extent
herein and therein provided. The Notes executed, authenticated and delivered
under this First Supplemental Indenture constitute a series of Securities and
shall not be considered to be a part of a series of securities executed,
authenticated and delivered under any other supplemental indenture entered into
pursuant to the Mortgage Indenture.
Section 5.02. Effect of Headings.
The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
Section 5.03. Successors and Assigns.
All covenants and agreements in this First Supplemental Indenture by
the Company shall bind its successors and assigns, whether so expressed or not.
Section 5.04. Severability Clause.
In case any provision in this First Supplemental Indenture or in the
Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 5.05. Benefit of First Supplemental Indenture.
Except as otherwise provided in the Mortgage Indenture, nothing in
this First Supplemental Indenture or in the Notes, express or implied, shall
give to any person, other than the parties hereto and their successors hereunder
and the Noteholders, any benefit or any legal or equitable right, remedy or
claim under this First Supplemental Indenture.
Section 5.06. Execution and Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
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Section 5.07. Conflict with Mortgage Indenture.
If any provision hereof limits, qualifies or conflicts with another
provision of the Mortgage Indenture, such provision of this First Supplemental
Indenture shall control, insofar as the rights between the Company and the
Noteholders are concerned.
Section 5.08. Recitals.
The recitals contained herein shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness and
makes no representations as to the validity or sufficiency of this First
Supplemental Indenture.
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IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
MICHIGAN ELECTRIC TRANSMISSION COMPANY,
LLC
By: /s/ Royal ▇. ▇▇▇▇▇▇ ▇▇.
------------------------------------
Name: Royal ▇. ▇▇▇▇▇▇ ▇▇.
Title: Senior Vice President - Finance
JPMORGAN CHASE BANK, as Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
DRAFTED BY:
Dev R. Sen, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
AFTER RECORDED, RETURN TO:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
LandAmerica
National Commercial Services
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
ACKNOWLEDGMENT
STATE OF MICHIGAN )
) ss.
COUNTY OF ▇▇▇▇▇ )
On the 10th day of December 2003, before me, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the
undersigned notary public, personally came Royal ▇. ▇▇▇▇▇▇ ▇▇. of Michigan
Electric Transmission Company, LLC, a limited liability company organized under
the laws of the State of Michigan, and acknowledged that he executed the
foregoing instrument in his authorized capacity, and that by his signature on
the instrument he, or the entity upon behalf of which he acted, executed the
instrument.
------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Notary Public - Michigan
▇▇▇▇▇ County
My Commission Expires Oct. 7, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
) ss.
COUNTY OF NEW YORK )
On the 10th day of December 2003, before me, ▇▇▇▇▇ ▇. ▇▇▇▇▇, the
undersigned notary public, personally came ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of JPMorgan Chase
Bank, a banking corporation organized under the laws of the State of New York,
and acknowledged that he executed the foregoing instrument in his authorized
capacity, and that by his signature on the instrument he, or the entity upon
behalf of which he acted, executed the instrument.
------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
No. 01FO6348400
Notary Public State of New York
Qualified in New York County
My Commission Expires Aug. 31, 2006