Exhibit 10.5

 

EXECUTION VERSION

 

FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, DIRECTION AND WAIVER

 

This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, DIRECTION AND
WAIVER, dated as of November 1, 2017 (this “Amendment”) amends that certain
Amended and Restated Credit Agreement, dated as of December 3, 2015 (as amended,
restated, amended and restated or otherwise modified prior to the date hereof,
the “Agreement”), by and among SHARYLAND DISTRIBUTION & TRANSMISSION SERVICES,
L.L.C. (the “Borrower”), as successor in interest to Sharyland Projects L.L.C.,
and the holders of the notes issued thereunder (“Holders”). Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Agreement (as amended by this Amendment) and the rules of
interpretation set forth therein shall apply to this Amendment.

 

RECITALS

 

WHEREAS, the Borrower and the Holders are parties to the Agreement;

 

WHEREAS, the Borrower and the Holders are parties to that certain Second Amended
and Restated Collateral Agency Agreement, dated as of December 10, 2014 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Collateral Agency Agreement”), among the Borrower, the holders and lenders (or
agents thereof) of Permitted Secured Indebtedness (as such term is defined in
the Collateral Agency Agreement) from time to time party thereto, and The Bank
of New York Mellon Trust Company, N.A., acting in its capacity as collateral
agent (in such capacity, the “Collateral Agent”) for itself and the other
Secured Parties (as such term is defined in the Collateral Agency Agreement);

 

WHEREAS, to secure payment and performance of the Obligations (as such term is
defined in the Collateral Agency Agreement), the Borrower and the Collateral
Agent entered into that certain Amended and Restated Security Agreement, dated
as of September 29, 2015 (the “Security Agreement”);

 

WHEREAS, Sharyland Utilities, L.P., a Texas limited partnership (“Sharyland”) is
engaged in the electric distribution business in and around the cities of
Stanton and McAllen, Texas (the “Stanton/McAllen Distribution Business”) and the
electric distribution and transmission business in and around the cities of
Brady and Celeste, Texas (the “Brady/Celeste Business” and, together with the
Stanton/McAllen Distribution Business, the “Subject SU Businesses”) and owns the
assets that relate to the Subject SU Businesses more particularly described on
Schedule A to the SU Pre-Closing Merger Agreement (as defined below) and include
the Regulatory Assets (as defined in the Principal Merger Agreement defined
below) (collectively, the “SU Assets”);

 

 

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

 

WHEREAS, the Borrower owns certain real property and other assets that it leases
to Sharyland pursuant to certain Leases (existing on the date hereof) between
the parties (each, an “SU/SDTS Lease”) which such real property and other assets
are used by Sharyland in connection with the conduct of the Subject SU
Businesses and are more particularly described on Schedule A to the SDTS
Pre-Closing Merger Agreement (as defined below) (the “SDTS Assets”);

 

WHEREAS, the Borrower has entered into that certain Agreement and Plan of Merger
(the “Principal Merger Agreement”), by and among the Borrower, Sharyland, Oncor
Electric Delivery Company LLC (“Oncor”) and the other parties named therein,
pursuant to which, among other things, after the effectiveness and/or
consummation of the transactions contemplated by the SU Pre-Closing Merger
Agreement, the SDTS Pre-Closing Merger Agreement and the Oncor Pre-Closing
Contribution Agreement (as each such term is defined hereinbelow) (i) a
newly-formed, wholly-owned subsidiary of Sharyland formed under the laws of the
State of Texas (“SU AssetCo” and together with Sharyland, the “SU Entities”)
will merge (the “SU AssetCo Merger”) with and into Oncor, as the surviving
entity, as a result of which Oncor will acquire the SU Package (as defined
below), (ii) a newly-formed, wholly-owned subsidiary of the Borrower formed
under the laws of the State of Texas (“SDTS AssetCo” and together with SDTS, the
“SDTS Entities”) will merge (the “SDTS AssetCo Merger”) with and into Oncor, as
the surviving entity, as a result of which Oncor will acquire the SDTS Package
(as defined below) and (iii) a newly-formed, wholly-owned subsidiary of Oncor
formed under the laws of the State of Texas (“Oncor AssetCo”) will merge (the
“Oncor AssetCo Merger”) with and into the Borrower, as the surviving entity, as
a result of which the Borrower will acquire the Oncor T Package (as defined
below);

 

WHEREAS, in connection with the Principal Merger Agreement and to facilitate the
transactions contemplated by the Principal Merger Agreement, (i) Sharyland and
SU AssetCo will merge (with each entity surviving) (the “SU Pre-Closing Merger”)
pursuant to the terms and conditions of an Agreement and Plan of Merger between
Sharyland and SU AssetCo (the “SU Pre-Closing Merger Agreement”) and as a result
thereof Sharyland and SU AssetCo will allocate the SU Assets and certain related
liabilities, as more particularly described in the SU Pre-Closing Merger
Agreement (together with the SU Assets, the “SU Package”), to SU AssetCo, (ii)
the Borrower and SDTS AssetCo will merge (with each entity surviving) (the “SDTS
Pre-Closing Merger”) pursuant to the terms and conditions of an Agreement and
Plan of Merger to be entered into between the Borrower and SDTS AssetCo (the
“SDTS Pre-Closing Merger Agreement”) and as a result thereof the Borrower and
SDTS AssetCo will allocate the SDTS Assets and certain related liabilities, as
more particularly described in the SDTS Pre-Closing Merger Agreement (together
with the SDTS Assets, the “SDTS Package”), to SDTS AssetCo and (iii) pursuant to
a Contribution Agreement between Oncor and Oncor AssetCo (the “Oncor Pre-Closing
Contribution Agreement”), Oncor will contribute and transfer (the “Oncor
Pre-Closing Contribution”) the Oncor T Assets (as defined below) to Oncor
AssetCo and Oncor AssetCo will assume certain related liabilities (together with
the Oncor T Assets, the “Oncor T Package”), as more particularly described in
the Oncor Pre-Closing Contribution Agreement;

 

WHEREAS, the Oncor T Package includes all of the properties and assets owned by
Oncor that relate to the Applicable Transmission Systems (as defined in the
Principal Merger Agreement) (the “Oncor T Assets”);

2

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

 

 

WHEREAS, in connection with the foregoing, the Borrower and Sharyland will agree
that (i) the SDTS Assets will be removed from the SU/SDTS Leases, (ii) the Oncor
T Assets will be added to the SU/SDTS Leases, (iii) the Stanton/Brady/Celeste
Lease will be terminated and (iv) the SU/SDTS Leases will be amended to
accommodate the foregoing transactions;

 

WHEREAS, the formation of SU AssetCo and SDTS AssetCo, the SU AssetCo Merger,
the SDTS AssetCo Merger, the Oncor AssetCo Merger, the SU Pre-Closing Merger,
the SDTS Pre-Closing Merger, the Oncor Pre-Closing Contribution, the
modifications to and terminations of the Leases described above and the other
transactions contemplated by the Principal Merger Agreement, the SU Pre-Closing
Merger Agreement, the SDTS Pre-Closing Merger Agreement and the Oncor
Pre-Closing Contribution Agreement are referred to collectively herein as the
“Transactions;”

 

WHEREAS, pursuant to Section 6.9(d) of the Agreement, the Borrower is required
to, among other things, cause certain newly formed Subsidiaries to (x) execute
and deliver to the Collateral Agent a Subsidiary Guaranty and (y) take
additional actions to grant to the Collateral Agent, on behalf of the Secured
Parties (or in the case of Real Property Collateral, the Trustee named in the
Deeds of Trust, for the benefit of the Collateral Agent and the other Secured
Parties), a Lien in the Collateral to the extent required in the Security
Documents, in each case, within the time periods specified therein
(collectively, the “New Subsidiary Requirements”);

 

WHEREAS, pursuant to Section 7.2 of the Agreement, the Borrower is restricted
from permitting Subsidiaries to merge with any other Person or Transfer all or
substantially all of its assets in a single transaction or series of
transactions to any Person, subject to certain exceptions set forth therein;

 

WHEREAS, pursuant to Section 7.10 of the Agreement, the Borrower is restricted
from Transferring any of its assets, subject to certain exceptions set forth
therein;

 

WHEREAS, the Borrower has requested, and the Holders party hereto have agreed
subject to the terms and conditions hereof to, notwithstanding anything to the
contrary in the Note Documents in connection with the Transactions, waive
compliance with the New Subsidiary Requirements, Section 7.2 and Section 7.10 of
the Agreement;

 

WHEREAS, the Borrower has further requested, and the Required Fixed Rate Note
Holders have agreed subject to the terms and conditions hereof to (i) consent to
the termination and release of any and all liens and security interests granted
in the Security Documents with respect to all SDTS Assets substantially
concurrently with the effectiveness of the SDTS AssetCo Merger (all such
Collateral to be released, the “Released Collateral”) and (ii) direct the
Collateral Agent, upon delivery by the Borrower to the Collateral Agent of the
Merger Certificate (as defined in the Direction Letter (as defined below)), to
execute and deliver releases of all liens and security interests covering the
Released Collateral (the “SDTS Releases”) pursuant to which the Collateral Agent
will release all liens and security interests granted in the Security Documents
with respect to the Released Collateral;

 

3

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

 

WHEREAS, the Borrower has requested, and the Holders party thereto have agreed
subject to the terms and conditions hereof, to amend the Agreement as more fully
described herein; and

 

WHEREAS, the Borrower has requested, and the Holders party hereto have agreed
subject to the terms and conditions hereof, to amend the Collateral Agency
Agreement as more fully described herein and in the Direction Letter.

 

NOW THEREFORE, in consideration of the mutual agreement herein contained and
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.Waiver of under Agreement. In accordance with Section 10.1 of the Agreement,
the Holders party hereto hereby (i) waive, in connection with the Transactions,
compliance with Sections 7.2 and 7.10 the Agreement (and agree that no breach,
violation, Default or Event of Default shall be deemed to arise under the Note
Documents as a result of the Transactions) and (ii) so long as (a) after the
formation of SDTS Assetco it shall be and remain an entity with no material
assets and (b) the Principal Merger Agreement remains in full force and effect,
the New Subsidiary Requirements shall be waived and not apply to SDTS AssetCo
(and agree that no breach, violation, Default or Event of Default shall be
deemed to arise under the Note Documents as a result of SDTS AssetCo’s failure
to comply with the New Subsidiary Requirements). The waiver contained in this
Section 1 is a limited waiver and (1) shall only be relied upon for the specific
purpose set forth herein, (2) shall not constitute nor be deemed to constitute a
waiver of any other Default or Event of Default or condition of the Agreement
and the other Note Documents and (3) shall not constitute a custom or course of
dealing among the parties hereto.

 

2.Consent and Direction under Collateral Agency Agreement. In accordance with
Section 10.1 of the Agreement, the Holders party hereto hereby:

 

 

a.

consent to the termination and release of the liens and security interests
created under the Security Documents in respect of any and all Released
Collateral substantially concurrently with the effectiveness of the SDTS AssetCo
Merger; and

 

 

b.

agree to execute and deliver to the Collateral Agent on the date hereof a
Direction Letter to the Collateral Agent and Amendment to Collateral Agency
Agreement substantially in the form attached hereto as Exhibit A (the “Direction
Letter”), which Direction Letter shall direct the Collateral Agent to, among
other things, (i) execute and deliver the Direction Letter in order to evidence
the Collateral Agent’s agreement to the amendments to the Collateral Agency
Agreement set forth in such Direction Letter and (ii) upon the execution and
delivery of the Merger Certificate (as defined in the Direction Letter) by the
Borrower to the Collateral Agent (A) to terminate and release any and all
security interests in and liens on the Released Collateral granted under the
Security Documents, (B) to do, execute and deliver, or cause to be done,
executed and delivered all such further acts, instruments, documents and
agreements as may be reasonably requested by the Borrower (at the expense of

4

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

 

 

the Borrower), which may be necessary or desirable in order to evidence or
effectuate the SDTS Releases and the termination and release of all liens and
security interests on the Released Collateral, (C) to authorize the Borrower to
amend or terminate, as necessary, any and all UCC-1 financing statements which
relate to any of the Released Collateral and (D) to authorize the Borrower to
file of record in the applicable recording offices the SDTS Releases
substantially in the form attached to the Direction Letter.

 

3.Amendments to the Agreement. The Agreement is hereby amended to delete the
stricken text (indicated textually in the same manner as the following example:
stricken text) and to add the bold underlined text (indicated textually in the
same manner in the following example: underlined text), as set forth in the
Agreement as attached hereto as Annex A, which amendments shall become effective
upon (a) the execution and delivery of the Merger Certificate by the Borrower to
the Collateral Agent, (b) the Closing Date (as defined under the Principal
Merger Agreement) having occurred and (c) the Holders’ receipt (which shall be
deemed to occur upon posting thereof on IntraLinks or similar website to which
Holders have access) of an order from the Public Utility Commission of Texas
approving the transactions contemplated by the Principal Merger Agreement, which
order is in effect and either (a) the time period for filing a motion for
rehearing of the order has expired without a motion having been filed, or (b) if
the time period for filing a motion for rehearing of the order has expired and a
motion for rehearing was timely filed (i) an order overruling the motion has
been issued, (ii) the motion for rehearing has been overruled by operation of
law or (iii) such motion is a Procedural Motion that could not reasonably be
expected to have (A) a material adverse effect on the business or financial
condition of the Borrower and its Subsidiaries taken as a whole and/or (B) an
adverse effect on the ability of the Borrower and its Subsidiaries to perform
their respective obligations under the Agreement and the Fixed Rate Notes, the
ability of any Subsidiary Guarantor to perform its obligations under its
Subsidiary Guaranty, the validity or enforceability of the Agreement or any
other Note Document and/or the validity, perfection or priority of the
Collateral Agent’s Liens on any material Collateral.

 

4.Conditions to the Effective Date. This Amendment shall become effective as of
the first date upon which each of the following conditions have been satisfied:

 

 

a.

executed counterparts of this Amendment, duly executed by the Borrower and the
Holders party hereto, shall have been delivered to the Holders party hereto;

 

 

b.

the representations and warranties of the Borrower set forth in Section 5 hereof
are true and correct in all material respects on and as of the date hereof,
except to the extent that such representation or warranty expressly relates to
an earlier date (in which event such representation or warranty was true and
correct in all material respects as of such earlier date); and

 

 

c.

the fees and expenses of Morgan, Lewis & Bockius LLP, counsel to the Holders,
shall have been paid by the Borrower, in connection with the negotiation,
preparation, approval, execution and delivery of this Amendment in accordance
with the terms of the Agreement and to the extent a written invoice with respect
thereto (with related backup documentation) shall have been delivered to the
Borrower at least 2 business days prior thereto.

5

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

 

 

5.Representations and Warranties of the Borrower. In order to induce the Holders
party hereto to enter into this Amendment, the Borrower hereby represents and
warrants that:

 

 

a.

The Borrower has the requisite power and authority to execute, deliver and carry
out the terms and provisions of this Amendment and has taken all necessary
corporate or other organizational action to authorize the execution, delivery
and performance of this Amendment. The Borrower has duly executed and delivered
this Amendment, and this Amendment (and the Agreement as amended by the
Amendment) constitutes the legal, valid and binding obligation of the Borrower
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).

 

 

b.

The execution, delivery and performance by the Borrower of this Amendment do not
and will not (i) contravene, result in any breach of, or constitute a default
under, or result in the creation of any Lien in respect of any property of the
Borrower under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or limited partnership or limited liability
company agreement, or any other agreement or instrument to which the Borrower is
bound or by which the Borrower or any of its properties may be bound or
affected, (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Borrower or (iii) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Borrower, which in the case of any of the foregoing
clauses (i) through (iii), individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

 

c.

No consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Authority is required in connection with the execution,
delivery or performance by the Borrower of this Amendment.

 

 

d.

No Default or Event of Default has occurred and is continuing on the date hereof
or after giving effect to this Amendment.

 

6.Continuing Effect of Financing Documents. Except as expressly set forth
herein, this Amendment shall not constitute an amendment or waiver of any
provision of any Note Document and shall not be construed as an amendment,
waiver or consent to any further or future action on the part of the Borrower
that would require an amendment, waiver or consent under any Note Document.
Except as expressly amended hereby, the provisions of the Note Documents are and
shall remain in full force and effect. This Amendment shall be deemed a Note
Document for purposes of the Agreement.

 

6

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

 

7.Fees. In accordance with Section 10.5 of the Agreement, the Borrower shall pay
the fees, charges and disbursements of special counsel to the Holders in
connection with this Amendment.

 

8.Counterparts. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Borrower and the Holders party
hereto. Delivery of an executed counterpart of a signature page to this
Amendment by telecopy or electronic transmission shall be effective as the
delivery of a manually executed counterpart of this Amendment.

 

9.Severability. If any provision of this Amendment is held to be illegal,
invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Amendment shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

10.Integration. This Amendment and the other Note Documents represent the
agreement of the Borrower and the Holders with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Borrower or any Holder relative to the subject matter hereof not
expressly set forth or referred to herein or in the other Note Documents.

 

11.GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

 

[Signatures on Following Pages]

 

 

 

7

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

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.

 

 

 

Borrower:

 

 

 

 

 

SHARYLAND DISTRIBUTION & TRANSMISSION SERVICES, L.L.C.

 

 

 

 

 

 

By:

/s/ Brant Meleski

 

 

Name:

Brant Meleski

 

 

Title:

Senior Vice President and Chief

 

 

 

Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First Amendment to Amended and Restated Credit Agreement,
Direction and Waiver

 

 

 

 

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

 

 

 

THE PRUDENTIAL INSURANCE COMPANY

 

 

OF AMERICA, as a Holder

 

 

 

 

 

 

 

 

 

By:

/s/ Richard Carrell

 

 

Name:

Richard Carrell

 

 

Title:

Vice President

 

 

 

 

 

 

Amount of Fixed Rate

Notes held by such

Holder on the date

hereof:

 

 

 

 

 

 

$

48,652,311.00

 

 

 

 

 

PRUCO LIFE INSURANCE COMPANY OF

 

 

NEW JERSEY, as a Holder

 

 

 

 

 

 

 

 

 

 

By:

/s/ Richard Carrell

 

 

Name:

Richard Carrell

 

 

Title:

Vice President

 

 

 

 

 

 

 

 

 

 

Amount of Fixed Rate

Notes held by such

Holder on the date

hereof:

 

 

 

 

 

 

$

6,000,000.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First Amendment to Amended and Restated Credit Agreement,
Direction and Waiver

 

 

 

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

 

 

 

 

PRUDENTIAL ANNUITIES LIFE ASSURANCE

 

 

CORPORATION, as a Holder

 

 

 

 

 

 

By:     PGIM, Inc., as investment manager

 

 

 

 

 

 

By:

/s/ Richard Carrell

 

 

Name:

Richard Carrell

 

 

Title:

Vice President

 

 

 

 

 

 

Amount of Fixed Rate

Notes held by such

Holder on the date

hereof:

 

 

 

 

 

 

$

5,347,689.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to First Amendment to Amended and Restated Credit Agreement,
Direction and Waiver

 

 

 

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

 

Exhibit A

 

Direction Letter

 

[see attached]

 

 

 

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

 

DIRECTION LETTER TO COLLATERAL AGENT AND

AMENDMENT TO COLLATERAL AGENCY AGREEMENT

November 1, 2017

This DIRECTION LETTER TO COLLATERAL AGENT AND AMENDMENT TO COLLATERAL AGENCY
AGREEMENT (this “Direction Letter”) is by and among Sharyland Distribution &
Transmission Services, L.L.C., a Texas limited liability company (the
“Borrower”), the Secured Parties (or their agents) party hereto and The Bank of
New York Mellon Trust Company, N.A., as collateral agent to the Secured Parties
(in such capacity, the “Collateral Agent”).

 

W I T N E S S E T H :

 

WHEREAS, the Borrower is a party to (A) that certain Third Amended and Restated
Credit Agreement dated as of December 10, 2014 (as amended, restated,
supplemented or otherwise modified from time to time, the “Revolving Credit
Agreement”) among the Borrower, the several lenders from time to time party
thereto and Royal Bank of Canada, as administrative agent to the lenders
thereunder (in such capacity, the “Revolver Administrative Agent”), (B) that
certain Amended and Restated Note Purchase Agreement dated as of September 14,
2010 (as amended, restated, supplemented and otherwise modified from time to
time, the “2009 NPA”) among the Borrower and the holders of the notes issued
thereunder (the “2009 Holders”), (C) that certain Amended and Restated Note
Purchase Agreement dated as of July 13, 2010 (as amended, restated, supplemented
and otherwise modified from time to time, the “2010 NPA”) among the Borrower and
the holders of the notes issued thereunder (the “2010 Holders”), (D) that
certain Amended and Restated Credit Agreement, dated as of December 3, 2015 (as
amended, restated, supplemented or otherwise modified from time to time, the “SP
Notes Credit Agreement”), among Sharyland Projects L.L.C., predecessor in
interest to the Borrower, and the Fixed Rate Note Holders (as defined therein)
party thereto (the “SP Note Holders”), (E) that certain Note Purchase Agreement,
dated as of December 3, 2015 (as amended, restated, supplemented or otherwise
modified from time to time, the “A/B NPA”), among the Borrower and the holders
of the notes issued thereunder (the “A/B Holders”), and (F) that certain Term
Loan Credit Agreement, dated as of June 5, 2017 (as amended, restated,
supplemented or otherwise modified from time to time, the “Term Loan Credit
Agreement” and together with the Revolving Credit Agreement, the 2009 NPA, the
2010 NPA, the SP Notes Credit Agreement and the A/B NPA, the “Financing
Agreements”), among the Borrower, the several lenders from time to time party
thereto and Canadian Imperial Bank of Commerce, New York Branch, as
administrative agent to the lenders thereunder (in such capacity, the “Term Loan
Administrative Agent” and together with the Revolver Administrative Agent, the
“Administrative Agents”);

 

WHEREAS, the Administrative Agents, the 2009 Holders, the 2010 Holders, the SP
Note Holders and the A/B Holders are parties to the Second Amended and Restated
Collateral Agency Agreement dated as of December 10, 2014 (as heretofore
amended, restated, supplemented or otherwise modified, the “Collateral Agency
Agreement”; capitalized terms used herein but not otherwise defined shall have
the respective meanings provided such terms in the Collateral

 

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

 

Agency Agreement) among the Borrower, the Collateral Agent, the Revolver
Administrative Agent, for the benefit of itself and the lenders under the
Revolving Credit Agreement, the Term Loan Administrative Agent, for the benefit
of itself and the lenders under the Term Loan Credit Agreement, the 2009
Holders, the 2010 Holders, the SP Note Holders and the A/B Holders and the other
holders and lenders (or agents thereof) of Permitted Secured Indebtedness from
time to time party thereto;

 

WHEREAS, to secure payment and performance of the Obligations (as such term is
defined in the Collateral Agency Agreement), the Borrower and the Collateral
Agent entered into that certain Amended and Restated Security Agreement, dated
as of September 29, 2015 (the “Security Agreement”);

 

WHEREAS, Sharyland Utilities, L.P., a Texas limited partnership (“Sharyland”) is
engaged in the electric distribution business in and around the cities of
Stanton and McAllen, Texas (the “Stanton/McAllen Distribution Business”) and the
electric distribution and transmission business in and around the cities of
Brady and Celeste, Texas (the “Brady/Celeste Business” and, together with the
Stanton/McAllen Distribution Business, the “Subject SU Businesses”) and owns the
assets that relate to the Subject SU Businesses more particularly described on
Schedule A to the SU Pre-Closing Merger Agreement (as defined below), including
the Regulatory Assets (as defined in the Principal Merger Agreement defined
below) (collectively, the “SU Assets”);

 

WHEREAS, the Borrower owns certain real property and other assets that it leases
to Sharyland pursuant to certain leases (existing on the date hereof) between
the parties (each, an “SU/SDTS Lease”) which such real property and other assets
are used by Sharyland in connection with the conduct of the Subject SU
Businesses and are more particularly described on Schedule A to the SDTS
Pre-Closing Merger Agreement (as defined below) (the “SDTS Assets”);

 

WHEREAS, the Borrower has entered into that certain Agreement and Plan of Merger
(the “Principal Merger Agreement”), by and among the Borrower, Sharyland, Oncor
Electric Delivery Company LLC (“Oncor”) and the other parties named therein,
pursuant to which, among other things, after the effectiveness and/or
consummation of the transactions contemplated by the SU Pre-Closing Merger
Agreement, the SDTS Pre-Closing Merger Agreement and the Oncor Pre-Closing
Contribution Agreement (as each such term is defined hereinbelow) (i) a
newly-formed, wholly-owned subsidiary of Sharyland formed under the laws of the
State of Texas (“SU AssetCo” and together with Sharyland, the “SU Entities”)
will merge (the “SU AssetCo Merger”) with and into Oncor, as the surviving
entity, as a result of which Oncor will acquire the SU Package (as defined
below), (ii) a newly-formed, wholly-owned subsidiary of the Borrower formed
under the laws of the State of Texas (“SDTS AssetCo” and together with the
Borrower, the “SDTS Entities”) will merge (the “SDTS AssetCo Merger”) with and
into Oncor, as the surviving entity, as a result of which Oncor will acquire the
SDTS Package (as defined below) and (iii) a newly-formed, wholly-owned
subsidiary of Oncor formed under the laws of the State of Texas (“Oncor
AssetCo”) will merge (the “Oncor AssetCo Merger”) with and into the Borrower, as
the surviving entity, as a result of which the Borrower will acquire the Oncor T
Package (as defined below);

 

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

 

 

WHEREAS, in connection with the Principal Merger Agreement and to facilitate the
transactions contemplated by the Principal Merger Agreement, (i) Sharyland and
SU AssetCo will merge (with each entity surviving) (the “SU Pre-Closing Merger”)
pursuant to the terms and conditions of an Agreement and Plan of Merger between
Sharyland and SU AssetCo (the “SU Pre-Closing Merger Agreement”) and as a result
thereof Sharyland and SU AssetCo will allocate the SU Assets and certain related
liabilities, as more particularly described in the SU Pre-Closing Merger
Agreement (together with the SU Assets, the “SU Package”), to SU AssetCo, (ii)
the Borrower and SDTS AssetCo will merge (with each entity surviving) (the “SDTS
Pre-Closing Merger”) pursuant to the terms and conditions of an Agreement and
Plan of Merger to be entered into between the Borrower and SDTS AssetCo (the
“SDTS Pre-Closing Merger Agreement”) and as a result thereof the Borrower and
SDTS AssetCo will allocate the SDTS Assets and certain related liabilities, as
more particularly described in the SDTS Pre-Closing Merger Agreement (together
with the SDTS Assets, the “SDTS Package”), to SDTS AssetCo and (iii) pursuant to
a Contribution Agreement between Oncor and Oncor AssetCo (the “Oncor Pre-Closing
Contribution Agreement”), Oncor will contribute and transfer (the “Oncor
Pre-Closing Contribution”) the Oncor T Assets (as defined below) to Oncor
AssetCo and Oncor AssetCo will assume certain related liabilities (together with
the Oncor T Assets, the “Oncor T Package”), as more particularly described in
the Oncor Pre-Closing Contribution Agreement;

 

WHEREAS, the Oncor T Package includes all of the properties and assets owned by
Oncor that relate to the Applicable Transmission Systems (as defined in the
Principal Merger Agreement) (the “Oncor T Assets”);

 

WHEREAS, in connection with the foregoing, the Borrower and Sharyland will agree
that (i) the SDTS Assets will be removed from the SU/SDTS Leases, (ii) the Oncor
T Assets will be added to the SU/SDTS Leases and (iii) the SU/SDTS Leases will
be amended to accommodate the foregoing transactions;

 

WHEREAS, the formation of SU AssetCo and SDTS AssetCo, the SU AssetCo Merger,
the SDTS AssetCo Merger, the Oncor AssetCo Merger, the SU Pre-Closing Merger,
the SDTS Pre-Closing Merger, the Oncor Pre-Closing Contribution, the
modifications to and terminations of the Leases described above and the other
transactions contemplated by the Principal Merger Agreement, the SU Pre-Closing
Merger Agreement, the SDTS Pre-Closing Merger Agreement and the Oncor
Pre-Closing Contribution Agreement are referred to collectively herein as the
“Transactions;”

 

WHEREAS, concurrently with the closing of the Transactions, the Borrower will
execute and deliver to the Collateral Agent and the other Secured Parties (or an
agent acting on their behalf) party hereto (or their agents) a certificate in
substantially the form attached to this Direction Letter as Exhibit A (the
“Merger Certificate”);

 

WHEREAS, the Borrower has requested, and the Secured Parties party hereto (or an
agent on behalf of the relevant Secured Parties) have agreed subject to the
terms and conditions hereof to (i) consent to the termination and release of any
and all liens and security interests granted in the Collateral Documents with
respect to all SDTS Assets substantially concurrently

 

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

 

with the effectiveness of the SDTS AssetCo Merger (all such Collateral to be
released, the “Released Collateral”) and (ii) direct the Collateral Agent, upon
delivery by the Borrower to the Collateral Agent of the Merger Certificate,
execute and deliver releases of all liens and security interests covering the
Released Collateral (the “SDTS Releases”) pursuant to which the Collateral Agent
will release the liens and security interests granted in the Collateral
Documents with respect to the Released Collateral; and

 

WHEREAS, the Borrower has requested, and the Secured Parties party hereto (or an
agent on behalf of the relevant Secured Parties) have agreed, subject to the
terms and conditions hereof, to amend (and to direct the Collateral Agent to
amend) the Collateral Agency Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.LIMITED CONSENT AND DIRECTION BY SECURED PARTIES.

 

 

a.

In accordance with Sections 5.2, 6.1 and 13 of the Collateral Agency Agreement,
the Secured Parties party to this Direction Letter (or an agent on behalf of the
relevant Secured Parties) hereby:

 

 

(i)

consent to the termination and release of the liens and security interests
created under the Security Agreement in respect of any and all Released
Collateral substantially concurrently with the effectiveness of the SDTS AssetCo
Merger; and

 

 

(ii)

upon the execution and delivery of the Merger Certificate by the Borrower to the
Collateral Agent, authorize, direct and instruct the Collateral Agent, at the
sole cost and expense of the Borrower, (A) to terminate and release without
recourse, representation or warranty any and all security interests in and liens
on the Released Collateral granted under the Collateral Documents, (B) to
execute and deliver (at the expense of the Borrower) the SDTS Releases in the
forms attached to this Direction Letter as Exhibit B and to authorize the
Borrower to file such SDTS Releases in the applicable recording offices, (C) to
execute and deliver (at the expense of the Borrower) such other documents (in
form and substance reasonably satisfactory to the Collateral Agent) as shall be
prepared and determined by the Borrower to be reasonably necessary for the
purpose terminating and releasing the security interests in and liens on the
Released Collateral granted under the Collateral Documents, and (D) to do,
execute and deliver, or cause to be done, executed and delivered all such
further acts, instruments, documents and agreements as may be reasonably
requested by the Borrower (at the expense of the Borrower), which may be
necessary or desirable in order to evidence or effectuate the SDTS Releases or
the termination and release of all liens and security interests on the Released
Collateral.

 

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

 

 

The parties hereto acknowledge and agree that the Collateral Agent shall be a
third party beneficiary of this Section 1 of this Direction Letter.

 

2.AMENDMENTS TO COLLATERAL AGENCY AGREEMENT.

 

In accordance with Section 13 of the Collateral Agency Agreement, the Secured
Parties party to this Direction Letter (or an agent acting on behalf of the
relevant Secured Parties) hereby authorize, direct and instruct the Collateral
Agent to amend the Collateral Agency Agreement to delete the stricken text
(indicated textually in the same manner as the following example: stricken text)
and to add the bold underlined text (indicated textually in the same manner in
the following example: underlined text), as set forth in the Collateral Agency
Agreement as attached hereto as Exhibit C, and by their execution and delivery
of this Direction Letter, the Collateral Agent, the Secured Parties (or an agent
acting on behalf of the relevant Secured Parties) and the Borrower hereby agree
that the Collateral Agency Agreement is amended as set forth in the Collateral
Agency Agreement as attached hereto as Exhibit C, which amendments shall become
effective upon (a) the execution and delivery of the Merger Certificate by the
Borrower to the Collateral Agent, (b) the Closing Date (as defined under the
Principal Merger Agreement) having occurred and (c) the receipt by the Secured
Parties (or by an agent acting on their behalf), which shall be deemed to occur
upon posting thereof on IntraLinks or similar website to which Secured Parties
have access, of a copy of an order from the Public Utility Commission of Texas
approving the transactions contemplated by the Principal Merger Agreement, which
order is in effect and either (a) the time period for filing a motion for
rehearing of the order has expired without a motion having been filed, or (b) if
the time period for filing a motion for rehearing of the order has expired and a
motion for rehearing was timely filed (i) an order overruling the motion has
been issued, (ii) the motion for rehearing has been overruled by operation of
law or (iii) such motion is a Procedural Motion that could not reasonably be
expected to have (A) a material adverse effect on the business or financial
condition of the Borrower and its Subsidiaries taken as a whole and/or (B) an
adverse effect on the ability of the Borrower and its Subsidiaries to perform
their respective obligations under any Financing Agreement, the ability of any
subsidiary guarantor to perform its obligations under its guaranty, the validity
or enforceability of the Financing Agreements and/or the validity, perfection or
priority of the Collateral Agent’s Liens on any material Collateral.

 

For purposes of this Direction Letter, “Procedural Motion” shall mean a motion
or other filing (1) seeking clarification on, further information or data with
respect to, or otherwise dealing with or relating to deployment, implementation,
procedural and/or administrative issues and matters (such as, but not limited
to, transition of retail customers, implementation of rates, language requested
by ERCOT to be included in the order relating to updates to models for ERCOT or
otherwise and/or the transition or incorporation of regulatory assets and
liabilities among the parties subject to the order), and (2) which, if adversely
determined, would not negate the approval of the transactions contemplated by
the Principal Merger Agreement.

 

 

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

 

3.REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order to induce the
undersigned Secured Parties (or an agent acting on behalf of the relevant
Secured Parties) to enter into this Direction Letter, the Borrower hereby
represents and warrants to the Secured Parties party hereto that no default or
other right of enforcement or acceleration under a Financing Agreement or Event
of Default has occurred and is continuing on the date hereof. In order to induce
the Collateral Agent to take the actions requested in Section 1(a) hereof, the
Borrower hereby represents and warrants to the Collateral Agent that no default
or other right of enforcement or acceleration under a Financing Agreement or
Event of Default has occurred and is continuing on the date hereof.

 

4.CONTINUING EFFECT OF CREDIT DOCUMENTS. Except as expressly set forth herein,
this Direction Letter shall not constitute an amendment or waiver of any
provision of any Financing Agreement and shall not be construed as an amendment,
waiver or consent to any further or future action on the part of the Borrower
that would require an amendment, waiver or consent of any Secured Party. Except
as expressly waived hereby, the provisions of each Financing Agreement are and
shall remain in full force and effect. This Direction Letter shall be deemed a
Credit Document for purposes of the Revolving Credit Agreement and the Term Loan
Credit Agreement, a Financing Document for purposes of each of the 2009 NPA, the
2010 NPA, the SP Notes Credit Agreement and a Note Document for purposes of the
A/B NPA.

 

5.FEES.

 

 

a.

In accordance with Section 12.1 of the Revolving Credit Agreement, the Borrower
shall pay the fees, charges and disbursements of the Revolving Administrative
Agent’s special counsel in connection with this Direction Letter.

 

 

b.

In accordance with Section 12.1 of the Term Loan Credit Agreement, the Borrower
shall pay the fees, charges and disbursements of the Term Loan Administrative
Agent’s special counsel in connection with this Direction Letter.

 

 

c.

In accordance with Section 15.1 of the 2009 NPA, the Borrower shall pay the
fees, charges and disbursements of the 2009 Holders’ special counsel in
connection with this Direction Letter.

 

 

d.

In accordance with Section 15.1 of the 2010 NPA, the Borrower shall pay the
fees, charges and disbursements of the 2010 Holders’ special counsel in
connection with this Direction Letter.

 

 

e.

In accordance with Section 15.1 of the SP Notes Credit Agreement, the Borrower
shall pay the fees, charges and disbursements of the SP Note Holders’ special
counsel in connection with this Direction Letter.

 

 

f.

In accordance with Section 15.1 of the A/B NPA, the Borrower shall pay the fees,
charges and disbursements of the A/B Holders’ special counsel in connection with
this Direction Letter.

 

 

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

 

 

g.

In accordance with Section 2.8 of the Collateral Agency Agreement, the Borrower
shall pay the fees, charges and disbursements of the Collateral Agent’s special
counsel in connection with this Direction Letter.

 

6.COUNTERPARTS. This Direction Letter may be executed by one or more of the
parties hereto in any number of separate counterparts (including by facsimile),
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. Delivery of an executed signature page to this
Direction Letter by facsimile or electronic transmission shall be effective as
the delivery of a manually executed counterpart of this Direction Letter.

 

7.SEVERABILITY. Any provision of this Direction Letter which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

8.INTEGRATION. This Direction Letter represents the agreement of the Borrower,
the Secured Parties and the Collateral Agent with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Borrower, the Secured Parties or the Collateral Agent relative to the
subject matter hereof not expressly set forth or referred to herein.

 

9.GOVERNING LAW. THIS DIRECTION LETTER AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS DIRECTION LETTER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

10.COLLATERAL AGENT.  The parties hereto agree that the Collateral Agent shall
be afforded all of the rights, protections, indemnities, immunities and
privileges afforded to the Collateral Agent under the Collateral Agency
Agreement in connection with the execution of this Direction Letter and
performance of its obligations hereunder.

 

[Remainder of page intentionally left blank]

 

 

 

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

 

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Direction Letter as of the date first above
written.

 

 

 

SHARYLAND DISTRIBUTION &

 

 

TRANSMISSION SERVICES, L.L.C., as

 

 

the

 

 

Borrower

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

 

 

SECURED PARTIES

 

 

 

 

 

 

ROYAL BANK OF CANADA, as

 

 

Revolving Administrative Agent

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Amount of

Commitments held by

the Lenders under the

Revolving Credit

Agreement on the date

hereof:

 

 

 

 

 

 

$

 

 

 

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

 

 

CANADIAN IMPERIAL BANK OF

 

 

COMMERCE, NEW YORK BRANCH, as

 

 

Term Loan Administrative Agent

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Amount of

Loans held by the

Lenders under the

Term Loan Credit

Agreement on the date

hereof:

 

 

 

 

 

 

$

 

 

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

 

 

THE PRUDENTIAL INSURANCE COMPANY

 

 

OF AMERICA, as a 2009 Holder

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

Amount of 2009

Notes held by such

Holder on the date

hereof:

 

 

 

 

 

 

$

 

 

 

 

 

PRUDENTIAL RETIREMENT INSURANCE

 

 

AND ANNUITY COMPANY, as a 2009

 

 

Holder

 

 

 

 

 

 

By: PGIM, Inc., as investment manager

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

Amount of 2009

Notes held by such

Holder on the date

hereof:

 

 

 

 

 

 

$

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

 

 

THE PRUDENTIAL INSURANCE COMPANY

 

 

OF AMERICA, as 2010 Holder

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

Amount of 2010

Notes held by such

Holder on the date

hereof:

 

 

 

 

 

 

$

 

 

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

 

PRUCO LIFE INSURANCE COMPANY OF

 

 

NEW JERSEY, as a SP Note Holder

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

Amount of SP Notes

held by such Holder

on the date hereof:

 

 

 

 

 

 

$

 

 

 

 

 

 

 

PRUDENTIAL ANNUITIES LIFE

 

 

ASSURANCE CORPORATION, as a SP Note

 

 

Holder

 

 

 

 

 

 

By: PGIM, Inc., as investment manager

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

Amount of SP Notes

held by such Holder

on the date hereof:

 

 

 

 

 

 

$

 

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

 

 

THE PRUDENTIAL INSURANCE COMPANY

 

 

OF

 

 

AMERICA, as a SP Note Holder

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

Amount of SP Notes

held by such Holder

on the date hereof:

 

 

 

 

 

 

$

 

 

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

 

 

[NAME OF HOLDER], as A/B Holder

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

Amount of A/B Notes

held by such Holder

on the date hereof:

 

 

 

 

 

 

$

 

 

 

 

Signature Page to Direction Letter to Collateral Agent

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

 

 

ANNEX A TO FIRST AMENDMENT, DIRECTION AND WAIVER

 

Amended and Restated Credit Agreement, as amended by this Amendment

 

[see attached]

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

 

 

 

 

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

among

 

SHARYLAND PROJECTS L.L.C.

(predecessor in interest to Sharyland Distribution & Transmission Services,
L.L.C.)

 

as Borrower, and

 

Fixed Rate Note Holders party hereto Dated as of December 3, 2015

 

Amended by First Amendment, dated as of November 1, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

TABLE OF CONTENTS

 

 

Page

ARTICLE 1. DEFINITIONS

1

 

1.1.

Definitions

1

 

1.2.

Rules of Interpretation

19

 

ARTICLE 2. THE FIXED RATE NOTES

21

 

2.1.

Fixed Rate Notes

21

 

2.2.

Sale and Purchase of Fixed Rate Notes

21

 

2.3.

Repayment of Fixed Rate Note

21

 

2.4.

[RESERVED].

21

 

2.5.

Optional Prepayments

21

 

2.6.

Terms of All Prepayments

22

 

2.7.

Interest Rates and Payment Dates

27

 

2.8.

Computation of Interest and Fees

23

 

2.9.

Payments

23

ARTICLE 3. [RESERVED]

23

ARTICLE 4. [RESERVED.]

23

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

23

 

5.1.

No Default or Event of Default

23

ARTICLE 6. AFFIRMATIVE COVENANTS OF BORROWER

23

 

6.1.

Financial and Business Information

24

 

6.2.

Certificates; Other Information

26

 

6.3.

Compliance with Law.

26

 

6.4.

Insurance.

27

 

6.5.

Maintenance of Properties

27

 

6.6.

Payment of Taxes and Claims

27

 

6.7.

Existence, Etc.

28

 

6.8.

Books and Records; Inspection Rights.

28

 

6.9.

Collateral; Further Assurances

28

 

6.10.

Material Project Documents

30

 

6.11.

Financial Ratios

31

ARTICLE 7. NEGATIVE COVENANTS OF BORROWER

31

 

7.1.

Transactions with Affiliates

31

 

7.2.

Merger, Consolidation, Etc

31

 

7.3.

Line of Business

32

 

7.4.

Terrorism Sanctions Regulations

32

 

7.5.

Liens

32

 

7.6.

Indebtedness

34

 

7.7.

Loans, Advances, Investments and Contingent Liabilities

35

 

7.8.

No Subsidiaries

35

 

7.9.

Restricted Payments

35

 

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

 

 

7.10.

Sale of Assets, Etc

36

 

7.11.

Sale or Discount of Receivables

37

 

7.12.

Amendments to Organizational Documents

38

 

7.13.

Sale and Lease-Back

38

 

7.14.

ERISA Compliance

38

 

7.15.

No Margin Stock

39

 

7.16.

Project Documents

39

 

7.17.

Regulation

40

 

7.18.

Swaps

40

 

7.19.

Additional Financial Covenants.

40

 

7.20.

Burdensome Agreements

41

ARTICLE 8. EVENTS OF DEFAULT; REMEDIES

41

 

8.1.

Events of Default

41

 

8.2.

Acceleration

45

 

8.3.

Other Remedies

45

 

8.4.

Rescission

45

 

8.5.

No Waivers or Election of Remedies, Expense, Etc

46

ARTICLE 9. [RESERVED]

46

ARTICLE 10. MISCELLANEOUS

46

 

10.1.

Amendments

46

 

10.2.

Addresses

47

 

10.3.

No Waiver; Cumulative Remedies

47

 

10.4.

Survival of Representations and Warranties

48

 

10.5.

Payment of Expenses and Taxes

48

 

10.6.

Successors and Assigns; Participations and Assignments

49

 

10.7.

Representations and Warranties of the Fixed Rate Note Holder; Registration and
Exchange of Fixed Rate Notes

50

 

10.8.

Adjustments; Set-off

51

 

10.9.

Entire Agreement

51

 

10.10.

APPLICABLE LAW

51

 

10.11.

Submission To Jurisdiction; Waivers

52

 

10.12.

Severability

52

 

10.13.

Interpretation

52

 

10.14.

Acknowledgements

52

 

10.15.

Limitation on Liability

52

 

10.16.

Waiver of Jury Trial

53

 

10.17.

Confidentiality

53

 

10.18.

Counterparts

54

 

10.19.

Third Party Beneficiaries

54

 

10.20.

Patriot Act Compliance

54

 

10.21.

Amendment and Restatement

54

 

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

 

SECTION 1. DEFINED TERMS

3

 

1.1

Definitions

3

 

1.2

Other Definitional Provisions

4

SECTION 2. GUARANTEE

4

 

2.1

Guarantee

4

 

2.2

Right of Contribution

5

 

2.3

No Subrogation

5

 

2.4

Amendments, etc. with respect to the Guaranteed Obligations

5

 

2.5

Guarantee Absolute and Unconditional

6

 

2.6

Reinstatement

6

 

2.7

Payments

7

SECTION 3.  REPRESENTATIONS AND WARRANTIES

7

 

3.1

Credit Agreement Representations and Warranties

7

 

3.2

Financial Condition, etc

7

 

3.3

Best Interests

7

SECTION 4. COVENANTS, ETC.

7

SECTION 5. MISCELLANEOUS

8

 

5.1

Amendments in Writing

8

 

5.2

Notices

8

 

5.3

No Waiver by Course of Conduct; Cumulative Remedies

8

 

5.4

Enforcement Expenses; Indemnification

8

 

5.5

Successors and Assigns

9

 

5.6

Set-Off

9

 

5.7

Counterparts

9

 

5.8

Severability

9

 

5.9

Section Headings

9

 

5.10

Integration/Conflict

9

 

5.11

GOVERNING LAW

10

 

5.12

Submission To Jurisdiction; Waivers

10

 

5.13

Acknowledgements

10

 

5.14

Additional Subsidiary Guarantors.

11

 

5.15

WAIVER OF JURY TRIAL

11

 

5.16

Release.

11

 

INDEX OF EXHIBITS AND SCHEDULE

 

Exhibit A

Form of Fixed Rate Note

Exhibit B

From of Subsidiary Guaranty

Schedule A

Purchaser Schedule

 

 

 

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

 

AMENDED AND RESTATED CREDIT AGREEMENT

This AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”), dated as of
December 3, 2015, by and among Borrower (as hereinafter defined) and the Fixed
Rate Note Holders (as hereinafter defined).

WHEREAS, Sharyland Projects, L.L.C., a Texas limited liability company
(“Sharyland Projects”), the several banks and other financial institutions or
entities from time to time party thereto as “Lenders”, Société Générale, as
administrative agent and collateral agent, Royal Bank of Canada and The Royal
Bank of Scotland PLC, as co-syndication agents, The Royal Bank of Scotland PLC,
as Issuing Bank (in such capacity ,the “Issuing Bank”), The Bank of Nova Scotia,
Mizuho Corporate Bank Ltd. and Sumitomo Mitsui Banking Corporation, as co-
documentation agents, the Fixed Rate Note Holders and Prudential Investment
Management, Inc. as structuring and documentation advisor entered into that
certain Credit Agreement, dated as of June 20, 2011 (as amended by Amendment No.
1 and Omnibus Amendment, dated as of October 11 2011, Amendment No. 2, dated as
of October 1, 2013, Amendment No. 3, dated as of May 29, 2014 and Amendment 4,
dated as of December 11, 2014, the “Original Credit Agreement”);

WHEREAS, immediately prior to the effectiveness of this Agreement, Sharyland
Projects paid in full all outstanding Obligations (as defined in the Original
Credit Agreement) owed to the Lenders, the Issuing Bank and the Agents (as
defined in the Original Credit Agreement), including but not limited to all
outstanding principal and accrued but unpaid interest on the Loans and Letters
of Credit and the unpaid interest on the Fixed Rate Notes, and any outstanding
Commitments (as defined in the Original Credit Agreement), together with all
liens and security interests granted by Sharyland Projects to secure the
Obligations, were terminated and released;

WHEREAS, substantially concurrently with, but immediately after, the
effectiveness of this Agreement, Sharyland Projects will merge into Sharyland
Distribution & Transmission Services, L.L.C. (“SDTS”) with SDTS as the surviving
entity of such merger (the “Merger”), and, immediately upon the effectiveness of
the Merger, SDTS automatically shall be the Borrower under this Agreement; and

WHEREAS, the parties hereto, being the only remaining parties to the Original
Credit Agreement, desire to amend and restate the Original Credit Agreement in
its entirety;

NOW THEREFORE, for good and valuable consideration, the parties hereto hereby
agree as follows:

ARTICLE 1.

DEFINITIONS

1.1.Definitions.  Except as otherwise expressly provided, capitalized terms used
in this Agreement (including in the preamble hereto) and its exhibits shall have
the meanings given in this Section 1.1.

“2009 NPA” means the Amended and Restated Note Purchase Agreement, dated
September 14, 2010, among the Borrower and the holders of the 2029 Notes.

“2010 NPA” means the Note Purchase Agreement, dated July 13, 2010, among the
Borrower and the holders of the 2030 Notes.

1

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

 

“2029 Notes” means the Borrower’s 7.25% Senior Notes due December 30, 2029,
issued under the 2009 SDTS Note Agreement.

“2030 Notes” means the Borrower’s 6.47% Senior Notes due September 30, 2030,
issued under the 2010 SDTS Note Agreement.

“Additional Financial Covenants” shall have the meaning given to it in Section
7.19 hereof.

“Affiliate” means, at any time, and with respect to any Person, any other Person
that at such time directly or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control with, such first
Person and, with respect to the Borrower, shall include any Person beneficially
owning or holding, directly or indirectly, 10% or more of any class of voting or
equity interest of the Borrower or any corporation of which the Borrower
beneficially owns or holds, in the aggregate, directly or indirectly, 10% or
more of any class of voting or equity interests; provided, however, that this
definition shall at all times exclude owners or investors in the Operating
Partnership, except for Hunt Family Members. Unless the context otherwise
clearly requires, any reference to an “Affiliate” is a reference to an Affiliate
of the Borrower.

“Affiliated Fixed Rate Note Holder” shall mean a Fixed Rate Note Holder that is
the Borrower or an Affiliate of the Borrower.

“Agreement” has the meaning given to such term in the preamble hereto.

“Approved Accountant” has the meaning given to such term in Section 6.1(b).

“Asset Sale” has the meaning given such term in Section 7.10.

“Benefited Fixed Rate Note Holder” has the meaning given to such term in Section
10.8(a).

“Blocked Person” means (i) an OFAC Listed Person, (ii) an agent, department, or
instrumentality of, or a Person otherwise beneficially owned by, controlled by
or acting on behalf of, directly or indirectly, (x) any OFAC Listed Person or
(y) any Person, entity, organization, foreign country or regime that is subject
to any OFAC Sanctions Program, or (iii) a Person otherwise blocked, subject to
sanctions under or engaged in any activity in violation of U.S. Economic
Sanctions.

“Board” means the Board of Governors of the Federal Reserve System of the United
States (or any successor).

“Borrower” means, prior to the effectiveness of the Merger, Sharyland Projects
and, upon and after the effectiveness of the Merger, SDTS, as successor by
merger to Sharyland Projects.

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

“Capital Lease” means, at any time, a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

2

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

 

“Capital Stock” of any Person shall mean any and all shares, interests, rights
to purchase, warrants, options, participation, patronage capital or other
equivalents of or interest in (however designated) equity of such Person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest.

“Cash Flow” means, for any period, the sum of the following (without
duplication): (i) all cash paid to the Borrower during such period under the
Leases, (ii) all cash distributions received by the Borrower from Project
Finance Subsidiaries of the Borrower during such period, (iii) all interest and
investment earnings, if any, paid to the Borrower during such period on amounts
on deposit in the amount created under the Deposit Agreement, (iv) revenues, if
any, received by or on behalf of the Borrower during such period under any
insurance policy as business interruption insurance proceeds, (v) direct cash
equity investments made by TDC in the Borrower during such period (excluding
equity contributed to a Project Finance Subsidiary) in an amount not greater
than the amount necessary to cause the Borrower to be in compliance with the
financial covenants set forth in Section 6.11 (each such investment, an “Equity
Cure”); provided, however, that during any period of four consecutive fiscal
quarters, “Cash Flow” shall include an Equity Cure in no more than two of such
quarters and (vi) proceeds of any borrowing made after the date hereof to the
extent used to finance the payment of bullet or balloon installments of
Indebtedness for borrowed money.

“Cash Flow Available for Debt Service” for any period, means (i) Cash Flow
received during such period minus (ii) (A) all O&M Costs paid during such period
and (B) if an Equity Cure has been made in any fiscal quarter during the period
for which Cash Flow Available for Debt Service is calculated, the lesser of the
aggregate amount of (x) such Equity Cure during such period and (y) the
aggregate amount of cash distributions paid by the Borrower during such period.

“CCN” means a Certificate of Convenience and Necessity or amendment thereto
issued by the PUCT in respect of the Project.

“CISADA” means the Comprehensive Iran Sanctions, Accountability and Divestment
Act.

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time.

“Consent” means the Consent and Agreement of Fixed Rate Note Holders dated as of
the date hereof by and among the Fixed Rate Note Holders and Sharyland Projects,
L.L.C.

“Collateral” means, collectively, the collateral described in each of the
Security Documents.

“Collateral Agency Agreement” means the Second Amended and Restated Collateral
Agency Agreement, dated as of December 10, 2014, among the Collateral Agent, the
Borrower, the Fixed Rate Note Holders (pursuant to the Joinder to the Collateral
Agency Agreement) and the holders of other Permitted Secured Indebtedness from
time to time party thereto.

“Collateral Agent” means The Bank of New York Mellon Trust Company, N.A., a
national association, acting in its capacity as collateral agent for itself and
the other Secured Parties, or its successors in such capacity appointed pursuant
to the terms of the Collateral Agency Agreement.

3

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

 

“Consolidated Net Plant” means, with respect to any Person, as of the date of
determination, the net plant set forth on the face of the consolidated balance
sheet of such Person or absent such amount on the consolidated balance sheet,
the total plant of such Person on a consolidated basis minus accumulated
depreciation set forth in the footnotes of the consolidated financial
statements, in each case for the fiscal quarter ended on the date of the last
financial statements delivered pursuant to Section 6.1.

“Consolidated Qualified Lessee” shall mean any Qualified Lessee that is
consolidated into the financial statements of another Qualified Lessee.

“Consolidated Total Assets” means, at any time, the total assets of the Borrower
and its Subsidiaries which would be shown on a consolidated balance sheet of the
Borrower and its Subsidiaries as of such time prepared in accordance with GAAP.

“Contractual Obligation” shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.

“Controlled Entity” means (i) any of the Subsidiaries of the Borrower and any of
their or the Borrower’s respective Controlled Affiliates and (ii) if the
Borrower has a parent company, such parent company and its Controlled
Affiliates.

“CREZ Lease” means the Second Amended and Restated Lease Agreement (CREZ
Assets), between the Borrower, as lessor, and SU, as lessee, with respect to the
CREZ Project.

“CREZ Project” shall mean the five transmission lines, four substations and
other facilities in Texas identified and awarded to SU by the Public Utility
Commission of Texas (the “PUCT”) in Docket Number 37902.

“Cross Valley Project” means the approximately 49 mile transmission line in
South Texas near the Mexican border, known as the “North Edinburg to Loma Alta
345 kV single-circuit transmission line” project, subsequently, renamed as the
“North Edinburg to Palmito 345 kV double-circuit transmission line” project,
which is built on double-circuit capable structures and the Palmito substation
located on the eastern terminus of the Cross Valley Project. The Cross Valley
Project is part of a 100 mile transmission line, which is jointly developed and
permitted by SU and Electric Transmission Texas.

“Cross Valley Project Transfer” shall mean the sale and Transfer of all of the
Capital Stock of CV Project Entity, L.L.C., a Project Finance Subsidiary of the
Borrower, to Cross Valley Partnership, L.P., a Person Controlled by one or more
Hunt Family Members, for a purchase price at least equal to the Cross Valley
Project’s rate base cost at such time.

“Debt Service” for any period, the aggregate (without duplication) of (i) all
amounts of interest on the Fixed Rate Notes and in respect of other Indebtedness
of the Borrower required to be paid during such period, plus (ii) all amounts of
principal on the Fixed Rate Notes and in respect of other Indebtedness of the
Borrower or required to be paid during such period, excluding any optional
prepayments of principal during such period, plus (iii) all other premiums,
fees, costs, charges, expenses and indemnities due and payable to the Fixed Rate
Note Holders or the other Secured Parties and holders of other Indebtedness of
the Borrower and agents acting on their behalf during such period.

4

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

 

“Debt Service Coverage Ratio” means, for each period of four consecutive fiscal
quarters, the quotient of (i) Cash Flow Available for Debt Service for such
period to (ii) Debt Service for such period. If, during any period, the Borrower
and/or any Subsidiary enters into a transaction or series of related
transactions not prohibited by this Agreement (including by waiver, consent or
amendment given or made in accordance with Section 10.1) pursuant to which the
Borrower and/or any Subsidiary acquires or disposes of any assets with a fair
market value greater than $1,000,000, the Debt Service Coverage Ratio shall be
calculated on a pro forma basis after giving effect to such transaction or
series of related transactions as a whole (including any related incurrence,
repayment or assumption of Indebtedness), and such transaction or series of
related transactions (including any related incurrence, repayment or assumption
of Indebtedness) shall be deemed to have occurred as of the first day of the
applicable period.

“Deeds of Trust” means (i) the Amended and Restated First Lien Deed of Trust,
Security Agreement and Fixture Filing (Texas) and each First Lien Deed of Trust,
Security Agreement, Assignment of Rents and Leases and Fixture Filing (Texas) by
and from the Borrower, as grantor, to Peter M. Oxman, as trustee, for the
benefit of the Collateral Agent and the other Secured Parties, dated as of July
13, 2010, in each case as the same may be amended, restated, supplemented or
otherwise modified from time to time and (ii) each other deed of trust by and
from the Borrower, as grantor, for the benefit of the Collateral Agent and the
other Secured Parties entered into from time to time.

“Default” means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

“Default Rate” has the meaning given to such term in Section 2.7(b).

“Deposit Agreement” means the Amended and Restated Deposit Account Control
Agreement, dated as of December 20, 2014, among the Borrower, the Collateral
Agent and Bank of America, N.A.

“Development Agreement” means that certain Development Agreement entered into or
to be entered into among Hunt Transmission Services, L.L.C., SU, the General
Partner and/or the Operating Partnership in connection with one or more New
Projects, pursuant to which Hunt Transmission Services, L.L.C. has granted the
General Partner a right of first offer related to the New Projects identified
therein, as amended from time to time in accordance with its terms.

“Disposition Value” means, at any time, with respect to any property (a) in the
case of property that does not constitute Subsidiary Stock, the book value
thereof, valued at the time of such disposition in good faith by the Borrower,
and (b) in the case of property that constitutes Subsidiary Stock, an amount
equal to (x) the book value of all assets of the Subsidiary that issued such
Subsidiary Stock multiplied by (y) the percentage of all of the outstanding
Capital Stock of such Subsidiary represented by such Subsidiary Stock subject to
an Asset Sale (assuming, in making such calculations, that all Securities
convertible into such Capital Stock are so converted and giving full effect to
all transactions that would occur or be required in connection with such
conversion), determined at the time of the disposition thereof, in good faith by
the Borrower.

5

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

 

“Distributions” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Capital Stock of any Person,
or any payment (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, defeasance, acquisition, cancellation or termination of any such
Capital Stock or on account of any return of capital to such Person’s
stockholders, partners or members (or the equivalent Person thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment.

“Dollars” and “$” means United States dollars or such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts in the United States of America.

“Environmental Claim” means any and all actions, suits, demands, demand letters,
claims, Liens, notices of non-compliance or violation, notices of liability or
potential liability, investigations, or proceedings, under or relating to any
Environmental Law, or regarding the investigation or remediation or release of,
or human exposure to, any Materials of Environmental Concern.

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to Hazardous Materials.

“ERCOT” means the Electric Reliability Council of Texas or any other succeeding
entity thereof.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time in effect.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Borrower, is treated as a single employer under Section
414 of the Code.

“Event of Default” is defined in Section 8.1.

“Fair Market Value” shall mean, at any time and with respect to any property,
the sale value of such property that would be realized in an arm’s-length sale
at such time between an informed and willing buyer and an informed and willing
seller (neither being under a compulsion to buy or sell).

“FERC” means the Federal Energy Regulatory Commission, or its successor.

“FERC Lease” means the Third Amended and Restated Lease Agreement (Stanton
Transmission Loop Assets) between the Borrower, as lessor, and SU, as lessee.

“Financing Documents” means this Agreement, each Fixed Rate Note, the 2009 NPA,
the 2029 Notes, the 2010 NPA, the 2030 Notes, the RBC Agreement, the Security
Documents, any other documents, agreements or instruments entered into in
connection with any of the foregoing and any other documents, agreements or
instruments from time to time constituting “Financing Agreements” under the
Collateral Agency Agreement.

6

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

 

“First Amendment” shall mean that certain First Amendment to Amended and
Restated Credit Agreement, Direction and Waiver, dated as of November 1, 2017,
among the Borrower and the Fixed Rate Note Holders party thereto.

“First Amendment Effective Date” shall mean _________, 2017.

“Fixed Rate Note” means either an Initial Fixed Rate Note or a Replacement Fixed
Rate Note, as applicable.

“Fixed Rate Note Holder” means a financial institution or other Person that
holds a Fixed Rate Note pursuant to this Agreement.

“Fixed Rate Note Maturity Date” means June 20, 2018.

“FPA” means the Federal Power Act, 16 U.S.C. §§791 et seq., as amended, and the
regulations of the FERC thereunder.

“GAAP” means generally accepted accounting principles as in effect in the United
States of America. In the event that any “Accounting Change” (as defined below)
shall occur and such change results in a change in the method of calculation of
financial covenants, ratios, standards or terms in this Agreement, then the
Borrower and the Fixed Rate Note Holders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to reflect equitably such
Accounting Changes with the desired result that the criteria for evaluating the
financial condition of the Borrower and SU shall be the same after such
Accounting Changes as if such Accounting Changes had not been made. Until such
time as such an amendment shall have been executed and delivered by the Borrower
and the Fixed Rate Note Holders, all financial covenants, ratios, standards and
terms in this Agreement shall continue to be calculated or construed as if such
Accounting Changes had not occurred. “Accounting Changes” refers to changes in
accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants or, if applicable, the SEC.

“General Partner” means InfraREIT, L.L.C., a Delaware limited liability company,
and its successors.

“Golden Spread Project” shall mean a new 345 kilovolt transmission line that
will be approximately 55 miles long and will connect the Golden Spread Electric
Cooperative, Inc. Antelope-Elk Energy Center in Hale County, approximately 1.6
miles north of the City of Abernathy on County Road P, to the proposed White
River Station that will be built by SU in Floyd County, approximately 9 miles
northwest of the City of Floydada and 1.1 miles east of the intersection of
County Road 231 and County Road 200 and the Abernathy substation that is located
in the western portion of the transmission line.

“Golden Spread Project Transfer” shall mean the sale and Transfer of all of the
Capital Stock of GS Project Entity to a Person Controlled by one or more Hunt
Family Members for a purchase price at least equal to the Golden Spread
Project’s rate base cost at such time.

“Governmental Authority” means:

(a)the government of:

(i)the United States of America or any State or other political subdivision
thereof, or

7

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

 

(ii)any other jurisdiction in which the Borrower conducts all or any part of its
business, or which asserts jurisdiction over any properties of the Borrower, or

(b)any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government, or

(c)ERCOT, or

(d)the Texas Regional Entity.

“GS Project Entity” means a Project Finance Subsidiary of the Borrower created
to finance and develop the Golden Spread Project.

“Guaranty” means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness of any other Person in any manner, whether directly or indirectly,
including (without limitation) obligations incurred through an agreement,
contingent or otherwise, by such Person:

(a)to purchase such Indebtedness or any property constituting security

therefor;

(b)to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
Indebtedness;

(c)to lease properties or to purchase properties or services primarily for the
purpose of assuring the owner of such Indebtedness of the ability of any other
Person to make payment of the Indebtedness; or

(d)otherwise to assure the owner of such Indebtedness against loss in respect
thereof.

The amount of any Guaranty shall be deemed to be an amount equal to the stated
or determinable amount of the related primary obligation (or, if less, the
maximum amount for which such Guaranty is made) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing Person in good faith. In any computation of the
indebtedness or other liabilities of the obligor under any Guaranty, the
indebtedness or other obligations that are the subject of such Guaranty shall be
assumed to be direct obligations of such obligor.

“Hazardous Material” means any and all pollutants, toxic or hazardous wastes or
other substances that might pose a hazard to health and safety, the removal of
which may be required or the generation, manufacture, refining, production,
processing, treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage or filtration of which is or
shall be restricted, prohibited or penalized by any applicable law including,
but not limited to, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum, petroleum products, lead based paint, radon gas or similar
restricted, prohibited or penalized substances.

8

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

 

“Hunt Family Members” means (i) Ray L. Hunt; (ii) the spouse of Ray L. Hunt and
each of his children and siblings; (iii) the spouse and lineal descendants of
any Person identified in the foregoing clause (ii); (iv) any trust or account
primarily for the benefit of any Person or Persons identified in the foregoing
clauses (i), (ii) or (iii); (v) any corporation, partnership or other entity in
which any of the Persons identified in the foregoing clauses (i), (ii), (iii) or
(iv) are the beneficial owners of substantially all of the shares of capital
stock, membership interests, partnership interests or other equity interests and
options or warrants to acquire, or securities convertible into, capital stock,
membership interests, partnership interests or other equity securities of an
entity; and (vi) the personal representative or guardian of any of the Persons
identified in the foregoing clauses (i), (ii) and (iii) upon such Person’s death
for purposes of the administration of such Person’s estate or upon such Person’s
disability or incompetency for purposes of the protection and management of the
assets of such Person.

“Indebtedness” with respect to any Person means, at any time, without
duplication,

(a)its liabilities for borrowed money and its redemption obligations in respect
of mandatorily redeemable Preferred Stock;

(b)its liabilities for the deferred purchase price of property acquired by such
Person (excluding accounts payable arising in the ordinary course of business
but including all liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such property);

(c)(i) all liabilities appearing on its balance sheet in accordance with GAAP in
respect of Capital Leases and (ii) all liabilities which would appear on its
balance sheet in accordance with GAAP in respect of Synthetic Leases assuming
such Synthetic Leases were accounted for as Capital Leases; provided, however,
that for purposes of this definition (including with respect to clauses (i) and
(ii) hereof), the System Leases, any other Lease and any similar lease shall not
be treated as a capital lease;

(d)all liabilities for borrowed money secured by any Lien with respect to any
property owned by such Person (whether or not it has assumed or otherwise become
liable for such liabilities);

(e)all its liabilities in respect of letters of credit or instruments serving a
similar function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed money);
provided, however, that for purposes of this definition, any surety bonds or
indemnification agreements entered into by SU (with respect to which the
Borrower or a subsidiary thereof has a reimbursement or backstop obligation) in
connection with condemnation proceedings shall be excluded;

(f)the aggregate Swap Termination Value of all Swap Contracts of such Person;
and

(g)any Guaranty of such Person with respect to liabilities of a type described
in any of clauses (a) through (f) hereof.

Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.

9

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

 

“Indebtedness Prepayment Application”  means, with respect to any Transfer of
property constituting an Asset Sale, the payment by the Borrower or any
Subsidiary of cash in an amount equal to the Net Proceeds Amount (or portion
thereof) with respect to such Asset Sale applied to repay or retire Permitted
Secured Indebtedness; provided, that with respect to any such revolving
Permitted Secured Indebtedness, the amount of the Indebtedness Prepayment
Application with respect thereto shall be deemed to be equal to the amount of
any such repayment or retirement to the extent that there has been a commitment
reduction in respect thereof;  provided further that in the course of making the
initial payment (or initial offer in respect of such payment) the Borrower shall
offer to prepay each outstanding Fixed Rate Note in accordance with Section
2.5(c) in a principal amount which is at least equal to the Ratable Portion for
such Fixed Rate Note. “Ratable Portion” for any Fixed Rate Note means an amount
equal to the product of (x) the Net Proceeds Amount (or portion thereof) being
so applied to the payment of Permitted Secured Indebtedness multiplied by (y) a
fraction the numerator of which is the outstanding principal amount of such
Fixed Rate Note and the denominator of which is the aggregate principal amount
of Permitted Secured Indebtedness of the Borrower and its Subsidiaries
outstanding at such time; provided that the outstanding principal amount of any
revolving Permitted Secured Indebtedness will not be included in such
denominator except to the extent an Indebtedness Prepayment Application is being
made with respect thereto in accordance with the preceding sentence.

“Indemnified Liabilities” has the meaning given such term in Section 10.5.
“Indemnitee” has the meaning given such term in Section 10.5.

“Initial Fixed Rate Notes” has the meaning given to such term in Section 2.1
(a).

“Interest Payment Date” means (a) the thirtieth (30th) day of each March, June,
September and December and the Fixed Note Maturity Date and (b) the date of any
repayment or prepayment made in respect of the Fixed Rate Notes.

“Investment Grade Credit Rating” means with respect to any Person, a rating of
the long-term unsecured debt securities of such Person (or if such rating is
unavailable, issuer rating) equal to or higher than (1) “BBB-” (or the
equivalent) with a stable or better outlook by Standard & Poor’s Financial
Services LLC, or (2) “Baa3” (or the equivalent) with a stable or better outlook
by Moody’s Corporation; provided, that if such Person has a rating from both
Standard & Poor’s Financing Services LLC and Moody’s Corporation, then the
applicable rating shall be deemed to be the lower of the two.

“Investments” has the meaning given to such term in Section 7.7.

“Joinder to Collateral Agency Agreement” means the Joinder Agreement dated as of
the date hereof, by and among the Collateral Agent, the Borrower, the Fixed Rate
Note Holders, and the other Secured Parties, pursuant to which the Fixed Rate
Note Holders joined the Collateral Agency Agreement as secured parties
thereunder.

“Leased Consolidated Net Plant” shall mean that portion of the Consolidated Net
Plant of the lessor of a Lease between such lessor and a Qualified Lessee that
is the subject of such Lease.

“Leases” means (i) the System Leases and any other leases of transmission and
distribution and related assets to a Qualified Lessee under which the Borrower
or any Subsidiary of the Borrower is a party as a lessor and (ii) any lease of
transmission and distribution and related assets pursuant to which SU is the
lessee and a Subsidiary of SU or another Person Controlled by one or more Hunt
Family Members is the lessor; provided, no such lease will qualify as a “Lease”
hereunder if each of the three following criteria apply; (x) SU is the lessee,
(y) cash rental payments have become due and payable pursuant thereto and (z)
none of the Borrower, a Subsidiary of the Borrower or a Subsidiary of SU is the
lessor.

10

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

 

“Lenders” has the meaning given to such term in the Recitals.

“Lien” means, with respect to any Person, any mortgage, lien, pledge, charge,
security interest or other encumbrance, or any interest or title of any vendor,
lessor, lender or other secured party to or of such Person under any conditional
sale or other title retention agreement or Capital Lease, upon or with respect
to any property or asset of such Person, in each case, in the nature of a
security interest of any kind or nature whatsoever.

“Make-Whole Amount” means, with respect to any Fixed Rate Note, an amount equal
to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Fixed Rate 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 Amount,
the following terms have the following meanings:

A.“Called Principal” means, with respect to any Fixed Rate Note, the principal
of such Fixed Rate Note that is to be prepaid pursuant to Section 2.5 or has
become or is declared to be immediately due and payable pursuant to Section 8.2,
as the context requires.

B.“Discounted Value” means, with respect to the Called Principal of any Fixed
Rate Note, the amount obtained by discounting all Remaining Scheduled 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 Fixed Rate Notes is payable)
equal to the Reinvestment Yield with respect to such Called Principal.

C.“Reinvestment Yield” means, with respect to the Called Principal of any Fixed
Rate Note, 0.50% greater than the yield to maturity implied by the yield(s)
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” (or such other display as may replace Page PX1)
on Bloomberg Financial Markets for the most recently issued actively traded
on-the-run U.S. Treasury securities (“Reported”) having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date. If
there are no such U.S. Treasury securities Reported having a maturity equal to
such Remaining Average Life, then such implied yield to maturity will be
determined by (a) converting U.S. Treasury bill quotations to bond equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between the yields Reported for the applicable most recently issued
actively traded on-the-run U.S. Treasury securities with the maturities (1)
closest to and greater than such Remaining Average Life and (2) closest to and
less than such Remaining Average Life. The Reinvestment Yield shall be rounded
to the number of decimal places as appears in the interest rate of the
applicable Fixed Rate Note.

If such yields are not Reported or the yields Reported as of such time are not
ascertainable (including by way of interpolation), then “Reinvestment Yield”
means, with respect to the Called Principal of any Fixed Rate Note, the yield to
maturity implied by the U.S. Treasury constant maturity 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

11

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

 

Principal, in Federal Reserve Statistical Release H.15 (or any comparable
successor publication) for the U.S. Treasury constant maturity having a term
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. If there is no such U.S. Treasury constant maturity having a
term equal to such Remaining Average Life, such implied yield to maturity will
be determined by interpolating linearly between (1) the U.S. Treasury constant
maturity so reported with the term closest to and greater than such Remaining
Average Life and (2) the U.S. Treasury constant maturity so reported with the
term closest to and less than such Remaining Average Life. The Reinvestment
Yield shall be rounded to the number of decimal places as appears in the
interest rate of the applicable Fixed Rate Note.

D.“Remaining Average Life” means, with respect to any Called Principal, the
number of years 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, computed on the basis of a 360-day year composed of twelve
30-day months, that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled Payment.

E.“Remaining Scheduled Payments” means, with respect to the Called Principal of
any Fixed Rate 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 Fixed Rate Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and required
to be paid on such Settlement Date.

F.“Settlement Date” means, with respect to the Called Principal of any Fixed
Rate Note, the date on which such Called Principal is to be prepaid pursuant to
Section 2.5 or has become or is declared to be immediately due and payable
pursuant to Section 8.2, as the context requires.

“Material Adverse Effect” means a material adverse effect upon and/or material
adverse developments with respect to (a) the operations, business, assets,
properties, liabilities or financial condition of the Borrower and its
Subsidiaries (taken as a whole); (b) the ability of the Note Parties (taken as a
whole) to perform their obligations under the Note Documents; (c) the legality,
validity or enforceability of this Agreement or any other Note Document or the
rights or remedies of the Collateral Agent or the Fixed Rate Note Holders
hereunder or thereunder or (d) the validity, perfection or priority of the
Collateral Agent’s Liens on any material Collateral.

“Material Project Documents” means (i) any contract or agreement that is related
to the ownership, operation, maintenance, management service, repair or use of
the System entered into by the Borrower or any Subsidiary subsequent to December
10, 2014 that involves full payments or obligations of the Borrower or any
Subsidiary in excess of $5,000,000 in any calendar year, and (ii) System Leases,
but shall exclude any documents subject to Section 7.12 herein.

“Materials of Environmental Concern” means all pollutants, contaminants, wastes,
chemicals, explosive or radioactive substances, petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas or electromagnetic fields, to the extent subject to
regulation or which can give rise to liability under any Environmental Law.

12

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

 

“McAllen Lease” shall mean the Third Amended and Restated Master System Lease
Agreement (McAllen System), between the Borrower, as lessor, and SU, as lessee.

“Merger” has the meaning given to such term in the Recitals.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a Plan that is a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA).

“Net Proceeds Amount” means, with respect to any Transfer of any assets by any
Person, an amount equal to the difference of (a) the aggregate amount of the
consideration (if not cash, valued at the Fair Market Value of such
consideration at the time of the consummation of such Transfer) allocated to
such Person in respect of such Transfer, net of any applicable taxes incurred in
connection with such Transfer, minus (b) all ordinary and reasonable
out-of-pocket costs and expenses actually incurred by such Person in connection
with such Transfer.

“New Project” shall mean any transmission or distribution project, including any
such project acquired or built by a Project Finance Subsidiary, any “Footprint
Project” (as defined in the Leases) that the Borrower or a Subsidiary of the
Borrower funds pursuant to a Lease and any such project that the General Partner
or a Subsidiary thereof acquires pursuant to the Development Agreement,
including, for the avoidance of doubt, the Cross Valley Project and the Golden
Spread Project.

“Non-Recourse Debt” means Indebtedness of a Project Finance Subsidiary or a
Subsidiary of SU, as the case may be, that, if secured, is secured solely by a
pledge of collateral owned by such Project Finance Subsidiary or such Subsidiary
of SU, as the case may be, and the Capital Stock in such Project Finance
Subsidiary or such Subsidiary of SU, as the case may be, and for which no Person
other than such Project Finance Subsidiary or such Subsidiary of SU, as the case
may be, is personally liable.

“Note Documents” means this Agreement, the Fixed Rate Notes, the Security
Documents, the Subsidiary Guaranties and any amendment, waiver, supplement or
other modification to any of the foregoing.

“Note Parties” means the Borrower and each Subsidiary that is a party to a Note
Document, as applicable.

“O&M Costs” means actual cash management and operation costs of the Borrower,
taxes payable by the Borrower, insurance premiums, consumables, fees and
expenses of, and other amounts owing to, the Collateral Agent and the depositary
under the Depositary Agreement, and other costs and expenses in connection with
the management or operation of the Borrower, but exclusive in all cases of (a)
non-cash charges, including depreciation or obsolescence charges or reserves
therefor, amortization of intangibles or other bookkeeping entries of a similar
nature, (b) all other payments of Debt Service and Make-Whole Amounts, if any,
(c) costs of repair or replacement paid with insurance proceeds and (d)
development costs related to any Project Finance Subsidiary.

“Obligations” means the unpaid principal of and interest on (including interest
accruing after the maturity of the Fixed Rate Notes and interest accruing after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
the Fixed Rate Notes and all other obligations and liabilities of the Borrower
to any Fixed Rate Note

13

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

 

Holder, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, any other Note Document or any other document
made, delivered or given in connection herewith or therewith, whether on account
of principal, interest, Make Whole Amount, indemnities, costs, expenses
(including all fees, charges and disbursements of counsel to any Fixed Rate Note
Holder that are required to be paid by the Borrower pursuant hereto) or
otherwise (whether or not evidenced by any note or instrument and whether or not
for the payment of money).

“OFAC” means the Office of Foreign Assets Control, United States Department of
the Treasury.

“OFAC Listed Person” means a Person whose name appears on the list of Specially
Designated Nationals and Blocked Persons published by OFAC.

“OFAC Sanctions Program” shall mean any economic or trade sanction that OFAC is
responsible for administering and enforcing. A list of OFAC Sanctions Programs
may be found at
http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.

“Operating Partnership” means InfraREIT Partners, LP, a Delaware limited
partnership.

“Original Credit Agreement” has the meaning given to such term in the Recitals.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Permit” means any action, approval, consent, waiver, exemption, variance,
franchise, order, permit, authorization, right or license of or from a
Governmental Authority, provided that interests or estates in real property,
shall not be considered Permits.

“Permitted Investments” means any (a) marketable direct obligation of the United
States of America, (b) marketable obligation directly and fully guaranteed as to
interest and principal by the United States of America, (c) demand deposit with
Bank of America, N.A., or time deposit, certificate of deposit and banker’s
acceptance issued by any member bank of the Federal Reserve System which is
organized under the laws of the United States of America or any state thereof or
any United States branch of a foreign bank, in each case whose equity capital is
in excess of $500,000,000 and whose long-term debt securities are rated “A” or
better by S&P and “A2” or better by Moody’s, (d) commercial paper or tax exempt
obligations given the highest rating by Moody’s and S&P, (e) obligations of a
commercial bank described in clause (c) above, in respect of the repurchase of
obligations of the type as described in clauses (a) and (b) hereof, provided
that such repurchase obligation shall be fully secured by obligations of the
type described in said clauses (a) and (b) and the possession of such obligation
shall be transferred to, and segregated from other obligations owned by, any
such bank, (f) instrument rated “AAA” by S&P and “Aaa” by Moody’s issued by
investment companies and having an original maturity of 180 days or less, (g)
eurodollar certificates of deposit issued by any bank described in clause (c)
above, and (h) marketable security rated not less than “A-1” by S&P or not less
than “Prime-1” by Moody’s. In no event shall Permitted Investments include any
obligation, certificate of deposit, acceptance, commercial paper or instrument
which by its terms matures (A) more than 180 days after the date of investment,
unless a bank meeting the requirements of clause (c) above shall have agreed to
repurchase such obligation, certificate of deposit, acceptance, commercial paper
or instrument at its purchase price plus earned interest within no more than 90
days after its purchase thereunder or (B) after the next Payment Date.

“Permitted Lien” is defined in Section 7.5.

14

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

 

“Permitted Secured Indebtedness” has the meaning given to it in the Collateral
Agency Agreement.

“Person” means an individual, partnership, corporation, cooperative corporation,
limited liability company, association, trust, unincorporated organization,
business entity or Governmental Authority.

“Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA)
subject to Title I of ERISA that is or, within the preceding five years, has
been established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Borrower or
any ERISA Affiliate or with respect to which the Borrower or any ERISA Affiliate
may have any liability.

“Pledge Agreement” means the Amended and Restated Assignment of Membership
Interests and Pledge Agreement, dated as of December 20, 2014, by TDC with
respect to its membership interests in the Borrower, to the Collateral Agent.

“Preferred Stock” means any class of capital stock of a Person that is preferred
over any other class of capital stock (or similar equity interests) of such
Person as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such Person.

“Project Finance Subsidiary” means a special purpose Subsidiary of a Person
created to develop a New Project and to finance such New Project solely with
Non-Recourse Debt and equity (including, for the avoidance of doubt, CV Project
Entity, L.L.C.).

“property” or “properties” means, unless otherwise specifically limited, real or
personal property of any kind, tangible or intangible, choate or inchoate.

“Property Reinvestment Application” means, with respect to any Transfer of
assets constituting an Asset Sale, the application of all or any portion of the
Net Proceeds Amount with respect to such Transfer to the acquisition by the
Borrower or any of its Subsidiaries of assets to be used in the principal
business of the Borrower or any of its Subsidiaries.  For avoidance of doubt, to
the extent consideration received by the Borrower or any of its Subsidiaries in
an Asset Sale is not cash but constitutes assets to be used in the principal
business of the Borrower or any of its Subsidiaries, the Net Proceeds Amount in
respect of such consideration received shall be considered a Property
Reinvestment Application.

“PUCT” means Public Utility Commission of Texas.

“Qualified Lessee” means SU and/or any other utility that is (x) approved or
authorized by the applicable public utility commission or similar regulatory
authority to operate and/or lease the transmission and/or distribution assets of
the Borrower or any Subsidiary and (y) a party to a then-effective lease
agreement with the Borrower or a Subsidiary thereof pursuant to which such
utility leases and operates such entity’s transmission and/or distribution
assets.

“Qualified Lessee Affiliate Loan” means loans made by the Operating Partnership
or a Subsidiary thereof to Qualified Lessees from time to time in an aggregate
principal amount not to exceed $10,000,000 at any time outstanding as long as
the use of proceeds of such loans is limited to the acquisition or financing of
equipment or other assets used in the Qualified Lessee’s operation or lease of
transmission or distribution assets from the Borrower or a Subsidiary thereof
pursuant to a Lease.

15

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

 

“RBC” means Royal Bank of Canada, a Canadian banking institution.

“RBC Agreement” means that certain Third Amended and Restated Credit Agreement,
dated as of December 10, 2014, among the Borrower, as borrower, the lenders from
time to time party thereto and RBC, administrative agent, as the same may be
amended, restated, supplemented and otherwise modified from time to time.

“Real Property Collateral” means any fee owned real property (other than
easements and rights of way) with a fair market value in excess of $3,000,000.

“Regulation D” means Regulation D of the Board as in effect from time to time.

“Regulation U” means Regulation U of the Board as in effect from time to time.

“Replacement Fixed Rate Note” has the meaning given to such term in Section
2.1(b)

“Required Fixed Rate Note Holders” means at any time, and at all times excluding
any portion of the Fixed Rate Notes held by Affiliated Fixed Rate Note Holders,
the holders of more than 50% of the aggregate principal amount of the Fixed Rate
Notes.

“Required Permit” means all governmental and third party licenses, permits,
franchises, authorizations, patents, copyright, proprietary software, service
marks, trademarks and trade names, or rights thereto, that are material to the
ownership, leasing, operating and maintenance of the System.

“Requirements of Law” means as to any Person, the certificate of incorporation
or formation and by-laws or partnership or operating agreement or other
organizational or governing documents of such Person, and any local, state or
Federal law, regulation, rule, ordinances or determination, interpretation or
order of an arbitrator or a court or other Governmental Authority, and any
Required Permit, in each case applicable to or binding upon such Person or any
of its properties or its business or to which such Person or any of its
properties or its business is subject.

“Responsible Officer” means any Senior Financial Officer and any other officer
of the Borrower with responsibility for the administration of the relevant
portion of this Agreement.

“ROFO Transfer” shall mean the sale and Transfer to Persons Controlled by one or
more Hunt Family Members of any assets located in the Texas Panhandle related to
the CREZ Project that are categorized as ROFO Projects under the Development
Agreement with an aggregate fair market value not to exceed $5,000,000.

“S&P” means Standard and Poor’s Rating Services.

“SDTS” has the meaning given to such term in the Recitals.

“SEC” shall mean the Securities and Exchange Commission of the United States, or
any successor thereto.

“Secured Parties” means the Collateral Agent, the Fixed Rate Note Holders and
the other “Secured Parties” (as defined in the Collateral Agency Agreement) from
time to time.

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

16

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

 

“Securities” or “Security” shall have the meaning specified in Section 2(1) of
the Securities Act.

“Security Agreement” means the Amended and Restated Security Agreement, dated as
of September 29, 2015, between SDTS and the Collateral Agent.

“Security Documents” means, to the extent such document has not been terminated,
(i) the Collateral Agency Agreement, as joined by the Joinder to the Collateral
Agency Agreement, the Security Agreement, the Deeds of Trust, the Pledge
Agreement and the Deposit Agreement and (ii) other security documents entered
into pursuant to Section 6.9 and any other security documents, financing
statements and the like filed or recorded in connection with the foregoing.

“Senior Financial Officer” means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Borrower or a Qualified
Lessee, as applicable.

“Sharyland Projects” has the meaning given to such term in the Recitals.

“Specified Qualified Lessee” shall mean SU and any Qualified Lessee (a) (i)
without an Investment Grade Credit Rating or (ii) whose obligations under the
applicable Leases are not guaranteed by an entity with an Investment Grade
Rating and (b) whose business is limited to the leasing of transmission and/or
distribution assets from the Borrower or any of its Subsidiaries or Affiliates.

“Stanton/Brady/Celeste Lease” shall mean the Second Amended and Restated Lease
Agreement (Stanton/Brady/Celeste Assets), between the Borrower, as lessor, and
SU, as lessee.

“SU” means Sharyland Utilities, L.P.

“Subsidiary” means, as to any Person, any other Person in which such first
Person or one or more of its Subsidiaries or such first Person and one or more
of its Subsidiaries owns sufficient equity or voting interests to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
second Person and any partnership or joint venture if more than a 50% interest
in the profits or capital thereof is owned by such first Person or one or more
of its Subsidiaries or such first Person and one or more of its Subsidiaries
(unless such partnership or joint venture can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries).  Unless the context otherwise clearly requires, any reference to
a “Subsidiary” is a reference to a Subsidiary of the Borrower.

“Subsidiary Guaranty” means each Guaranty provided by the Subsidiary Guarantors
pursuant to Section 6.9(d), if any, substantially in the form of Exhibit B to
the Agreement.

“Subsidiary Guarantor” means any Subsidiary of the Borrower that is a guarantor
under a Guaranty pursuant to Section 6.9(d).

“Subsidiary Stock” means, with respect to any Person, the Capital Stock of any
Subsidiary of such Person.

“SVO” means the Securities Valuation Office of the National Association of
Insurance Commissioners or any successor to such Office.

17

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

 

“Swap Contract” means (a) any and all interest rate swap transactions, basis
swap transactions, basis swaps, credit derivative transactions, forward rate
transactions, commodity swaps, commodity options, forward commodity contracts,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options or forward foreign exchange transactions, cap transactions, floor
transactions, currency options, spot contracts or any other similar transactions
or any of the foregoing (including, but without limitation, any options to enter
into any of the foregoing), and (b) any and all transactions of any kind, and
the related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc., or any International Foreign Exchange Master
Agreement.

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amounts(s) determined as the
mark-to-market values(s) for such Swap Contracts, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts.

“Synthetic Lease” means, at any time, any lease (including leases that may be
terminated by the lessee at any time) of any property (a) that is accounted for
as an operating lease under GAAP and (b) in respect of which the lessee retains
or obtains ownership of the property so leased for U.S. federal income tax
purposes, other than any such lease under which such Person is the lessor.

“System” means the Borrower’s and/or any Subsidiary’s (other than a Project
Finance Subsidiary’s) integrated electrical transmission and distribution
facilities located primarily in the State of Texas and the systems and other
property necessary to operate the transmission and distribution facilities, and
all improvements to and expansions of such facilities, and each New Project
(upon its completion) owned by the Borrower or a Subsidiary thereof; provided
that, for the purposes hereof, “System” shall not be deemed to include any
easements held by the Borrower or any Subsidiary.

“System Leases” means (1) the McAllen Lease, (2) the Stanton/Brady/Celeste
Lease, (3) the Lease Agreement (ERCOT Transmission Assets), between the
Borrower, as lessor, and SU, as lessee, (4) the FERC Lease, (5) the CREZ Lease
and (6) any and all other Leases and supplements thereto in connection with the
System and the transmission and distribution facilities ancillary thereto and
any easements associated therewith, or, in each of the foregoing clauses (1)
through (6), any new lease entered into in replacement thereof, in accordance
with Section 6.10 and/or Section 7.16 of this Agreement, as applicable.

“Taxes” shall mean all present or future taxes, levies, imposts, duties,
deductions, withholdings (including backup withholding), assessments, fees or
other charges imposed by any Governmental Authority, including any interest,
additions to tax or penalties applicable thereto.

“TDC” means Transmission and Distribution Company, L.L.C.

“Total Debt” means, with respect to the Borrower, all Indebtedness of the
Borrower on a consolidated basis; provided, however, that for purposes of
calculating the Borrower’s Total Debt to Capitalization Ratio, the Borrower’s
Total Debt shall exclude Non- Recourse Debt of a Project Finance Subsidiary of
the Borrower and that portion of the Swap Termination Value defined in clause
(b) of the definition of “Swap Termination Value” and shall include Indebtedness
of SU on a consolidated basis (excluding Non-Recourse Debt of a Project Finance
Subsidiary of SU).

18

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

 

“Total Debt to Capitalization Ratio” means (a) the Borrower’s Total Debt,
divided by (b) the sum of (i) Total Debt plus (ii) the Borrower’s
capitalization, as shown on the Borrower’s balance sheet plus (iii) if positive,
SU’s capitalization, as shown on its balance sheet. In connection with any
transaction or series of related transactions not prohibited by this Agreement
(including by waiver, consent or amendment given or made in accordance with
Section 10.1) pursuant to which the Borrower or any Subsidiary makes any
acquisition or disposition of assets with a fair market value greater than
$1,000,000, the Total Debt to Capitalization Ratio shall be calculated on a pro
forma basis after giving effect to such transaction or series of related
transactions as a whole (including any related incurrence, repayment or
assumption of Indebtedness).

“Transfer” means, with respect to any item, the sale, exchange, conveyance,
lease, transfer or other disposition of such item.

“UCC” means the Uniform Commercial Code as in effect in the applicable state of
jurisdiction

“UCC Collateral” means the Collateral that is of a type in which a valid
security interest can be created under Article 8 or Article 9 of the UCC as in
effect in New York.

“USA Patriot Act” means United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

“U.S. Economic Sanctions” shall mean United States economic sanctions, including
but not limited to, the Trading with the Enemy Act, the International Emergency
Economic Powers Act, CISADA or any similar law or regulation with respect to
Iran or any other country, the Sudan Accountability and Divestment Act, any OFAC
Sanctions Program, or any economic sanctions regulations administered and
enforced by the United States or any enabling legislation or executive order
relating to any of the foregoing.

“Wholly-Owned Subsidiary” means, at any time, any Subsidiary one hundred percent
of all of the voting interests of which are owned by any one or more of the
Borrower and the Borrower’s other Wholly-Owned Subsidiaries at such time.

1.2.Rules of Interpretation. Except as otherwise expressly provided, the
following rules of interpretation shall apply to this Agreement and the other
Note Documents:

(a)The singular includes the plural and the plural includes the singular; and
words in the masculine, neuter or feminine gender shall be read and construed as
though in either of the other genders where the context so requires.

(b)The word “or” is not exclusive.

(c)A reference to any law includes any amendment or modification to such law,
and all regulations, rulings and other laws and regulations promulgated under
such law.

(d)A reference to a Person includes its successors and permitted assigns.

19

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

 

(e)Accounting terms have the meanings assigned to them by GAAP (as defined in
the applicable Financing Agreement), as applied by the accounting entity to
which they refer.

(f)The words “include,” “includes” and “including” are not limiting.

(g)A reference in a document to an Article, Section, Exhibit, Schedule, Annex or
Appendix is to the Article, Section, Exhibit, Schedule, Annex or Appendix of
such document unless otherwise indicated. Exhibits, Schedules, Annexes or
Appendices to any document shall be deemed incorporated by reference in such
document.

(h)References to “knowledge” or words of similar import refer to the actual
knowledge of the current officers of the relevant Person, without any duty of
investigation unless otherwise indicated.

(i)References to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) shall mean such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and
in effect at any given time

(j)The words “hereof,” “herein” and “hereunder” and words of similar import when
used in any document shall refer to such document as a whole and not to any
particular provision of such document.

(k)References to “days” means calendar days, unless the term “Business Days”
shall be used. References to a time of day means such time in New York, New
York, unless otherwise specified.

(l)The section and subsection headings in a document are for convenience of
reference only and shall neither be deemed to be a part of such document nor
modify, define, expand or limit any of the terms or provisions thereof.

(m)References to agreements or other contractual obligations shall, unless
otherwise specified, be deemed to refer to such agreements or contractual
obligations as amended, supplemented, restated or otherwise modified from time
to time.

20

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

 

ARTICLE 2.

THE FIXED RATE NOTES

2.1.Fixed Rate Notes. (a) On the date of the Original Credit Agreement, the
Borrower authorized the issuance and sale of $60,000,000 aggregate principal
amount of its 5.04% Fixed Rate Notes (the “Initial Fixed Rate Notes”).

(b)Upon the effectiveness of the Merger and at the request of any Fixed Rate
Note Holder, SDTS shall promptly execute and deliver to such Fixed Rate Note
Holder a replacement Fixed Rate Note in amount equal to the then outstanding
principal amount of such Fixed Rate Note Holder’s Initial Fixed Rate Note
provided that such Fixed Rate Note Holder returns it’s Initial Fixed Rate Note
to SDTS marked cancelled (any such replacement note, a “Replacement Fixed Rate
Note”).

2.2.Sale and Purchase of Fixed Rate Notes.  Subject to the terms and conditions
of this Agreement, the Borrower issued and sold to each Fixed Rate Note Holder
and each Fixed Rate Note Holder purchased from the Borrower, on the date of the
Original Credit Agreement, its share of the Fixed Rate Notes at the purchase
price of 100% of the principal amount thereof. The Fixed Rate Note Holders’
obligations hereunder are several and not joint, and no Fixed Rate Holder shall
have any liability to any Person for the performance or non-performance of any
obligation by any other Fixed Rate Note Holder hereunder.

2.3.Repayment of Fixed Rate Note. The Borrower shall repay the full principal
amount of the Fixed Rate Notes to each Fixed Rate Note Holder on the earlier to
occur of the date of acceleration of the Fixed Rate Notes under Section 8.2 and
the Fixed Rate Note Maturity Date.

2.4.[RESERVED].

2.5.Optional Prepayments. (a)The Borrower may prepay the Fixed Rate Notes in
accordance with this Section 2.5(a). At any time the Borrower may, at its
option, upon notice as provided below, prepay at any time all, or from time to
time any part of, the Fixed Rate Notes, in an amount not less than $5,000,000 of
the aggregate principal amount of the Fixed Rate Notes then outstanding, or any
amount in multiples of $1,000,000 in excess thereof, at 100% of the principal
amount so prepaid, and the Make-Whole Amount determined for the prepayment date
with respect to such principal amount. The Borrower will give each Fixed Rate
Note Holder written notice of each optional prepayment under this Section 2.5(a)
not less than 30 days and not more than 60 days prior to the date fixed for such
prepayment.  Each such notice shall specify such prepayment date (which shall be
a Business Day), the aggregate principal amount of the Fixed Rate Notes to be
prepaid on such date, the principal amount of each Fixed Rate Note held by such
Fixed Rate Note Holder to be prepaid, and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and shall
be accompanied by a certificate of a Responsible Officer as to the estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation. Two Business Days prior to such prepayment, the Borrower
shall deliver to each Fixed Rates Note Holder a certificate of a Responsible
Officer specifying the calculation of such Make-Whole Amount as of the specified
prepayment date.

21

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

 

(b)The Borrower will not and will not permit any of its Affiliates to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Fixed Rate Notes except upon the payment or prepayment of the Fixed
Rate Notes in accordance with the terms of this Agreement and the Fixed Rate
Notes and except as provided pursuant to Section 10.6(b) hereunder. The Borrower
will promptly cancel all Fixed Rate Notes acquired by it or by any of its
Affiliates pursuant to any payment or prepayment of Fixed Rate Notes pursuant to
any provision of this Agreement (other than pursuant to Section 10.6(b)
hereunder) and no Fixed Rate Notes may be issued in substitution or exchange for
any such Fixed Rate Notes.

(c) If the Borrower wants to offer to prepay any Fixed Rate Notes in connection
with an Asset Sale pursuant to Section 7.10, the Borrower will give written
notice thereof to each Fixed Rate Note Holder, which notice shall (i) refer
specifically to this Section 2.5(c) and describe in reasonable detail the Asset
Sales giving rise to such offer to prepay the Fixed Rate Notes, (ii) specify the
principal amount of each Fixed Rate Notes being offered to be prepaid, (iii)
specify a date upon which the Fixed Rate Notes will be prepaid, which shall be
not less than 30 days and not more than 60 days after the date of such notice
(the “Disposition Prepayment Date”) and specify the Disposition Response Date
(as defined below), and (iv) offer to prepay on the Disposition Prepayment Date
the amount specified in (ii) above with respect to each Fixed Rate Note together
with interest accrued thereon to the Disposition Prepayment Date. Each Fixed
Rate Note Holder shall notify the Borrower of such Fixed Rate Note Holder’s
acceptance or rejection of such offer by giving written notice of such
acceptance or rejection to the Borrower (provided, however, that any Fixed Rate
Note Holder who fails to so notify the Borrower shall be deemed to have rejected
such offer) on a date at least 5 days prior to the Disposition Prepayment Date
(such date 5 days prior to the Disposition Prepayment Date being the
“Disposition Response Date”), and the Borrower shall prepay on the Disposition
Prepayment Date the amount specified in (ii) above plus interest accrued thereon
to the Disposition Prepayment Date, but without any Make-Whole Amount or any
other premium, with respect to each Fixed Rate Note held by the Fixed Rate Note
Holders who have accepted such offer in accordance with this Section 2.5(c).

2.6.Terms of All Prepayments.

(a)Amounts to be applied in connection with prepayments made pursuant to Section
2.5 shall be applied as the Borrower shall direct, subject to Section 2.6(b).

(b)All prepayments of the Fixed Rate Notes shall be applied among the Fixed Rate
Note Holders according to the pro rata portion of the Fixed Rate Notes held by
each Fixed Rate Note Holder at the time of the applicable prepayment.

(c)In the case of each prepayment of Fixed Rate Notes pursuant to this
Agreement, the principal amount of each Fixed Rate Note to be prepaid shall
mature and become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such date and the
applicable Make-Whole Amount, if any, which shall be paid to each Fixed Rate
Note Holder. From and after such date, unless the Borrower shall fail to pay
such principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Fixed Rate Note paid or prepaid in full shall be
surrendered to the Borrower and cancelled and shall not be reissued, and no
Fixed Rate Note shall be issued in lieu of any prepaid principal amount of any
Fixed Rate Note.

2.7.Interest Rates and Payment Dates. (a)  The Fixed Rate Notes shall bear
interest at a fixed rate per annum of 5.04%.

22

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

 

(b)Upon the occurrence and during the continuance of an Event of Default, all
amounts outstanding under the Fixed Rate Notes (whether or not overdue) shall
bear interest at a rate per annum of 7.04% (the “Default Rate”).

(c)Interest shall be payable in arrears on each Interest Payment Date; provided
that interest accruing pursuant to paragraph (b) of this Section shall be
payable from time to time on demand.

2.8.Computation of Interest and Fees. Interest and fees payable pursuant hereto
in respect of the Fixed Rate Notes shall be computed on the basis of a 360-day
year of twelve 30- day months.

2.9.Payments. All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without set- off or counterclaim and shall be made prior to 12:00 Noon,
New York time, on the due date thereof to each Fixed Rate Note Holder by the
method and at the address specified for such purpose below such Fixed Rate Note
Holder’s name in Schedule A or by such other method or at such other address as
such Fixed Rate Note Holder shall have from time to time specified to the
Borrower in writing in accordance with Section 10.2.  If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day without including the additional
days elapsed in the calculation of amounts owed on such next succeeding Business
Day; provided that if the Fixed Rate Note Maturity Date is on a day other than a
Business Day, the payment due on the next succeeding Business Day shall include
the additional days elapsed for purposes of calculating the amounts owed on such
day.

ARTICLE 3.

[RESERVED]

ARTICLE 4.

[RESERVED.]

ARTICLE 5.

REPRESENTATIONS AND WARRANTIES

5.1.No Default or Event of Default.  In order to induce the Fixed Rate Note
Holders to enter into this Agreement, the Borrower hereby represents and
warrants that no Default or Event of Default has occurred and is continuing on
the date hereof both before and immediately after giving effect to this
Agreement, the transactions contemplated herein and the Merger .

ARTICLE 6.

AFFIRMATIVE COVENANTS OF BORROWER

The Borrower hereby agrees that, so long as the Fixed Rate Notes remain
outstanding or any other amount is owing to any Fixed Rate Note Holder
hereunder:

23

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

 

6.1.Financial and Business Information. The Borrower shall deliver, and shall
cause SU to deliver, and shall use commercially reasonable efforts to cause each
other Qualified Lessee (other than any Consolidated Qualified Lessee) to
deliver, to each Fixed Rate Note Holder (provided, that no default shall arise
under this Section 6.1 as a result of the failure by a Qualified Lessee other
than SU to deliver financial statements and other documents in accordance with
the requirements of an applicable Lease and such Lease is terminated in
accordance with Section 7.16 hereunder):

(a)Within 45 days after the end of each quarterly fiscal period in each calendar
year of such Person and its Subsidiaries (excluding the last quarterly fiscal
period of each such calendar year), duplicate copies of

(i)balance sheets of such Person and its Subsidiaries on a consolidated basis as
at the end of such quarter, and

(ii)profit and loss statements and cash flows statements for such Person and its
Subsidiaries on a consolidated basis for such quarter and (in the case of the
second and third quarters) for the portion of the calendar year ending with such
quarter,

(iii)setting forth in each case in comparative form the figures for the
corresponding periods in the previous calendar year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial statements
generally, and certified by a Senior Financial Officer of such Person as fairly
presenting, in all material respects, the financial position of the companies
being reported on and their results of operations and cash flows, subject to
changes resulting from year-end adjustments;

(b)Within 90 days after the end of each calendar year of the Borrower and each
Qualified Lessee (other than a Consolidated Qualified Lessee), as applicable,
duplicate copies of

(i)balance sheets of such Person and its Subsidiaries on a consolidated basis as
at the end of such year; and

(ii)statements of income, profit and loss statements and cash flow statements
for such Person and its Subsidiaries on a consolidated basis for such year,
setting forth in each case in comparative form the figures for the previous
calendar year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by

(A)an opinion thereon of Ernst & Young LLP or another independent public
accounting firm of nationally recognized standing selected by the Borrower or
such Qualified Lessee (herein, the “Approved Accountant”), which opinion shall
state that such financial statements present fairly, in all material respects,
the financial position of the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity with GAAP, and
that the examination of the Approved Accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable basis for such
opinion in the circumstances, and

24

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

 

(B)a certificate of the Approved Accountants stating that they have reviewed
this Agreement and stating further whether, in making their audit, they have
become aware of any condition or event that then constitutes a Default or an
Event of Default (or, in the case of a Qualified Lessee, any default or event of
default under any Leases under which such Qualified Lessee is a lessee), and, if
they are aware that any such condition or event then exists, specifying the
nature and period of the existence thereof (it being understood that the
Approved Accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default (or, in the case
of a Qualified Lessee, any default or event of default under the applicable
Lease) unless the Approved Accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted auditing standards or did
not make such an audit);

(c)Promptly upon their becoming available, and to the extent not otherwise
required to be delivered pursuant to another provision of this Agreement, one
copy of (i) each financial statement and budget and such other reports and
notices as the Fixed Rate Note Holders may reasonably request sent by the
Borrower or any Qualified Lessee to its Subsidiaries, (ii) each report or filing
(without exhibits except as expressly requested by the Fixed Rate Note Holders)
other than regular and periodic reports and filings made by the Borrower, any
Subsidiary, or any Qualified Lessee to any state or Federal regulatory body and
(iii) each report and filing made by the Borrower to its lenders;

(d)Promptly, and in any event within 5 Business Days after (i) a Responsible
Officer of the Borrower becoming aware of the existence of any Default or Event
of Default or that any Person has given any notice or taken any action with
respect to a claimed default hereunder or that any Person has given any notice
or taken any action with respect to a claimed default of the type referred to in
Section 8.1(i), a written notice specifying the nature and period of existence
thereof and what action the Borrower or any Subsidiary is taking or proposes to
take with respect thereto and (ii) the Borrower receives a written notice of
default under a System Lease from the applicable Qualified Lessee, a copy of
such notice of default or a written notice specifying the nature and period of
existence of such default and what action the Borrower is taking or proposes to
take with respect thereto;

(e)Promptly, and in any event within 5 Business Days of receipt (or knowledge
thereof by a Responsible Officer of the Borrower) of copies of any notice to the
Borrower, any Subsidiary, or any Qualified Lessee from any Federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse Effect;

(f)Promptly, and in any event within 5 Business Days of receipt (or knowledge by
a Responsible Officer of the Borrower) thereof:

(i)any pending or threatened adversarial or contested proceeding of or before a
Governmental Authority relating to the System or the System Leases that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect;

25

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

 

(ii)any litigation or proceeding taken or threatened in writing against the
Borrower, any Subsidiary, or any Qualified Lessee, that, if successful, could
reasonably be expected to result in a Material Adverse Effect;

(g)As soon as available and in any event within 30 days after the close of each
calendar year of the Borrower and each Qualified Lessee (other than a
Consolidated Qualified Lessee), as the case may be, the annual budget of the
Borrower and its Subsidiaries and each Qualified Lessee, as applicable; and

(h)With reasonable promptness, such other data and information relating to the
business, operations, affairs, financial condition, assets or properties of the
Borrower or relating to the ability of the Borrower to perform its obligations
hereunder and under the Fixed Rate Notes as from time to time may be reasonably
requested by any the Fixed Rate Note Holders.

6.2.Certificates; Other Information. Each set of financial statements delivered
pursuant to Section 6.1(a) or Section 6.1(b) shall be accompanied by a
certificate of a Senior Financial Officer of each Qualified Lessee (other than a
Consolidated Qualified Lessee) or the Borrower, as applicable, setting forth:

(a)the information (including detailed calculations) required in order to
establish whether the Borrower was in compliance with the requirements of
Sections 6.11, 7.6 and 7.9, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each such Section,
where applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then in existence); and

(b)a statement that such Senior Financial Officer has reviewed the relevant
terms hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Borrower from the beginning of
the quarterly or annual period covered by the statements then being furnished to
the date of the certificate and that no Default or an Event of Default has
occurred and is continuing (or in the case of any Qualified Lessee, any default
or event of default has occurred and is continuing under any Leases to which it
is a party, which default or event of default constitutes an Event of Default
pursuant to Section 8.1(f)) or, if any such condition or event has occurred and
is continuing (including, without limitation, any such event or condition
resulting from the failure of the Borrower to comply with any Environmental
Law), (or in the case of any Qualified Lessee, any default or event of default
has occurred and is continuing under any Leases to which it is a party, which
default or event of default constitutes an Event of Default pursuant to Section
8.1(f)), specifying the nature and period of existence thereof and what action
the Borrower shall have taken or proposes to take with respect thereto.

6.3.Compliance with Law. Without limiting Section 7.4, the Borrower will, and
will cause its Subsidiaries to, comply with all laws, ordinances or governmental
rules or regulations to which it is subject, including, without limitation,
ERISA, the USA Patriot Act and Environmental Laws, and will obtain and maintain
in effect all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of its properties or

26

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

 

to the conduct of its businesses to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

6.4.Insurance.

(a)The Borrower will maintain or cause to be maintained, and will cause its
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self- insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.

(b)Promptly upon request by the Fixed Rate Note Holders or the Collateral Agent,
the Borrower shall furnish the Fixed Rate Note Holders and the Collateral Agent
with approved certification of all required insurance. Such certification shall
be executed by each insurer or by an authorized representative of each insurer
where it is not practical for such insurer to execute the certificate
itself.  Such certification shall identify underwriters, the type of insurance,
the insurance limits, and the policy term, and shall specifically list the
special provisions enumerated for such insurance required by this Section 6.4.
Upon request, the Borrower will promptly furnish the Fixed Rate Note Holders and
the Collateral Agent with copies of all insurance certificates, binders, and
cover notes or other evidence of such insurance relating to the Collateral.

(c)No provision of this Section 6.4 or any other provision of this Agreement,
any other Financing Document or any Lease shall impose on the Fixed Rate Note
Holders or the Collateral Agent any duty or obligation to verify the existence
or adequacy of the insurance coverage maintained by the Borrower, nor shall the
Fixed Rate Note Holders or the Collateral Agent be responsible for any
representations or warranties made by or on behalf of the Borrower to any
insurance company or underwriter.

6.5.Maintenance of Properties.  The Borrower will, and will cause its
Subsidiaries, SU and Qualified Lessees that are Affiliates of the Borrower to,
and will use commercially reasonable efforts to cause the other Qualified
Lessees to, (a) maintain, preserve and protect in all material respects all of
its respective material properties (including any such properties comprising any
material portion of the System) and equipment necessary in the operation of its
respective business (taken as a whole) in good, working order and condition,
ordinary wear and tear excepted; and (b) make all necessary repairs thereto and
renewals and replacements thereof.

6.6.Payment of Taxes and Claims. The Borrower will, and will cause each of its
Subsidiaries to, file all tax returns required to be filed in any jurisdiction
and to pay and discharge all taxes shown to be due and payable on such returns
and all other taxes, assessments, governmental charges, or levies imposed on
them or any of their properties, assets, income or franchises, to the extent the
same have become due and payable and before they have become delinquent and all
claims for which sums have become due and payable that have or might

27

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

 

become a Lien on properties or assets of the Borrower or any Subsidiary,
provided that none of the Borrower or any Subsidiary need pay any such tax,
assessment, charge, levy or claim if (i) the amount, applicability or validity
thereof is contested by such Person on a timely basis in good faith and in
appropriate proceedings, and such Person has established adequate reserves
therefor in accordance with GAAP on its books or (ii) the nonpayment of all such
taxes, assessments, charges, levies and claims in the aggregate could not
reasonably be expected to have a Material Adverse Effect.

6.7.Existence, Etc.  Except as permitted under Section 7.2, the Borrower will,
and will cause each of its Subsidiaries, at all times preserve and keep in full
force and effect its respective limited liability company, corporate or limited
partnership existence and all rights and franchises of the Borrower unless
(other than with respect to the Borrower’s existence), in the good faith
judgment of the Borrower, the termination of or failure to preserve and keep in
full force and effect such limited liability company, corporate or limited
partnership existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.

6.8.Books and Records; Inspection Rights. The Borrower will, and will cause each
of its Subsidiaries and SU to, and will use commercially reasonable efforts to
cause other Qualified Lessees to, maintain proper books of record and account in
conformity with GAAP and all applicable requirements of any Governmental
Authority having legal or regulatory jurisdiction over such Person. The Borrower
will permit representatives and independent contractors of the Fixed Rate Note
Holders to visit and inspect any of its properties, to examine its corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss its affairs, finances and accounts with its directors, officers,
and independent public accountants, all at the expense of the Borrower and at
such reasonable times during normal business hours no more than once per
calendar year, upon reasonable advance notice to the Borrower; provided,
however, that when an Event of Default has occurred and is continuing, the Fixed
Rate Note Holders (or any of its respective representatives or independent
contractors) may do any of the foregoing at the expense of the Borrower at any
time during normal business hours and as often as reasonably desired.

6.9.Collateral; Further Assurances.  Upon the effectiveness of the Merger,

(a)The Borrower shall take all actions necessary to insure that the Collateral
Agent, on its behalf and on behalf of the Secured Parties (or in the case of
Real Property Collateral, the Trustee named in the Deeds of Trust, for the
benefit of the Collateral Agent and the other Secured Parties), has and
continues to have in all relevant jurisdictions duly and validly created,
attached and enforceable Liens on the Collateral, including perfected
first-priority Liens on Collateral constituting UCC Collateral or Real Property
Collateral, in each case, to the extent required under the Security Documents
(including, in accordance with clauses (c) and (d) of this Section 6.9,
after-acquired Collateral), subject to no Liens other than Permitted Liens. The
Borrower shall cause the Obligations to constitute direct senior secured
obligations of the Borrower and to be senior in right of payment and to rank
senior in right of security (other than Permitted Liens) with respect to
Collateral granted in the Security Documents to all other Indebtedness of the
Borrower (other than other Permitted Secured Indebtedness, with which it shall
be pari passu in accordance with the terms of the Collateral Agency Agreement).

28

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

 

(b)Upon completion of each New Project of a Project Finance Subsidiary, the
Borrower may cause any such Project Finance Subsidiary to Transfer the New
Project to the Borrower and upon such Transfer, the Borrower shall take all
actions necessary to insure that (w) the New Project becomes a part of the
Collateral to the extent required under the Security Documents and Section
6.9(c), subject to the first priority Lien of the Security Documents (subject to
no Liens other than Permitted Liens and rights of holders of Permitted Secured
Indebtedness in accordance with the Collateral Agency Agreement), (x) no Default
or Event of Default occurs as a result of such Transfer, (y) the Indebtedness of
the Project Finance Subsidiary is either repaid in full at the time of the
Transfer or becomes Permitted Secured Indebtedness in accordance with the
Collateral Agency Agreement, and (z) the Project Finance Subsidiary is
liquidated or merged with and into the Borrower.

(c)If, after December 10, 2014 Borrower acquires any Real Property Collateral,
the Borrower shall forthwith (and in any event, within five Business Days of
such acquisition or such longer period of time as reasonably agreed by the
Required Fixed Rate Note Holders) deliver to the Collateral Agent a fully
executed mortgage or deed of trust over the Borrower’s interests in such Real
Property Collateral, in form and substance satisfactory to the Required Fixed
Rate Note Holders and the Collateral Agent, together with such surveys,
environmental reports and other documents and certificates with respect to such
real estate as may be reasonably required by the Required Fixed Rate Note
Holders.  The Borrower further agrees to take all other actions necessary to
create in favor of the Trustee named therein for the benefit of the Collateral
Agent and the other Secured Parties a valid and enforceable first priority Lien
on the Borrower’s interests in such Real Property Collateral, free and clear of
all Liens except for Permitted Liens and rights of holders of Permitted Secured
Indebtedness in compliance with the Collateral Agency Agreement.

(d)If, after December 10, 2014, the Borrower acquires or creates any new
Subsidiary (other than any Subsidiary of the Borrower that is not organized
under the laws of the United States, any state thereof or the District of
Columbia, any Project Finance Subsidiary and any other Subsidiary that is
prohibited from providing a Guaranty of the Obligations by any Requirement of
Law), the Borrower shall or cause such Subsidiary forthwith (and in any event,
within 30 days of such creation or acquisition (or such longer time as the
Required Fixed Rate Note Holders may agree):

(i)to execute and deliver to the Collateral Agent a Subsidiary Guaranty;

(ii)to deliver to the Collateral Agent a certificate of such Subsidiary,
certifying as to the resolutions attached thereto and other corporate
proceedings by the such Subsidiary relating to the authorization, execution and
delivery of the Subsidiary Guaranty, with appropriate insertions and
attachments;

29

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

 

(iii)to take such actions reasonably necessary or advisable to grant to the
Collateral Agent for the benefit of the Secured Parties (or, in the case of Real
Property Collateral, the Trustee named in the Deeds of Trust, for the benefit of
the Collateral Agent and the other Secured Parties), a perfected and enforceable
first-priority Lien in the Collateral described in the Security Documents with
respect to such new Subsidiary, subject to no Liens other than Permitted Liens
and rights of holders of Permitted Secured Indebtedness in compliance with the
Collateral Agency Agreement; and

(iv)if reasonably requested by the Collateral Agent, to deliver to the
Collateral Agent legal opinions relating to the matters described above, which
opinions shall be in form and substance reasonably satisfactory to the
Collateral Agent.

Notwithstanding anything to the contrary herein or in any other Note Document,
it is understood and agreed that the Subsidiary Guaranty of any Subsidiary that
is subject to an Asset Sale permitted under Section 7.10 shall be automatically
released simultaneously with the release of liens and security interests in
connection with such Asset Sale in accordance with the Collateral Agency
Agreement without the need for any further consent from, or action by, any Fixed
Rate Note Holder.  In addition, in connection with any Asset Sale permitted
under Section 7.10, the Fixed Rate Note Holders hereby agree to execute and/or
deliver any documents and/or take any other action reasonably requested by the
Borrower to further evidence or give effect to the release of any Subsidiary
Guaranty by any Subsidiary that is the subject of such Asset Sale.

6.10.Material Project Documents.

(a)The Borrower shall at all times (i) perform and observe all of the covenants
under the Material Project Documents to which it is a party and take reasonable
actions to enforce all of its rights thereunder, other than to the extent the
same could not reasonably be expected to have a Material Adverse Effect, (ii)
subject to the provisions of clause (b) of this Section 6.10, maintain the
System Leases (other than Leases constituting System Leases only pursuant to
clause (56) of the definition thereof) in full force and effect, and (iii)
maintain the Leases (other than the System Leases referred to in the foregoing
clause (ii) of this Section 6.10(a)) to which it or any of its Subsidiaries is a
party in full force and effect, except to the extent the same could not
reasonably be expected to have a Material Adverse Effect.

(b)If the term of a Lease with the Borrower or one of its Subsidiaries expires
and the Qualified Lessee under such Lease has either ceased operating the
related assets or has ceased paying rent as required under the applicable Lease,
the Borrower shall, or shall cause a Subsidiary, as applicable, to enter into a
supplement or a new Lease with respect to the related leasehold assets with a
Qualified Lessee that provides for rent that, when combined with all other
expected revenue, will, in the reasonable judgment of the Borrower, as of the
commencement date of such supplement or new Lease, generate sufficient revenue
to satisfy the requirements of Section 6.11 and will not otherwise result in a
materially worse position for the Borrower as compared to the terms of the
applicable expired Lease.  Each such new Lease shall have a term of at least
five years. Notwithstanding the foregoing, if (i) such expired Lease relates to
transmission and/or distribution assets that are not generating significant
revenue, (ii) the failure to renew such Lease would not constitute a Material
Adverse Effect and (iii) the Borrower reasonably believes it will generate
sufficient revenue and hold sufficient assets (without giving effect to the
leasehold assets with respect to such Lease) to satisfy the requirements of
Section 6.11, then this Section 6.10(b) will not require a supplement or new
lease with respect to such leasehold assets.

30

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

 

6.11.Financial Ratios.

(a)The Borrower shall at all times maintain, on a consolidated basis, a Total
Debt to Capitalization Ratio of not more than 0.65 to 1.00.

(b)The Borrower shall maintain, for each period of four consecutive fiscal
quarters, a Debt Service Coverage Ratio of at least 1.40 to 1.00.

ARTICLE 7.

NEGATIVE COVENANTS OF BORROWER

The Borrower hereby agrees that, so long as the Fixed Rate Notes remain
outstanding or other amount is owing to any Fixed Rate Note Holder hereunder:

7.1.Transactions with Affiliates. The Borrower will not and will not permit any
Subsidiary to enter into directly or indirectly any transaction or group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate other than (i) transactions with Project Finance Subsidiaries, as
permitted by Section 6.9(b) and other transactions between or among the Borrower
and one or more Subsidiaries, or any subset thereof, to the extent permitted
under Sections 7.2, 7.6, 7.7, 7.10 and 7.14, (ii) Leases with Qualified Lessees
and transactions relating thereto, (iii) any Qualified Lessee Affiliate Loan and
any Indebtedness permitted under Section 7.6(d)(ii), (iv) payment of customary
fees and reasonable out of pocket costs to, and indemnities for the benefit of,
directors, officers and employees of the Borrower and its Subsidiaries in the
ordinary course of business, (v) Investments permitted pursuant to Section 7.7,
(vi) transactions entered into in connection with the Cross Valley Project on or
prior to the Cross Valley Project Transfer and the Golden Spread Project on or
prior to the Golden Spread Project Transfer, (vii) ROFO Transfers, and (viii)
upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than would be obtained in a comparable arms-length transaction with a
Person not an Affiliate; provided that any transaction will be deemed to meet
the requirements of this clause (viii) if such transaction is on terms approved
by a majority of the board of directors (or comparable governing body) of the
General Partner or an Affiliate thereof who are “independent”(as such term is
defined pursuant to the rules of the primary exchange on which the Capital Stock
is listed for trading), or a majority of the “independent” members of a
committee of any such board of directors (or comparable governing body).

7.2.Merger, Consolidation, Etc. The Borrower will not nor will it cause or
permit any of its Subsidiaries to consolidate with or merge with any other
Person or Transfer all or substantially all of its assets in a single
transaction or series of transactions to any Person, except (i) pursuant to the
System Leases or any other Lease, (ii) as permitted pursuant to Section 6.9(b),
or (iii) that so long as both before and after giving effect to such merger or
consolidation or Transfer of all or substantially all of its assets to another
Person no Default or Event of Default exists, the Borrower or any Subsidiary may
merge or consolidate with another Person, and the Borrower or any Subsidiary may
Transfer all or substantially all of its assets to another Person, so long as,
after giving effect to such merger or consolidation, or such Transfer of all or
substantially all of its assets, (A) with respect to any merger or consolidation
to which the Borrower is a party, the Borrower shall be the surviving entity,
(B) with respect to any merger or

31

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

 

consolidation to which a Subsidiary is a party but the Borrower is not, a
Subsidiary (other than a Project Finance Subsidiary) shall be the surviving
entity and (C) with respect to any Transfer of all or substantially all of its
assets by the Borrower or a Subsidiary, the Borrower or another Subsidiary
(other than a Project Finance Subsidiary) shall be the transferee or lessee of
such assets (except to the extent permitted by clauses (i) and (ii) of this
Section 7.2., or (iv) the Borrower or any Subsidiary may merge or consolidate
with another Person or otherwise Transfer assets to another Person in connection
with any transaction permitted by Section 7.10 so long as (A) such transaction
does not constitute the Transfer of all or substantially all of the assets of
the Borrower and its Subsidiaries, taken as a whole and (B) in the case of a
merger or a consolidation to which the Borrower is a party, the Borrower shall
survive such merger or consolidation.

7.3.Line of Business. The Borrower will not and will not permit any Subsidiary
to engage in any business if, as a result, the general nature of the business in
which the Borrower and its Subsidiaries taken as a whole, would then be engaged
would be substantially changed from the transmission and distribution of
electric power and the provision of ancillary services.

7.4.Terrorism Sanctions Regulations. The Borrower will not and will not permit
any Controlled Entity (a) to become (including by virtue of being owned or
controlled by a Blocked Person), own or control a Blocked Person or any Person
that is the target of sanctions imposed by the United Nations or by the European
Union, or (b) directly or indirectly to have any investment in or engage in any
dealing or transaction (including, without limitation, any investment, dealing
or transaction involving the proceeds of the Fixed Rate Notes) with any Person
if such investment, dealing or transaction (i) would cause any holder to be in
violation of any applicable United States (federal or state) anti-terrorism law
or regulation applicable to such holder, or (ii) is prohibited by or subject to
sanctions under any U.S. Economic Sanctions, or (c) to engage, nor shall any
Affiliate of either engage, in any activity that could subject such Person or
any holder to sanctions under CISADA or any similar law or regulation with
respect to Iran or any other country that is subject to U.S. Economic Sanctions.

7.5.Liens. The Borrower will not, nor will it cause or permit any Subsidiary to,
directly or indirectly create, incur, assume or permit to exist (upon the
happening of a contingency or otherwise) any Lien on or with respect to the
Collateral or any other property of the Borrower or such Subsidiary, whether now
owned or held or hereafter acquired, or any income or profits therefrom, or
assign or otherwise convey any right to receive income or profits, or on any
other asset now owned or hereafter acquired by the Borrower or such Subsidiary,
except (each, a “Permitted Lien”):

(a)solely in the case of the Note Parties, Liens created or permitted by the
Financing Documents on the assets of the Note Parties; and

(b)(i) solely in the case of a Project Finance Subsidiary, Liens on assets owned
by that Project Finance Subsidiary, (ii) Liens on the Capital Stock in that
Project Finance Subsidiary, in each case to secure its Non-Recourse Debt and
(iii) Liens in respect of Guaranties permitted under Section 7.6(c)(iii);

(c)Liens created or permitted pursuant to the terms of the Security Documents,
including Cash Collateral (as defined in the Collateral Agency Agreement);

32

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

 

(d)Liens for Taxes which are not yet due and payable or the payment of which is
not at the time required by Section 6.6;

(e)any attachment or judgment Lien, unless such attachment or judgment Lien
constitutes an Event of Default under Section 8.1(l) hereof;

(f)Liens of a lessor of equipment to the Borrower or any Subsidiary on such
lessor’s leased equipment (but excluding equipment leased pursuant to a Capital
Lease), including any of the foregoing which is evidenced by a protective UCC
filing;

(g)Mechanics’, warehousemen’s, carriers’, workers’, repairers’, landlords’, and
other similar liens arising or incurred in the ordinary course of business and
(i) which do not in the aggregate materially detract from the value of property
or assets subject to such Liens or materially impair the continued use thereof
in the operation of the business or (ii) which are being contested in good faith
by appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property or asset subject to such Liens, or other
Liens incurred or deposits made in the ordinary course of business in connection
with workers’ compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, trade contracts, leases, government contracts,
performance and return-of-money bonds and other similar obligations incurred in
the ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money);

(h)zoning, entitlement, restriction, and other land use and environmental
regulations by Governmental Authorities and encroachments, easements, rights of
way, covenants, restrictions or agreements which do not materially interfere
with the continued use of any asset as currently used in the conduct of the
business;

(i)any encumbrances set forth in any franchise or governing ordinance under
which any portion of the business is conducted which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect;

(j)all rights of condemnation, eminent domain, or other similar right of any
Person;

(k)any interest of title of a lessor under leases; and

(l)Liens securing Permitted Secured Indebtedness on a pari passu basis with the
Obligations in accordance with the terms of the Collateral Agency Agreement.

Notwithstanding the foregoing, the Borrower shall not, and shall not permit any
Subsidiary to, grant any Liens securing Indebtedness for borrowed money (other
than Non- Recourse Debt incurred by a Project Finance Subsidiary) unless such
Indebtedness for borrowed money is secured by Liens securing Permitted Secured
Indebtedness on a pari passu basis with the Obligations in accordance with the
terms of the Collateral Agency Agreement.

33

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

 

7.6.Indebtedness. The Borrower will not, and will not cause or permit any
Subsidiary or SU to incur any Indebtedness, and will use commercially reasonable
efforts not to permit any Qualified Lessee or Subsidiaries of Specified
Qualified Lessees to incur Indebtedness for borrowed money, in each case except
the following Indebtedness, which may be incurred subject to the requirements of
the last paragraph of this section:

(a)Indebtedness evidenced by the Financing Documents;

(b)Indebtedness of the Borrower (i) that is not related to, and does not
support, Non-Recourse Debt of a Project Finance Subsidiary and (ii) if incurred,
would not result in a breach of Section 6.11; provided that if the Indebtedness
is proposed to be secured by any of the Collateral, then at least five Business
Days (or such shorter period reasonably agreed by the Required Fixed Rate Note
Holders) prior to the incurrence of such Indebtedness, the Borrower shall (x)
notify the Fixed Rate Note Holders of its intent to incur such Indebtedness,
which notice shall set forth in reasonable detail (A) the amount and proposed
economic terms of such Indebtedness, (B) by type of lender or purchaser and (C)
the proposed collateral for such Indebtedness (which proposed collateral may
include any or all of the Collateral) and (y) deliver to the Collateral Agent
and the other Secured Parties an executed joinder agreement substantially in the
form of Exhibit A to the Collateral Agency Agreement pursuant to which all the
proposed holders of such Indebtedness have become party to the Collateral Agency
Agreement;

(c)(i) Non-Recourse Debt incurred by a Project Finance Subsidiary of the
Borrower (including Non-Recourse Debt incurred by such Project Finance
Subsidiary prior to being acquired by the Borrower or a Subsidiary) to fund a
New Project, (ii) any Indebtedness in the form of a pledge of Capital Stock in a
Project Finance Subsidiary as security for Non- Recourse Debt of such Project
Finance Subsidiary and (iii) Indebtedness in the form of Guaranties by the
Borrower or any Subsidiary of Indebtedness of any Project Finance Subsidiary,
the aggregate amount of which Guaranties shall not exceed $25,000,000
outstanding at any given time;

(d)Indebtedness of any such Qualified Lessee (i) in an aggregate principal
amount for such Qualified Lessee of up to the greater of (A) $5,000,000 and (B)
an amount equal to 1% of the sum of, without duplication, (x) the total amount
of the Consolidated Net Plant of such Qualified Lessee, plus (y) the total
amount of the Consolidated Net Plant of any guarantor(s) of such Qualified
Lessee’s obligations under the applicable Leases, plus (z) the total amount of
Leased Consolidated Net Plant, in each case on a senior secured basis and (ii)
in an aggregate principal amount for such Qualified Lessee of up to the greater
of (A) $10,000,000 and (B) an amount equal to 1.5% of the sum of, without
duplication, (x) the total amount of the Consolidated Net Plant of such
Qualified Lessee, plus (y) the total amount of the Consolidated Net Plant of any
guarantor(s) of such Qualified Lessee’s obligations under the applicable Leases,
plus (z) the total amount of Leased Consolidated Net Plant, in each case on an
unsecured subordinated basis on terms substantially similar to the terms set
forth on Exhibit D, to the extent allowed under the Leases to which such
Qualified Lessee is a party as a lessee or tenant thereunder; provided, that for
purposes of this clause (d), all Consolidated Qualified Lessees will be treated
as one Qualified Lessee;

34

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

 

(e)Indebtedness of the Borrower to any of its Subsidiaries, which by its terms
is expressly subordinated to the Obligations, and Indebtedness of any Subsidiary
to the Borrower or any other Subsidiary of the Borrower not to exceed $5,000,000
at any one time outstanding and in each case to have a maturity date of less
than one year;

(f)any Qualified Lessee Affiliate Loan and other Indebtedness of Qualified
Lessees otherwise acceptable to the Required Fixed Rate Note Holders; and

(g)Indebtedness of Subsidiaries of Specified Qualified Lessees incurred in an
aggregate principal amount for each such Specified Qualified Lessee of up to the
product of (x) such Specified Qualified Lessee’s Consolidated Net Plant (derived
from its most recently prepared consolidated balance sheet, prepared in
accordance with GAAP but adjusted to reverse the effects of failed
sale-leaseback accounting in a manner reasonably determined by such Specified
Qualified Lessee in good faith) multiplied by (y) the lesser of (A) the sum of
such Specified Qualified Lessee’s then-current PUCT-regulated debt-to-equity
ratio (expressed as a percentage) and 5% or (B) 65%; provided that such
Indebtedness must be Non-Recourse Debt to such Specified Qualified Lessee.

Indebtedness of the Borrower or any of its Subsidiaries may be incurred under
this Section 7.6 only if no Default or Event of Default is, or as a result of
such incurrence would be, existing.

7.7.Loans, Advances, Investments and Contingent Liabilities. The Borrower will
not make or permit to remain outstanding any loan or advance to, or extend
credit other than credit extended in the ordinary course of business to any
Person, or own, purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to, any Person
(collectively, “Investments”), or commit to do any of the foregoing, except (a)
Permitted Investments, (b) ownership, purchase and acquisition of equity
interests in and capital contributions to Project Finance Subsidiaries of the
Borrower and Wholly-Owned Subsidiaries, (c) loans, advances and extensions of
credit (i) to Subsidiary Guarantors and other Wholly- Owned Subsidiaries (other
than Project Finance Subsidiaries) not required to provide a Guaranty pursuant
to Section 6.9(d) and (ii) to Project Finance Subsidiaries in the form of
Guaranties by the Borrower or any Subsidiary of Indebtedness of any Project
Finance Subsidiary, the aggregate amount of which Guaranties shall not exceed
$25,000,000 outstanding at any given time, (d) any Qualified Lessee Affiliate
Loan or (e) Investments made in connection with the Cross Valley Project and the
Golden Spread Project prior to the Cross Valley Project Transfer and the Golden
Spread Project Transfer and (f) the ROFO Transfers.

7.8.No Subsidiaries. The Borrower shall have no subsidiaries other than Project
Finance Subsidiaries and Wholly-Owned Subsidiaries.

7.9.Restricted Payments. The Borrower will not, directly or indirectly, make or
declare any Distribution unless there does not exist and, after giving effect to
the proposed Distribution, there will not exist, a Default or an Event of
Default. The Borrower shall deliver to the Fixed Rate Note Holders and the
Collateral Agent before a Distribution is made a certificate of a Responsible
Officer of the Borrower stating that the foregoing condition has been satisfied
and, if requested, providing supporting data and calculations.

35

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

 

7.10.Sale of Assets, Etc. The Borrower will not, nor will it cause or permit any
Subsidiary, to Transfer, or agree or otherwise commit to Transfer, any of its
assets with a fair market value of greater than $15,000,000, in the aggregate
during the term of this Agreement ((an “Asset Sale”) except:

(a)the Borrower or a Subsidiary shall lease the System or other transmission and
distribution assets and related assets pursuant to a Lease to which the Borrower
or a Subsidiary thereof is a party;

(b)(i) each Project Finance Subsidiary of the Borrower may Transfer its assets
to the Borrower or its Wholly-Owned Subsidiaries in accordance with Section
6.9(b); and

(ii)the Borrower may Transfer, or suffer the Transfer of, its ownership
interests in a Project Finance Subsidiary and such Project Finance Subsidiary
may Transfer, or suffer the Transfer of its assets, in each case in connection
with and pursuant to the exercise of remedies under the documentation governing
Non-Recourse Debt incurred by such Project Finance Subsidiary;

(c)Asset Sales (i) among the Borrower and the Subsidiary Guarantors (or a subset
thereof), (ii) among Subsidiaries that are not Subsidiary Guarantors and (iii)
from Subsidiaries to the Borrower or a Subsidiary Guarantor;

(d)in connection with an acquisition that is not prohibited under this
Agreement, (i) Asset Sales of operating assets and related assets to a Qualified
Lessee and (ii) Asset Sales of property acquired after the date of this
Agreement that are not electric transmission or distribution assets, in each
case (x) which are, in the aggregate, not material in relation to the assets
acquired and (y) upon fair and reasonable terms no less favorable to such Person
than would be obtained in a comparable arms-length transaction with a Person not
an Affiliate;

(e)Permitted Liens;

(f)Investments permitted by Section 7.7, transactions permitted by Section 7.2
and Distributions permitted by Section 7.9;

(g)Asset Sales made in connection with the Cross Valley Project Transfer and the
Golden Spread Project Transfer;

(h)Asset Sales consisting of goods and inventory from the Borrower or any
Subsidiary to a Qualified Lessee at cost or on such other terms as may be
approved by a majority of the board of directors (or comparable governing body)
of the General Partner or an Affiliate thereof who are “independent” (as such
term is defined pursuant to the rules of the primary exchange on which the
Capital Stock of the General Partner or such Affiliate is listed for trading),
or a majority of the “independent” members of a committee of any such board of
directors (or comparable governing body);

(i)ROFO Transfers; and

36

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

 

(j)Asset Sales of assets that are obsolete or no longer used or useful in such
Person’s business.; and

(k)any Asset Sale so long as (i) in the good faith opinion of the Borrower or
such Subsidiary making such Asset Sale, such Asset Sale is in exchange for
consideration having a Fair Market Value at least equal to that of the property
exchanged and (ii) no Default or Event of Default exists and, immediately after
giving effect to such Asset Sale, no Default or Event of Default would exist;
provided that:

(x)subject to clause (z) below, the sum of the Disposition Value of the property
subject to such Asset Sale under this clause (k), as it may be reduced pursuant
to clause (z) below, plus the aggregate Disposition Value of all other property
that was the subject of an Asset Sale under this clause (k) during the fiscal
year in which such Asset Sale occurs shall not exceed 10% of Consolidated Total
Assets as of the last day of the most recently ended fiscal quarter of the
Borrower,  

(y)subject to clause (z) below, but otherwise notwithstanding anything to the
contrary set forth in this Section 10.10, the aggregate sum of the Disposition
Value of the property subject to Asset Sales under this clause (k) after the
First Amendment Effective Date (excluding, for the avoidance of doubt, the
transactions consummated pursuant to the Principal Merger Agreement (as defined
in the First Amendment)), as it may be reduced pursuant to clause (z) below,
shall not exceed 25% of Consolidated Total Assets as of the last day of the most
recently ended fiscal quarter of the Borrower; and

(z)if any Indebtedness Prepayment Application and/or any Property Reinvestment
Application has been made with respect to all or a portion of the Net Proceeds
Amount of any Asset Sale within one year after such Asset Sale is consummated,
then the Disposition Value of the property subject to such Asset Sale shall be
deemed to be reduced dollar-for-dollar by any such (1) Indebtedness Prepayment
Application  for purposes of determining compliance with clause (x) above and/or
(2) Property Reinvestment Application for purposes of determining compliance
with clause (x) or (y) above.

Notwithstanding anything to the contrary herein or in any other Note Document,
it is understood and agreed that the liens on and security interests in any
Collateral that is subject to an Asset Sale permitted under Section 7.10 shall
be automatically released in accordance with the Collateral Agency Agreement
without the need for any further consent from, or action by, any Fixed Rate Note
Holder.  In addition, in connection with any Asset Sale permitted under Section
7.10, the Fixed Rate Note Holders hereby agree to execute and/or deliver any
documents and/or take any other action reasonably requested by the Borrower to
further evidence or give effect to the release of liens on or security interests
in any Collateral that is subject to such Asset Sale.

7.11.Sale or Discount of Receivables. The Borrower will not nor will it cause or
permit any Subsidiary to sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable.

37

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

 

7.12.Amendments to Organizational Documents. The Borrower will not, nor will it
cause or permit any of its Subsidiaries to, and shall use commercially
reasonable efforts not to permit any Qualified Lessee or any of its Subsidiaries
to, amend, supplement, terminate, replace or waive any provision of its
operating agreement or other organization documents after the date of this
Agreement after December 10, 2014.  Notwithstanding this Section 7.12, the
Borrower, its Subsidiaries, any Qualified Lessee and its Subsidiaries may,
without the consent of the Fixed Rate Note Holders, amend their respective
operating agreement or similar organizational documents as may be required to
facilitate or implement any of the following:

(a)to reflect (i) the contribution of any new capital or additional capital by
new or existing members or partners of such Person, (ii) the addition of new
members or partners of such Person, or (iii) any adjustment, termination,
reduction or redemption of equity interests of its members, partners or other
holders of equity interests or the issuance of additional equity interests in
such Person; provided, that after giving effect to any such changes, no Event of
Default would exist under Sections 7.8, or 8.1(n);

(b)to reflect a change that does not adversely affect the Fixed Rate Note
Holders in any material respect, or to cure any ambiguity, or correct or
supplement any provision, not inconsistent with law or with the provisions of
this Agreement;

(c)to satisfy any requirements, conditions, or guidelines contained in any
order, directive, opinion, ruling or regulation of a federal or state agency or
contained in federal or state law;

(d)to take actions to avoid any material adverse consequences to such Person as
a result of any change in law or interpretation of law applicable to Persons
subject to regulation by the PUCT and FERC; and

(e)to effect the dissolution, liquidation, merger or consolidation of any Person
that is not otherwise prohibited under this Agreement.

The Borrower will provide prompt notice to the Fixed Rate Note Holders upon
taking any such action under the foregoing sentence of this Section 7.12.

7.13.Sale and Lease-Back. Except for the System Leases, the CREZ Lease and any
other Lease, the Borrower will not, nor will it cause or permit any Subsidiary
to, enter into any arrangement providing for the leasing by the Borrower or any
Subsidiary of real or personal property which has been or is to be Transferred
by the Borrower or such Subsidiary to a lender or investor or to any Person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or rental obligations of the Borrower or any
Subsidiary.

7.14.ERISA Compliance.

(a)The Borrower will not as of the last day of any calendar year permit any Plan
to be “at risk” within the meaning of Section 303 of ERISA to the extent such
action could reasonably be expected to result in a Material Adverse Effect. The
Borrower and its ERISA Affiliates will not incur withdrawal liabilities (and
will not become subject to contingent withdrawal liabilities) under section 4201
or 4204 of ERISA in respect of Multiemployer Plans that individually or in the
aggregate could reasonably be expected to result in a Material Adverse Effect.

38

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

 

(b)For the purposes of clause (a) above, all assumptions and methods used to
determine the actuarial valuation of vested and unvested employee benefits under
any Plan at any time maintained by the Borrower and the present value of assets
of any such Plan shall be reasonably consistent with those determinations made
for purposes of Section 5.13 of the 2010 NPA.

(c)The Borrower will not, nor, as applicable, will any Plan at any time
maintained by the Borrower:

(i)engage in any action that could reasonably be expected to cause the execution
and delivery of this Agreement and the issuance and sale of the Fixed Rate Notes
to result in a non-exempt “prohibited transaction” (as such term is defined in
Section 406 of ERISA and Section 4975(c) of the Code);

(ii)fail to meet the minimum funding standards of Section 302 of ERISA or
Sections 412 and 430 of the Code, or seek or obtain a waiver thereof or fail to
make any required contribution to a Multiemployer Plan; or

(iii)terminate any such Plan in a manner which could result in the imposition of
a Lien on the Property of the Borrower pursuant to Section 4068 of ERISA that
could reasonably be expected to result in a Material Adverse Effect.

7.15.No Margin Stock. Anything herein contained to the contrary notwithstanding,
the Borrower will not, nor will it permit any Subsidiary to, make or authorize
any investment in, or otherwise purchase or carry, any margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System of the United States) that violates the provisions, or for any purpose
that violates the provisions, of Regulation U of the Board of Governors of the
Federal Reserve System of the United States.

7.16.Project Documents.

(a)The Borrower will not, and will not permit any Subsidiary to, amend, modify,
supplement, replace, renew, extend, terminate or waive any provision of any
Lease to which the Borrower or such Subsidiary is party, or consent to any
amendment, modification, supplement, replacement, renewal, extension,
termination or waiver of any such Lease except (i) to the extent the same could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect and (ii) if the Borrower reasonably believes, after giving effect
thereto, the Borrower will generate sufficient revenue and hold sufficient
assets to satisfy the requirements of Section 6.11.

(b)The Borrower shall use commercially reasonable efforts to ensure that no
Specified Qualified Lessee enters into any lease of transmission or distribution
facilities other than (i) the Leases (including maintaining or entering into new
Leases or replacement Leases and amending or modifying Leases to the extent not
prohibited under this Agreement) and (ii) any other leases consented to by the
Fixed Rate Note Holders.

39

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

 

7.17.Regulation.

(a)The Borrower shall not be or become, and shall use commercially reasonable
efforts not to permit any Specified Qualified Lessee to be or become, subject to
FERC jurisdiction as a public utility under the FPA; provided, however, that the
Borrower shall not be in default of the forgoing negative covenant if the
Borrower or any Specified Qualified Lessee becomes subject to FERC jurisdiction
under the FPA solely as a result of a change to the FPA or in FERC’s
interpretation thereof or regulations thereunder, if the Borrower or such
Specified Qualified Lessee takes all necessary actions to comply with applicable
FERC requirements and the operation of the System is uninterrupted; and

(b)The Borrower shall not, and shall use commercially reasonable efforts to
cause any Specified Qualified Lessee not to violate in any material respect any
regulation or order of the PUCT applicable to it.

(c)None of the Borrower nor any Specified Qualified Lessee shall own, operate or
control any electrical generating, transmitting or distribution facility, nor
effect or control any sale of electricity, outside of the ERCOT balancing area
authority except (i) as permitted by FERC, as set forth in its declaratory order
issued in Docket no. EL07-93-000 or (ii) interconnected transmission or
distribution assets or systems located substantially in the State of Texas or
deriving a majority of their revenue from customers within the State of Texas.

7.18.Swaps. The Borrower will not, nor will it permit any Subsidiary to, enter
into any Swap Contracts, except that the Borrower and its Project Finance
Subsidiaries may enter into Swap Contracts solely to hedge interest rate risk
and not for speculative purposes.

7.19.Additional Financial Covenants. If the Borrower shall at any time enter
into one or more agreements pursuant to which Indebtedness in an aggregate
principal amount greater than $25,000,000 shall be outstanding and such
agreement contains one or more financial covenants which are more restrictive on
the Borrower and its Subsidiaries than the financial covenants contained in
Section 6.11 of this Agreement, then such more restrictive financial covenants
and any related definitions (the "Additional Financial Covenants") shall
automatically be deemed to be incorporated into Section 6.11 of this Agreement
by reference from the time such other agreement becomes binding upon the
Borrower until such time as such other Indebtedness is repaid in full and all
commitments related thereto are terminated; provided, that if at the time of any
such repayment or the termination of any such commitment a Default or Event of
Default shall exist under this Agreement, then such Additional Financial
Covenants shall continue in full force and effect under this Agreement so long
as such Default or Event of Default continues to exist. So long as such
Additional Financial Covenants shall be in effect, no modification or waiver of
such Additional Financial Covenants shall be effective unless the Required Fixed
Rate Note Holders shall have consented thereto pursuant to Section 10.1 hereof.
Promptly but in no event more than 5 Business Days following the execution of
any agreement providing for Additional Financial Covenants, the Borrower shall
furnish each Fixed Rate Note Holder with a copy of such agreement. Upon written
request of the Required Fixed Rate Note Holders, the Borrower will enter into an
amendment to this Agreement pursuant to which this Agreement will be formally
amended to incorporate the Additional Financial Covenants on the terms set forth
herein.

40

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

 

7.20.Burdensome Agreements. The Borrower will not enter into or permit any
Subsidiary Guarantor or Subsidiary of a Subsidiary Guarantor to enter into any
Contractual Obligation that limits the right (a) of such Subsidiary to make
Distributions to the Borrower or any Subsidiary Guarantor or to otherwise
transfer property to the Borrower or any Subsidiary Guarantor, (b) of any
Subsidiary of the Borrower to guarantee the Indebtedness of the Borrower or (c)
of the Borrower or any Subsidiary Guarantor to create, incur, assume or suffer
to exist Liens on property of such Person, in each case except for (i)
restrictions arising under any Requirement of Law, (ii) customary restrictions
and conditions contained in any agreement relating to the sale or other
disposition of assets not prohibited under this Agreement pending the
consummation of such sale or other disposition, (iii) this Agreement, the other
Note Documents, Permitted Liens (other than Liens permitted under Section
7.5(k)), and any document or instrument evidencing or granting any such
Permitted Liens; (iv) any Contractual Obligation relating to Indebtedness
permitted pursuant to Section 7.6 (including Liens permitted pursuant to Section
7.5) to the extent, in the good faith judgment of the Borrower, such limitations
and requirements described in clauses (a), (b) or (c) above (x) are on customary
market terms for Indebtedness of such type at the time entered into, so long as
the Borrower has determined in good faith that such restrictions would not
reasonably be expected to impair in any material respect the ability of the Note
Parties to meet their ongoing payment obligations under the Note Documents, or
(y) are not materially more restrictive, taken as a whole with respect to the
Borrower and the Subsidiaries than the restrictions in the Note Documents, (v)
with respect to clause (c), any negative pledge incurred or provided in favor of
any holder of Indebtedness permitted under Section 7.6(c) solely to the extent
any such negative pledge relates to the property financed by or the subject of
such Indebtedness, (vi) non-assignment provisions in franchise agreements,
licenses, easements, leases, indemnities or other agreements and (vii)
restrictions on any property or any Person contained in any asset or stock sale
agreement or other similar agreements entered into with respect to such property
or Person to the extent (x) the sale or other disposition of such property or
Person is not prohibited by this Agreement and (y) such restrictions relate only
to the property or Person to be sold or otherwise disposed of.

ARTICLE 8.

EVENTS OF DEFAULT; REMEDIES

8.1.Events of Default. An “Event of Default” shall exist if any of the following
conditions or events shall occur and be continuing:

(a)the Borrower defaults in the payment of any principal or Make-Whole Amount,
if any, on any Fixed Rate Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise; or

(b)the Borrower defaults in the payment of any interest on any Fixed Rate Note,
fees or other amounts for more than five days after the same becomes due and
payable; or

(c)the Borrower defaults in the performance of or compliance with any term
contained in Section 6.1(d), Section 6.11 or Section 7; or

41

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

 

(d)the Borrower defaults in the performance of or compliance with any term
contained herein (other than those referred to in Sections 8.1(a), (b) and (c))
or in any other Note Document (other than those referred to in another paragraph
of this Section 8) and such default is not remedied within 30 days after the
earlier of (i) a Responsible Officer obtaining actual knowledge of such default
and (ii) the Borrower receiving written notice of such default from the
Collateral Agent or Fixed Rate Note Holder (any such written notice to be
identified as a “notice of default” and to refer specifically to this Section
8.1(d)); or

(e)any representation or warranty made in writing by or on behalf of the
Borrower or by any officer of the Borrower in this Agreement or any other Note
Document or in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any material
respect on the date as of which made; or

(f)with respect to any Lease to which the Borrower or a Subsidiary thereof is a
party (other than Leases pursuant to which the Borrower recognized revenue, in
the aggregate, that constituted 10% or less of the total consolidated revenue of
the Borrower and its Subsidiaries (other than Project Finance Subsidiaries) as
set forth on the face of the consolidated statements of operations for the four
consecutive fiscal quarter period that ended on the date of the financial
statements most recently delivered pursuant to Section 6.1), (i) any such Lease
is declared to be null and void or is otherwise unenforceable, or any party
thereto claims that any such agreement is unenforceable (unless, within 90 days
after such declaration or claim, replaced by a Lease that complies with the
provisions of Section 7.16), (ii) one or more payment defaults in an amount in
excess of $10,000,000 in the aggregate occurs across all such Leases, after
giving effect to any cure periods specified therefor or (iii) any default or
event of default (other than those referred to in clause (i) or (ii) of this
Section 8.1(f)) occurs under any such Lease that could reasonably be expected to
have a Material Adverse Effect and such failure continues for more than 90 days;
or

(g)(i) the Certificate of Conveniences and Necessity (#30192, #30026, #30114 and
#30191) issued or transferred by the PUCT to SU is terminated without being
timely replaced, revoked or otherwise is not in effect; or (ii) except as could
not reasonably be expected to result in a Material Adverse Effect, any other
Required Permit is terminated without being timely replaced (if the terminated
Permit continues to be a Required Permit), revoked or otherwise is not in
effect; provided, however, that the termination without immediate renewal of any
franchise agreement pursuant to which the Qualified Lessee operating the
applicable portion of the System is authorized to operate the System and collect
fees for services shall not constitute an Event of Default if the parties to the
franchise agreement continue to perform in accordance with the terms of such
agreement notwithstanding the termination; or

(h)any Security Document or any other security document entered into pursuant to
Section 6.9 ceases to give the Collateral Agent perfected first priority Liens
(subject to Permitted Liens) purported to be created thereby in a material
portion of the Collateral, taken as a whole, for any reason other than as
expressly permitted hereunder or thereunder (including by amendment, waiver
and/or consent granted in accordance with the terms hereunder or thereunder) or
satisfaction in full of the Obligations; or any Note Document, at any time after
its execution and delivery and for any reason other than as expressly permitted
hereunder or thereunder (including by amendment, waiver and/or consent granted
in accordance with the

42

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

 

terms hereunder or thereunder) or satisfaction in full of all the Obligations,
ceases to be in full force and effect; or any Note Party contests in any manner
the validity or enforceability of any Note Document; or any Note Party denies
that it has any further liability or obligation under any Note Document or
purports to revoke, terminate or rescind any Note Document, other than, for each
of the foregoing, as expressly permitted hereunder or thereunder (including by
amendment, waiver and/or consent granted in accordance with the terms hereunder
or thereunder) or satisfaction in full of the Obligations; or

(i)without limiting clause (h), (i) the Borrower or any Specified Qualified
Lessee is in default (as principal or as guarantor or other surety) in the
payment of any principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount of at least,
in the case of the Borrower or SU, $10,000,000 or, in the case of any other
Specified Qualified Lessee, $2,000,000, in each case beyond any period of grace
provided with respect thereto, or (ii) the Borrower or any Specified Qualified
Lessee is in default in the performance of or compliance with any term of any
evidence of any Indebtedness (including any mortgage, indenture or other
agreement relating thereto), which Indebtedness, in the case of the Borrower or
SU, is in an aggregate outstanding principal amount of at least $10,000,000 (for
each such Person individually) or, in the case of any other Specified Qualified
Lessee, is an amount that could reasonably be expected to result in a Material
Adverse Effect, and as a consequence of such default or condition one or more
Persons are entitled to declare such Indebtedness to be due and payable before
its stated maturity or before its regularly scheduled dates of payment, (iii) 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 Indebtedness to convert
such Indebtedness into equity interests), Indebtedness of the Borrower or SU in
an aggregate outstanding principal amount of at least $10,000,000 (for each such
Person individually) has become or has been declared due and payable before its
stated maturity or before its regularly scheduled dates of payment, or (iv) a
default or an event of default occurs under the 2009 NPA, the 2010 NPA or the
RBC Agreement, and such failure continues for more than any cure period
specified therefor and has not otherwise been waived; or

(j)the Borrower or SU or, to the extent the same could reasonably be expected to
result in a Material Adverse Effect, any other Qualified Lessee (i) is generally
not paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against it or,
a petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or

43

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

 

(k)a court or Governmental Authority of competent jurisdiction enters an order
appointing, without consent by the Borrower, any Subsidiary, SU or, to the
extent the same could reasonably be expected to result in a Material Adverse
Effect, any other Qualified Lessee, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of any such Person or any such petition shall be filed against any
such Person and such petition shall not be dismissed within 60 days; or

(l)a final judgment or judgments for the payment of money is rendered against
the Borrower or a Qualified Lessee, in the case of the Borrower or SU,
aggregating in excess of $10,000,000 or $2,000,000, respectively, or, in the
case of any other Qualified Lessee, to the extent the same could reasonably be
expected to result in a Material Adverse Effect, other than, in each case,
judgments payable by the Borrower or such Qualified Lessee, rendered in
connection with the condemnations in favor thereof, and which judgments are not,
within 60 days after entry thereof, bonded, discharged or stayed pending appeal,
or are not discharged within 60 days after the expiration of such stay; or

(m)if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA
or the Code for any plan year or part thereof or a waiver of such standards or
extension of any amortization period is sought or granted under Section 412 of
the Code, (ii) a notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Borrower or any ERISA
Affiliate that a Plan may become a subject of any such proceedings, (iii) any
Plan shall be “at- risk” within the meaning of Section 303 of ERISA as of the
last day of any calendar year, (iv) the Borrower or any ERISA Affiliate shall
have incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Borrower or any ERISA Affiliate withdraws from
any Multiemployer Plan, or (vi) the Borrower establishes or amends any employee
welfare benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of the Borrower thereunder; and any such event
or events described in clauses (i) through (vi) above, either individually or
together with any other such event or events, could reasonably be expected to
have a Material Adverse Effect; or

(n)Hunt Family Members cease to Control SU, or any Person other than a Qualified
Lessee shall be the lessee under any lease with respect to the System; or

(o)(i) the Operating Partnership shall cease to own or control, directly or
indirectly, 90% of the outstanding equity interest of the Borrower; or (ii) Hunt
Family Members cease to own and control, directly or indirectly, at least 5% of
the outstanding equity interests of the Operating Partnership, unless in the
case of clause (ii), (x) the General Partner has become a publicly held company,
or (y) the Borrower has total assets on its balance sheet valued at
$1,000,000,000 or greater.

44

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

 

As used in Section 8.1(m), the terms “employee benefit plan” and “employee
welfare benefit plan” shall have the respective meanings assigned to such terms
in section 3 of ERISA.

8.2.Acceleration.

(a)If an Event of Default with respect to the Borrower described in Section
8.1(j) or (k) (other than an Event of Default described in clause (i) of Section
8.1(j) or described in clause (vi) of Section 8.1(j) by virtue of the fact that
such clause encompasses clause (i) of Section 8.1(j)) has occurred, all the
Fixed Rate Notes then outstanding shall automatically become immediately due and
payable.

(b)If any other Event of Default has occurred and is continuing, the Required
Fixed Rate Note Holders may at any time at its or their option, by notice or
notices to the Borrower, declare all the Fixed Rate Notes then outstanding to be
immediately due and payable.

(c)If any Event of Default described in Section 8.1(a) or (b) has occurred and
is continuing, the Fixed Rate Note Holders affected by such Event of Default may
at any time, at their option, by notice or notices to the Borrower, declare all
the Fixed Rate Notes held by them to be immediately due and payable.

Upon any Fixed Rate Notes becoming due and payable under this Section 8.2,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Fixed Rate Notes, plus (x) all
accrued and unpaid interest thereon (including, but not limited to, interest
accrued thereon at the Default Rate) and (y) the Make- Whole Amount determined
in respect of such principal amount (to the fullest 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 Borrower acknowledges, and the parties hereto agree, that
each Fixed Rate Note Holder has the right to maintain its investment in the
Fixed Rate Notes free from repayment by the Borrower (except as herein
specifically provided for) and that the provision for payment of a Make-Whole
Amount by the Borrower in the event that the Fixed Rate Notes are prepaid or are
accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.

8.3.Other Remedies. If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Fixed Rate Notes have become or have
been declared immediately due and payable under Section 8.2, the Required Fixed
Rate Note Holders may proceed to protect and enforce their rights by an action
at law, suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in any Fixed Rate Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise.

8.4.Rescission. At any time after any Fixed Rate Notes have been declared due
and payable pursuant to Section 8.2(b) or (c), the Fixed Rate Note Holders, by
written notice to the Borrower, may rescind and annul any such declaration and
its consequences if (a) the Borrower has paid all overdue interest on the Fixed
Rate Notes, all principal of and Make-Whole Amount, if any, on any Fixed Rate
Notes that are due and payable and are unpaid other than by reason of such
declaration, and all interest on such overdue principal and Make-Whole Amount,
if any, and (to the extent permitted by applicable law) any overdue interest in
respect of the Fixed Rate Notes, at the Default Rate, (b) neither the Borrower
nor any other Person shall have paid any

45

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

 

amounts which have become due solely by reason of such declaration, (c) all
Events of Default and Defaults, other than non-payment of amounts that have
become due solely by reason of such declaration, have been cured or have been
waived pursuant to Section 10.1, and (d) no judgment or decree has been entered
for the payment of any monies due pursuant hereto or to the Fixed Rate Notes. No
rescission and annulment under this Section 8.4 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.

8.5.No Waivers or Election of Remedies, Expense, Etc. At any time after any
Fixed Rate Notes have been declared due and payable pursuant to Section 8.2(b)
or (c), the Fixed Rate Note Holders, by written notice to the Borrower, may
rescind and annul any such declaration and its consequences if (a) the Borrower
has paid all overdue interest on the Fixed Rate Notes and all principal of on
any Fixed Rate Notes that are due and payable and are unpaid other than by
reason of such declaration, and all interest on such overdue principal and (to
the extent permitted by applicable law) any overdue interest in respect of the
Fixed Rate Notes, at the Default Rate,

(b) neither the Borrower nor any other Person shall have paid any amounts which
have become due solely by reason of such declaration, (c) all Events of Default
and Defaults, other than non- payment of amounts that have become due solely by
reason of such declaration, have been cured.

ARTICLE 9.

[RESERVED]

ARTICLE 10.

MISCELLANEOUS

10.1.Amendments. (a) Neither this Agreement or any other Note Document, nor any
terms hereof or thereof, may be amended or modified except in accordance with
the provisions of this Section 10.1. (1) The Required Fixed Rate Note Holders
may waive, on such terms and conditions as the Required Fixed Rate Note Holders
may specify in such instrument, any of the requirements of this Agreement or the
other Note Documents or any Default or Event of Default and its consequences,
and (2) the Required Fixed Rate Note Holders and the Borrower may enter into
written amendments, supplements or modifications hereto and to the other Note
Documents to which they are parties for the purpose of adding any provisions to
this Agreement or such other Note Documents or changing in any manner the rights
of the Fixed Rate Note Holders or of the Borrower hereunder or thereunder;
provided, however, for purposes of the foregoing clauses (a)and (b), that no
such waiver and no such amendment, supplement or modification shall:

(A)Forgive the principal amount or extend the final scheduled date of maturity
of the Fixed Rate Notes, reduce the stated rate of any interest or fee payable
hereunder (except in connection with the waiver of applicability of any
post-default increase in interest rates (which waiver shall be effective with
the consent of the Required Fixed Rate Note Holders)) or extend the scheduled
date of any payment thereof, in each case without the written consent of each
Fixed Rate Note Holder directly affected thereby;

46

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

 

(B)eliminate or reduce the voting rights of any Fixed Rate Note Holder under
this Section 10.1 without the written consent of such Fixed Rate Note Holder;

(C)consent to the assignment or transfer by the Borrower of any of its rights
and obligations under this Agreement and the other Note Documents;

(D)amend, modify or waive any provision of Section 2.9 in a way that changes the
pro rata sharing of payments among the Fixed Rate Note Holders without the
written consent of all Fixed Rate Note Holders;

(E)reduce the percentage specified in the definition of Required Fixed Rate Note
Holders without the written consent of all Fixed Rate Note Holders; or

10.2.Addresses. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by telecopy), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered, or three (3) Business Days after being deposited
in the mail, postage prepaid, or, in the case of telecopy notice, when received
during the recipient’s normal business hours, addressed, if to any Fixed Rate
Note Holder, to such Person at the address specified for such communications in
Schedule A, of, if to the Borrower, as follows, or, in each case, to such other
address as may be hereafter notified by the respective parties hereto:

 

Borrower:

Sharyland Distribution & Transmission

Services, L.L.C.

 

Address: 1807 Ross Avenue, 4th Floor

 

Dallas, TX 75201-2300

 

Attention: Brant Meleski

 

e-mail: bmeleski@huntutility.com

 

Telecopy: (212) 449-7938

 

Telephone: (212) 449-7148

 

Cc: Greg Imhoff

provided that any notice, request or demand to or upon the Fixed Rate Note
Holders shall not be effective until received during its normal business hours.

Notices and other communications to the Fixed Rate Note Holders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Fixed Rate Note Holders. Any Fixed Rate Note Holder or the
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

10.3.No Waiver; Cumulative Remedies.

(a)No failure or delay of any Fixed Rate Note Holder in exercising any right or
power hereunder or under any other Note Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce any such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.

47

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

 

(b)The rights and remedies of the Fixed Rate Note Holders hereunder and under
the other Note Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have.

10.4.Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Note Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement.

10.5.Payment of Expenses and Taxes.  The Borrower agrees (a) to pay or reimburse
the Fixed Rate Note Holders for all reasonable costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Note
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including the reasonable fees and disbursements of one counsel and
one regulatory counsel on behalf of the Fixed Rate Note Holders, filing and
recording fees and expenses, and the costs and expenses incurred in connection
with the initial filing of this Agreement and all related documents and
financial information with the SVO, with statements with respect to the
foregoing to be submitted to the Borrower from time to time thereafter, (b) to
pay or reimburse each Fixed Rate Note Holder for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the other Note Documents and any such other documents, including
the fees and disbursements of counsel (including the allocated fees and expenses
of in-house counsel) to each Fixed Rate Note Holder, (c) to pay, indemnify, and
hold each Fixed Rate Note Holder harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Note Documents and any such other documents, and (d)
to pay, indemnify, and hold each Fixed Rate Note Holder and its officers,
directors, employees, affiliates, agents, advisors and controlling Persons
(each, an “Indemnitee”) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Note Documents and any such other documents, including any
of the foregoing relating to the use of proceeds of the Fixed Rate Notes, the
Equity Letter of Credit, any of the transactions contemplated by the Note
Documents or the non- compliance by any party with the provisions thereof or the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Borrower and the reasonable fees and
expenses of legal counsel in connection with claims (including Environmental
Claims), actions or proceedings by any Indemnitee against the Borrower under any
Note Document (all the foregoing in this clause (d), collectively, the
“Indemnified Liabilities”), provided, that the Borrower shall have no obligation
hereunder to any Indemnitee with respect to Indemnified Liabilities to the
extent such Indemnified Liabilities are found by a final and non-appealable
decision of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such Indemnitee. Without limiting the
foregoing, and to the extent permitted by applicable law, the Borrower agrees
not to assert, and hereby waives,

48

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

 

all rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that it might have by statute or otherwise against any Indemnitee.  All amounts
due under this Section 10.5 shall be payable not later than ten (10) days after
written demand therefor.  Statements payable by the Borrower pursuant to this
Section 10.5 shall be submitted to Kristin Boyd, at the address of the Borrower
set forth in Section 10.2, or to such other Person or address as may be
hereafter designated by the Borrower in a written notice to the Fixed Rate Note
Holders. The agreements in this Section 10.5 shall survive repayment of the
Fixed Rate Notes and all other amounts payable hereunder.

10.6.Successors and Assigns; Participations and Assignments.

(a)The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Fixed Rate Note Holder (and any attempted assignment or transfer
by the Borrower without such consent shall be null and void) and (ii) no Fixed
Rate Note Holder may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section 10.6.

(b)(i)  Any Fixed Rate Note Holder may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Fixed Rate Note); provided that the General Partner and Operating
Partnership shall have a ‘right of first offer’ with respect to all assignments
of the Fixed Rate Note.

(c)For any assignment, the assigning Fixed Rate Note Holder shall, promptly
after the effectiveness of any such assignment, notify the Borrower thereof;
provided that the assignment shall be effective regardless of whether such
notice is provided.

(d)By its acquisition of any part of the Fixed Rate Notes, an Affiliated Fixed
Rate Note Holder shall be deemed to have acknowledged and agreed that (i) it
shall not have any right to make or bring (or participate in, other than as a
passive participant in or recipient of its pro rata benefits of) any claim, in
its capacity as a Fixed Rate Note Holder, against any other Fixed Rate Note
Holder with respect to any duties or obligations or alleged duties or
obligations of any such Fixed Rate Note Holder under the Note Documents, (ii)
the Fixed Rate Notes held by an Affiliated Fixed Rate Note Holder shall be
disregarded in both the numerator and denominator in the calculation of any
Fixed Rate Note Holder vote and (iii) the aggregate principal amount of Fixed
Rate Notes held at any one time by Affiliated Fixed Rate Note Holder may not
exceed 30% of the principal amount of the Fixed Rate Notes outstanding at such
time under this Agreement.

49

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

 

10.7.Representations and Warranties of the Fixed Rate Note Holder; Registration
and Exchange of Fixed Rate Notes.

(a)Each Fixed Rate Note Holder severally represents that it is an “Accredited
Investor” as defined in Rule 501 of Regulation D under the Securities Act. Each
Fixed Rate Note Holder severally represents that it is purchasing the Fixed Rate
Notes for its own account or for one or more separate accounts maintained by
such Fixed Rate Note Holder or for the account of one or more pension or trust
funds and not with a view to the distribution thereof, provided that the
disposition of such Fixed Rate Note Holder’s property shall at all times be
within such Fixed Rate Note Holder’s control. Each Fixed Rate Note Holder
understands that the Fixed Rate Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law, and that the Borrower is not required to register the Fixed
Rate Notes.

(b)The Borrower shall keep at its principal executive office a register for the
registration and registration of transfers of Fixed Rate Notes. The name and
address of each Fixed Rate Note Holder of one or more Fixed Rate Notes, each
transfer thereof and the name and address of each transferee of one or more
Fixed Rate Notes shall be registered in such register. Prior to due presentment
for registration of transfer, the Person in whose name any Fixed Rate Notes
shall be registered shall be deemed and treated as the owner and Fixed Rate Note
Holder thereof for all purposes hereof, and the Borrower shall not be affected
by any notice or knowledge to the contrary. In addition to and not in limitation
of any representations contained herein, each Fixed Rate Note Holder
acknowledges and agrees that the Fixed Rate Notes have not been registered under
the Securities Act and may not be transferred except pursuant to registration or
an exemption therefrom and in compliance with Section 10.6 hereof.

(c)Subject to compliance with Section 10.6, upon surrender of any Fixed Rate
Note to the Borrower at the address and to the attention of the designated
officer (all as specified in Section 10.2) for registration of transfer or
exchange (and in the case of a surrender for registration of transfer
accompanied by a written instrument of transfer duly executed by the registered
Fixed Rate Note Holder of such Fixed Rate Note or such Fixed Rate Note Holder’s
attorney duly authorized in writing and accompanied by the relevant name,
address and other information for notices of each transferee of such Fixed Rate
Note or part thereof), within ten Business Days thereafter, the Borrower shall
execute and deliver, at the Borrower’s expense (except as provided below), one
or more new Fixed Rate Notes (as requested by the Fixed Rate Note Holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Fixed Rate Note. Each such new Fixed
Rate Note shall be payable to such Person as such Fixed Rate Note Holder may
request and shall be substantially in the form of Exhibit A. Each such new Fixed
Rate Note shall be dated and bear interest from the date to which interest shall
have been paid on the surrendered Fixed Rate Note or dated the date of the
surrendered Fixed Rate Note if no interest shall have been paid thereon. The
Borrower may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Fixed Rate Notes.
Any transferee, by its acceptance of a Fixed Rate Note registered in its name
(or the name of its nominee), shall be deemed to have made the representations
set forth in Section 10.7(a).

50

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

 

10.8.Adjustments; Set-off.

(a)Except to the extent that this Agreement, any other Note Document or a court
order expressly provides for payments to be allocated to a particular Fixed Rate
Note Holder or to the Fixed Rate Note Holders, if any Fixed Rate Note Holder (a
“Benefited Fixed Rate Note Holder”) shall receive any payment of all or part of
the Obligations owing to it (other than in connection with an assignment made
pursuant to Section 10.6), or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 8.1(k), or otherwise), in a greater proportion
than any such payment to or collateral received by any other Fixed Rate Note
Holder, if any, in respect of the Obligations owing to such other Fixed Rate
Note Holder, such Benefited Fixed Rate Note Holder shall purchase for cash from
the other Fixed Rate Note Holders a participating interest in such portion of
the Obligations owing to each such other Fixed Rate Note Holder, or shall
provide such other Fixed Rate Note Holders with the benefits of any such
collateral, as shall be necessary to cause such Benefited Fixed Rate Note Holder
to share the excess payment or benefits of such collateral ratably with each of
the Fixed Rate Note Holders; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from such Benefited
Fixed Rate Note Holder, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery, but without interest.

(b)In addition to any rights and remedies of the Fixed Rate Note Holders
provided by law, each Fixed Rate Note Holder shall have the right, without
notice to the Borrower, any such notice being expressly waived by the Borrower
to the extent permitted by applicable law, upon any Obligations becoming due and
payable by the Borrower (whether at the stated maturity, by acceleration or
otherwise), to apply to the payment of such Obligations, by set-off or
otherwise, any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Fixed Rate Note Holder,
any affiliate thereof or any of their respective branches or agencies to or for
the credit or the account of the Borrower. Each Fixed Rate Note Holder agrees
promptly to notify the Borrower after any such application made by such Fixed
Rate Note Holder, provided that the failure to give such notice shall not affect
the validity of such application.

10.9.Entire Agreement. This Agreement, together with other agreements attached
hereto or referred to herein and the other Note Documents constitute the entire
contract between the parties relative to the subject matter hereof.  Any
previous agreement among or representations from the parties or their Affiliates
with respect to the subject matter hereof is superseded by this Agreement and
the other Note Documents.

10.10.APPLICABLE LAW. THIS AGREEMENT AND ANY CLAIM OR CONTROVERSY ARISING
HEREUNDER OR RELATED HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

51

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

 

10.11.Submission To Jurisdiction; Waivers.

(a)The Borrower hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in the Borough of
Manhattan, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard and determined in such New York state court or, to the
extent permitted by law, in such federal court. The Borrower further irrevocably
consents to the service of process in any action or proceeding in such courts in
any manner permitted by Requirements of Law. The Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.

(b)The Borrower hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement in any New York State or federal court. The
Borrower hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

10.12.Severability. In the event any one or more of the provisions contained in
this Agreement should be held invalid, illegal, or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

10.13.Interpretation. The section headings in this Agreement are for the
convenience of reference only and shall not affect the meaning or construction
of any provision hereof.

10.14.Acknowledgements. The Borrower hereby acknowledges that it has been
advised by counsel in the negotiation, execution and delivery of this Agreement
and the other Note Documents.

10.15.Limitation on Liability. NO CLAIM SHALL BE MADE BY ANY PARTY HERETO, OR
ANY OF SUCH PARTY’S AFFILIATES, DIRECTORS, EMPLOYEES, ATTORNEYS OR AGENTS
AGAINST ANY OTHER PARTY HERETO OR ANY OF ITS AFFILIATES, DIRECTORS, EMPLOYEES,
ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES
(WHETHER OR NOT THE CLAIM THEREFOR IS BASED ON CONTRACT, TORT, DUTY IMPOSED BY
LAW OR OTHERWISE), IN CONNECTION WITH, ARISING OUT OF OR IN ANY WAY RELATED TO
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE OTHER NOTE DOCUMENTS OR
ANY ACT OR OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND EACH PARTY
HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER OR NOT ACCRUED AND
WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

52

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

 

10.16.Waiver of Jury Trial.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER NOTE DOCUMENTS. EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.16.

10.17.Confidentiality. Each Fixed Rate Note Holder agrees to keep confidential
all non- public information provided to it by the Borrower or any Fixed Rate
Note Holder pursuant to or in connection with this Agreement that is designated
by the provider thereof as confidential; provided that nothing herein shall
prevent any Fixed Rate Note Holder from disclosing any such information (a) to
any other Fixed Rate Note Holder or any affiliate thereof, (b) to its employees,
directors, agents, attorneys, accountants and other professional advisors or
those of any of its affiliates, (c) upon the request or demand of any
Governmental Authority, (d) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirements of Law, (e) if requested or required to do so in connection with
any litigation or similar proceeding, (f) that has been publicly disclosed, (g)
to the National Association of Insurance Commissioners or the SVO, or, in each
case, any similar organization or any nationally recognized rating agency that
requires access to information about a Fixed Rate Note Holder’s investment
portfolio in connection with ratings issued with respect to such Fixed Rate Note
Holder, (h) in connection with the exercise of any remedy hereunder or under any
other Note Document, or (i) if agreed by the Borrower in its sole discretion, to
any other Person.

Each Fixed Rate Note Holder acknowledges that information furnished to it
pursuant to this Agreement or the other Note Documents may include material
non-public information concerning the Borrower and its Affiliates and their
related parties or their respective securities, and confirms that it has
developed compliance procedures regarding the use of material non-public
information and that it will handle such material non-public information in
accordance with those procedures and applicable law, including Federal and state
securities laws.

All information, including requests for waivers and amendments, furnished by the
Borrower pursuant to, or in the course of administering, this Agreement or the
other Note Documents will be syndicate-level information, which may contain
material non-public information about the Borrower and its Affiliates and their
related parties or their respective securities.  Accordingly, each Fixed Rate
Note Holder represents to the Borrower  that it has identified in its
administrative questionnaire a credit contact who may receive information that
may contain material non-public information in accordance with its compliance
procedures and applicable law, including Federal and state securities laws.

53

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

 

10.18.Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original but all of which, when taken
together, shall constitute but one contract, and shall become effective when
executed and delivered by each Person intended to be a party hereto. Delivery of
an executed counterpart to this Agreement by facsimile transmission or “pdf”
electronic format shall be as effective as delivery of a manually signed
original.

10.19.Third Party Beneficiaries. Subject to Section 10.5 of this Agreement,
there shall be no third party beneficiaries to this Agreement or any provision
hereof.

10.20.Patriot Act Compliance. Pursuant to the requirements of the Patriot Act,
each Fixed Rate Note Holder shall be required to obtain, verify and record
information that identifies the party, which information includes the names and
addresses and other information that will allow it to identify the party in
accordance with the requirements of the Patriot Act. The party shall promptly
deliver information described in the immediately preceding sentence when
requested by any Fixed Rate Note Holder in writing pursuant to the requirements
of the Patriot Act.

10.21.Amendment and Restatement. This Agreement amends and restates the Original
Credit Agreement in its entirety.

 

54