Document:

exv10w16

Exhibit 10.16

Execution Copy

STOCK PURCHASE AGREEMENT

by and among

DORAL FINANCIAL CORPORATION

and

PURCHASERS

dated as of April 19, 2010

 

 

TABLE OF CONTENTS

	 	 	 	 	 

	SECTION 1. ISSUANCE AND SALE OF SHARES
	 	 	2	 
	1.1. Funding; Deliveries of Each Purchaser
	 	 	2	 
	1.2. [Intentionally Omitted.]
	 	 	2	 
	1.3. Delivery of Shares; Release of Escrow Funds; Closing the Escrow Account
	 	 	3	 
	SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
	 	 	4	 
	2.1. Organization and Qualification
	 	 	4	 
	2.2. Reporting Company; Form S-1
	 	 	6	 
	2.3. Capitalization; Authorized Capital Stock
	 	 	6	 
	2.4. Issuance, Sale and Delivery of the Shares
	 	 	6	 
	2.5. Stockholder Approval
	 	 	8	 
	2.6. Due Execution, Delivery and Performance of the Agreements
	 	 	9	 
	2.7. Accountants
	 	 	10	 
	2.8. No Defaults or Consents
	 	 	10	 
	2.9. No Actions
	 	 	10	 
	2.10. Properties
	 	 	11	 
	2.11. No Material Adverse Change
	 	 	11	 
	2.12. Reports
	 	 	12	 
	2.13. Taxes
	 	 	12	 
	2.14. Transfer Taxes
	 	 	12	 
	2.15. Investment Company
	 	 	13	 
	2.16. Offering Materials
	 	 	13	 
	2.17. Insurance
	 	 	13	 
	2.18. Additional Information
	 	 	13	 
	2.19. Price of Common Stock
	 	 	14	 
	2.20. Use of Proceeds
	 	 	14	 
	2.21. Use of Purchaser Name
	 	 	14	 
	2.22. Financial Statements
	 	 	14	 
	2.23. Listing Compliance
	 	 	14	 
	2.24. Internal Accounting Controls
	 	 	15	 
	2.25. Foreign Corrupt Practices
	 	 	15	 

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	2.26. Money Laundering
	 	 	16	 
	2.27. Employee Relations
	 	 	16	 
	2.28. ERISA
	 	 	17	 
	2.29. Environmental Matters
	 	 	17	 
	2.30. Integration; Other Issuances of Shares
	 	 	17	 
	2.31. Non-Public Information
	 	 	18	 
	2.32. Risk Management Instruments
	 	 	18	 
	2.33. Mortgage Banking Business
	 	 	19	 
	2.34. Shell Company Status
	 	 	20	 
	2.35. Solvency
	 	 	20	 
	2.36. Transactions With Affiliates and Employees
	 	 	20	 
	2.37. Application of Takeover Protections; Rights Agreements
	 	 	20	 
	2.38. Adequate Capitalization
	 	 	20	 
	2.39. FDIC Policy Statement
	 	 	21	 
	2.40. Compliance with Other Regulations
	 	 	21	 
	2.41. Substantially Similar Agreement
	 	 	21	 
	2.42. Ownership
	 	 	21	 
	2.43. Enforcement of Cooperation Agreement
	 	 	21	 
	SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH PURCHASER
	 	 	21	 
	3.1. Experience
	 	 	21	 
	3.2. Reliance on Exemptions
	 	 	22	 
	3.3. Confidentiality
	 	 	22	 
	3.4. Investment Decision
	 	 	23	 
	3.5. Risk of Loss
	 	 	23	 
	3.6. Legend
	 	 	23	 
	3.7. Transfer Restrictions
	 	 	24	 
	3.8. Residency
	 	 	25	 
	3.9. Public Sale or Distribution
	 	 	25	 
	3.10. Organization; Validity; Enforcements
	 	 	25	 
	3.11. Short Sales
	 	 	26	 
	3.12. Control
	 	 	26	 
	3.13. Prohibited Person
	 	 	27	 

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	3.14. Representation
	 	 	27	 
	3.15. Taxes on Escrow Account
	 	 	27	 
	SECTION 4. CONDITIONS PRECEDENT AND CLOSING DELIVERABLES
	 	 	28	 
	4.1. Purchasers’ Conditions Precedent to Funding
	 	 	28	 
	4.2. Bid Condition
	 	 	28	 
	4.3. Purchasers’ Conditions Precedent to the Closing Date of the Contingent Tranche
	 	 	29	 
	4.4. Company’s Conditions Precedent to the Closing Date
	 	 	29	 
	4.5. Closing Deliverables
	 	 	29	 
	SECTION 5. REGISTRATION OF THE OFFERED COMMON STOCK, CONVERSION SHARES AND HOLDINGS’ COMMON STOCK; COMPLIANCE WITH THE
SECURITIES ACT
	 	 	29	 
	5.1. Registration Procedures and Expenses
	 	 	29	 
	5.2. Additional Registration Statements
	 	 	33	 
	5.3. Transfer of Securities
	 	 	33	 
	5.4. Indemnification
	 	 	34	 
	5.5. Termination of Conditions and Obligations
	 	 	37	 
	5.6. Information Available
	 	 	38	 
	5.7. No Piggyback on Registrations
	 	 	38	 
	5.8. Delay in Filing or Effectiveness of Registration Statement
	 	 	38	 
	SECTION 6. BROKER’S FEE
	 	 	39	 
	SECTION 7. INDEPENDENT NATURE OF PURCHASERS’ OBLIGATIONS AND
 RIGHTS
	 	 	39	 
	SECTION 8. PURCHASERS’ RIGHTS WITH RESPECT TO THE COOPERATION 
AGREEMENT
	 	 	40	 
	SECTION 9. MISCELLANEOUS
	 	 	40	 
	9.1. Notices
	 	 	40	 
	9.2. Survival of Agreements
	 	 	41	 
	9.3. Changes
	 	 	41	 
	9.4. Headings
	 	 	41	 
	9.5. Severability
	 	 	41	 
	9.6. Governing Law; Venue
	 	 	41	 
	9.7. Counterparts
	 	 	42	 
	9.8. Entire Agreement
	 	 	42	 

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	9.9. Fees and Expenses
	 	 	42	 
	9.10. Parties
	 	 	42	 
	9.11. Further Assurances
	 	 	42	 

iv

 

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of the 19th day of April
2010, by and between Doral Financial Corporation (the “Company”), a corporation organized
under the laws of the Commonwealth of Puerto Rico, with its principal offices at 1451 Franklin D.
Roosevelt Avenue, San Juan, Puerto Rico 00920-2717, and each of the purchasers whose names and
addresses are set forth on Schedule I hereto (collectively, the “Purchasers” and each a
“Purchaser”).

RECITALS

     WHEREAS, pursuant to a Confidential Private Placement Memorandum, dated as of April13, 2010
prepared by the Company (including all exhibits, supplements and amendments thereto, up to the
signing of this Agreement, the “Private Placement Memorandum”), the Company has offered
(the “Offering”) shares of the Company’s Common Stock, $0.01 par value (the “Offered
Common Stock”) and shares of the Company’s Mandatory Convertible Non-Cumulative Non-Voting
Convertible Preferred Stock, $1.00 par value and $1,000 liquidation preference per share (the
“Offered Preferred Stock” and, together with the Offered Common Stock, the
“Shares”) for an aggregate consideration of $600,000,000, to the Purchasers, with Barclays
Capital acting as the placement agent (the “Placement Agent”);

     WHEREAS, the Shares are being offered to the Purchasers in two tranches: (i) a tranche (the
“Non-Contingent Tranche”) consisting of only Offered Preferred Stock, and (ii) a tranche
(the “Contingent Tranche”) consisting of Offered Common Stock and Offered Preferred Stock,
the issuance and sale of which is conditioned on the concurrent consummation of an Acquisition (as
defined herein) as described herein; the Offered Preferred Stock is convertible into shares of the
Company’s Common Stock (the “Conversion Shares”) in accordance with the terms and
conditions of the Certificate of Designations (as defined herein);

     WHEREAS, the Company and the Purchasers intend to complete the sale and delivery of a portion
of the Non-Contingent Tranche following the delivery by the Company of the Funding Notice (as
defined herein), with the remaining portion to be delivered, if at all, concurrent with the return
of the Contingent Offering Proceeds (as defined herein) to the Purchasers if an Acquisition (as
defined herein) is not consummated in accordance with this Agreement, and the Company intends to
use the cash proceeds from the Non-Contingent Tranche (the “Non-Contingent Offering
Proceeds”) to provide additional capital to the Company to facilitate qualifying as a bidder
(through Doral Bank, a Puerto Rico commercial bank and wholly owned subsidiary of the Company,
“Doral Bank PR”) for the acquisition of certain assets and liabilities of one or more
Puerto Rico banks from the Federal Deposit Insurance Corporation (the “FDIC”) as receiver,
as further described in the Private Placement Memorandum;

     WHEREAS, the cash proceeds of the Offering from the Contingent Tranche (the “Contingent
Offering Proceeds”), which will be used to provide additional capital to the Company following
the Acquisition if it is consummated, and a portion of the Offered Preferred Stock in the
Non-Contingent Tranche (the “Escrow Securities”) will be deposited and held in one or more
escrow accounts (together, the “Escrow Account”) pursuant to an Escrow and Security

 

 

Agreement (the “Escrow Agreement”), dated as of date hereof, by and among the Company
and Mellon Investor Services LLC, a New Jersey limited liability company, as escrow agent (the
“Escrow Agent”), in substantially the form attached hereto as Exhibit B;

     WHEREAS, Doral Bank PR plans to bid to acquire certain assets and assume certain liabilities
of one or more Puerto Rico banks from the FDIC as receiver, as further described in the Private
Placement Memorandum (the “Acquisition”), and if any bid is accepted, to complete the
Acquisition pursuant to the terms of one or more purchase and assumption agreements to be entered
into by Doral Bank, PR and the FDIC (the “Purchase and Assumption Agreement”); and

     WHEREAS, if (i) the FDIC notifies the Company that Doral Bank PR will not be permitted to
enter a bid for the Acquisition, (ii) each of Doral Bank PR’s bid or bids for the Acquisition are
rejected by the FDIC, (iii) Doral Bank PR has not submitted a bid by the last time that bids may be
submitted in connection with an Acquisition, (iv) no bid by Doral Bank PR has been accepted by the
FDIC by the date four weeks after the Funding Date, or (v) as of the close of business on the
Acquisition Deadline (as defined in the Escrow Agreement), the Company has not delivered to the
Escrow Agent a Disbursement Event Notice or a Failure Event Notice (each as defined in the Escrow
Agreement) (each, a “Failure Event”), the Contingent Offering Proceeds will be released
from escrow and returned to each Purchaser at the account specified by each Purchaser in the Escrow
Agreement, together with the Escrow Securities.

     NOW, THEREFORE, in consideration of the promises, mutual covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as follows:

          SECTION 1. Issuance and Sale of Shares.

          1.1. Funding; Deliveries of Each Purchaser. Within one business day of the receipt of a
funding notice from the Company (the “Funding Notice”), by facsimile, e-mail or otherwise,
(such date, but not later than two weeks from the date hereof, the “Funding Date”), subject
to the execution and delivery of the Escrow Agreement and the satisfaction of the other conditions
set forth in Section 4 of this Agreement, each Purchaser shall, by wire transfer, (i) deliver the
aggregate non-contingent purchase price adjacent to such Purchaser’s name on Schedule I pursuant to
the instructions contained in the Funding Notice and (ii) deposit the aggregate contingent purchase
price adjacent to such Purchaser’s name on Schedule I pursuant to the instructions set forth in the
Escrow Agreement; provided, however, that the Purchasers set forth under the
heading “Investment Companies” on Schedule I hereto, will not be required to deliver the aggregate
non-contingent purchase price or the aggregate contingent purchase price, in each case, adjacent to
such Purchaser’s name on Schedule I until such Purchaser’s receipt of Shares and notice of the
Escrow Agent’s receipt of the Escrow Securities. The Contingent Offering Proceeds, plus all
interest, dividends and other distributions and payments thereon, if any, received by the Escrow
Agent, less any funds distributed or paid in accordance with this Agreement, are collectively
referred to herein as the “Escrow Funds.”

          1.2. [Intentionally Omitted.]

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          1.3. Delivery of Shares; Release of Escrow Funds; Closing the Escrow Account.

               (a) Upon the receipt from a Purchaser of the aggregate non-contingent purchase price adjacent
to such Purchaser’s name on Schedule I, the Company shall:

                    (i) issue and sell to each Purchaser and each Purchaser, severally and not jointly, shall buy
from the Company, upon the terms and conditions herein set forth the number of non-contingent
shares of Offered Preferred Stock to be delivered as of the Funding Date set forth opposite each
Purchaser’s name in Schedule I to this Agreement at a purchase price of $1,000 per share;

                    (ii) deliver to each Purchaser one or more stock certificates registered in the name of such
Purchaser, or in such nominee name(s) as designated by such Purchaser in writing, representing the
number of shares of non-contingent Offered Preferred Stock to be delivered as of the Funding Date
set forth opposite such Purchaser’s name in Schedule I, or if such shares are to be held in
book-entry, to instruct the registrar to register such number of shares of non-contingent Offered
Preferred Stock in the book-entry register; provided, however, that any Purchaser set forth under
the heading “Investment Companies” on Schedule I hereto shall not be required to pay such
non-contingent purchase price until it has first received such certificates or book-entry shares;
and

                    (iii) deliver into an escrow account established pursuant to the Escrow Agreement (the
“Share Escrow Account”) certificates registered in the name of such Purchaser, or in such
nominee name(s) as designated by such Purchaser in writing, representing the number of shares of
Escrow Securities to be delivered into the Share Escrow Account set forth opposite such Purchaser’s
name in Schedule I, or if such shares are to be held in book-entry, to instruct the registrar to
register such number of shares of Escrow Securities in the book-entry register.

               (b) Concurrent with the closing of the Acquisition (the “Closing Date”), the Company
shall:

                    (i) issue and sell to each Purchaser and each Purchaser, severally and not jointly, shall buy
from the Company, upon the terms and conditions herein set forth, (i) the number of contingent
shares of Offered Common Stock set forth opposite each Purchaser’s name in Schedule I to this
Agreement at a purchase price of $4.75 per share and (ii) the number of contingent shares of
Offered Preferred Stock set forth opposite each Purchaser’s name in Schedule I to this Agreement at
a purchase price of $1,000 per share; provided, however, that Purchasers who indicate on the
signature page hereof that they are subject to HSR Approval or the Conversion Limit shall receive
shares of Offered Preferred Stock only. “HSR Approval” means, as to any Purchaser, to the
extent applicable and required to permit such Purchaser to convert such Purchaser’s shares of
Offered Preferred Stock into common stock and to own such common stock without such Purchaser being
in violation of applicable law, rule or regulation, the receipt of approvals and authorizations of,
filings and registrations with, notifications to, or expiration or termination of any applicable
waiting period under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations

3

 

thereunder (the “HSR Act”). “Conversion Limit” means ownership, or deemed ownership
for applicable bank regulatory purposes, or ownership or deemed ownership upon conversion by a
Purchaser (together with its affiliates, which for purposes of this definition include all
“affiliates” as defined in the BHC Act or Regulation Y of the Board of Governors of the Federal
Reserve) of more than 9.9% of the total number of any class of Voting Securities (as defined in the
BHC Act and any rules or regulations promulgated thereunder) of the Corporation (4.9% for a holder
that is subject to the Bank Holding Company Act of 1956, as amended (the “BHC Act”); and

                    (ii) deliver to each Purchaser one or more stock certificates registered in the name of such
Purchaser, or in such nominee name(s) as designated by such Purchaser in writing, representing the
number of shares of Contingent Offered Common Stock and Contingent Offered Preferred Stock set
forth opposite such Purchaser’s name in Schedule I, or if such shares are to be held in book-entry,
to instruct the registrar to register such number of shares of Contingent Offered Common Stock and
Contingent Offered Preferred Stock in the book-entry register.

               (c) Pursuant to the terms of the Escrow Agreement, upon notice of a Disbursement Event (as
defined in the Escrow Agreement), the Escrow Agent shall release the Escrow Funds to the Company
from the Escrow Account.

               (d) Pursuant to the terms of the Escrow Agreement, upon notice of a Disbursement Event, the
Escrow Agent shall release to the Company the aggregate number of shares of Escrow Securities
delivered into the Share Escrow Account and the Company shall cancel such shares of Offered
Preferred Stock.

               (e) Upon the occurrence of a Failure Event, (i) the Escrow Agent will unwind the Escrow
Account and, subject to the terms and conditions of the Escrow Agreement, (A) release to each
Purchaser that has deposited funds into the Escrow Account a pro rata portion of the Escrow Funds,
measured as of the date such funds are released by the Escrow Agent from the Escrow Account,
according to the aggregate purchase price adjacent to each such Purchaser’s name on Schedule I and
(B) release to each Purchaser the number of shares of Escrow Securities delivered into the Share
Escrow Account as set forth opposite such Purchaser’s name in Schedule I and (ii) no Offered Common
Stock or Offered Preferred Stock will be issued hereunder with respect to the Contingent Tranche.

          SECTION 2. Representations, Warranties and Covenants of The Company. The Company hereby
represents and warrants to, and covenants with, each Purchaser as follows:

          2.1. Organization and Qualification.

               (a) The Company is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation with full corporate power and authority to own or
lease, as the case may be, and operate its properties and conduct its business as described in the
Private Placement Memorandum; the Company is (x) duly qualified in or licensed by, and is in good
standing (or other similar concept that may exist in the applicable jurisdiction) in, each
jurisdiction in which the nature of its respective businesses requires such qualification or
licensing, and (y) in compliance with the applicable laws, orders, rules,

4

 

regulations and directives issued or administered by such jurisdictions, except, with respect
to (x) and (y), for any failure to be so qualified, so licensed, in good standing or in compliance
with the applicable laws, orders, rules, regulations and directives issued or administered by such
jurisdictions, as would not, individually or in the aggregate, have a material adverse effect on
the business, properties, financial condition or results of operations of the Company and the
Subsidiaries taken as a whole or would not prevent or materially interfere with the consummation of
the transactions contemplated hereby (the occurrence of any such effect or any such prevention or
interference or any such result being herein referred to as a “Material Adverse Effect”);
and the Company is duly registered as a bank holding company under the BHC Act. The deposit
accounts of Doral Bank PR are insured up to applicable limits by the FDIC, and all premiums and
assessments required to be paid in connection therewith have been paid.

               (b) The Company has no subsidiaries other than those listed on Schedule II of this Agreement
(each a “Subsidiary” and collectively the “Subsidiaries”); the Company owns all of
the issued and outstanding capital stock of each of the Subsidiaries; complete and correct copies
of the charters and the bylaws of the Company and each Subsidiary and all amendments thereto have
been delivered to you, and no changes therein will be made on or after the date hereof through and
including the Closing Date, except that the Company’s certificate of incorporation shall be amended
to include the Certificate of Designations for the Offered Preferred Stock; each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to own or lease, as the
case may be, and operate its properties and to conduct its business as described in the Private
Placement Memorandum; each Subsidiary is duly qualified in, or licensed by, and is in good standing
(or other similar concept that may exist in the applicable jurisdiction) in each jurisdiction where
the ownership or leasing of its properties or the conduct of its business requires such
qualification or licensing, except where the failure to be so qualified, licensed or in good
standing would not have a Material Adverse Effect; all of the outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable, have been issued in compliance with all applicable securities laws, were not issued
in violation of any preemptive right, resale right, right of first refusal or similar right and are
owned by the Company subject to no security interest, other encumbrance or adverse claims; and no
options, warrants or other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligation into shares of capital stock or ownership interests in the
Subsidiaries are outstanding, except where such failure or violation would not reasonably be
expected to have a Material Adverse Effect.

               (c) Each of the Company and the Subsidiaries has all necessary licenses, authorizations,
consents and approvals and has made all necessary filings required under any applicable law,
regulation or rule, and has obtained all necessary licenses, authorizations, consents and approvals
from other persons, in order to conduct their respective businesses; neither the Company nor any of
the Subsidiaries is in violation of, or in default under, or has received notice of any proceedings
relating to revocation or modification of, any such license, authorization, consent or approval or
any federal, state, local (which, for all purposes of this Agreement, shall include the
Commonwealth of Puerto Rico and any subdivision thereof) or foreign law, regulation or rule or any
decree, order or judgment applicable to the Company or any of the Subsidiaries or knows of any
condition, circumstance, or situation that would prohibit or otherwise materially interfere with
the ability of the Company

5

 

from entering and performing any of its obligations under the Transaction Documents (as
defined below), except where such violation, default, revocation, modification, condition,
circumstance or situation would not reasonably be expected to have a Material Adverse Effect.

          2.2. Reporting Company; Form S-1. The Company is not an “ineligible issuer” (as defined in
Rule 405 promulgated under the Securities Act) and is eligible to register the Offered Common Stock
and the Conversion Shares for resale by any Purchaser on a registration statement on Form S-1 (the
“Registration Statement”) under the Securities Act. The Company is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and has filed all reports required thereby during the preceding twelve months on a
timely basis or has received a valid extension of such time of filing and has filed any such
reports prior to the expiration of any such extension.

          2.3. Capitalization; Authorized Capital Stock. The Company has an authorized and
outstanding capitalization as set forth under the heading “Capitalization” in the Private Placement
Memorandum prepared by the Company as of the date set forth therein. All of the outstanding shares
of capital stock of the Company have been duly and validly authorized and issued and are fully paid
and non-assessable and were not issued in violation of any pre-emptive rights, resale rights,
rights of first refusal or similar rights. No bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which the stockholders of the Company may vote are
issued and outstanding. There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Shares or the Conversion Shares. Except
as disclosed in the Private Placement Memorandum, (i) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any shares of capital
stock of the Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of the Company or
options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or exchangeable for, any
shares of capital stock of the Company, other than those issued or granted pursuant to equity or
incentive plans or arrangements as set forth above; (ii) except for the registration rights granted
under this Agreement, there are no agreements or arrangements under which the Company is obligated
to register the sale of any of their securities under the Securities Act; (iii) there are no
outstanding securities or instruments of the Company or which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or arrangements by which the
Company is or may become bound to redeem a security of the Company; (iv) the Company does not have
any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or
agreement and (v) there is no authorized and outstanding capital stock of the Company.

          2.4. Issuance, Sale and Delivery of the Shares.

               (a) The shares of Offered Common Stock have been duly authorized and, when issued, delivered
and paid for in the manner set forth in this Agreement, will be validly issued, fully paid and
nonassessable, and will conform in all material respects to the description thereof set forth in
the Private Placement Memorandum.

6

 

               (b) The shares of Offered Preferred Stock have been duly authorized and, when issued,
delivered and paid for in the manner set forth in this Agreement, will be validly issued, fully
paid and nonassessable, and will conform in all material respects to the description thereof set
forth in the Private Placement Memorandum.

               (c) The holders of Offered Preferred Stock will be entitled to the rights and preferences set
forth in the Certificate of Designations of the Offered Preferred Stock (the “Certificate of
Designations”), a form of which is attached to this Agreement as Exhibit A, as further
described in the Private Placement Memorandum.

               (d) The Company has reserved and at all times shall reserve and keep available, out of its
authorized but unissued common stock, solely for the purpose of effecting the conversion of the
Offered Preferred Stock (the “Conversion”), the full number of shares of common stock
issuable upon the Conversion of all the Offered Preferred Stock from time to time outstanding. The
Conversion Shares have been duly authorized, and when issued and delivered in the manner set forth
in the Certificate of Designations, will be validly issued, fully paid and nonassessable.

               (e) No preemptive rights, resale rights, rights of first refusal or similar rights to
subscribe for or purchase any shares of common stock or preferred stock of the Company exist with
respect to the issuance and sale of the Shares by the Company pursuant to this Agreement or the
Conversion Shares pursuant to the Certificate of Designations, in each case, which have not been
waived or complied with or will be waived or complied with on or before the Funding Date.

               (f) No further approval or consent by, or notice to, the stockholders or Board of Directors of
the Company will be required for the issuance and sale of the Shares or the issuance of the
Conversion Shares, as contemplated herein, except:

                    (i) pursuant to the Securityholders and Registration Rights Agreement, dated as of July 19,
2007, between Doral Holdings Delaware LLC (“Holdings”) and the Company (the
“Stockholders Agreement”), a 20-day written notice must be provided to Holdings prior to an
issuance of common stock, so long as Holdings owns at least 25% of the outstanding voting power of
the Company; and

                    (ii) pursuant to New York Stock Exchange (the “NYSE”) Rule 312.03(c)(2), the
stockholders of the Company must approve the issuance of common stock, or securities convertible
into or exercisable for common stock, when such issuance will equal or exceed 20 percent of the
number of shares of common stock outstanding before the issuance of common stock or securities
convertible into or exercisable for common stock and, pursuant to NYSE Rule 312.03(b)(3), the
stockholders of the Company must approve the issuance of common stock or securities convertible
into or exercisable for common stock, when such issuance involves issuances to a substantial
security holder (such common stockholder approvals being referred to herein as the “Stockholder
Approval”). Notwithstanding the foregoing, the issuance and sale of the Shares prior to
receipt of the Stockholder Approval will not contravene the rules and regulations of the NYSE.

7

 

          2.5. Stockholder Approval.

               (a) The Company will file a proxy statement in preliminary form with respect to a special
meeting of stockholders of the Company (the “Stockholder Meeting”) to obtain Stockholder
Approval within 90 days following the Closing Date, and thereafter, will use its reasonable best
efforts to cause a definitive proxy statement (the “Proxy Statement”) to be available to be
distributed to stockholders. If the Company is notified by the U.S. Securities and Exchange
Commission (the “SEC”) that the proxy statement will not be subject to review or subject to
further review, as the case may be, it will mail the Proxy Statement within five business days
after such notification and hold the Stockholder Meeting within 25 business days after mailing the
Proxy Statement. The Proxy Statement shall solicit each such stockholder’s affirmative vote at the
Stockholder Meeting for approval of resolutions providing for the: (i) approval of the Conversion
for purposes of NYSE Rule 312.03(c)(2) and (ii) approval of the Conversion for purposes of NYSE
Rule 312.03(b)(3). The Company shall use its reasonable best efforts to solicit its stockholders’
approval of such resolutions and to cause the Board of Directors of the Company to recommend to the
stockholders that they approve such resolutions.

               (b) Notwithstanding Section 2.5(a) above, if a Failure Event occurs, the Company will file a
proxy statement in preliminary form within 20 days following the return to the Purchasers of the
Escrow Funds pursuant to the Escrow Agreement.

               (c) If the Company is unable to obtain the Stockholder Approval at the Stockholder Meeting,
the Company will undertake to obtain such approval at (i) a special meeting of the Company’s
stockholders held 90 days after the Stockholder Meeting and (ii) at least once every 90 days
thereafter until Stockholder Approval is obtained.

               (d) If the Offered Preferred Stock (other than shares of Offered Preferred Stock held by
investors that cannot invest directly in the Company’s Common Stock prior to receipt of HSR
Approval and shares of Offered Preferred Stock that are not converted due to the Conversion Limit)
remains outstanding on the 180th day following the Closing Date, the Conversion Price (as defined
in the Certificate of Designations) will be decreased by 1.0%, subject to a maximum decrease of
10%, subject to adjustment, every 90 days thereafter (or the pro rata portion of such adjustments
for any partial period) until the Offered Preferred Stock is no longer outstanding (other than
shares of Preferred Stock held by investors that cannot invest directly in our Common Stock prior
to receipt of HSR Approval and shares of Offered Preferred Stock that are not converted due to the
Conversion Limit). The decreased Conversion Price shall not be applied with respect to shares of
Offered Preferred Stock not previously converted due to the absence of an HSR Approval.

               (e) On or prior to the Funding Date, the Company will enter into a cooperation agreement, in
substantially the form attached hereto as Exhibit C (the “Cooperation Agreement”), by and
among the Company, Holdings, Doral Holdings L.P., and Doral GP Ltd. (such individuals and entities
referred to as “Cooperation Agreement Stockholders”), committing each Cooperation Agreement
Stockholder, among other things, to (i) vote their shares in favor of the resolutions described in
Section 2.5(a) above, (ii) not voluntarily dissolve Holdings and Doral Holdings L.P. or transfer
any of its shares of Common Stock prior to receipt of

8

 

Stockholder Approval, and (iii) to dissolve Holdings and its direct and indirect parent
companies after receipt of the Stockholder Approval;

          2.6. Due Execution, Delivery and Performance of the Agreements.

               (a) The Company has full legal right, corporate power and authority to enter into this
Agreement, the Escrow Agreement, and the Cooperation Agreement (the “Transaction
Documents”) and to perform the transactions contemplated hereby and thereby. The Transaction
Documents have been duly authorized, executed and delivered by the Company. The Transaction
Documents constitute (assuming the due authorization, execution and delivery by the other party or
parties hereto and thereto) legal, valid and binding agreements of the Company, enforceable against
the Company in accordance with their terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to
or affecting the enforcement of creditors’ rights and the application of equitable principles
relating to the availability of remedies, subject to 12 U.S.C. §1818(b)(6)(D) (or any successor
statute) and similar bank regulatory powers and to the application of principles of public policy,
and except as rights to indemnity or contribution, including but not limited to, indemnification
provisions set forth in Section 5.4 of this Agreement, may be limited by federal, state, or local
securities law or the public policy underlying such laws and general equitable principles relating
to the availability of remedies. The execution of the Transaction Documents by the Company and
performance by the Company of its obligations under the Transaction Documents and the Certificate
of Designations and the consummation of the transactions herein and therein contemplated will not
violate any provision of the charter or bylaws of the Company or the organizational documents of
any Subsidiary and will not result in the creation of any lien, charge, security interest or
encumbrance upon any assets of the Company or any Subsidiary (provided, however,
that nothing contained in this Agreement shall be construed as to prevent the Company from granting
the Purchasers a security interest in the Escrow Funds pursuant to the terms of the Escrow
Agreement) pursuant to the terms or provisions of, or will not conflict with, result in the breach
or violation of, or constitute, either by itself or upon notice or the passage of time or both, a
default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which any of the Company or any Subsidiary is a party or by which any of the
Company or any Subsidiary or their respective properties may be bound or affected, or any statute
or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory
body, self-regulatory organization (including the NYSE) administrative agency or other governmental
agency or body applicable to the Company or any Subsidiary or any of their respective properties,
and in each case that would have a Material Adverse Effect.

               (b) No approval, authorization, consent or order of or filing with any federal, state, local
or foreign governmental or regulatory commission, board, body, authority or agency, or of or with
any self-regulatory organization or other non-governmental regulatory authority (including, without
limitation, the NYSE), or approval of the shareholders of the Company, is required for the
execution and delivery of this Agreement, the Transaction Documents or the consummation of the
transactions contemplated hereby, other than (i) the filing of the Certificate of Designations with
the Secretary of State of the Commonwealth of Puerto Rico; (ii) the registration of the Offered
Common Stock, and the Conversion Shares, under the Securities Act, in accordance with Section 5
hereof; (iii) solely with respect to the

9

 

issuance of the Conversion Shares in accordance with the Certificate of Designations, such
approvals, authorizations, consents, orders or filings, approvals required in connection with the
Stockholder Approvals, which will be effected in accordance with Section 2.5 above; or (iv) any
necessary qualification under the securities or blue sky laws of the various jurisdictions in which
the Shares will be sold.

          2.7. Accountants. PricewaterhouseCoopers LLP (“PWC”), who has expressed its audit
opinion with respect to the consolidated financial statements contained in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2009, which has been incorporated by reference
in the Private Placement Memorandum, is a registered independent public accounting firm, within the
meaning of the Code of Professional Conduct of the American Institute of Certified Public
Accountants, as required by the Securities Act, and the rules and regulations promulgated
thereunder (the “1933 Act Rules and Regulations”), and by the rules of the Public Company
Accounting Oversight Board.

          2.8. No Defaults or Consents.

               (a) Neither the Company nor any of the Subsidiaries is in breach or violation of or in default
under, nor has any event occurred which, with notice, lapse of time or both, would result in any
breach or violation of, constitute a default under, or give the holder of any indebtedness (or a
person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment
of all or a part of such indebtedness under, (i) its charter or bylaws, (ii) any indenture,
mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any
license, lease, contract or other agreement or instrument to which it is a party or by which it or
any of its properties may be bound or affected, (iii) any federal, state, local or foreign law,
regulation or rule, (iv) any rule or regulation of any self-regulatory organization or other
non-governmental regulatory authority (including, without limitation, the rules and regulations of
the NYSE), or (v) any decree, judgment or order applicable to it or any of its properties, which
violation or default would, in the case of clauses (ii), (iii), (iv) and (v) above, either
individually or in the aggregate with all other violations and defaults referred to in this
paragraph, result in a Material Adverse Effect.

               (b) Neither the execution, delivery and performance of this Agreement by the Company nor the
consummation of any of the transactions contemplated hereby (including, without limitation, the
issuance and sale by the Company of the Shares and the issuance of the Conversion Shares) will give
rise to a right to terminate or accelerate the due date of any payment due under, or conflict with
or result in the breach of any term or provision of, or constitute a default (or an event which
with notice or lapse of time or both would constitute a default) under, except such defaults that
individually or in the aggregate would not cause a Material Adverse Effect, or require any consent
or waiver under, or result in the execution or imposition of any lien, charge or encumbrance upon
any properties or assets of the Company or any Subsidiary pursuant to the terms of, any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or any Subsidiary is
a party or by which either the Company or any Subsidiary or any of their properties or businesses
is bound, or any franchise, license, permit, judgment, decree, order, statute, rule or regulation
applicable to the Company or any of its Subsidiaries or violate any provision of the charter or
bylaws of the

10

 

Company or any of its subsidiaries, except for such consents or waivers which have already
been obtained and are in full force and effect.

          2.9. No Actions.

               (a) There are no actions, suits, claims, investigations or proceedings pending or, to the
Company’s knowledge, threatened to which the Company or any of the Subsidiaries is a party or of
which any of their respective properties is or would be subject at law or in equity, before or by
any federal, state, local or foreign governmental or regulatory commission, board, body, authority
or agency, or before or by any self-regulatory organization or other non-governmental regulatory
authority (including, without limitation, the NYSE), except any such action, suit, claim,
investigation or proceeding which, if resolved adversely to the Company or any Subsidiary, would
not, individually or in the aggregate, have a Material Adverse Effect.

               (b) Neither the Company nor any Subsidiary is in violation of any rule or regulation of the
SEC, the Office of Thrift Supervision (the “OTS”), the Federal Reserve or the FDIC, which
would have, individually or in the aggregate, a Material Adverse Effect. Neither the Company nor
any Subsidiary is subject to any directive from the OTS, the Federal Reserve or the FDIC to make
any change in the method of conducting its business or affairs, and the Company and each Subsidiary
have conducted their businesses in compliance with all applicable statutes and regulations
(including, without limitation, all regulations, decisions, directives and orders of the OTS, the
Federal Reserve and the FDIC), except where the failure to so comply would not have, individually
or in the aggregate, a Material Adverse Effect.

          2.10. Properties. The Company and each of the Subsidiaries have good and marketable title
to all property (real and personal) described in the Private Placement Memorandum as being owned by
any of them, free and clear of all liens, claims, security interests or other encumbrances, except
where the failure to so own such property would not have, individually or in the aggregate, a
Material Adverse Effect; all the property described in the Private Placement Memorandum as being
held under lease by the Company or any Subsidiary is held thereby under valid, subsisting and
enforceable leases, except where the failure to so lease such property would not have, individually
or in the aggregate, a Material Adverse Effect.

          2.11. No Material Adverse Change.

               (a) Except as described in or contemplated by the Private Placement Memorandum, from December
31, 2009 until the date hereof, there has been no circumstance, effect, event or change that,
individually or in the aggregate, has, or would reasonably be expected to have a Material Adverse
Effect on the Company. The capitalization, assets, properties and business of the Company conform
in all material respects to the descriptions thereof in the Private Placement Memorandum as of the
date specified.

               (b) Except as described in or contemplated by the Private Placement Memorandum, from December
31, 2009 until the date hereof, neither the Company nor any Subsidiary has issued any securities or
incurred any liability or obligation, direct or contingent,

11

 

for borrowed money, except borrowings in the ordinary course of business, or entered into any
other transaction not in the ordinary course of business, in each case, which is material in light
of the businesses and properties of the Company and the Subsidiaries, taken as a whole. Neither
the Company nor any of its Subsidiaries has any material contingent liabilities of any kind, except
as set forth in the Private Placement Memorandum.

               (c) Except as described in or contemplated by the Private Placement Memorandum, from December
31, 2009 until the date hereof, none of the Company or any of its Subsidiaries has declared or paid
any dividend or distribution to any holder of its capital stock or other equity interests (other
than any cash dividend or distribution from a wholly owned Subsidiary to another wholly owned
Subsidiary or the Company).

          2.12. Reports. During the preceding twelve months, the Company and each Subsidiary have
filed all material reports, registrations, documents, filings, statements and submissions together
with any required amendments thereto, that it was required to file with any governmental agency or
body applicable to the Company or any Subsidiary (the foregoing, collectively, the “Company
Reports”) and have paid all material fees and assessments due and payable in connection
therewith. The Company Reports were filed on a timely basis or the Company received a valid
extension and has filed any such Company Reports prior to the expiration of any such extension. As
of their respective filing dates, the Company Reports complied in all material respects with all
statutes and applicable rules and regulations of the applicable governmental agency or body, as the
case may be. To the knowledge of the Company, as of the date of hereof, there are no outstanding
comments from the SEC or any other governmental agency or body applicable to the Company or any
Subsidiary with respect to any Company Report. The Company Reports, including the documents
incorporated by reference in each of them, each contained all of the information required to be
included in it and, when it was filed and as of the date of each such Company Report filed with or
furnished to the SEC, such Company Report did not, as of its date or if amended prior to the date
hereof, as of the date of such amendment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made in it, in light of the
circumstances under which they were made, not misleading and complied as to form in all material
respects with the applicable requirements of the Securities Act and the Exchange Act. No executive
officer of the Company has failed in any respect to make the certifications required of him or her
under Section 302 or 906 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

          2.13. Taxes. Except as disclosed in the Private Placement Memorandum, all tax returns
required to be filed by the Company or any of the Subsidiaries have been timely filed (except in
any case in which the failure so to file would not reasonably be expected to have a Material
Adverse Effect), and to the Company’s knowledge, all such returns are true, correct and complete;
all taxes and other assessments of a similar nature (whether imposed directly or through
withholding) including any interest, additions to tax or penalties applicable thereto due or
claimed to be due from such entities have been timely paid, other than those being contested in
good faith and for which adequate reserves have been provided or as would not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary has
knowledge of any tax deficiency that has been or might be asserted or threatened against it that
could have a Material Adverse Effect.

12

 

          2.14. Transfer Taxes. All stock transfer or other taxes (other than income taxes) that are
required to be paid in connection with the sale and transfer of the Shares to be sold to each
Purchaser hereunder, as set forth in Schedule I to this Agreement, will have been, fully paid or
provided for by the Company and all laws imposing such taxes will have been fully complied with.

          2.15. Investment Company. Neither the Company nor any Subsidiary is, or after giving
effect to the transactions contemplated hereby, will be an “investment company,” as such term is
defined in the Investment Company Act of 1940, as amended.

          2.16. Offering Materials. The Company has not distributed and will not distribute any
offering material in connection with the offering and sale of the Shares other than the Private
Placement Memorandum or any amendment or supplement thereto (including filings made by the Company
under the Exchange Act and incorporated by reference into the Private Placement Memorandum). The
Company has not in the past nor will it hereafter take any action to sell, offer for sale or
solicit offers to buy any securities of the Company that could result in the initial sale of the
Shares not being exempt from the registration requirements of Section 5 of the Securities Act.

          2.17. Insurance. The Company and each of its Subsidiaries maintain insurance underwritten
by insurers of recognized financial responsibility, of the types and in the amounts that the
Company reasonably believes is adequate for its and its Subsidiaries businesses, including, but not
limited to, insurance covering all real and personal property owned or leased by the Company or any
Subsidiary against theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, with such deductibles as are customary for companies in the same or similar
business, all of which insurance is in full force and effect. Neither the Company nor any of its
Subsidiaries has received any notice of cancellation of any such insurance, except for such
cancellation as would not, individually or in the aggregate, have a Material Adverse Effect.

          2.18. Additional Information. The information contained in the following documents, taken
as a whole, which the Placement Agent has furnished to each Purchaser (it being understood that all
documents publicly filed with or publicly furnished to the SEC shall be deemed “furnished” for
purposes of this Section 2.18) did not, as of the date hereof, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances in which they were made not misleading:

               (a) the Private Placement Memorandum, including all addenda and exhibits thereto and any
document incorporated by reference therein, other than this Agreement and appendices and exhibits
hereto; and

               (b) the investor presentation distributed to potential Purchasers, including all addenda and
exhibits thereto.

     The documents incorporated by reference in the Private Placement Memorandum or attached as
exhibits thereto, at the time they became effective or were filed with the SEC, as the

13

 

case may be, complied in all material respects with the requirements of the Exchange Act, as
applicable, and the rules and regulations of the SEC thereunder (the “1934 Act Rules and
Regulations” and, together with the 1933 Act Rules and Regulations, the “Rules and
Regulations”).

          2.19. Price of Common Stock. The Company has not taken, and will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted or that might
reasonably be expected to constitute, the stabilization or manipulation of the price of the common
stock to facilitate the sale or resale of the Shares.

          2.20. Use of Proceeds. The Company shall use the proceeds from the sale of the Shares as
described under “Use of Proceeds” in the Private Placement Memorandum.

          2.21. Use of Purchaser Name. Except as otherwise required by applicable law or regulation,
the Company shall not use any Purchaser’s name or the name of any of such Purchaser’s affiliates or
investment advisers in any advertisement, announcement, press release or other similar public
communication unless it has received the prior written consent of the Purchasers for the specific
use contemplated; provided that, to the extent such disclosure (i) is required to be disclosed
under any law or regulation, (ii) is required to be disclosed or requested by, or necessary under
the rules of, any court, any governmental agency or other regulatory authority (including, without
limitation, any stock exchange or self-regulatory organization), or (iii) is necessary in
connection with any action, investigation or proceeding (including, without limitation, as part of
any interrogatory, court order, subpoena, administrative proceeding, civil investigatory demand, in
each case whether oral or written, or any other legal or regulatory process), the Company shall
provide such Purchaser with prior written notice of such disclosure to the extent practicable.

          2.22. Financial Statements. The financial statements incorporated by reference in the
Private Placement Memorandum, together with the related notes and schedules, present fairly the
consolidated financial position of the Company and the Subsidiaries as of the dates indicated and
the consolidated results of operations, cash flows and changes in “stockholder” equity of the
Company and the Subsidiaries for the periods specified and have been prepared in compliance in all
material respects with the requirements of the Securities Act and Exchange Act and in conformity
with U.S. generally accepted accounting principles applied on a consistent basis during the periods
involved. There is no transaction, arrangement, or other relationship between the Company (or any
Subsidiary) and an unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so disclosed therein or in the
Private Placement Memorandum.

          2.23. Listing Compliance.

               (a) The Company is in compliance with the requirements of the NYSE for continued listing of
the Company’s common stock thereon. The Company has taken no action designed to, or, to its
knowledge, likely to have the effect of, terminating the registration of the Company’s common stock
under the Exchange Act or the listing of the Company’s common stock on the NYSE, nor has the
Company received any notification that the SEC or the NYSE is contemplating terminating such
registration or listing. The transactions contemplated

14

 

by this Agreement will not contravene the rules and regulations of the NYSE. The Company will
comply with all requirements of the NYSE with respect to the issuance of the Conversion Shares and
shall use its reasonable best efforts to cause the Offered Common Stock and Conversion Shares to be
listed on the NYSE.

               (b) The Company hereby undertakes to file, and use reasonable best efforts to cause to be
approved, a supplemental listing application with NYSE for the Offered Common Stock and Conversion
Shares

          2.24. Internal Accounting Controls.

               (a) The Company and each of the Subsidiaries maintain a system of internal accounting controls
meeting the requirements of Section 13(b)(2) of the Exchange Act and sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with U.S. generally accepted accounting principles and to
maintain accountability for the Company’s assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

               (b) The Company maintains a system of internal accounting controls it has established and
maintains and evaluates “disclosure controls and procedures” (as such term is defined in Rule
13a-15 and 15d-15 under the Exchange Act) and “internal control over financial reporting” (as such
term is defined in Rule 13a-15 and 15d-15 under the Exchange Act); such disclosure controls and
procedures are designed to ensure that (i) material information relating to the Company and its
Subsidiaries is made known to the management of the Company by others within those entities as
appropriate to allow timely decisions regarding required disclosure and to make the certificates
required by the Exchange Act with respect to documents required to be filed by the Company with the
SEC, and (ii) the Company has disclosed, based on its most recent evaluation prior to the date
hereof, to the Company’s auditors and the audit committee of the Company’s Board of Directors (A)
any significant deficiencies in the design or operation of internal controls which could adversely
affect in any material respect the Company’s ability to record, process, summarize and report
financial data and have identified for the Company’s auditors any material weaknesses in internal
controls and (B) any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company’s internal controls; since the date of the most recent
evaluation of such disclosure controls and procedures and internal controls, there have been no
significant changes in internal controls or in other factors that could significantly affect
internal controls, including any corrective actions with regard to significant deficiencies and
material weaknesses. The principal executive officers (or their equivalents) and principal
financial officers (or their equivalents) of the Company have made all certifications required by
the Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC, and the
statements contained in each such certification are complete and correct; the Company, the
Subsidiaries and the Company’s directors and officers are each in compliance in all material
respects with all applicable effective provisions of the Sarbanes-Oxley Act and the rules and
regulations of the SEC and the NYSE promulgated thereunder.

15

 

          2.25. Foreign Corrupt Practices. Neither the Company, nor any Subsidiary, nor, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any Subsidiary has in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment
 to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “Foreign Corrupt Practices Act”); or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. The Company and its Subsidiaries have instituted and maintain policies and procedures de
signed to ensure continued compliance with the Foreign Corrupt Practices Act.

          2.26. Money Laundering. The operations of the Company and the Subsidiaries are and have
been conducted at all times in compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended (the
“Bank Secrecy Act”), the money laundering statutes of all jurisdictions, the rules and
regulations thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money Laundering
Laws”); and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator or non-governmental authority involving the Company or any of
its Subsidiaries with respect to the Money Laundering Laws is pending or, to the Company’s
knowledge, threatened. Neither the Company nor any of its Subsidiaries nor, to the knowledge of
the Company, any director, officer, agent, employee or affiliate of the Company or any of the
Subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department (“OFAC”), and the Company will not knowingly
directly or indirectly use the proceeds of the sale of the Shares, or lend, contribute or otherwise
make available such proceeds to any Subsidiary, joint venture partner or other Person or entity,
towards any sales or operations in any country sanctioned by OFAC or for the purpose of financing
the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

          2.27. Employee Relations.

               (a) Except for matters which would not, individually or in the aggregate, have a Material
Adverse Effect, (i) neither the Company nor any of the Subsidiaries is engaged in any unfair labor
practice; (ii) there is (A) no unfair labor practice complaint pending or, to the Company’s
knowledge, threatened against the Company or any of the Subsidiaries before the National Labor
Relations Board, and no grievance or arbitration proceeding arising out of or under collective
bargaining agreements is pending or, to the Company’s knowledge, threatened, (B) no strike, labor
dispute, slowdown or stoppage pending or, to the Company’s knowledge, threatened against the
Company or any of the Subsidiaries, (C) no union representation dispute or collective bargaining
agreement currently existing concerning the employees of the Company or any of the Subsidiaries,
(iii) to the Company’s knowledge, no union organizing activities are currently taking place
concerning the employees of the Company or any of the Subsidiaries, and (iv) there has been no
violation of any federal, state, local or foreign law relating to discrimination in the hiring,
promotion or pay of employees, any

16

 

applicable wage or hour laws or any provision of the Employee Retirement Income Security Act
of 1974, as amended, including regulations and published interpretations thereunder
(“ERISA”), as amended, or the rules and regulations promulgated thereunder concerning the
employees of the Company or any of the Subsidiaries.

          2.28. ERISA. Except as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, the Company and each of the Subsidiaries or their “ERISA
Affiliates” (as defined below) are in compliance in all material respects with all presently
applicable provisions of ERISA; no “reportable event” (as defined in ERISA) has occurred with
respect to any “employee benefit plan” (as defined in ERISA) for which the Company or any of its
Subsidiaries or ERISA Affiliates would have any liability; the Company and each of its Subsidiaries
or their ERISA Affiliates have not incurred and do not expect to incur liability under (i) Title IV
of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or
(ii) Sections 412, 4971, 4975 or 4980B of the United States Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (collectively, the
“Code”); and each “employee benefit plan” for which the Company and each of its
Subsidiaries or any of their ERISA Affiliates would have any liability that is intended to be
qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would reasonably be expected to cause the
loss of such qualification. “ERISA Affiliate” means, with respect to the Company or a Subsidiary,
any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Code
or Section 400(b) of ERISA of which the Company or such Subsidiary is a member.

          2.29. Environmental Matters. Except as would not, individually or in the aggregate, have a
Material Adverse Effect, (i) none of the Company, its Subsidiaries or any of their respective
properties, assets and operations are in violation of any Environmental Laws (as defined below) and
(ii) neither the Company nor any of its Subsidiaries are required to hold any permits or obtain any
authorizations under any Environmental Laws (as defined below) (as used herein, “Environmental
Law” means any federal, state, local or foreign law, statute, ordinance, rule, regulation,
order, decree, judgment, injunction, permit, license, authorization or other binding requirement,
or common law, relating to health, safety or the protection, cleanup or restoration of the
environment or natural resources, including those relating to the distribution, processing,
generation, treatment, storage, disposal, transportation, other handling or release or threatened
release of Hazardous Materials, and “Hazardous Materials” means any material (including,
without limitation, pollutants, contaminants, hazardous or toxic substances or wastes) that is
regulated by or may give rise to liability under any Environmental Law).

          2.30. Integration; Other Issuances of Shares. Neither the Company nor any Subsidiary or
any affiliates, nor any person acting on its or their behalf, has issued any Shares or shares of
any other series of common or preferred stock, or other securities or instruments convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of capital stock which
would be integrated with the sale of the Shares to the Purchasers for purposes of the Securities
Act or of any applicable stockholder approval provisions, including, without limitation, under the
rules and regulations of the NYSE, nor will the Company or its Subsidiaries or affiliates or any
person acting on behalf of the Company take any action or steps that would require registration of
any of the Shares under the Securities Act or cause the offering of the

17

 

Shares to be integrated with other offerings. Assuming the accuracy of the representations and
warranties of Purchasers, the initial offer and sale of the Shares by the Company to the Purchasers
pursuant to this Agreement will be exempt from the registration requirements of the Securities Act.

          2.31. Non-Public Information.

               (a) The Company confirms that neither it nor any of its officers or directors nor any other
Person acting on its or their behalf has provided, and it has not authorized the Placement Agent to
provide, any Purchaser or its respective agents or counsel with any information that it believes
constitutes or could reasonably be expected to constitute material, non-public information except
insofar as the existence, provisions and terms of this Agreement and the proposed transactions
hereunder or contemplated herein (including, the Acquisition) may constitute such information.

               (b) The Company shall use its reasonable best efforts to (i) issue a press release announcing
the signing of this Agreement prior to 9:30 a.m., New York City Time, on the first business day
after the date hereof (which press release will disclose both the Non-Contingent Tranche and the
Contingent Tranche, and describing, without naming the targets, that the proceeds of the Contingent
Tranche are being held in escrow to support Doral Bank PR’s efforts related to a possible assisted
transaction, and will be returned to investors if the transaction is not completed), (ii) file a
Current Report on Form 8-K describing the material terms of the transactions contained in this
Agreement, (iii) issue a press release announcing the closing of an Acquisition or the occurrence
of a Failure Event prior to 8:30 a.m., New York City time, on the first business day after the
Closing Date or the second business day after the occurrence of the Failure Event, as the case may
be, and (iv) file a Current Report on Form 8-K describing the material terms of the transactions
contained in any Acquisition agreements, and attaching as an exhibit to such Form 8-K the
Acquisition agreements (the “Closing 8-K Filing”) prior to 5:30 p.m., New York City time,
on the first business day after the Closing Date.

               (c) After giving effect to the filing of the Closing 8-K Filing or the filing of a Current
Report on Form 8-K after the occurrence of a Failure Event, the Purchasers will not be in
possession of any material non-public information relating to the Company and its Subsidiaries.
Notwithstanding the foregoing, nothing contained in this Section 2.31(c) shall require the Company
to release information covered by a confidentiality agreement with the FDIC, if any.

               (d) The Company shall not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents, not to, provide any Purchaser with any
material, non-public information regarding the Company or any of its Subsidiaries from and after
the earlier of (i) the filing of the Closing 8-K Filing with the SEC; and (ii) the unwinding of the
Escrow Account following a Failure Event, without the prior express written consent of such
Purchaser.

          2.32. Risk Management Instruments. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, any and all material interest rate
swaps, caps, floors, option agreements (other than employee stock options)

18

 

and other interest risk management arrangements, whether entered into for the account of the
Company or one of its Subsidiaries or for the account of a customer of the Company or one of its
Subsidiaries, were entered into in the ordinary course of business and in accordance with
applicable laws, rules, regulations and policies of all applicable regulatory agencies. The
Company and each of its Subsidiaries have duly performed in all material respects all of their
obligations thereunder to the extent that such obligations to perform have accrued, and there are
no material breaches, violations or defaults or allegations or assertions of such by any party
thereunder

          2.33. Mortgage Banking Business. Except as has not had and would not reasonably be
expected to have a Material Adverse Effect:

               (a) The Company and each Subsidiary has complied with, and all documentation in connection
with the origination, processing, underwriting and credit approval of any mortgage loan originated,
purchased or serviced by the Company or any Subsidiary satisfied, (i) all applicable federal, state
and local laws, rules and regulations with respect to the origination, insuring, purchase, sale,
pooling, servicing, subservicing, or filing of claims in connection with mortgage loans, including
all laws relating to real estate settlement procedures, consumer credit protection, truth in
lending laws, usury limitations, fair housing, transfers of servicing, collection practices, equal
credit opportunity and adjustable rate mortgages, (ii) the responsibilities and obligations
relating to mortgage loans set forth in any agreement between the Company or any Subsidiary and any
Agency, Loan Investor or Insurer, (iii) the applicable rules, regulations, guidelines, handbooks
and other requirements of any Agency, Loan Investor or Insurer and (iv) the terms and provisions of
any mortgage or other collateral documents and other loan documents with respect to each mortgage
loan; and

               (b) No Agency, Loan investor or Insurer has (i) claimed in writing that the Company or any
Subsidiary has violated or has not complied with the applicable underwriting standards with respect
to mortgage loans sold by the Company or any Subsidiary to a Loan Investor or Agency, or with
respect to any sale of mortgage servicing rights to a Loan Investor, (ii) imposed in writing
restrictions on the activities (including commitment authority) of the Company or any Subsidiary or
(iii) indicated in writing to the Company or any Subsidiary that it has terminated or intends to
terminate its relationship with the Company or any Subsidiary for poor performance, poor loan
quality or concern with respect to the Company’s or any Subsidiary’s compliance with laws.

               (c) For purposes of this Section 2.33:

                    (i) “Agency” shall mean the Federal Housing Administration, the Federal Home Loan
Mortgage Corporation, the Farmers Home Administration (now known as Rural Housing and Community
Development Services), the Federal National Mortgage Association, the United States Department of
Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture or any other
federal or state agency with authority to (A) authority to determine any investment, origination,
lending or servicing requirements with regard to mortgage loans originated, purchased or serviced
by the Company or any Subsidiary or (B) originate, purchase, or service mortgage loans, or
otherwise promote mortgage lending, including without limitation, state and local housing finance
authorities.

19

 

                    (ii) “Loan Investor” shall mean any person (including an Agency) having a beneficial
interest in any mortgage loan originated, purchased or serviced by the Company or any Subsidiary or
a security backed by or representing an interest in any such mortgage loan; and

                    (iii) “Insurer” means a person who insures or guarantees for the benefit of the
mortgagee all or any portion of the risk of loss upon borrower default on any of the mortgage loans
originated, purchased or serviced by the Company or any Subsidiary, including the Federal Housing
Administration, the United States Department of Veterans’ Affairs, the Rural Housing Service of the
U.S. Department of Agriculture and any private mortgage insurer, and providers of hazard, title or
other insurance with respect to such mortgage loans or the related collateral.

          2.34. Shell Company Status. The Company is not, and has never been, an issuer of the type
described in Rule 144(i)(l) under the Securities Act.

          2.35. Solvency. The Company and each of its Subsidiaries do and will after giving effect
to the transactions contemplated hereby to occur (i) own assets the fair saleable value of which
are (A) greater than the total amount of its liabilities (including known contingent liabilities)
and (B) greater than the amount that will be required to pay the probable liabilities of its
existing debts as they become absolute and matured considering the financing alternatives
reasonably available to it, and (ii) not have capital that will be unreasonably small in relation
to its business as presently conducted or contemplated. The Company has no knowledge of any facts
or circumstances which lead it to believe that it or any of its Subsidiaries will be required to
file for reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction, and has no present intent to so file.

          2.36. Transactions With Affiliates and Employees. Except as set forth in the Private
Placement Memorandum and other than the grant of stock options or other equity awards that are not
individually or in the aggregate material in amount, none of the officers or directors of the
Company and, to the Company’s knowledge, none of the employees of the Company, is presently a party
to any transaction with the Company or to a presently contemplated transaction (other than for
services as employees, officers and directors) that would be required to be disclosed pursuant to
Item 404 of Regulation S-K promulgated under the Securities Act.

          2.37. Application of Takeover Protections; Rights Agreements. The Company has not
adopted any stockholder rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company. The Company and its Board of
Directors have taken all necessary action, if any, in order to render inapplicable any control
share acquisition, business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s articles of incorporation
or other organizational documents or the laws of the jurisdiction of its incorporation or otherwise
which is or could become applicable to any Purchaser solely as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s issuance of the Shares
and any Purchaser’s ownership of the Shares or the Conversion Shares.

20

 

          2.38. Adequate Capitalization. As of December 31, 2009, the Company’s Subsidiary
insured depository institutions meet or exceed the standards necessary to be considered “adequately
capitalized” under the FDIC’s regulatory framework for prompt corrective action.

          2.39. FDIC Policy Statement. The Company and Doral Bank PR are not subject to, and do
not expect that, as a result of the issuance of Shares provided herein or otherwise arising in
connection with the Acquisition, they will become subject to, the FDIC Statement of Policy on
Qualifications for Failed Bank Acquisitions (August 26, 2009) (the “FDIC Policy
Statement”).

          2.40. Compliance with Other Regulations. The Company has no knowledge of any facts
and circumstances, and has no reason to believe that any facts or circumstances exist, that would
cause any of its Subsidiary banking institutions: (i) to be deemed not to be in satisfactory
compliance with the Community Reinvestment Act (“CRA”) and the regulations promulgated
thereunder or to be assigned a CRA rating by federal or state banking regulators of lower than
“satisfactory”; (ii) to be deemed to be operating in violation, in any material respect, of the
Bank Secrecy Act, the Patriot Act, any order issued with respect to anti-money laundering by the
U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other anti-money
laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance,
in any material respect, with all applicable privacy of customer information requirements contained
in any federal and state privacy laws and regulations as well as the provisions of all information
security programs adopted by the Subsidiaries.

          2.41. Substantially Similar Agreement. Except as disclosed in the Private Placement
Memorandum or the Transaction Documents, the Company has no other agreements with any Purchaser to
purchase Offered Shares on terms that are not substantially similar to the Purchasers hereunder.

          2.42. Ownership. Based on the stock register of the Company, Holdings is the owner of
a majority of the shares of the Company’s Common Stock.

          2.43. Enforcement of Cooperation Agreement. The Company agrees that it shall use its
reasonable best efforts to enforce its rights under the Cooperation Agreement, including Section
3.05 thereof.

          SECTION 3. Representations, Warranties and Covenants of Each Purchaser. Each
Purchaser, severally and not jointly, represents and warrants to, and covenants with, the Company
that:

          3.1. Experience. (i) Such Purchaser is knowledgeable, sophisticated and experienced in
financial and business matters, in making, and is qualified to make, decisions with respect to
investments in shares representing an investment decision like that involved in the purchase of the
Shares, including investments in securities issued by the Company and comparable entities, has the
ability to bear the economic risks of an investment in the Shares and has reviewed carefully the
Private Placement Memorandum and has requested, received, reviewed and considered all information
it deems relevant in making an informed decision to

21

 

purchase the Shares, including all information it deems relevant as the intended use of proceeds
and resulting impact on the Company; (ii) Purchaser is acquiring up to the number of Shares set
forth in Schedule I in the ordinary course of its business and for its own account and with no
present intention of distributing any of the Shares, or Conversion Shares, or any arrangement or
understanding with any other persons regarding the distribution of such Shares, or Conversion
Shares (it being understood and agreed that this representation and warranty does not limit the
Purchaser’s rights to sell or otherwise transfer shares pursuant to the Registration Statement or
in compliance with the Securities Act and the Rules and Regulations or to transfer Shares to its
partners or members in compliance with the Securities Act and the Rules and Regulations); (iii) the Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the Shares, or Conversion Shares, nor will the Purchaser engage in any short sale that
results in a disposition of any of the Shares, or Conversion Shares by the Purchaser, except in
compliance with the Securities Act and the Rules and Regulations and any applicable state
securities laws; (iv) the Purchaser has completed or caused to be completed, or will complete or
cause to be completed promptly after the date hereof but in any event within fifteen (15) days
after the date hereof, the Registration Statement Questionnaire attached hereto as part of Appendix
I, for use in preparation of the Registration Statement, and the answers thereto are or will be
true and correct as of the date it is so completed, and will be confirmed promptly by the Purchaser
on written request of the Company (failure of the Purchaser to respond within two business days of
receipt to be taken as confirmation); (v) the Purchaser has, in connection with its decision to
purchase the number of Shares set forth in Schedule I, relied solely upon the Private Placement
Memorandum and the representations and warranties of the Company contained herein and the
Purchaser’s own investigation of the Company (including the intended use of proceeds and resulting
impact on the Company); (vi) the Purchaser has had an opportunity to discuss this investment with
representatives of the Company and ask questions of them; and (vii) the Purchaser is one of (A) an
“institutional accredited investor” as defined in clauses (1), (2), (3), (4), (7) and (8) of
Rule 501(a) of Regulation D promulgated under the Securities Act, (B) an “accredited investor” that
is also a direct or indirect investor in Holdings or (C) an “accredited investor” who is also a
director or executive officer of the Company.

          3.2. Reliance on Exemptions. The Purchaser understands that the Shares are being offered
and sold to it in reliance upon specific exemptions from the registration requirements of the
Securities Act, the Rules and Regulations and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Purchaser’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in
order to determine the availability of such exemptions and the eligibility of the Purchaser to
acquire the Shares.

          3.3. Confidentiality. For the benefit of the Company, the Purchaser previously agreed with
the Placement Agent to keep confidential all information concerning this private placement,
including without limitation, the assets that the Company may acquire pursuant to the Acquisition.
The Purchaser understands that the information contained in the Private Placement Memorandum is
strictly confidential and proprietary to the Company and is being submitted to the Purchaser solely
for such Purchaser’s confidential use. The Purchaser agrees to use the information contained in
the Private Placement Memorandum for the sole purpose of evaluating a possible investment in the
Shares and the Purchaser acknowledges that it is prohibited from

22

 

reproducing or distributing the Private Placement Memorandum, this Agreement, or any other offering
materials or other information provided by the Company in connection with the Purchaser’s
consideration of its investment in the Company, in whole or in part, or divulging or discussing any
of their contents, except to its financial, investment or legal advisors and its custodians and
administrators in connection with its proposed investment in the Shares. Further, the Purchaser
understands that the existence and nature of all conversations and presentations, if any, regarding
the Company and this offering must be kept strictly confidential, except as provided in the prior
sentence. The Purchaser understands that the federal securities laws impose restrictions on
trading based on information divulged in connection with this Offering. The obligations set forth
in this Section 3.3 will terminate upon the earlier of the filing by the Company of the Closing 8-K
Filing with the SEC or the filing of a Current Report on Form 8-K after the occurrence of a Failure
Event. The foregoing agreements shall not apply to any information that (i) is or becomes publicly
available through no fault of the Purchaser, (ii) is required to be disclosed under any law or
regulation, (iii) is required to be disclosed or requested by, or necessary under the rules of, any
court, any governmental agency or other regulatory authority (including, without limitation, any
stock exchange or self-regulatory organization), or (iv) is necessary in connection with any
action, investigation or proceeding (including, without limitation, as part of any interrogatory,
court order, subpoena, administrative proceeding, civil investigatory demand, in each case whether
oral or written, or any other legal or regulatory process); provided, however, that if the
Purchaser is, subject to the exceptions in the immediately preceding sentence, legally required to
disclose any information as provided in clauses (ii) – (iv) above, such Purchaser shall provide the
Company with prior written notice of such disclosure to the extent practicable. To the extent
legally permissible, the Purchaser will (at the Company’s expense) cooperate with the Company to
the extent the Company may seek to limit such disclosure or avoid the requirement for such
disclosure, including cooperating with the Company’s efforts to seek an order or other reliable
assurance that confidential treatment will be afforded to the disclosed information.

          Notwithstanding anything to the contrary in this Agreement, nothing in this Agreement should
be considered to impose on the Purchaser any limitation on disclosure of the tax treatment or tax
structure of the transactions or matters described herein.

          3.4. Investment Decision. The Purchaser understands that nothing in this Agreement or any
other materials presented to the Purchaser in connection with the purchase and sale of the Shares,
including the Private Placement Memorandum, constitutes legal, tax or investment advice. The
Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Shares.

          3.5. Risk of Loss. The Purchaser understands that its investment in the Shares involves a
significant degree of risk, including a risk of total loss of the Purchaser’s investment, and the
Purchaser has full cognizance of and understands all of the risk factors related to the Purchaser’s
purchase of the Shares, including, but not limited to, those set forth as “Risk Factors” in the
Private Placement Memorandum and the risks involved in acquiring assets from an institution in FDIC
receivership. The Purchaser understands that the market price of the Company’s common stock has
been volatile, that there is no existing market for the Offered Preferred Stock and that no
representation is being made as to the future value of the Shares or

23

 

the future value or performance of any of the assets that the Company may acquire pursuant to the
Acquisition.

          3.6. Legend. The Purchaser understands that, until such time as the Registration Statement has
been declared effective, or the Shares or Conversion Shares may be sold pursuant to Rule 144 under
the Securities Act without any restriction as to the number of securities as of a particular date
that can then be immediately sold and without the requirement for the Company to be in compliance
with the current public information required under Rule 144(c)(1), the Shares and Conversion Shares
will bear a restrictive legend in substantially the following form (the “Transfer Legend”):

“THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT), THE PUERTO RICO
UNIFORM SECURITIES ACT (THE “PRUSA”) OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. THE SHARES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER EACH OF THE
SECURITIES ACT AND THE PRUSA OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH THE PRUSA AND ALL
APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND
IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION
DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT, THE PRUSA AND SUCH OTHER
APPLICABLE LAWS.”

          3.7. Transfer Restrictions. (a) Until the earlier of (i) the Closing Date and
(ii) unwinding of the Escrow Account following a Failure Event, the shares of Offered Preferred
Stock issued in the Non-Contingent Tranche may not be offered, sold, pledged or otherwise
transferred by a Purchaser except transfers to (A) the Company or its affiliates, (B) affiliates of
such Purchaser, (C) persons that share a common discretionary investment adviser with such
Purchaser or (D) for estate planning. Any such transfer must include the right to receive a
corresponding portion of the Escrow Securities.

               (b) Consistent with the Transfer Legend set forth in Section 3.6, the Shares, and Conversion
Shares, may only be disposed of in compliance with federal, state, or local securities laws. In
connection with any transfer of Shares, or Conversion Shares, other than pursuant to the
Registration Statement, the Company may require the transferor to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of the transferred Shares, or Conversion Shares, under the
Securities Act. As a condition of such transfer (unless effected pursuant to the Registration
Statement or under Rule 144), any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under

24

 

this Agreement. The certificates representing the Shares, or Conversion Shares, may be
subject to a stop transfer order for the purpose of enforcing the foregoing provisions, and the
Company will instruct the transfer agent to transfer Shares, or Conversion Shares, to a transferee
if the foregoing provisions are complied with and if, in the case of a transfer pursuant to the
Registration Statement, the transferor causes the Prospectus (as defined in Section 3.9) to be
delivered to the transferee (whether physically or through compliance with Rule 172 under the
Securities Act or any similar rule). At such time as the Shares, or Conversion Shares, are no
longer required to bear a Transfer Legend, the Company agrees that it will, no later than three (3)
business days after delivery by the Purchaser to the Company or its transfer agent of a certificate
(in the case of a transfer, in the proper form for transfer) representing Shares, or Conversion
Shares, issued with the foregoing Transfer Legend, deliver or cause to be delivered to the
Purchaser a certificate representing such Shares, or Conversion Shares, that is free from all
restrictive and other legends. The Company shall not make any notation on its records or give
instructions to its transfer agent that enlarge the restrictions on transfer set forth in this
Section 3.7.

          3.8. Residency. The Purchaser’s principal executive offices are in the jurisdiction set
forth immediately below the Purchaser’s name on the signature pages hereto.

          3.9. Public Sale or Distribution. The Purchaser hereby covenants with the Company not to
make any sale of the Shares, or Conversion Shares, under the Registration Statement without
complying with the provisions of this Agreement and without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied (whether physically or through
compliance with Rule 172 under the Securities Act or any similar rule). The Purchaser acknowledges
that there may occasionally be times when the Company must suspend the use of the prospectus (the
“Prospectus”) forming a part of the Registration Statement (a “Suspension”) until
such time as an amendment to the Registration Statement has been filed by the Company and declared
effective by the SEC, or until such time as the Company has filed an appropriate report with the
SEC pursuant to the Exchange Act. Without the Company’s prior written consent, which consent shall
not be unreasonably withheld, conditioned or delayed, the Purchaser shall not use any written
materials to offer the Shares, or Conversion Shares, for resale other than the Prospectus,
including any “free writing prospectus” as defined in Rule 405 under the Securities Act. The
Purchaser covenants that it will not sell any Shares, or Conversion Shares, pursuant to said
Prospectus during any period when the Purchaser’s use of the Prospectus is suspended pursuant to
the last paragraph of Section 5.1 hereof. So long as the Purchaser holds Registrable Securities,
on written request of the Company the Purchaser agrees to notify the Company of the sale of all of
such Registrable Securities.

          3.10. Organization; Validity; Enforcements. To the extent the Purchaser is not a natural
person, the Purchaser is duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization. The Purchaser further represents and warrants to, and covenants
with, the Company that (i) the Purchaser has full right, power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby and has taken all
necessary action to authorize the execution, delivery and performance of this Agreement, (ii) the
making and performance of this Agreement by the Purchaser and the consummation by the Purchaser of
the transactions herein contemplated will not violate any provision of the organizational documents
of the Purchaser (to the extent the Purchaser is not a

25

 

natural person) or conflict with, result in the breach or violation of, or constitute, either by
itself or upon notice or the passage of time or both, a default under any material agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which
the Purchaser is a party or, any statute or any authorization, judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or other governmental agency
or body applicable to the Purchaser, (iii) except for HSR Approval in the case of Purchasers that
indicate on the signature page hereof that they are subject to HSR Approval, no consent, approval,
authorization or other order of any court, regulatory body, administrative agency or other
governmental agency or body is required on the part of the Purchaser for the execution and delivery
by the Purchaser of this Agreement or the consummation by the Purchaser of the transactions
contemplated by this Agreement, (iv) upon the execution and delivery of this Agreement, this
Agreement shall (assuming the due authorization, execution and delivery by the Company and the
other parties hereto) constitute a legal, valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application
relating to, or the enforcement of creditor’s rights and the application of equitable principles
relating to, the availability of remedies, and except as rights to indemnity or contribution,
including, but not limited to, the indemnification provisions set forth in Section 5.4 of this
Agreement, may be limited by federal, state, or local securities laws or the public policy
underlying such laws, and (v) there is not in effect any order enjoining or restraining the
Purchaser from entering into or engaging in any of the transactions contemplated by this Agreement.

          3.11. Short Sales. After the date the Purchaser entered into a confidentiality undertaking
with the Placement Agent with respect to the transactions contemplated hereby, the Purchaser has
not taken, and prior to the earlier of (i) the public announcement of the Acquisition or (ii) the
unwinding of the Escrow Account, the Purchaser shall not take, any action that has caused or will
cause the Purchaser to have, directly or indirectly, sold or agreed to sell any shares of Offered
Common Stock, effected any short sale of Offered Common Stock, whether or not against the box,
established any “put equivalent position” (as defined in Rule 16a-1(h) under the Exchange Act) with
respect to the Offered Common Stock, granted any other right (including, without limitation, any
put or call option) with respect to the Offered Common Stock or with respect to any security that
includes, relates to or derived any significant part of its value from the Offered Common Stock.

          3.12. Control. Assuming the accuracy of the representations and warranties of the Company
and the other Purchasers, and the performance of the covenants and agreements of the Company
contained herein, after giving effect to the purchase of the Shares set forth opposite each
Purchaser’s name in Schedule I, a Purchaser, either acting alone or together with any other person
or entity that to its knowledge may be affiliated with such Purchaser, or deemed to be acting in
concert with such Purchaser pursuant to 12 C.F.R. Part 303, Subpart E, or 12 C.F.R. § 225.41, will
not own, control or have the power to vote in excess of, (a) other than the Purchaser(s) listed on
Schedule III hereto, if such Purchaser is or is controlled by a company registered under the BHC
Act (a “BHC”), 4.9% of the shares of the Company’s voting stock outstanding, or (b) if such
Purchaser is not a BHC, 9.9% of the shares of the Company’s voting stock outstanding, in each case
immediately after giving effect to the issuance of all of the Shares offered by the Private
Placement Memorandum. Without limiting the foregoing, each Purchaser

26

 

represents and warrants that it does not have control and has no present intention of acquiring
control of the Company, as “control” is defined in 12 C.F.R. Part 303, Subpart E or 12 C.F.R. §
225.2 and interpreted in the Federal Reserve Board’s “Policy Statement on Equity Investments in
Banks and Bank Holding Companies” found in 12 C.F.R. §225.144.

          3.13. Prohibited Person. Neither the Purchaser, nor any person controlling, controlled by,
or under common control with the Purchaser, nor, to such Purchaser’s knowledge, any person having a
beneficial interest in the Purchaser, nor any other person on whose behalf a subscriber is acting,
is any of the following (each a “Prohibited Person”):

               (a) a person whose name appears on the List of Specially Designated Nationals and Blocked
Persons maintained by OFAC; “designated national” other than an “unblocked national” as
defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515;

               (b) a person with whom a United States citizen or entity is prohibited from transacting
business, whether such prohibition arises under United States law, regulation, executive order,
anti-money laundering laws, regulations or orders, or as a result of any list published by the U.S.
Department of Commerce, the U.S. Department of Treasury, or the U.S. Department of State including
any agency or office thereof;

               (c) a person who has funded or supported terrorism or suspected terrorist organizations or who
has engaged in, or derived funds from, activities that relate to the laundering of the proceeds of
illegal activity;

               (d) a non-U.S. shell bank (a bank without a physical presence in any country) or a person
providing banking services indirectly to a non-U.S. shell bank;

               (e) a senior non-U.S. political figure or an immediate family member or close associate of
such figure or an entity owned or controlled by such a figure; or

               (f) a person who, to the knowledge of the Purchaser, will result in, by reason of such
person’s participation in the Offering or ownership of shares of Company common stock, the
violation of any law, regulation, or governmental order (including banking or other financial
institution regulatory laws, regulations or orders) to which the Company is subject.

               (g) If the Purchaser is a financial institution that is subject to the Bank Secrecy Act, the
Purchaser has met and will continue to meet all of its obligations under the Bank Secrecy Act.

               (h) The funds to be used by the Purchaser to purchase the Shares are derived from legitimate
and legal sources and not from any Prohibited Person.

          3.14. Representation. The Purchaser understands and agrees that Skadden, Arps, Slate,
Meagher & Flom LLP represents the Placement Agent and not any Purchaser individually or the
Purchasers collectively. The Purchaser further understands and agrees that the interest of the
Placement Agent may be different than the interests of the Purchasers.

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          3.15. Taxes on Escrow Account. Purchaser shall be treated for tax purposes as owning their
pro rata portion of the assets held in the Escrow Account until the earlier of: (1) the date of the
consummation of the Acquisition, or (2) the date upon which the funds held in the Escrow Account
are returned to Purchaser. Until such date, Purchaser must include their pro rata portion of all
items of income, deduction, and credit of the Escrow Account.

          SECTION 4. Conditions Precedent and Closing Deliverables.

          4.1. Purchasers’ Conditions Precedent to Funding. Each Purchaser’s obligation to (a) pay the
aggregate non-contingent purchase price and accept delivery of stock certificate(s) (or shares in
book-entry form) to finalize the sale of the aggregate number of non-contingent Shares set forth
adjacent to such Purchaser’s name on Schedule I and (b) fund the contingent purchase price to the
Escrow Account shall be subject to the following conditions: (i) the Company shall have filed the
Certificate of Designations with the Secretary of State of the Commonwealth of Puerto Rico pursuant
to the Puerto Rico General Corporations Law; (ii) the Company’s representations and warranties in
this Agreement (considered collectively), and each of these representations and warranties
(considered individually), must be accurate as of the date hereof and as of the Funding Date, as
though made on and as of such date, except for those representations and warranties explicitly made
as of a different date (which shall be accurate on and as of such date); (iii) the Company shall
have entered into the Escrow Agreement in substantially the form provided as Exhibit B whereby the
Escrow Agent shall have executed and delivered to the Company the Escrow Agreement and shall
execute and deliver to the Company a receipt for the escrow funds; (iv) the Company shall have
entered into the Cooperation Agreement in substantially the form provided as Exhibit C whereby the
Cooperation Agreement Stockholders covenant to vote all of their existing securities in favor of
all resolutions related to the Conversion; (v) the delivery to the Purchasers by counsel to the
Company of a legal opinion (which may be relied upon by the Placement Agent as if such opinion were
addressed to it) substantially in the form attached hereto as Exhibit D-I; (vi) the delivery to the
Purchasers by the Company’s counsel in Puerto Rico of a legal opinion (which may be relied upon by
the Placement Agent as if such opinion were addressed to it) in the form attached hereto as Exhibit
D-II; (vii) receipt by the Purchasers of a certificate (which may be relied upon by the Placement
Agent as if such certificate were addressed to it) executed by the chief executive officer and the
chief financial or accounting officer of the Company, dated as of the Funding Date, to the effect
that the representations and warranties of the Company set forth herein were true and correct as of
the date hereof and are true and correct as of the Funding Date and that the Company has complied
with all the agreements and satisfied all the conditions herein on its part to be performed or
satisfied on or prior to the Funding Date; (viii) such Purchaser shall not have been made subject
to the FDIC Policy Statement solely as a result of its purchase of Shares hereunder; and (ix) the
Company shall have received subscriptions for Shares aggregating at least $600 million (subject to
reduction due to rounding).

          4.2. Bid Condition. Prior to Doral Bank PR submitting a bid, or any material change to a
bid previously submitted, the Company shall certify to the Escrow Agent that it has determined that
such bid constitutes a Qualified Acquisition (as defined herein). A “Qualified Acquisition” is one
in which the Company would, on a pro forma basis as of December 31, 2009, have (a) a Tier 1
risk-based capital ratio as determined in accordance with 12 C.F.R. part 225, appendix A, of not
less than 16.0%, and (b) a tangible book value per share of not less than $7.69.

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Tangible book value per share for these purposes shall be calculated by deducting from book value
per share, as determined in accordance with generally accepted accounting principles, goodwill
resulting from purchase accounting and the core deposit intangible that would result from the
Acquisition. In determining whether a bid is a Qualified Acquisition, the Company shall be
entitled to include any disposition of assets or repayment or satisfaction of liabilities if such
action has been consummated or if the Company has entered into a binding contract with a
counterparty ((which contract may be subject to conditions) and the Company must expect the
contract to be consummated within 30 days after the Acquisition). Any variance between the pro
forma metrics included in the Qualified Acquisition and the corresponding actual metrics, including
any variance between estimates underlying the pro forma metrics and actual results will not, in the
absence of bad faith on the part of the Company, result in any liability to the Company.

          4.3. Purchasers’ Conditions Precedent to the Closing Date of the Contingent Tranche. The
release of funds from the Escrow Account and each Purchaser’s obligation to accept delivery of
stock certificate(s) to finalize the sale of the aggregate number of contingent Shares set forth
adjacent to such Purchaser’s name on Schedule I, on the Closing Date shall be subject to the
Company having delivered to the Escrow Agent a certificate confirming that a Disbursement Event has
occurred and instructing the Escrow Agent to release the Escrow Funds.

          4.4. Company’s Conditions Precedent to the Closing Date. The Company’s obligation to
complete the purchase and sale of the Shares and deliver such stock certificate(s) (or shares in
book-entry form) to each Purchaser at the Closing Date shall be subject to prior receipt by the
Escrow Agent of funds in the full amount of the aggregate purchase price adjacent to such
Purchaser’s name on Schedule I hereto.

          4.5. Closing Deliverables. On the Closing Date the Company shall deliver, or cause to be
delivered, to each Purchaser a legal opinion of Company’s counsel in Puerto Rico (which may be
relied upon by the Placement Agent as if such opinion were addressed to it) in the form attached
hereto as Exhibit D-III.

          SECTION 5. Registration of the Offered Common Stock, Conversion Shares and Holdings’ Common
Stock; Compliance with the Securities Act.

          5.1. Registration Procedures and Expenses. The Company shall:

          (a) as soon as practicable, but in no event later than 90 days following the Closing Date (the
“Initial Filing Deadline”), prepare and file with the SEC a Registration Statement on Form
S-1 (the “Initial Registration Statement”) relating to the resale of Registrable
Securities; provided, however, that if a Failure Event occurs (or the Escrow
Agreement has otherwise been terminated), the Initial Filing Deadline shall be 20 days following
the return to the Purchasers of the Escrow Funds pursuant to the Escrow Agreement.
“Registrable Securities” means the Offered Common Stock and the Conversion Shares
(including shares of common stock issuable as a result of an anti-dilution adjustment to the
Conversion Price (as defined in the Certificate of Designation)), the shares of Common Stock owned
as of the date hereof by Holdings and any capital stock of the Company issued with respect to the
Shares or such shares owned by Holdings as a result of any stock split, stock dividend,
recapitalization, exchange or

29

 

similar event or otherwise, provided that Offered Common Stock, Conversion Shares, shares of
Common Stock owned by Holdings or other capital stock shall not be Registrable Securities when (i)
it is sold pursuant to an effective registration statement under the Securities Act or pursuant to
Rule 144 under the Securities Act, (ii) on and after the one-year anniversary of the Closing Date
or, if none, the Funding Date, or (iii) it has ceased to be outstanding;

          (b) use its reasonable best efforts, subject to receipt of necessary information from the
Holders (as defined herein), to cause the SEC to declare the Initial Registration Statement
effective within 180 days of the Closing Date; provided, however, that if a Failure
Event occurs or the Escrow Agreement has otherwise been terminated, the Company shall use its
reasonable best efforts, subject to receipt of necessary information from the Holders (including a
completed Registration Statement Questionnaire (in the form attached hereto as part of Appendix I),
to cause the SEC to declare the Initial Registration Statement effective within 110 days of the
Funding Date) and in any event no later than five business days following notification from the SEC
that the Initial Registration Statement will not be subject to review or that the SEC has no
further comments to the Initial Registration Statement;

          (c) include in the Initial Registration Statement such information regarding each Holder from
which the Company has received a completed Registration Statement Questionnaire to allow such
Holder to deliver the prospectus to purchasers of Registrable Securities;

          (d) notify the Holders via facsimile or electronic mail of a “.pdf” format data file of the
effectiveness of a Registration Statement within one (1) business day of the effective date of such
Registration Statement. The Company shall, on the first business day after the effective date of a
Registration Statement, file a final Prospectus with the SEC under Rule 424(b);

          (e) promptly prepare and file with the SEC such amendments and supplements to any Registration
Statement and the Prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective until such time as there are no Registrable Securities remaining
(the “Registration Period”);

          (f) provide to each Holder who has returned a completed Registration Statement Questionnaire
(in the form attached hereto as part of Appendix I) to the Company, a copy of any disclosure
regarding the plan of distribution or the selling stockholders, in each case, with respect to such
Holder, at least two business day in advance of any filing with the SEC of any Registration
Statement or any amendment or supplement thereto that includes such information (failure of the
Holder to respond within two business days of receipt to be taken as confirmation that such
information with respect to such Holder constitutes written information furnished to the Company by
or on behalf of such Holder expressly for use in such Registration Statement for purposes of
Section 5.4);

          (g) furnish to any Holder with respect to the Registrable Securities registered under a
Registration Statement (and to each underwriter, if any, of such Registrable Securities) such
number of copies of Prospectuses and such other documents as such Holder may reasonably

30

 

request, in order to facilitate the public sale or other disposition of all or any of the
Registrable Securities by such Holder;

          (h) file documents required of the Company for Blue Sky clearance in states specified in
writing by any Holder of Registrable Securities; provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any jurisdiction in which it
is not now so qualified or has not so consented;

          (i) in order to enable the Holders to sell the Registrable Securities under Rule 144 under the
Securities Act, for a period of one year from the Closing Date or the unwinding of the Escrow
Account following a Failure Event, as the case may be, use its reasonable best efforts to comply
with the requirements of Rule 144, including, without limitation, using its reasonable best efforts
to comply with the requirements of Rule 144(c)(1) with respect to public information about the
Company and to timely file all reports required to be filed by the Company under the Exchange Act;

          (j) ensure that each Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to make the statements
therein (in the case of prospectuses, in the light of the circumstances in which they were made)
not misleading;

          (k) subject to the “black-out” provisions in the last paragraph of this Section 5.1, notify
the Holders in writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the Prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that such notice shall
not contain any material, non-public information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission;

          (l) notify the Holders as promptly as practicable when any post-effective amendment has become
effective;

          (m) use its reasonable best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of the qualification of
any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension
is issued, to obtain the prompt withdrawal of such order or suspension and to notify each Holder of
Registrable Securities being sold of the issuance of such order and the resolution thereof or its
receipt of actual written notice of the initiation or written threat of any proceeding for such
purpose;

          (n) include in the “Plan of Distribution” section of any Registration Statement disclosure
substantially to the effect that: “The selling stockholders may enter into derivative transactions
with third parties, or sell securities not covered by this prospectus to third parties in privately
negotiated transactions”;

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          (o) upon receipt of a completed Registration Statement Questionnaire (in the form attached
hereto as part of Appendix I) after the date on which the Registration Statement becomes effective,
together with any other information the Company may reasonably request, within 15 business days of
receipt, or within 15 business days of the end of any period during which the Company has suspended
use of the Registration Statement, file any amendments to the Registration Statement or supplements
to the related prospectus as are necessary and permitted to allow any Holder from which the Company
has received a completed Registration Statement Questionnaire to deliver the prospectus to
purchasers of Registrable Securities; provided that the Company will not be obligated to file more
than one post-effective amendment in any 60-calendar day period;

          (p) bear all expenses in connection with the procedures in paragraphs (a) through (o) of this
Section 5.1, as well as Section 5.2, and the registration of the Registrable Securities pursuant to
any Registration Statement, other than fees and expenses, if any, of counsel or other advisers to
the Holders or underwriting discounts, brokerage fees and commissions incurred by the Holders, if
any, in connection with the offering of the Registrable Securities pursuant to any such
Registration Statement; and

          (q) use its reasonable best efforts to list the Common Stock and the Conversion Shares on the
NYSE by the effective date of the Initial Registration Statement or, if earlier, 180 days after the
Closing Date or the unwinding of the Escrow Account following a Failure Event, as the case may be.

     The Company understands that each Holder disclaims being an underwriter, but any such Holder
being deemed an underwriter shall not relieve the Company of any obligations it has hereunder. If
the SEC requires that any Holder be named as an underwriter in any Registration Statement, such
Holder may (and the Company will use its reasonable best efforts to allow such Holder to) withdraw
its Shares from such Registration Statement. A draft of the proposed form of the Registration
Statement Questionnaire related to a Registration Statement to be completed by each Holder
(including the Purchasers) is attached hereto as Appendix I.

     As used herein, “Holder” means any Purchaser, Holdings (or any intended direct or
indirect transferee of Holdings pursuant to its dissolution or other pro rata distribution of the
Shares of the Company’s Common Stock held by Holdings), and any other holder of Registrable
Securities to which the registration rights conferred by this Agreement have been transferred in
compliance with Section 5 hereof.

     The Company may suspend (such period of time, a “Suspension Period”) the Holders’ use
of any Registration Statement for a maximum of 45 calendar days in any 180 day period (an
“Allowable Suspension Period”), if the Company, in its reasonable judgment, believes that
(i) such Registration Statement, prospectus or prospectus supplement contains or may contain an
untrue statement of a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) circumstances exist that make
the use of such Registration Statement, prospectus or prospectus supplement inadvisable. However,
if the Company determines in good faith that it would be materially detrimental to the Company or
its securityholders for such use of such Registration Statement not to be suspended at such time,
the Company may extend the Suspension Period from 45 calendar days to 90 calendar

32

 

days; provided that the Company shall extend the Suspension Period (i) only if it generally
exercises similar black-out rights against holders of similar securities that have registration
rights and (ii) not more than once in any 12-month period. The Company will not specify the nature
of the event giving rise to a Suspension Period in any notice to Holders of the existence of such a
Suspension Period.

          5.2. Additional Registration Statements. If for any reason the SEC does not permit
all Registrable Securities to be included in the Initial Registration Statement (such that the
Initial Registration Statement may be used for resales in a manner that does not constitute, in the
SEC’s view, an offering by the Company and that permits the continuous resale at the market by the
Holders participating therein without being named therein as “underwriters”), then:

          (a) The Company shall promptly notify Holders and (i) first, exclude the shares held by any
officer or director of the Company; (ii) second, exclude the Existing Shares (as defined herein)
held by any Holder that is not an affiliate of the Company, any managing member of Doral GP Ltd. or
any of such managing member’s affiliates; and (iii) third, reduce the number of Registrable
Securities to be included in such Registration Statement by the Holders until such time as the SEC
shall so permit such Registration Statement to become effective and be used for resales in a manner
that does not constitute an offering by the Company and that permits the continuous resale at the
market by the Holders participating therein without being named therein as “underwriters.” In
making such reduction, the Company shall reduce the number of shares to be included by all such
Holders on a pro rata basis (based upon the number of Registrable Securities otherwise required to
be included for each such Holder). In no event shall a Holder be required to be named as an
“underwriter” in a Registration Statement without such Holder’s prior written consent; and

          (b) The Company shall prepare and file with the SEC one or more separate Registration
Statements that meet the criteria set forth in the first sentence of this Section 5.2 with respect
to any such Registrable Securities not included in the Initial Registration Statement. The Company
will then use its reasonable best efforts at the first opportunity that is permitted by the SEC,
but in no event later than the later of (i) 60 days from the date substantially all of the
Registrable Securities registered under the Registration Statement have been sold by the Holders or
(ii) six (6) months from the date the Initial Registration Statement was declared effective, to
register for resale the Registrable Securities that have been excluded from being registered
(provided such Registration Statement meets the criteria set forth in the first sentence of
this Section 5.2). The Company shall use its reasonable best efforts to cause any such
Registration Statement to be declared effective within 60 days following the filing thereof (and in
any event no later than five business days following notification from the SEC that the
Registration Statement will not be subject to review or that the SEC has no further comments to the
Registration Statement) and to remain continuously effective for the Registration Period. In the
event the SEC raises objections to any such subsequent Registration Statement, the procedures set
forth in this Section 5.2 shall again be followed.

          5.3. Transfer of Securities. Each Purchaser agrees that it will not effect any
disposition of the Shares or its right to purchase the Shares that would constitute a sale within
the meaning of the Securities Act or pursuant to any applicable state securities laws, except as
contemplated by a Registration Statement referred to in Section 5.1 or Section 5.2 or as

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otherwise permitted by law and in accordance with Section 3.7, and that it will promptly
notify the Company of any changes in the information set forth in any Registration Statement
regarding the Purchaser or its plan of distribution.

          The rights of each Purchaser to registration of Registrable Securities pursuant to Section 5
may be assigned by any Purchaser to a transferee or assignee, or to the transferees of Holdings’
shares referred to above of Registrable Securities if such transfer is permitted under the terms
hereof; provided, however, that the Company shall have no obligations with respect
to such transferee or assignee until such time as such Purchaser or such transferee or assignee
shall have furnished to the Company written notice of the name and address of such transferee or
assignee and the number and type of Registrable Securities that are being assigned and such
transferee or assignee shall have completed the Registration Statement Questionnaire attached
hereto as part of Appendix I.

          5.4. Indemnification.

               (a) For the purpose of this Section 5.4:

                    (i) the term “Holder/Affiliate” shall mean any affiliate of any Purchaser, including a
transferee who is an affiliate of the Holder, and any person who controls the Holder or any
affiliate of the Holder within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act; and

                    (ii) the term “Registration Statement” shall include any preliminary prospectus, final
prospectus, free writing prospectus, exhibit, supplement or amendment included in or relating to,
and any document incorporated by reference in, any Registration Statement referred to in
Section 5.1 or Section 5.2.

               (b) The Company agrees to indemnify and hold harmless such Holder and each Holder/Affiliate,
against any losses, claims, damages, liabilities or expenses, joint or several, to which such
Holder or Holder/Affiliates may become subject, under the Securities Act, the Exchange Act, or any
other federal, state, or local statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with the consent of the
Company, which consent shall not be unreasonably withheld, conditioned or delayed), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated
below) are based on any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, including the Prospectus, financial statements and schedules, and
all other documents filed as a part thereof, as amended at the time of effectiveness of the
Registration Statement, including any information deemed to be a part thereof as of the time of
effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rules 430B, 430C or 434, of
the Rules and Regulations, or the Prospectus, in the form first filed with the SEC pursuant to
Rule 424(b) of the Rules and Regulations, or filed as part of the Registration Statement at the
time of effectiveness if no Rule 424(b) filing is required, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state in any of them a
material fact required to be stated therein or necessary to make the statements in the Registration
Statement or any amendment or supplement thereto not misleading or in the Prospectus or any
amendment or supplement thereto, not misleading in light

34

 

of the circumstances under which they were made, and will promptly reimburse each Holder and
each Holder/Affiliate for any reasonable legal and other expenses as such expenses are incurred by
such Holder or such Holder/Affiliate in connection with investigating, defending or preparing to
defend, settling, compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that the Company will not be liable for amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed,
and the Company will not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus
or any amendment or supplement thereto in reliance upon and in conformity with written information
that relates to such Holder or such Holder/Affiliate’s proposed method of distribution to the
extent that such information was furnished to the Company by or on behalf of such Holder or
Holder/Affiliate expressly for use therein or (ii) any statement or omission in any Prospectus that
is corrected in any subsequent Prospectus that was delivered to any Holder/Affiliate prior to the
pertinent sale or sales by such Holder/Affiliate. All payments made by the Company pursuant to
this Section 5.4(b) shall be made free and clear of, and without withholding or deduction for or on
account of any present or future tax, duty, levy, impost, assessment or other governmental charge
(including penalties, interest, and other liabilities related thereto) (collectively,
“Taxes) imposed or levied by or on behalf of any taxing jurisdiction unless the Company is
required to withhold or deduct Taxes by law or by the official interpretation or administration
thereof. If the Company is so required to withhold or deduct any amount for, or on account of,
Taxes other than taxes or similar governmental charges imposed on net income or imposed other than
by withholding from any payment made pursuant to this Section 5.4(b), the Company shall pay such
additional amounts (“Additional Amounts”) as may be necessary so that the net amount
received by any Holder or Holder/Affiliates, as the case may be (including Additional Amounts),
after such withholding or deduction shall not be less than the amount such Holder or
Holder/Affiliates, as the case may be, would have received if such Taxes had not been required to
be withhold or deducted.

               (c) Each Holder will severally and not jointly indemnify and hold harmless the Company, each
of its directors, each of its officers who signed the Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, against any losses, claims, damages, liabilities or expenses to which the
Company, each of its directors, each of its officers who signed the Registration Statement or
controlling person may become subject, under the Securities Act, the Exchange Act, or any other
federal, state, or local statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, but only if such settlement is effected with the consent of such
Holder, which consent shall not be unreasonably withheld, conditioned or delayed) insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated
below) arise out of or are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements in the Registration Statement or
any amendment or supplement thereto not misleading or in the Prospectus or any amendment or
supplement thereto not misleading in the light of the circumstances under which they were made, in
each case to the

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extent, but only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written information that
relates to such Holder or Holder/Affiliate or such Holder’s or Holder/Affiliate’s proposed method
of distribution to the extent that such information was furnished to the Company by or on behalf of
such Holder or Holder/Affiliate expressly for use therein; and will reimburse the Company, each of
its directors, each of its officers who signed the Registration Statement or controlling person for
any reasonable legal and other expense incurred by the Company, each of its directors, each of its
officers who signed the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that (x) such Holder will not be liable for amounts paid in
settlement of any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably withheld, and (y) such
Holder’s aggregate liability under this Section 5 shall not exceed the amount of net proceeds
received by such Holder on the sale of the Shares pursuant to the Registration Statement with
respect to which the claim for indemnification hereunder is being made.

               (d) Promptly after receipt by an indemnified party under this Section 5.4 of notice of the
threat or commencement of any action, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party under this Section 5.4 notify the indemnifying party in
writing thereof, but the omission to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party for contribution or otherwise under the
indemnity agreement contained in this Section 5.4 to the extent it is not materially prejudiced as
a result of such failure. In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly
with all other indemnifying parties similarly notified, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such
action include both the indemnified party, and the indemnifying party and the indemnified party
shall have reasonably concluded, based on the written advice of counsel, which counsel is
reasonably satisfactory to the indemnifying party, that there may be a conflict of interest between
the positions of the indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other indemnified parties
that are different from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified party of its
election to assume the defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this Section 5.4 for any
legal or other expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed such counsel in connection
with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it
being understood, however, that the indemnifying party shall not be liable for the expenses of more
than one separate counsel, reasonably satisfactory to such indemnifying party, representing all of
the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified
party within

36

 

a reasonable time after notice of commencement of action, in each of which cases the
reasonable fees and expenses of counsel shall be at the expense of the indemnifying party. The
indemnifying party shall not be liable for any settlement of any action without its consent, which
consent shall not be unreasonably withheld. In no event shall any indemnifying party be liable in
respect of any amounts paid in settlement of any action unless the indemnifying party shall have
approved in writing the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is a party unless such settlement includes a complete release of the
indemnified party from all liability on claims that are the subject matter of such proceeding.

               (e) If a claim for indemnification under Section 5.4(b) or 5.4(c) is unavailable to an
indemnified party or insufficient to hold an indemnified party harmless for any losses, claims,
damages, liabilities or expenses to the extent provided in Section 5.4(b) or 5.4(c), as the case
may be (“Losses”), then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party as a result of such
Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions, statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of any Losses shall be
deemed to include, subject to the limitations set forth in this Agreement, any reasonable
attorneys’ or other reasonable fees or expenses incurred by such party in connection with any
proceeding to the extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section 5.4 was available to such party in accordance with its
terms.

     The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 5.4(e) were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5.4(e), no Holder shall be
required to contribute, in the aggregate, any amount in excess of the net proceeds actually
received by such Holder from the sale of the Registrable Securities subject to the proceeding. No
person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

               (f) The indemnity and contribution agreements contained in this Section 5.4 are in addition to
any liability that the indemnifying parties may have to the indemnified parties.

          5.5. Termination of Conditions and Obligations. The restrictions imposed by
Section 3.7 or Section 5.3 upon the transferability of the Registrable Securities shall cease and

37

 

terminate as to any particular number of the Registrable Securities upon the earlier of
(i) the passage of one year from the Closing Date or unwinding of the Escrow Account following a
Failure Event, as the case may be, covering such Registrable Securities and (ii) at such time as an
opinion of counsel satisfactory in form and substance to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the Securities Act.

          5.6. Information Available. The Company, upon the reasonable request of any
Purchaser, shall make available for inspection by each Purchaser, any underwriter participating in
any disposition pursuant to the Registration Statement and any attorney, accountant or other agent
retained by such Purchaser or any such underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company’s officers, employees and
independent accountants to supply all information reasonably requested by such Purchaser or any
such underwriter, attorney, accountant or agent in connection with the Registration Statement.

          5.7. No Piggyback on Registrations. Neither the Company nor any of its security
holders that is not a Holder may include securities of the Company in a Registration Statement
hereunder.

          5.8. Delay in Filing or Effectiveness of Registration Statement. If:

               (a) any Registration Statement is not filed with the SEC on or prior to the applicable filing
deadline as described in Section 5.1 or Section 5.2;

               (b) any Registration Statement is not declared effective by the SEC (or otherwise does not
become effective) for any reason on or prior to applicable effectiveness deadline as described in
Section 5.1 or Section 5.2;

               (c) after the SEC has declared any Registration Statement effective, (a) such Registration
Statement ceases for any reason (including, without limitation, by reason of a stop order, or the
Company’s failure to update such Registration Statement) to remain continuously effective as to all
Registrable Securities for which it is required to be effective, or (b) the Holders are not
permitted to utilize the Prospectus therein to resell such Registrable Securities (in each case of
(a) and (b), other than during an Allowable Suspension Period);

               (d) a Suspension Period exceeds the length of an Allowable Suspension Period; or

               (e) after the date six months following the Closing Date or, if no bid with regard to an
Acquisition has been accepted by the FDIC or the Escrow Agreement has otherwise been terminated,
the Funding Date, and only in the event a Registration Statement is not effective or available to
sell all Registrable Securities, the Company fails to file with the SEC any required reports under
Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1), as a
result of which the Holders that are not affiliates of the Company are unable to sell Registrable
Securities without restriction under Rule 144 (or any successor thereto);

38

 

(any such failure or breach in clauses (a) through (e) above being referred to as an
“Event,” and, for purposes of clauses (a), (b), (c or (e), the date on which such Event
occurs, or for purposes of clause (d, the date on which such Allowable Suspension Period is
exceeded, being referred to as an “Event Date”), then in addition to any other rights the
Holders may have hereunder or under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been cured by such
date) until the applicable Event is cured, the Company shall pay to each Holder (other than any
Holder that is an officer or director of the Company) an amount in cash, as liquidated damages and
not as a penalty (“Liquidated Damages”), equal to 0.5% of (A) with respect to Registrable
Securities that are Offered Common Stock (if any) and Conversion Shares, the aggregate purchase
price paid by such Holder pursuant to this Agreement for any such Registrable Securities held by
such Holder on the Event Date; and (B) with respect to Registrable Securities that are shares of
Common Stock owned as of the date hereof by Holdings and any capital stock of the Company issued
with respect to such shares as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise (the “Existing Shares”), the Purchase Price
Equivalent (as defined herein) of such Existing Shares held by such Holder on the Event Date;
provided, however, that the aggregate amount of Liquidated Damages shall not exceed
5.0% of the aggregate purchase price (in the case of (A) above) or 5.0% of the Purchase Price
Equivalent (in the case of (B) above). For purposes of this Section 5.8, “Purchase Price
Equivalent” means, with respect to any Holder as of any Event Date (x) the number of Existing
Shares owned by such Holder on such Event Date multiplied by (y) the aggregate
purchase price paid for the Offered Common Stock (if any) and the Offered Preferred Stock
divided by the sum of the Offered Common Stock (if any) and Conversion Shares. The
parties agree that notwithstanding anything to the contrary herein, no Liquidated Damages shall be
payable (i) if, as of the relevant Event Date (or any applicable monthly anniversary of such Event
Date), the Registrable Securities may be sold by non-affiliates without volume or manner of sale
restrictions under Rule 144 and the Company is in compliance with the current public information
requirements under Rule 144(c)(1), as determined by counsel to the Company pursuant to a written
opinion letter to such effect, addressed and reasonably acceptable to the Company’s transfer agent
or (ii) with respect to any period after the expiration of the Registration Period (it being
understood that this sentence shall not relieve the Company of any Liquidated Damages accruing
prior to the expiration of the Registration Period). The Liquidated Damages pursuant to the terms
hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an
Event, except in the case of the first Event Date, in which case Liquidated Damages shall apply as
from the Event Date.

          SECTION 6. Broker’s Fee. Each Purchaser acknowledges that the Company intends to pay to
the Placement Agent a fee in respect of the sale of the Shares to the Purchasers upon release of
the Escrow Funds from the Escrow Account, subject to the terms and conditions of Section 5 thereof.
Each Purchaser and the Company agree that no Purchaser shall be responsible for such fee and that
the Company will indemnify and hold harmless each Purchaser and its affiliates against any losses,
claims, damages, liabilities or expenses, joint or several, to which such Purchaser or Purchaser’s
affiliates may become subject with respect to such fee. Each of the parties hereto represents
that, on the basis of any actions and agreements by it, there are no other brokers or finders
entitled to compensation in connection with the sale of the Shares to the Purchasers.

39

 

          SECTION 7. Independent Nature of Purchasers’ Obligations and Rights. The obligations of
the Purchasers under this Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations
of any other Purchaser under this Agreement. The decision of each Purchaser to purchase the Shares
pursuant to this Agreement has been made by such Purchaser independently of any other Purchaser.
Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in
connection with making its investment hereunder and that no Purchaser will be acting as agent of
such Purchaser in connection with monitoring its investment in the Shares or enforcing its rights
under this Agreement. Each Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any proceeding for such
purpose.

          SECTION 8. Purchasers’ Rights with respect to the Cooperation Agreement. The Company
acknowledges and agrees that the Purchasers shall be third party beneficiaries to Section 3.01 and
Section 3.02 of the Cooperation Agreement and a Majority in Interest of the Purchasers shall have
the right to enforce such sections of the Cooperation Agreement directly to the extent a Majority
in Interest of the Purchasers deems such enforcement necessary or advisable to protect the rights
of the Purchasers thereunder. In addition, the Company agrees not to consent to any amendment of
Section 3.01 and Section 3.02 of the Cooperation Agreement that materially and adversely affects
the rights of the Purchasers thereunder without the prior written consent of a Majority in Interest
of the Purchasers. For purposes of this Section 8, “Majority in Interest of the
Purchasers” means a majority in interest of all Shares (calculated on an as-converted basis)
other than Shares owned by Holdings or a direct or indirect investor in Holdings and their
respective affiliates.

          SECTION 9. Miscellaneous.

          9.1. Notices. All notices, requests, consents and other communications hereunder shall be
in writing, shall be mailed by first-class registered or certified airmail, e-mail, confirmed
facsimile or nationally recognized overnight express courier, postage prepaid, and shall be deemed
given when so mailed and shall be delivered as addressed as follows:

               (a) if to the Company, to:

Doral Financial Corporation

1451 Franklin D. Roosevelt Avenue

San Juan, Puerto Rico 00920-2717

Attention: Enrique R. Ubarri

Facsimile: (787) 474-8014

E-mail: Enrique.Ubarri@doralfinancial.com

40

 

with a copy to:

Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, NY 10006

Attention: Leslie N. Silverman

Facsimile: (212) 225-3999

E-mail: lsilverman@cgsh.com

or to such other person at such other place as the Company shall designate to the Purchasers in
writing; and

               (b) if to a Purchaser, at its address as set forth on Schedule I or at such other address or
addresses as may have been furnished to the Company in writing.

          9.2. Survival of Agreements. Notwithstanding any investigation made by any party to this
Agreement or by the Placement Agent, all covenants and agreements made by the Company and each
Purchaser herein and in the certificates for the Shares delivered pursuant hereto shall survive the
execution of this Agreement, the delivery to each Purchaser of the Shares being purchased and the
payment therefore. All representations and warranties made by the Company and each Purchaser
herein and in the certificates for the Shares delivered pursuant hereto shall survive for a period
of two years following the Closing Date or the unwinding of the Escrow Account following a Failure
Event.

          9.3. Changes. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and each Purchaser affected thereby. Any amendment or
waiver effected in accordance with this Section 9.3 shall be binding upon each such Purchaser or
such Purchaser’s successors or assigns and the Company.

          9.4. Headings. The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this Agreement.

          9.5. Severability. In case any provision contained in this Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby.

          9.6. Governing Law; Venue. This Agreement is to be construed in accordance with and
governed by the federal law of the United States of America and the internal laws of the State of
New York without giving effect to any choice of law rule that would cause the application of the
laws of any jurisdiction other than the internal laws of the State of New York to the rights and
duties of the parties. Each of the Company and the Purchasers submit to the nonexclusive
jurisdiction of the United States District Court for the Southern District of New York and of any
New York State court sitting in New York City for purposes of all legal proceedings arising out of
or relating to this Agreement and the transactions contemplated hereby. Each of the Company and
each Purchaser irrevocably waives, to the fullest extent permitted by law, any objection that it
may now or hereafter have to the laying of the venue of

41

 

any such proceeding brought in such a court and any claim that any such proceeding brought in such
a court has been brought in an inconvenient forum.

          9.7. Counterparts. This Agreement may be executed in counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute but one instrument,
and shall become effective when one or more counterparts have been signed by each party hereto and
delivered to the other parties. Facsimile signatures shall be deemed original signatures.

          9.8. Entire Agreement. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein or therein, neither
the Company nor any Purchaser makes any representation, warranty, covenant or undertaking with
respect to such matters. Each party expressly represents and warrants that it is not relying on
any oral or written representations, warranties, covenants or agreements outside of this Agreement.
This Agreement supersedes all prior agreements and understandings, except for any existing
confidentiality agreements, between the parties with respect to the subject matter.

          9.9. Fees and Expenses. Except as set forth herein, each of the Company and each Purchaser
shall pay its respective fees and expenses related to the transactions contemplated by this
Agreement, including fees and expenses of its own financial or other consultants, investment
bankers, accountants and counsel.

          9.10. Parties. This Agreement is made solely for the benefit of and is binding upon the
Purchasers and the Company, to the extent provided in Section 5.4, any person controlling the
Company or the Purchasers, the officers and directors of the Company, and their respective
executors, administrators, successors and assigns and subject to the provisions of Section 5.4 and,
for purposes of Section 5 any other person included in the definition of “Holder”, and no other
person shall acquire or have any right under or by virtue of this Agreement. The term “successors
and assigns” of a Purchaser shall include any subsequent transferee of any the Shares sold to such
Purchaser pursuant to this Agreement or any related Conversion Shares.

          9.11. Further Assurances. Each party agrees to cooperate fully with the other parties and
to execute such further instruments, documents and agreements and to give such further written
assurance as may be reasonably requested by any other party to evidence and reflect the
transactions described herein and contemplated hereby and to carry into effect the intents and
purposes of this Agreement; provided that neither the Company nor any Purchaser shall be obligated
to provide any information, the disclosure of which either is prohibited by applicable law or
contract (and such party shall not be obligated to seek the consent of any person to such
disclosure).

42

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly
authorized representatives as of the day and year first above written.

	 	 	 	 	 
	 	Doral Financial Corporation

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Print or Type:

	 	 	 

	 

	 	 
	 

	 	 
	Name of Purchaser

	 	Jurisdiction of Purchaser’s Executive Offices
	(Individual or Institution
	 	 
	 
	 	 
	 

	 	 
	 

	 	 
	Name of Individual representing
Purchaser (if an Institution)

	 	Title of Individual representing
Purchaser (if an Institution)

Purchaser hereby represents and warrants that Purchaser is (check all that apply):

	 	 	 

	o

	 	an “investment company” within the meaning of Section 202 promulgated under the Investment Advisers
Act of 1940, as amended;
	 
	o

	 	an “institutional accredited investor” as defined in clauses (1), (2), (3), (4), (7) and (8) of Rule
501(a) of Regulation D promulgated under the Securities Act;
	 
	o

	 	an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act that is also a direct or indirect investor in Doral Holdings Delaware LLC, and, as such,
in the Contingent Tranche it will be issued only Offered Preferred Stock; and/or
	 
	o

	 	an “accredited investor” within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act who is also a director or executive officer of the Company.

Purchaser hereby notifies Company that its ownership of the Shares is (check all that apply):

	 	 	 

	o      subject to HSR Approval; and/or

	 	o       subject to the Conversion Limit;

and in each such case Purchaser requests that, in the Contingent Tranche, it be issued only Offered
Preferred Stock.

Signature by:

	 	 	 

	Individual Purchaser or Individual

	 	Address:
	representing Purchaser:

	 	Telephone:
	 

	 	Facsimile:
	 

	 	E-mail:
	 

	 	 

Signature Page to Purchase Agreement (Investment Company)

1

 

Schedule I

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Number of	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Non-	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Contingent	 	Number of	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Shares of	 	Non-	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Offered	 	Contingent	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Preferred	 	Shares of	 	 	 	 	 	 	 	 	 	Number of	 	 	 	 	 	Number of	 	 	 	 
	 	 	 	 	Stock Shares	 	Offered	 	 	 	 	 	 	 	 	 	Contingent	 	 	 	 	 	Contingent	 	 	 	 
	 	 	 	 	to Be	 	Preferred	 	 	 	 	 	Aggregate	 	Offered	 	 	 	 	 	Offered	 	 	 	 
	 	 	 	 	Delivered as	 	Stock Shares	 	 	 	 	 	Non-	 	Common	 	 	 	 	 	Preferred	 	 	 	 
	 	 	 	 	of the	 	to Be	 	Price Per	 	Contingent	 	Stock Shares	 	Price Per	 	Stock Shares	 	Price Per	 	Aggregate
	Name of	 	Funding	 	Delivered	 	Share In	 	Purchase	 	to Be	 	Share In	 	to Be	 	Share In	 	Contingent
	Purchaser	 	Date	 	into Escrow	 	Dollars	 	Price	 	Purchased	 	Dollars	 	Purchased	 	Dollars	 	Purchase Price

Investment Companies

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Number of	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Non-	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Contingent	 	Number of	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Shares of	 	Non-	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Offered	 	Contingent	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Preferred	 	Shares of	 	 	 	 	 	 	 	 	 	Number of	 	 	 	 	 	Number of	 	 	 	 
	 	 	 	 	Stock Shares	 	Offered	 	 	 	 	 	 	 	 	 	Contingent	 	 	 	 	 	Contingent	 	 	 	 
	 	 	 	 	to Be	 	Preferred	 	 	 	 	 	Aggregate	 	Offered	 	 	 	 	 	Offered	 	 	 	 
	 	 	 	 	Delivered as	 	Stock Shares	 	 	 	 	 	Non-	 	Common	 	 	 	 	 	Preferred	 	 	 	 
	 	 	 	 	of the	 	to Be	 	Price Per	 	Contingent	 	Stock Shares	 	Price Per	 	Stock Shares	 	Price Per	 	Aggregate
	Name of	 	Funding	 	Delivered	 	Share In	 	Purchase	 	to Be	 	Share In	 	to Be	 	Share In	 	Contingent
	Purchaser	 	Date	 	into Escrow	 	Dollars	 	Price	 	Purchased	 	Dollars	 	Purchased	 	Dollars	 	Purchase Price

S-I-1

 

Schedule II

List of Doral Financial Corporation Subsidiaries

	 	 	 
	Name of Subsidiary	 	Jurisdiction of Incorporation
	Doral Mortgage, LLC

	 	Puerto Rico
	Doral Investment International, LLC

	 	Puerto Rico
	Doral Bank

	 	Puerto Rico
	Doral Money, Inc.

	 	Delaware
	Doral Bank, FSB

	 	USA
	Doral Insurance Agency, Inc.

	 	Puerto Rico
	Doral Properties, Inc.

	 	Puerto Rico
	CB, LLC

	 	Puerto Rico

S-II-1

 

Schedule III

Purchasers listed in accordance with Section 3.12

Goldman Sachs Investment Partners Master Fund, L.P.

S-III-1

 

EXHIBIT A

Form of Certificate of Designation

A-1

 

EXHIBIT B

Form of Escrow Agreement

B-1

 

EXHIBIT C

Form of Cooperation Agreement

C-1

 

EXHIBIT D-I

Form of Company Counsel Funding Opinion

	 	1.	 	The Escrow Agreement has been duly executed and delivered by the Company under the law
of the State of New York and is a valid, binding and enforceable agreement of the Company.
	 
	 	2.	 	The Stock Purchase Agreement has been duly executed and delivered by the Company under
the law of the State of New York.
	 
	 	3.	 	The issuance and the sale of the Shares to the Purchasers pursuant to the Stock
Purchase Agreement do not, and the performance by the Company of its obligations in the
Stock Purchase Agreement, the Escrow Agreement and the Shares will not result in a
violation of any United States federal or New York State law or published rule or
regulation that in our experience normally would be applicable to Bank Holdings Companies
with respect to such issuance, sale or performance (but we express no opinion relating to
the United States federal securities laws or any state securities or Blue Sky laws).
	 
	 	4.	 	No registration of the Offered Common Stock or the Offered Preferred Stock under the
U.S. Securities Act of 1933, as amended, is required for the offer and sale of the
Securities by the Company to the Purchasers pursuant to and in the manner contemplated by
the Stock Purchase Agreement.

D-I-1

 

EXHIBIT D-II

Form of Company Counsel (Puerto Rico) Funding Opinion

	 	1.	 	The Company is validly existing as a corporation and in good standing under the laws of
Puerto Rico. The Company has the corporate power and authority to own, lease and operate
its properties and assets and to conduct its business as described in the Private Placement
Memorandum.
	 
	 	2.	 	The Stock Purchase Agreement has been duly authorized, executed and delivered by the
Company, and constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
	 
	 	3.	 	The Escrow Agreement has been duly authorized, executed and delivered by the Company,
and constitutes a valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms to the extent such enforceability is governed by
Puerto Rico law.
	 
	 	4.	 	The authorized capital stock of the Company consists of 340,000,000 shares of capital
stock, consisting of (i) 300,000,000 shares of Common Stock $0.01, par value per share,
(ii) 40,000,000 shares of preferred stock, $1.00 par value per share. As of March 31,
2010, there were 67,283,370 shares of common stock outstanding and 5,811,391 shares of
preferred stock outstanding, comprised of 950,166 shares of 7.00% Noncumulative Monthly
Income Preferred Stock, Series A, 1,331,694 shares of 8.35% Noncumulative Monthly Income
Preferred Stock, Series B, 2,716,005 shares of 7.25% Noncumulative Monthly Income Preferred
Stock, Series C, and 813,526 shares of 4.75% Perpetual Cumulative Convertible Preferred
Stock.
	 
	 	5.	 	The Offered Preferred Stock has been duly authorized by the Company and, when delivered
to and paid for by the Purchaser in accordance with the terms of the Stock Purchase
Agreement, will be validly issued, fully paid and nonassessable.
	 
	 	6.	 	The Conversion Shares issuable upon conversion of the Offered Preferred Stock at the
initial conversion price have been duly authorized by all necessary corporate action and,
when issued upon conversion of the Offered Preferred Shares in accordance with the terms of
the Certificate of Designations, will be validly issued, fully paid and nonassessable. The
resolutions of the Board of Directors of the Company approving the issuance of the Offered
Preferred Shares state that they have reserved the Conversion Shares issuable upon
conversion of the Offered Preferred Stock at the initial conversion price.
	 
	 	7.	 	The execution and delivery by the Company of each of the Stock Purchase Agreement and
the Escrow Agreement and the consummation by the Company of the transactions contemplated
thereby, including the issuance and sale of the Offered Common Stock, the Offered Preferred
Stock and the Conversion Shares, do not and will not result in any breach or violation of
or constitute a default under (nor constitute any event which, with notice, lapse of time
or both, would result in any breach or violation of or constitute a default under or give
the holder of any indebtedness (or a person on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or pay of such

D-II-1

 

	 	 	 	indebtedness under) (or result in the creation or imposition of a lien, charge or
encumbrance on any property or assets of the Company or any Subsidiary pursuant to (i) the
charter or bylaws of the Company, (ii) any contract, agreement, indenture, mortgage, deed of
trust, bank loan or credit arrangement or other evidence of indebtedness, or any license,
lease, contract or other agreement or instrument (collectively, “Agreements and
Instruments”) which is incorporated by reference into the Private Placement Memorandum
or is otherwise known by us to be an Agreement and Instrument to which the Company or any of
its Subsidiaries is a party or by which any of them or any of their respective properties
may be bound of affected, (iii) laws of Puerto Rico, or (iv) any decree, judgment or order
applicable to the Company or any of its Subsidiaries or any of their respective properties,
which decree, judgment or order is known by us.
	 	8.	 	The Company is not, and immediately after giving effect to the offer and sale of the
Securities as contemplated by the Stock Purchase Agreement, will not be, an “investment
company” required to be registered under the Investment Company Act of 1940, as amended.
	 
	 	9.	 	There is no action, suit or proceeding at law or in equity, or by or before any federal
or state court or governmental or regulatory body or agency or any arbitration board or
panel, pending or overtly threatened against the Company which would be required to be
described in the Private Placement Memorandum if such document was a prospectus filed with
the SEC but is not so described.
	 
	 	10.	 	No registration under the PRUSA of the Securities is required in connection with the
offer, sale and delivery of the Securities to the Placement Agent and the Purchasers,
assuming (i) the accuracy of the representations and warranties of the Company set forth in
the Stock Purchase Agreement and (ii) the due performance by the Company and the Purchasers
of the covenants and agreements sets forth in the Stock Purchase Agreement.
	 

D-II-2

 

EXHIBIT D-III

Form of Company Counsel (Puerto Rico) Closing Opinion

	 	1.	 	The Company is validly existing as a corporation and in good standing under the laws of
Puerto Rico.
	 
	 	2.	 	The Offered Common Stock and Offered Preferred Stock have been duly authorized by the
Company and, when delivered to and paid for by the Purchaser in accordance with the terms
of the Stock Purchase Agreement, will be validly issued, fully paid and nonassessable.
	 
	 	3.	 	The Conversion Shares issuable upon conversion of the Offered Preferred Stock at the
initial conversion price have been duly authorized by all necessary corporate action and,
when issued upon conversion of the Offered Preferred Shares in accordance with the terms of
the Certificate of Designations, will be validly issued, fully paid and nonassessable. The
resolutions of the Board of Directors of the Company approving the issuance of the Offered
Preferred Shares state that they have reserved the Conversion Shares issuable upon
conversion of the Offered Preferred Stock at the initial conversion price.
	 
	 	4.	 	The execution and filing of the Certificate of Designations has been duly authorized by
the Company and the Certificate of Designations has been duly executed and filed with the
Secretary of State of the State of Puerto Rico.

D-III-1

 

APPENDIX I

SUMMARY INSTRUCTION SHEET FOR PURCHASER

(to be read in conjunction with the entire

Purchase Agreement which follows)

A. Complete the following items on BOTH Purchase Agreements (Sign two originals):

	 	1.	 	Signature Page:

	 	(i)	 	Name of Purchaser (Individual or Institution)
	 
	 	(ii)	 	Name of Individual representing Purchaser (if an Institution)
	 
	 	(iii)	 	Title of Individual representing Purchaser (if an Institution)
	 
	 	(iv)	 	Signature of Individual Purchaser or Individual representing Purchaser

	 	2.	 	Appendix I — Stock Certificate Questionnaire/Registration Statement
Questionnaire:
	 
	 	 	 	Provide the information requested by the Stock Certificate Questionnaire and the
Registration Statement Questionnaire.
	 
	 	3.	 	Return BOTH properly completed and signed Purchase Agreements including the
properly completed Appendix I to (initially by facsimile with original by
overnight delivery):

Barclays Capital

745 Seventh Avenue, 5th Floor

New York, NY 10019

Attention: Keith Canton

Email: keith.canton@barcap.com

Facsimile: 212-520-9328

1

 

	 	B.	 	Instructions regarding the transfer of funds for the purchase of Shares will be sent by
facsimile to the Purchaser by the Placement Agent at a later date.
	 
	 	C.	 	Upon the resale of the Shares by the Purchasers after the Registration Statement covering the
Shares is effective, as described in the Purchase Agreement, the Purchaser:

	 	(i)	 	must deliver a current prospectus of the Company to the
Purchaser (prospectuses must be obtained from the Company at the Purchaser’s
request).

2

 

Doral Financial Corporation

STOCK CERTIFICATE QUESTIONNAIRE

     Pursuant to Section 5 of the Agreement, please provide us with the following information:

	1.	 	The exact name that your Shares are to be registered in (this is the
name that will appear on your stock certificate(s)). You may use a
nominee name if appropriate:
	 
	2.	 	The relationship between the Purchaser of the Shares and the
Registered Holder listed in response to Item 1 above:
	 
	3.	 	The mailing address of the Registered Holder listed in response to
Item 1 above:
	 
	4.	 	The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to Item 1 above:

3

 

Doral Financial Corporation

REGISTRATION STATEMENT QUESTIONNAIRE

     In connection with the preparation of the Registration Statement, please provide us with the
following information:

     SECTION 1. Pursuant to the “Selling Stockholder” section of the Registration Statement, please
state your or your organization’s name exactly as it should appear in the Registration Statement:

     SECTION 2. Please provide the number of shares of Offered Common Stock that you or your
organization own or Offered Preferred Stock that you or your organization own that will convert
into Offered Common Stock after the receipt of Stockholder Approvals. Please also provide the
number of shares of Common Stock that you or your organization purchased through other transactions
and provide the number of shares of Common Stock that you have or your organization has the right
to acquire within 60 days of the final Closing Date:

     Shares of Offered Common Stock: ___

	 	 	Shares of Offered Common Stock into which Offered Preferred Stock is convertible: ___

     Other shares of Common Stock held: ___

     Total shares of Common Stock held: ___

     SECTION 3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?

_____ Yes       _____ No

4

 

     If yes, please indicate the nature of any such relationships below:

     SECTION 4. Are you (i) a FINRA Member (see definition), (ii) a Controlling (see definition)
shareholder of a FINRA Member, (iii) a Person Associated with a Member of the FINRA (see
definition), or (iv) an Underwriter or a Related Person (see definition) with respect to the
proposed offering; or (b) do you own any shares or other securities of any FINRA Member not
purchased in the open market; or (c) have you made any outstanding subordinated loans to any FINRA
Member?

     Answer: [ ] Yes [ ] No            If “yes,” please describe below

5

 

     Control. The term “control” (including the terms “controlling,” “controlled by” and
“under common control with”) means the possession, direct or indirect, of the power, either
individually or with others, to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by contract, or otherwise. (Rule 405
under the Securities Act of 1933, as amended)

     FINRA Member. The term “FINRA member” means either any broker or dealer admitted to
membership in the Financial Industry Regulatory Authority, Inc. (“FINRA”). (FINRA Manual,
Article I, Definitions)

     Person Associated with a member of the FINRA. The term “person associated with a
member of the FINRA” means every sole proprietor, partner, officer, director, branch manager or
executive representative of any FINRA Member, or any natural person occupying a similar status or
performing similar functions, or any natural person engaged in the investment banking or securities
business who is directly or indirectly controlling or controlled by a FINRA Member, whether or not
such person is registered or exempt from registration with the FINRA pursuant to its bylaws.
(FINRA Manual, Article I, Definitions)

     Underwriter or a Related Person. The term “underwriter or a related person” means,
with respect to a proposed offering, underwriters, underwriters’ counsel, financial consultants and
advisors, finders, members of the selling or distribution group, and any and all other persons
associated with or related to any of such persons. (FINRA Interpretation)

6exv4w27

	 	 	 	 	 

EXHIBIT 4.27

FIFTH SUPPLEMENTAL INDENTURE

between

MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

Trustee

 

Dated as of April 20, 2010

 

Supplementing the First Mortgage Indenture

Dated as of December 10, 2003

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS

Establishing a series of Securities designated 5.64% Senior Secured Notes due 2040

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page	 
	ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
	 	 	7	 
	 
	 	 	 	 
	ARTICLE TWO TITLE, FORM AND TERMS AND CONDITIONS OF THE NOTES
	 	 	12	 
	 
	 	 	 	 
	Section 2.01. The Notes
	 	 	12	 
	Section 2.02. Payment on the Notes
	 	 	13	 
	Section 2.03. Mandatory Redemption of the Notes
	 	 	15	 
	Section 2.04. Optional Redemption
	 	 	15	 
	Section 2.05. Purchase of Notes
	 	 	16	 
	Section 2.06. Payment upon Event of Default
	 	 	16	 
	Section 2.07. Transfers
	 	 	17	 
	 
	 	 	 	 
	ARTICLE THREE ADDITIONAL COVENANTS
	 	 	17	 
	 
	 	 	 	 
	Section 3.01. Affirmative Covenants of the Company
	 	 	17	 
	Section 3.02. Negative Covenants of the Company
	 	 	18	 
	 
	 	 	 	 
	ARTICLE FOUR ADDITIONAL EVENTS OF DEFAULT
	 	 	21	 
	 
	 	 	 	 
	Section 4.01. Events of Default
	 	 	21	 
	Section 4.02. Acceleration of Maturity
	 	 	22	 
	 
	 	 	 	 
	ARTICLE FIVE MISCELLANEOUS PROVISIONS
	 	 	23	 
	 
	 	 	 	 
	Section 5.01. Execution of Fifth Supplemental Indenture
	 	 	23	 
	Section 5.02. Effect of Headings
	 	 	23	 
	Section 5.03. Successors and Assigns
	 	 	23	 
	Section 5.04. Severability Clause
	 	 	23	 
	Section 5.05. Benefit of Fifth Supplemental Indenture
	 	 	23	 
	Section 5.06. Execution and Counterparts
	 	 	24	 
	Section 5.07. Conflict with Mortgage Indenture
	 	 	24	 
	Section 5.08. Recitals
	 	 	24	 
	Section 5.09. Governing Law
	 	 	24	 

	 	 	 	 	 

	Schedule 1
	 	Recording Information
	 
	 	 	 	 
	Exhibit A
	 	Description of Properties
	Exhibit B
	 	Subordination Terms
	Exhibit C
	 	Form of Note

 

 

          FIFTH SUPPLEMENTAL INDENTURE (this “FIFTH SUPPLEMENTAL INDENTURE”), dated as of April
20, 2010, between MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC, a limited liability company
organized and existing under the laws of the State of Michigan (herein called the
“Company”), having its principal office at 27175 Energy Way, Novi, Michigan 48377, and THE
BANK OF NEW YORK MELLON TRUST COMPANY, N.A. (as successor to JPMorgan Chase Bank, N.A.), a national
banking association organized under the laws of the United States, as trustee (herein called the
“Trustee”), the office of the Trustee at which on the date hereof its corporate trust
business is administered being 2 N. LaSalle, Suite 1020, Chicago, Illinois 60602.

RECITALS OF THE COMPANY

          WHEREAS, the Company has heretofore executed and delivered to the Trustee a First Mortgage
Indenture dated as of December 10, 2003 (the “Original Mortgage Indenture”), as amended and
supplemented by the Third Supplemental Indenture thereto, dated as of November 25, 2008, (together
with the Original Mortgage Indenture, the “Mortgage Indenture”) encumbering the real
property interests as more particularly described on Exhibit A and Exhibit B attached to the
Original Mortgage Indenture and on Exhibit A to the Fourth Supplemental Indenture thereto, and
providing for (i) the issuance by the Company from time to time of its bonds, notes or other
evidences of indebtedness (in the Mortgage Indenture and herein called the “Debt
Securities”) to be issued in one or more series and to provide security for the payment of the
principal of and premium (including any Make-Whole Amount), if any, and interest, if any, on the
Debt Securities and (ii) the issuance from time to time of Collateral Securities (as defined in the
Mortgage Indenture) (together with the Debt Securities, in the Mortgage Indenture and herein called
the “Securities”); and

          WHEREAS, the Company has heretofore executed and delivered the following supplemental
indentures, each dated as hereinafter set forth:

	 	 	 
	Instrument	 	Date
	First Supplemental Indenture

	 	December 10, 2003
	 
	 	 
	Second Supplemental Indenture

	 	December 10, 2003
	 
	 	 
	Third Supplemental Indenture

	 	November 25, 2008
	 
	 	 
	Fourth Supplemental Indenture

	 	December 11, 2008

          WHEREAS, the Original Mortgage Indenture, the First Supplemental Indenture, the Second
Supplemental Indenture and the Fourth Supplemental Indenture listed in the foregoing paragraph were
recorded in the offices set forth in Schedule 1 attached hereto; and

          WHEREAS, there have heretofore been issued under the Indenture the following Securities in the
principal amounts as follows:

 

 

	 	 	 	 	 	 	 	 	 
	Title	 	Issued	 	 	Principal Amount	 
	5.75% Senior Secured
Notes, due 2015
	 	December 10, 2003	 	$	175,000,000	 
	 
	 	 	 	 	 	 	 	 
	Senior Secured Bonds,
Collateral Series A
	 	December 10, 2003 (Discharged on March 29, 2007)	 	$	35,000,000
	 
	 		 	 	 	 
	 
	 	 			 	 
	6.63% Senior Secured
Notes due 2014
	 	December 11, 2008	 	$	50,000,000	 

          WHEREAS, in addition to the property described in the Original Mortgage Indenture and the
Fourth Supplemental Indenture, the Company has acquired certain other property, rights, and
interests in property; and

          WHEREAS, the Company, in the exercise of the power and authority conferred upon and reserved
to it under the provisions of the Mortgage Indenture and pursuant to a Company Resolution, has duly
determined to make, execute and deliver to the Trustee this Fifth Supplemental Indenture to the
Mortgage Indenture as permitted by Sections 201, 301 and 1201 of the Mortgage Indenture in order to
establish the form and terms of, and to provide for the creation and issuance of, a series of
Securities under the Mortgage Indenture in an aggregate principal amount of $50,000,000 and to
amend and supplement the Mortgage Indenture as herein provided; and

          WHEREAS, all things necessary to make the Notes (as defined herein), when executed by the
Company and authenticated and delivered by the Trustee or any Authenticating Agent and issued upon
the terms and subject to the conditions hereinafter and in the Mortgage Indenture set forth against
payment therefor the valid, binding and legal obligations of the Company and to make this Fifth
Supplemental Indenture a valid, binding and legal agreement of the Company, have been done;

GRANTING CLAUSES

          NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL INDENTURE WITNESSETH that, in order to establish the
terms of a series of Securities, and for and in consideration of the premises and of the covenants
contained in the Mortgage Indenture and in this Fifth Supplemental Indenture and for other good and
valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order
to secure the payment of the principal of and premium, if any, and interest, if any, on, and all
other amounts (including, without limitation, fees, expenses and indemnities) in connection with,
all Securities from time to time Outstanding and the performance of the covenants therein and
herein contained and to declare the terms and conditions on which such Securities are secured, the
Company hereby grants, bargains, sells, conveys, assigns, transfers, mortgages, pledges, sets over
and confirms to the Trustee, and grants to the Trustee, for itself and for the benefit of the
Holders, with power of sale, a lien upon and a security interest in, the following (subject,
however, to the terms and conditions set forth in the Mortgage Indenture and herein):

2

 

GRANTING CLAUSE FIRST

          All right, title and interest of the Company, as of the date of the execution and delivery of
this Fifth Supplemental Indenture, as originally executed and delivered, in and to all of the
following property:

          (a) all real property owned in fee and other interests in real property located in the State
of Michigan or wherever else situated including, but not limited to, such property as described in
Exhibit A and Exhibit B attached to the Original Mortgage Indenture, Exhibit A attached to the
Fourth Supplemental Indenture and Exhibit A attached hereto;

          (b) the entire easement estate created under and by virtue of the Easement Agreement (as
defined in Section 101 of the Original Mortgage Indenture), including any interest in any fee, or
greater or lesser title to such easement estate, including, without limitation, the Company’s
interest in the parcels of real property described in Exhibit B attached to the Original Mortgage
Indenture for purposes of local recording of the Indenture (collectively, the “Easement
Land”) and the Improvements (as defined below) that the Company may own or hereafter acquire
(whether acquired pursuant to a right or option contained in the Easement Agreement or otherwise)
and all credits, deposits, options, privileges and rights of the Company under the Easement
Agreement (including all rights of use, occupancy and enjoyment) and under any amendments,
supplements, extensions, renewals, restatements, replacements and modifications thereof (including,
without limitation, (i) the right to give consents, (ii) the right to receive moneys payable to the
Company, (iii) the right to renew or extend the Easement Agreement for a succeeding term or terms,
(iv) the right, if any, to purchase the Real Estate (as defined below) and (v) the right to
terminate or modify the Easement Agreement); all of the Company’s claims and rights to the payment
of damages arising under the Bankruptcy Code (as defined in Section 101 of the Original Mortgage
Indenture) from any rejection of the Easement Agreement by the grantor thereunder or any other
party (such parcel(s) of real property (including the real property owned in fee and the Easement
Land and the Company’s easement estate), together with all of the buildings, improvements,
structures and fixtures now or subsequently located thereon (the “Improvements”) are
collectively referred to as the “Real Estate”);

          (c) the Improvements or any part thereof (whether owned in fee by the Company or held pursuant
to the Easement Agreement or otherwise) and all the estate, right, title, claim or demand
whatsoever of the Company, in possession or expectancy, in and to the Real Estate or any part
thereof;

          (d) all rights of way, gores of land, streets, ways, alleys, passages, sewer rights, waters,
water courses, water and riparian rights, development rights, air rights, mineral rights and all
estates, rights, titles, interests, privileges, licenses, tenements, hereditaments and
appurtenances belonging, relating or appertaining to the Real Estate, and any reversions,
remainders, rents, issues, profits and revenue thereof and all land lying in the bed of any street,
road or avenue, in front of or adjoining the Real Estate to the center line thereof (the assets
described in clauses (a), (b) and (c) above and this clause (d) are collectively referred to as the
“Real Property”);

3

 

          (e) all fixtures, towers, pole structures, poles, crossarms, wires, cables, conduits, guys,
anchors, transformers, insulators, substations, switching stations, chattels, business machines,
machinery, apparatus, equipment, furnishings, fittings and articles of personal property of every
kind and nature whatsoever, and all appurtenances and additions thereto and substitutions or
replacements thereof (together with, in each case, attachments, components, parts and accessories)
currently owned or subsequently acquired by the Company and now or subsequently attached to, or
contained in or used or usable in any way in connection with any operation or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds, curtains, draperies, artwork,
carpets, rugs, storm doors and windows, furniture and furnishings, heating, electrical, and
mechanical equipment, lighting, switchboards, plumbing, ventilating, air conditioning and
air-cooling apparatus, refrigerating, and incinerating equipment, escalators, elevators, loading
and unloading equipment and systems, stoves, ranges, laundry equipment, cleaning systems (including
window cleaning apparatus), telephones, communication systems (including satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire prevention and extinguishing
apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks,
conduits, appliances, fittings and fixtures of every kind and description and all other assets that
constitute “Equipment” as defined in the Uniform Commercial Code (all of the foregoing in this
clause (e), collectively being referred to as the “Equipment”);

          (f) all substitutes and replacements of, and all additions and improvements to, the Real
Estate and the Equipment, subsequently acquired by or released to the Company or constructed,
assembled or placed by the Company on the Real Estate, immediately upon such acquisition, release,
construction, assembling or placement, including, without limitation, any and all building
materials whether stored at the Real Estate or offsite, and, in each such case, without any further
mortgage, conveyance, assignment or other act by the Company;

          (g) all leases, subleases, underlettings, concession agreements, management agreements,
licenses and other agreements relating to the use or occupancy of the Real Estate or the Equipment
or any part thereof, now existing or subsequently entered into by the Company and whether written
or oral and all guarantees of any of the foregoing (collectively, as any of the foregoing may be
amended, restated, extended, renewed or modified from time to time, the “Leases”), and all
rights of the Company in respect of cash and securities deposited thereunder and the right to
receive and collect the revenues, income, rents, issues and profits thereof, together with all
other rents, royalties, issues, profits, revenue, income and other benefits arising from the use
and enjoyment of the Mortgaged Property (collectively, the “Rents”), including, but not
limited to, all rights conferred by Act No. 210 of the Michigan Public Acts of 1953 as amended by
Act No. 151 of the Michigan Public Acts of 1966 (MCLA 554.231 et seq.), and Act No.
228 of the Michigan Public Acts of 1925 as amended by Act No. 55 of the Michigan Public Acts of
1933 (MCLA 554.211 et seq.);

          (h) all trade names, trade marks, logos, copyrights, good will and books and records relating
to or used in connection with the operation of the Real Estate or the Equipment or any part
thereof, all rights, priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including copyrights, copyright
licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement or other

4

 

impairment thereof, including the right to receive all proceeds and damages therefrom; all general intangibles
related to the operation of the Improvements now existing or hereafter arising and all other assets
that constitute “Intellectual Property” as defined in the Uniform Commercial Code (all of the
foregoing in this clause (h), collectively being referred to as “Intellectual Property”);

          (i) all unearned premiums under insurance policies now or subsequently obtained by the Company
relating to the Real Estate or Equipment and the Company’s interest in and to all proceeds of any
such insurance policies (including title insurance policies) including the right to collect and
receive such proceeds, subject to the provisions relating to insurance generally set forth below;
and all awards and other compensation, including the interest payable thereon and the right to
collect and receive the same, made to the present or any subsequent owner of the Real Estate or
Equipment for the taking by eminent domain, condemnation or otherwise, of all or any part of the
Real Estate or any easement or other right therein;

          (j) all contracts from time to time executed by the Company or any Manager or agent on its
behalf relating to the ownership, construction, maintenance, repair, operation, occupancy, sale or
financing of the Real Estate or Equipment or any part thereof and all agreements relating to the
purchase or lease of any portion of the Real Estate or any property which is adjacent or peripheral
to the Real Estate, together with the right to exercise such options and all leases of Equipment;
all consents, licenses, building permits, certificates of occupancy and other Governmental
Approvals relating to construction, completion, occupancy, use or operation of the Real Estate or
any part thereof; and all drawings, plans, specifications and similar or related items relating to
the Real Estate (all of the foregoing in this clause (j) being referred to as “Real Estate
Contracts”);

          (k) any and all moneys now or subsequently on deposit for the payment of real estate taxes or
special assessments against the Real Estate or for the payment of premiums on insurance policies
covering the foregoing property or otherwise on deposit with or held by the Company as provided in
the Indenture;

          (l) any right to payment of a monetary obligation, whether or not earned by performance, (i)
for property that has been or is to be sold, leased, licensed, assigned or otherwise disposed of,
(ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be
issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to
be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising
out of the use of a credit or charge card or information contained on or for use with the card, or
(viii) as winnings in a lottery or other game of chance operated or sponsored by a state,
governmental unit of a state, or person licensed or authorized to operate the game by a state or
governmental unit of the state;

          (m) all Accounts;

          (n) all Chattel Paper;

          (o) all Contracts;

          (p) all Deposit Accounts;

5

 

          (q) all Documents;

          (r) all General Intangibles;

          (s) all Instruments;

          (t) all Inventory;

          (u) all Investment Property;

          (v) all Letter of Credit Rights;

          (w) all other property not otherwise described above;

          (x) all books and records pertaining to the Mortgaged Property; and

          (y) to the extent not otherwise included, all Proceeds, Supporting Obligations and products of
any and all of the foregoing and all collateral security and guarantees given by any Person with
respect to any of the foregoing.

GRANTING CLAUSE SECOND

          All right, title and interest of the Company in all property described in the foregoing
Granting Clause First, which may be hereafter acquired by the Company, it being the intention of
the Company that all such property and all such rights, title and interests acquired by the Company
after the date of the execution and delivery of this Fifth Supplemental Indenture, as originally
executed and delivered, shall be as fully embraced within and subjected to the Lien hereof as if
such property were owned by the Company as of the date of the execution and delivery of this Fifth
Supplemental Indenture, as originally executed and delivered;

GRANTING CLAUSE THIRD

          All tenements, hereditaments, servitudes and appurtenances belonging or in any wise
appertaining to the aforesaid property, with the reversions and remainders thereof;

          TO HAVE AND TO HOLD all such property, unto the Trustee, its successors in trust and their
assigns forever;

          IN TRUST, for the equal and ratable benefit and security of the Holders from time to time of
all Outstanding Securities without any priority of any such Security over any other such Security;

          PROVIDED, HOWEVER, that the right, title and interest of the Trustee in and to the Mortgaged
Property shall cease, terminate and become void in accordance with, and subject to the conditions
set forth in, Article Seven or Article Twelve of the Original Mortgage Indenture, and if,
thereafter, the principal of and premium, if any, and interest, if any, on, and any other amounts
(including, without limitation, fees, expenses and indemnities) in connection with, the Securities
shall have been paid to the Holders thereof, or shall have been paid to the

6

 

Company pursuant to Section 603 of the Original Mortgage Indenture, then and in that case the Indenture shall
terminate, and the Trustee shall execute and deliver to the Company such instruments as the Company
shall require to evidence such termination; otherwise the Indenture, and the estate and rights
hereby granted, shall be and remain in full force and effect;

          IT IS HEREBY COVENANTED AND AGREED by and between the Company and the Trustee that all the
Securities are to be authenticated and delivered, and that the Mortgaged Property is to be held,
subject to the further covenants, conditions and trusts set forth in the Indenture; and

          THE PARTIES HEREBY COVENANT AND AGREE as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION

          (a) Mortgage Indenture Definitions. Each capitalized term that is used herein and is
defined in the Mortgage Indenture shall have the meaning specified in the Mortgage Indenture unless
such term is otherwise defined herein; provided, however, that any reference to a “Section” or
“Article” refers to a Section or Article, as the case may be, of this Fifth Supplemental Indenture,
unless otherwise expressly stated.

          (b) Additional Definitions. For purposes of this Fifth Supplemental Indenture, except
as otherwise expressly provided or unless the context otherwise requires, the following capitalized
terms shall have the meanings set forth below:

          “Closing Date” has the meaning assigned to that term in Schedule B to the Note
Agreement.

          “Code” means the United States Internal Revenue Code of 1986, as amended.

          “Dispose” or “Disposition” means a sale, lease, transfer or other disposition
of any assets of the Company.

          “Environmental Laws” means any and all federal, state, local, and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits, licenses or legally
enforceable 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.

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

          “ERISA Affiliate” means, with respect to any Person, any trade or business (whether or
not incorporated) which is a member of a group of which such Person is a member and which is
treated as a single employer with such Person under Section 414 of the Code.

7

 

          “ERISA Event” means:

          (a) the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, with
respect to any Plan unless the notice requirement with respect to such event has been waived;

          (b) the application for a minimum funding waiver with respect to a Plan;

          (c) the provision by the administrator of any Plan of a notice of intent to terminate such
Plan, pursuant to Section 4041(c) of ERISA;

          (d) the withdrawal by the Company or any ERISA Affiliate from a Multiple Employer Plan during
a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;

          (e) the conditions for the imposition of a lien under Section 302(f) of ERISA shall have been
met with respect to any Plan;

          (f) the adoption of an amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA;

          (g) the institution by the PBGC of proceedings to terminate, or cause a trustee to be
appointed to administer, a Plan pursuant to Section 4042 of ERISA; or

          (h) the incurrence of withdrawal liability under Title IV of ERISA by the Company or any of
its ERISA Affiliates upon the withdrawal by the Company or any of its ERISA Affiliates from a
Multiemployer Plan or the incurrence of liability by the Company or any of its ERISA Affiliates
upon the termination of a Multiemployer Plan.

          “Event of Default” has the meaning assigned to that term in Article Four of this Fifth
Supplemental Indenture.

          “Fifth Supplemental Indenture” has the meaning assigned to that term in the
introductory paragraph hereof.

          “Financing Agreements” means the Mortgage Indenture, this Fifth Supplemental
Indenture, the Note Agreement and the Notes.

          “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 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.

          “Holdco” means ITC Holdings Corp., a Michigan corporation.

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          “Indenture” means the Original Mortgage Indenture, as supplemented and modified by any
and all indentures supplemental thereto, including this Fifth Supplemental Indenture.

          “Initial Noteholder” means each Noteholder listed on Schedule A to the Note Agreement
purchasing any Notes on the Closing Date.

          “Institutional Investor” means (a) any Initial Noteholder, (b) any holder of more than
$5,000,000 of the aggregate principal amount of the Notes and (c) any bank, trust company, other
financial institution, pension plan, investment company, insurance company, or similar financial
institution.

          “Investment” or “Invest” means (a) a purchase or acquisition of, or an
investment or reinvestment in, Rate Base Assets or (b) without duplication, the making of a firm,
good faith contractual commitment, in the ordinary course of business and not subject to any
conditions in the Company’s control, to purchase or acquire, or invest or reinvest in, Rate Base
Assets.

          “Make-Whole Amount” means, with respect to any Note, an amount, as determined by the
Company, equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments
with respect to the Called Principal of such Note over the amount of such Called Principal;
provided that the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amounts, the following terms have the following meanings:

“Called Principal” means, with respect to any Note, the principal of
such Note that is to be redeemed pursuant to Section 2.03 or 2.04 or has
become or is declared to be immediately due and payable pursuant to Section
802 of the Indenture, as the context requires.

“Discounted Value” means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (applied on the same periodic basis as that on which interest on the
Notes is payable) equal to the Reinvestment Yield with respect to such
Called Principal.

“Reinvestment Yield” means, with respect to the Called Principal of
any Note, 0.50% over the yield to maturity implied by (i) the yields
reported, as of 10:00 a.m. (New York City time) on the second Business Day
preceding the Settlement Date with respect to such Called Principal, on the
display designated as “Page PX1” on the Bloomberg Financial Markets Services
Screen (or such other display as may replace Page PX1 on the Bloomberg
Financial Markets Services Screen) for the most recently issued actively
traded on the run U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as

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of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields
reported as of such time are not ascertainable (including by way of
interpolation), the Treasury Constant Maturity Series Yields reported, for
the latest day for which such yields have been so reported as of the second
Business Day preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (or any comparable
successor publication) for U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. In the case of each determination
under clause (i) or clause (ii), as the case may be, of the preceding
sentence, such implied yield will be determined, if necessary, by (a)
converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between (1) the applicable U.S. Treasury security with the maturity closest
to and greater than such Remaining Average Life and (2) the applicable
traded U.S. Treasury security with the maturity 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
Note.

“Remaining Average Life” means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth year)
obtained by dividing (i) such Called Principal into (ii) the sum of the
products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b) the
number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal and
the scheduled due date of such Remaining Scheduled Payment.

“Remaining Scheduled Payments” means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date; provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 2.03 or 2.04
or Section 802 of the Indenture.

“Settlement Date” means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be redeemed pursuant to
Section 2.03 or 2.04 or has become or is declared to be immediately due and
payable pursuant to Section 802 of the Indenture, as the context requires.

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          “Material” means material in relation to the business, operations, affairs, financial
condition, assets or properties of the Company.

          “Material Adverse Effect” means a material adverse effect on (a) the business,
operations, affairs, financial condition, assets or properties of the Company, (b) the ability of
the Company to perform its obligations under any Financing Agreement (including, the timely
payments of principal of, or Make-Whole Amount, if any, and interest on, the Notes), (c) the
legality, validity or enforceability of the Financing Agreements or (d) the perfection or priority
of the Liens purported to be created pursuant to the Indenture or the rights and remedies of
the Noteholders with respect thereto.

          “Mortgage Indenture” has the meaning assigned to that term in the first Recital.

          “Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of
ERISA, to which the Company or any of its ERISA Affiliates is making or accruing an obligation to
make contributions, or has within any of the preceding five plan years made or accrued an
obligation to make contributions, such plan being maintained pursuant to one or more collective
bargaining agreements.

          “Multiple Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, which (a) is maintained for employees of the Company or any of its ERISA
Affiliates and at least one Person other than the Company and its ERISA Affiliates or (b) was so
maintained and in respect of which the Company or any of its ERISA Affiliates could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

          “Net Proceeds” means, with respect to any Disposition of assets, the gross proceeds
thereof (including any such proceeds received by way of deferred payment, installment, price
adjustment or otherwise), whether in cash or otherwise, net of any taxes paid or reasonably
estimated to be paid as a result thereof (after taking into account any available tax credits or
deductions applicable thereto).

          “Note” has the meaning assigned to that term in Section 2.01(a).

          “Note Agreement” means that certain Note Purchase Agreement, dated as of May 6, 2010,
between the Company and the Initial Noteholders.

          “Noteholders” means (a) the Initial Noteholders and (b) each subsequent holder of a
Note as shown on the register maintained by the Company pursuant to Section 305 of the Mortgage
Indenture.

          “Original Mortgage Indenture” has the meaning assigned to that term in the first
Recital.

          “Payment Event of Default” means an Event of Default under subsections (a) or (b) of
Section 801 of the Mortgage Indenture, or, with respect to failures to make payment only, Section
4.01(d).

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          “PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle
A of Title IV of ERISA, or any successor.

          “Plan” means an “employee benefit plan” as defined in Section 3(3) of ERISA that is
subject to Title IV of ERISA or is subject to Section 412 of the Code, other than a Multiemployer
Plan, which is maintained, sponsored or contributed to, by the Company or any of its ERISA
Affiliates.

          “Rate Base Assets” means assets of the Company which are included in FERC’s
determination of the Company’s revenue requirement under the OATT.

          “Reputable Insurer” means any financially sound and responsible insurance provider
permitted to do business in the State of Michigan rated “A-” or better by A.M. Best Company (or if
such ratings cease to be published generally for the insurance industry, meeting comparable
financial standards then applicable to the insurance industry).

          “Responsible Officer”, when used with respect to the Company, means any Senior
Financial Officer or any vice president of the Company or Holdco and any other officer of the
Company or Holdco with responsibility for the administration of the relevant Financing Agreement,
or portion thereof.

          “Senior Financial Officer” means the chief financial officer, principal accounting
officer, treasurer, comptroller or any vice president of Holdco.

          “Subordinated Debt” means unsecured Debt of the Company fully subordinated in right of
payment to the Notes and other Senior Secured Debt substantially on the terms set forth in
Exhibit B attached hereto.

          “Subsidiary” means, as to any Person, any Corporation or other business entity in
which such Person beneficially owns, directly or indirectly, a majority of the outstanding voting
securities thereof.

          “Transmission Documents” shall have the meaning assigned to such term in the Note
Agreement.

ARTICLE TWO

TITLE, FORM AND TERMS AND CONDITIONS OF THE NOTES

Section 2.01. The Notes.

          (a) The Securities of this series to be issued under the Mortgage Indenture pursuant to this
Fifth Supplemental Indenture shall be designated as “5.64% Senior Secured Notes due 2040” (the
“Notes”) and shall be Debt Securities issued under the Indenture.

          (b) The Trustee shall authenticate and deliver the Notes for original issue on the Closing
Date in the aggregate principal amount of $50,000,000, upon a Company Order for the authentication
and delivery thereof pursuant to Section 401 of the Mortgage Indenture.

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          (c) Interest on the Notes shall be payable to the Persons in whose names such Notes are
registered at the close of business on the Regular Record Date for such interest (as specified in
subsection (e) below), except as otherwise expressly provided in the form of such Notes attached
hereto as Exhibit C.

          (d) The Notes shall mature and the principal thereof shall be due and payable together with
all accrued and unpaid interest thereon on May 6, 2040.

          (e) The Notes shall bear interest at the rate of 5.64% per annum; provided that, to the extent
permitted by law, any overdue payment (including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole Amount shall bear interest at a rate
per annum from time to time equal to the greater of (i) 7.64% and (ii) 2.0% over the rate of
interest publicly announced by JPMorgan Chase Bank, N.A. from time to time in New York, New York as
its “base” or “prime” rate. Interest shall accrue on the Notes from the Closing Date, or the most
recent date to which interest has been paid or duly provided for. The Interest Payment Dates for
the Notes shall be June 30 and December 31 in each year, commencing June 30, 2010, and the Regular
Record Dates with respect to the Interest Payment Dates for the Notes shall be the 15th calendar
day preceding each Interest Payment Date (whether or not a Business Day); provided, however that
interest payable at Maturity will be payable to the Noteholder to whom principal is payable.

          (f) Subject to Section 2.02, the office or agency of the Trustee in New York, New York, which
as of the date hereof is located at c/o The Bank of New York Mellon, Trust Services Window, 101
Barclay Street, New York, New York 10286, shall be the place at which the principal of and
Make-Whole Amount, if any, and interest on the Notes shall be payable. The office or agency of the
Trustee in New York, New York, which as of the date hereof is located at c/o The Bank of New York
Mellon, Trust Services Window, 101 Barclay Street, New York, New York 10286, shall be the place at
which registration of transfer of the Notes may be effected; and The Bank of New York, N.A. shall
be the Security Registrar and the Paying Agent for the Notes; provided, however, that the Company
reserves the right to designate, by one or more Officer’s Certificates, its principal office in
Novi, Michigan as any such place or itself as the Security Registrar; provided, however, that there
shall be only a single Security Registrar for the Notes.

          (g) The Notes shall be issuable in registered form in denominations of at least $250,000 or
any integral multiple thereof.

          (h) The Notes shall not be defeasible pursuant to Sections 7.01 or 7.02 of the Indenture and
such Sections of the Indenture shall not apply to the Notes.

          (i) The Notes shall have such other terms and provisions as are provided in the form thereof
attached hereto as Exhibit C, and shall be issued in substantially such form.

Section 2.02. Payment on the Notes.

          (a) Subject to Section 2.02(b), payments of principal, Make-Whole Amount, if any, and interest
becoming due and payable on the Notes shall be made at the Place of Payment designated in Section
2.01(f) or such place as the Company may at any time, by notice,

13

 

specify to each Noteholder, so long as such Place of Payment shall be either the principal office of the Company or the principal
office of a bank or trust company in New York, New York.

          (b) So long as any Initial Noteholder or its nominee shall be a Noteholder, and
notwithstanding anything contained in the Indenture, Section 2.02(a) or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount,
if any, and interest by the method and at the address specified for such purpose below
such Initial Noteholder’s name in Schedule A to the Note Agreement, or by such other method or
at such other address as such Initial Noteholder shall have from time to time specified to the
Company and the Trustee in writing for such purpose in accordance with the Note Agreement, without
the presentation or surrender of such Note or the making of any notation thereon, except that
concurrently with or reasonably promptly after payment or redemption in full of any Note, such
Initial Noteholder shall surrender such Note for cancellation to the Company at its principal
office or at the Place of Payment most recently designated by the Company pursuant to Section
2.02(a). Prior to any sale or other disposition of any Note held by such Initial Noteholder or its
nominee such Initial Noteholder will, at its election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid thereon or surrender such
Note to the Company in exchange for a new Note or Notes pursuant to Section 305 of the Indenture;
provided, that a transfer by endorsement shall not constitute a registration of transfer for
purposes of the Indenture and the Trustee and any agent of the Trustee shall be entitled to the
protections of Section 308 of the Indenture with respect to any Note, the transfer of which has not
been so registered. The Company will afford the benefits of this Section 2.02(b) to any
Institutional Investor that is the direct or indirect transferee of any Note purchased by such
Initial Noteholder under the Indenture. The Company agrees and acknowledges that the Trustee shall
not be liable for any Noteholder’s failure to perform its obligations under this Section 2.02(b).
Each Initial Noteholder and any such Institutional Investor by its purchase of its Note agrees to
indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred
without negligence, willful misconduct or bad faith on its part, arising out of or in connection
with such Noteholder’s or Institutional Investor’s failure to comply with the provisions of this
Section 2.02(b), including the costs and expenses of defending itself against any claim or
liability in connection therewith, such indemnity to survive the payment of such Notes and the
resignation or removal of the Trustee.

          (c) Notwithstanding anything to the contrary in Section 113 of the Mortgage Indenture, if the
Stated Maturity or any Redemption Date of the Notes shall not be a Business Day at any Place of
Payment, then (notwithstanding any other provision of the Mortgage Indenture or this Fifth
Supplemental Indenture) payment of interest on or principal (and premium, if any) of the Notes due
at the Stated Maturity or on any Redemption Date thereof need not be made at such Place of Payment
on such date, but may be made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on the Stated Maturity or on any Redemption Date thereof, provided
that interest shall accrue on the outstanding principal amount of the Notes due at the Stated
Maturity or on any Redemption Date thereof at the rate set forth in the Notes until the date of
actual payment.

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Section 2.03. Mandatory Redemption of the Notes.

          In addition to the mandatory redemption required by Section 501(a) of the Mortgage Indenture,
which Section 501(a) shall apply to the Notes, in the event that any one or more Dispositions
during any consecutive 12 month period (except Dispositions permitted under Section 3.02(b)(i) or
(ii)) yield Net Proceeds in excess of $10,000,000, in the aggregate, the Net Proceeds of such
Disposition or Dispositions shall be used for the mandatory redemption of the Notes, and/or the
redemption or prepayment of other Senior Secured Debt in accordance with its terms, on a date which
is no more than nine months following a Disposition that, when aggregated with any other
Dispositions, requires compliance with this Section 2.03 unless (x) during the nine month period immediately preceding the date of such Disposition, the Company
Invested in any Rate Base Assets in which case an amount of such Net Proceeds equal to the excess,
if any, of (A) the total aggregate amount of all such Investments made during such preceding nine
month period (excluding, however, the amount of any Investments made pursuant to clause (b) of the
definition of “Investment” that were not expended for Rate Base Assets during such nine month
period) over (B) the aggregate amount of Debt incurred by the Company (which, with respect to any
Debt incurred under any permitted credit facility of a revolving nature, shall be calculated on a
net basis after taking into account any borrowings, prepayments, repayments, reborrowings or other
extensions of credit made by or in favor of the Company thereunder), in each case, during such
preceding nine month period, need not be applied to such redemption or prepayment, as the case may
be, or (y) during the nine month period following the date of such Disposition, the Company shall
Invest in Rate Base Assets, in which case an amount of such Net Proceeds so Invested during such
following nine month period need not be applied to such redemption or prepayment, as the case may
be; provided, however, that in the event that any such amounts referred to in this clause (y)
Invested pursuant to clause (b) of the definition of “Investment” are not expended for Rate Base
Assets within a period of six months from the end of such following nine month period, any such
amounts not so expended shall be used for the mandatory redemption of the Notes, and/or the
redemption or prepayment of other Senior Secured Debt in accordance with its terms, on a date not
later than the last day of such six month period. Any redemption of the Notes pursuant to this
Section 2.03 shall be made (i) at a redemption price equal to the principal amount of the Notes
being redeemed and shall be accompanied by payment of accrued and unpaid interest on the principal
amount of the Notes so redeemed to the redemption date and a Make-Whole Amount and (ii) in
accordance with the procedures for optional redemption set forth in Section 2.04(b) below.
Notwithstanding anything to the contrary in this Section 2.03, any amounts utilized pursuant to
clauses (x) or (y) above to reduce the amount of Net Proceeds required to be applied to redemption
of the Notes and/or redemption or prepayment of other Senior Secured Debt in accordance with its
terms may be utilized no more than once with respect to the Net Proceeds of any one or more
Dispositions occurring in any consecutive twelve month period.

Section 2.04. Optional Redemption.

          (a) Pursuant to Section 501(b) of the Mortgage Indenture, the Notes may be redeemed at the
option of Company, in whole or in part, at any time or from time to time at a redemption price
equal to the principal amount of such Notes plus the Make-Whole Amount plus accrued and unpaid
interest thereon to the redemption date; provided, however, that if the Notes

15

 

are redeemed in part, the Notes shall not be redeemed in an amount less than $5,000,000 of the aggregate principal amount
of the Notes then Outstanding.

          (b) Notwithstanding anything to the contrary in Article Five of the Mortgage Indenture, the
redemption of the Notes shall take place in accordance with the procedures and requirements set
forth in this Section 2.04(b), without prejudice to the requirements of Section 502 (which shall
for purposes of this Fifth Supplemental Indenture also be applicable to a redemption under Section
2.03) and Sections 505 through 507 of the Mortgage Indenture. The Company (or the Trustee, if so
requested pursuant to Section 504 of the Mortgage Indenture) shall give each Noteholder written
notice of each optional redemption under this Section 2.04, or a mandatory redemption under Section
2.03, as the case may be, not less than 30 days and not
more than 60 days prior to the date fixed for such redemption. Each such notice shall specify
such date, the aggregate principal amount of the Notes to be redeemed on such date, the principal
amount of each Note held by such Noteholder to be redeemed (determined in accordance with Section
2.04(c)) and the interest to be paid on the redemption date with respect to such principal amount
being redeemed, and shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such redemption (calculated as if the date of
such notice were the date of the redemption), setting forth the details of such computation. Two
Business Days prior to such redemption, the Company shall deliver to each Noteholder and the
Trustee a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole
Amount as of the specified redemption date. The Trustee shall have no responsibility for such
calculation.

          (c) Notwithstanding anything to the contrary in Article Five of the Mortgage Indenture, in the
case of each partial redemption of the Notes pursuant to Section 2.04(b), the principal amount of
the Notes to be redeemed shall be allocated by the Trustee among all of the Notes at the time
Outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts
thereof not theretofor called for redemption.

Section 2.05. Purchase of Notes.

          Except as may be agreed to by a Noteholder or Noteholders in connection with an offer made to
all Noteholders on the same terms and conditions, the Company shall not and shall not permit any
Affiliate to purchase, redeem or otherwise acquire, directly or indirectly, any of the Outstanding
Notes except upon the payment or redemption of the Notes in accordance with the terms of the
Indenture. The Company will promptly cause the Trustee to cancel all Notes acquired by it or any
Affiliate pursuant to any payment, redemption or purchase of Notes pursuant to any provision of the
Indenture and no Notes may be issued in substitution or exchange for any such Notes.

Section 2.06. Payment upon Event of Default.

          Upon any Notes becoming due and payable under Section 802 of the Indenture, whether
automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal
amount of such Notes, plus (x) all accrued and unpaid interest thereon (including, without
limitation, interest accrued thereon at the applicable rate for overdue payments) and (y) the
Make-Whole Amount determined in respect of such principal amount (to the full extent

16

 

permitted by applicable Law), shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived. The Company
acknowledges that each holder of a Note has the right to maintain its investment in the Notes free
from repayment by the Company (except as herein specifically provided for) and that the provision
for payment of a Make-Whole Amount by the Company in the event that the Notes have become due and
payable under Section 802 of the Indenture, whether automatically or by declaration, as a result of
an Event of Default, is intended to provide compensation for the deprivation of such right under
such circumstances.

Section 2.07. Transfers.

          In registering the transfer of any Note in accordance with Section 305 of the Mortgage
Indenture, the Security Registrar and the Trustee shall have no responsibility to monitor
securities law compliance in connection with any such transfer.

ARTICLE THREE

ADDITIONAL COVENANTS

Section 3.01. Affirmative Covenants of the Company.

          For purposes of the Notes, pursuant to Section 301(20) of the Mortgage Indenture, Article Six
of the Mortgage Indenture is hereby supplemented by (i) deeming each reference to the phrase
“Material Adverse Effect” in Article Six of the Mortgage Indenture to be a reference to the phrase
“Material Adverse Effect” as defined in this Fifth Supplemental Indenture and (ii) incorporating
therein the following additional affirmative covenants which the Company shall observe solely for
the benefit of the Noteholders for so long as any Note is Outstanding:

          (a) Maintenance and Operation of Properties. The Company shall maintain and preserve,
develop, and operate in substantial conformity with all Transmission Documents, applicable Law,
Good Utility Practices, and all material Governmental Approvals, all elements of the Transmission
System which are used or necessary in the conduct of its businesses in good working order and
condition, ordinary wear and tear excepted, except where the failure to so maintain and preserve,
develop and operate the Transmission System would not reasonably be expected to have a Material
Adverse Effect.

          (b) Maintenance of Insurance. At any time and from time to time, the Company shall
provide or cause to be provided, for itself and its assets (including the Transmission System and
related equipment), insurance with Reputable Insurers (or self-insurance, if adequate reserves are
maintained with respect thereto) in amounts and within the limits and coverages (including
deductibles and co-insurance) customarily obtained for comparable businesses under similar
circumstances.

          (c) Use of Proceeds. The Company shall apply the net proceeds from the issuance and
sale of the Notes to (i) refinance existing indebtedness, partially fund capital expenditures and
for general corporate purposes, and (ii) pay reasonable fees and expenses associated with the sale
of the Notes.

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          (d) Compliance with Laws and Regulations. The Company shall comply with all Laws
(including Environmental Laws) to which its Property or assets may be subject, except where failure
to comply would not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect. In addition, the Company shall immediately pay or cause to be paid when
due all costs and expenses incurred in such compliance, except to the extent that the same is being
contested in good faith by the Company through appropriate means under circumstances where none of
the Mortgaged Property or the Liens thereon will be endangered.

          (e) Permits; Approvals. The Company shall obtain in a timely manner and maintain all
Governmental Approvals which are necessary or desirable for the ownership or operation of its
Property or the conduct of its business as so conducted, except where failure to obtain or maintain
such Governmental Approvals would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

          (f) Real Estate Filings. To the extent that any filing required to perfect any
security interest in real property or fixtures constituting Mortgaged Property is not made on or
prior to the Closing Date, the Company shall undertake to present all such documents for filing
with the appropriate registers of deeds as soon as practicable after the Closing Date, but in no
event shall any such presentation for filing take place more than five (5) Business Days after the
Closing Date; provided that the Company shall confirm by an Officer’s Certificate delivered to the
Trustee within six (6) weeks after the Closing Date that each such document has been recorded with
the applicable registers of deeds and the security interests created or purported to be created in
real property or fixtures by such documents have been fully perfected by recording in the land
records, except for documents to be recorded in the registers of deeds in the Counties of Oakland,
Kent and Genesee in the State of Michigan, in which case the Company shall confirm by an Officer’s
Certificate delivered to the Trustee no more than three (3) months after the Closing Date with
respect to the Counties of Kent and Genesee, and no more than five (5) months after the Closing
Date with respect to the County of Oakland, that such documents have been so recorded.

          (g) Compliance with ERISA. With respect to each Plan, the Company shall comply with
ERISA and the Code, except where such failure would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

          (h) Delivery of Opinions of Counsel. The Company shall deliver, or cause to be
delivered, to the Trustee the opinions of counsel required pursuant to Section 4.4(a) of the Note
Agreement.

Section 3.02. Negative Covenants of the Company.

          For purposes of the Notes, pursuant to Section 301(20) of the Mortgage Indenture, Article Six
of the Mortgage Indenture is hereby supplemented by incorporating therein the following negative
covenants which the Company shall observe solely for the benefit of the Noteholders for so long as
any Note is Outstanding:

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          (a) Restrictions on the Establishment of Subsidiaries. The Company shall not create,
acquire or suffer to exist, directly or indirectly, any Subsidiaries or acquire or invest in any
other Capital Stock in any Person.

          (b) Limitations on Asset Sales. The Company shall not Dispose of all or any
substantial part of its assets during any fiscal year, other than:

          (i) Subject to compliance with Section 610 of the Mortgage Indenture, Dispositions in
the ordinary course of business of obsolete or worn out Property and real estate interests
not needed for the Company for its Transmission System or for the conduct of its business;

          (ii) Dispositions of assets that would be permitted under Article Eleven of the
Mortgage Indenture; or

          (iii) Subject to compliance with Section 610 of the Mortgage Indenture, any other
Disposition of assets; provided, that in the event the Net Proceeds of all such Dispositions
during any consecutive 12-month period are in excess of $10,000,000, in the aggregate, such
Net Proceeds shall be applied in accordance with the terms and conditions of Section 2.03.

          (c) [Reserved].

          (d) Limitation on Debt. The Company shall not incur any additional Debt (other than
Subordinated Debt) unless no Default or Event of Default has occurred and is continuing, or would
exist immediately after giving effect to, the incurrence of such Debt; provided that (A) if a
Default or an Event of Default shall have occurred and is continuing at the time of the incurrence
of any Subordinated Debt, the net proceeds from the incurrence of such Subordinated Debt shall be
applied to cure such Default or Event of Default to the extent such Default or Event of Default,
after giving pro forma effect to the incurrence of such Subordinated Debt, can be so cured, and (B)
if a Payment Event of Default shall have occurred and be continuing, no such Subordinated Debt
shall be incurred. Any such additional Debt permitted by the preceding sentence (other than (i)
any bank or other credit facilities (whether of a revolving nature or not) between the Company and
any lenders under which facilities the borrowings outstanding, the face amount of any letters of
credit outstanding and any unfunded commitments to extend credit exceed, in the aggregate,
$70,000,000 or (ii) any Subordinated Debt, each of which in case of clause (i) and (ii) shall be
unsecured) may be secured on a pari passu basis with the Notes pursuant to the terms and conditions
of the Mortgage Indenture (any such secured Debt, “Permitted Additional Senior Secured
Debt”). Further, the Company shall not, at any time, enter into (i) any Hedging Agreement for
speculative purposes or (ii) any Hedging Agreement if the obligations of the Company relating
thereto would not be reflected in the calculation of the Company’s revenue requirement to be
collected under the OATT.

          (e) Limitations on Liens. The Company shall not create, incur, assume or suffer to
exist any Lien upon any of the Company’s Property, whether now owned or hereafter acquired, other
than Permitted Liens.

19

 

          (f) Restrictions on Investments. Unless permitted by Article Eleven of the Mortgage
Indenture, the Company shall not make any advance, loan, extension of credit (by way of guarantee
or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures
or other debt securities of, or any assets constituting a business unit of, or make any other
investment in, any Person, except:

          (i) extensions of trade credit in the ordinary course of business;

          (ii) investments in Cash Equivalents;

          (iii) loans and advances to employees of the Company in the ordinary course of business
(including for travel, entertainment and relocation expenses) in an aggregate amount not to
exceed $300,000 at any one time outstanding;

          (iv) loans to Holdco to pay corporate overhead and administrative expenses incurred by
Holdco in the ordinary course of business not to exceed $2,000,000 at any one time
outstanding; and

          (v) investments in Rate Base Assets.

          (g) Limitation on Lines of Business. As of the Closing Date, the Company is in the
business of owning transmission facilities and providing transmission service over such facilities.
From the Closing Date onward, the Company shall not engage in any business, if as a result, the
general nature of the business engaged in by the Company taken as a whole would be substantially
changed from the general nature of the business the Company is engaged in on the Closing Date.

          (h) Limitation on Transactions with Affiliates. The Company shall not enter into any
Material transaction with any Affiliate, except (i) in the ordinary course of business and (ii) on
terms and conditions (A) no less favorable than would be obtainable in a comparable arms-length
transaction negotiated in good faith with a Person that is not an Affiliate and (B) consistent with
applicable FERC policy regarding Affiliate transactions.

          (i) Limitation on Sale-Lease and Lease-Lease Back Transactions. The Company shall not
enter into any sale-leaseback or lease-leaseback transaction involving any of its Properties
whether now owned or hereafter acquired, whereby the Company sells, otherwise transfers or leases
such Properties and then or thereafter leases or subleases such Properties or any part thereof or
any other Properties which the Company intends to use for substantially the same purpose or
purposes as the Properties sold, otherwise transferred or leased.

          (j) Amendments to Exhibit B Hereto. The Company shall not make any amendments or
changes to the subordination terms and conditions set forth in Exhibit B hereto that adversely
affect the Noteholders without the prior consent of the Noteholders of all the Outstanding Notes.

20

 

ARTICLE FOUR

ADDITIONAL EVENTS OF DEFAULT

Section 4.01. Events of Default.

          For purposes of the Notes, pursuant to Section 301(21) of the Mortgage Indenture, Section 801
of the Mortgage Indenture shall be supplemented to include as “Events of Default” thereunder the
occurrence of any of the following events (each such event, together with those “Events of Default”
in Section 801 of the Mortgage Indenture, an “Event of Default”):

          (a) Material Covenants. The Company shall fail to perform or observe any covenant set
forth in Section 3.02 or its obligation to provide notice to the Noteholders under Section 7.1(c)
of the Note Agreement and such failure is not cured within ten (10) days;

          (b) Other Covenants. The Company shall fail to perform or observe any of its
obligations or covenants (other than the covenants described in Section 4.01(a) or in Section
801(a), 801(b) or 801(e) of the Mortgage Indenture) contained in any of the Financing
Agreements, including Section 7 of the Note Agreement (or in any modification or supplement
thereto), and such failure is not cured within 30 days after the earlier to occur of (i) a
Responsible Officer of the Company obtaining actual knowledge of such failure and (ii) the Company
receiving notice of such failure from the Trustee or any Noteholder in accordance with the terms of
the Mortgage Indenture or the Note Agreement;

          (c) Representations. Any representation, warranty or certification by the Company in
any of the Financing Agreements or in any certificate furnished to the Trustee or any Noteholder
pursuant to the provisions of this Fifth Supplemental Indenture or any other Financing Agreement
shall prove to have been false in any Material respect as of the time made or furnished, as the
case may be;

          (d) Debt.

          (i) The Company shall be in default in the payment of any principal, premium, including
any make-whole amount, if any, or interest on any Debt (other than Subordinated Debt) in the
aggregate principal amount of $10,000,000 or more beyond the expiration of any applicable
grace or cure period relating thereto;

          (ii) The Company shall be in default in the performance or compliance with any term
(other than those referred to in Section 4.01(d)(i)) of any agreement or instrument
evidencing any Debt (other than Subordinated Debt) in the aggregate principal amount of
$10,000,000 or more or any other document relating thereto or any condition exists and, as a
consequence, such Debt has become or has been declared (or the holder or beneficiary of such
Debt or a trustee or agent on behalf of such holder or beneficiary is entitled to declare
such Debt to be) due and payable before its stated maturity or before its regularly
scheduled dates of payment; or

          (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 Debt to convert

21

 

such Debt into equity interests), other than as provided in Section 2.03 or Section 2.04 or Section 501(a)
or (b) of the Mortgage Indenture, (x) the Company shall have become obligated to purchase or
repay any Debt before its regularly scheduled maturity date in the aggregate principal
amount of $10,000,000 or more or (y) one or more Persons have the right to require such Debt
to be purchased or repaid;

          (e) Judgments. Any judgment or judgments for the payment of money in excess of
$10,000,000 (or its equivalent in any other currency) in the aggregate by the Company, which is, or
are, not covered by insurance, shall be rendered by one or more courts, administrative tribunals or
other bodies having jurisdiction over the Company and the same shall not be discharged (or
provision shall not be made for such discharge), bonded or a stay of execution thereof shall not be
procured, within 60 days from the date of entry thereof and the Company shall not, within said
period of 60 days, or such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such appeal;

          (f) Transmission System. The Company shall directly or indirectly terminate
transmission service over all or a significant portion of the Transmission System or cease to
pursue the operation of the Transmission System for a period in excess of 30 days;

          (g) Transmission Documents. Any Material Transmission Document shall have been
terminated prior to its stated termination date and such termination has, or would reasonably be
expected to have, a Material Adverse Effect;

          (h) Security Interests. Subject to Section 611(2) of the Mortgage Indenture and
Section 3.01(f), the Company shall fail to perfect and maintain a valid and perfected first
priority Lien in any part of the Mortgaged Property, to the extent such perfection can be
accomplished by filing;

          (i) Repudiation. Any provision (i) of any Financing Agreement shall be repudiated by
the Company or (ii) of any Financing Agreement or the Consumers Consent for any reason other than
the express terms thereof cease to be enforceable and such repudiation or unenforceability shall
not be remedied within 30 days;

          (j) Total Loss. There shall occur a Total Loss;

          (k) ERISA. Any ERISA Event shall have occurred and the liability of the Company and
the ERISA Affiliates related to such ERISA Event, when aggregated with all other ERISA Events
(determined as of the date of occurrence of such ERISA Event), has resulted in or would reasonably
be expected to result in a Material Adverse Effect; or

          (l) Holdco Ownership. Holdco either directly or indirectly shall cease to own 100% of
the Capital Stock of the Company.

Section 4.02. Acceleration of Maturity.

          Pursuant to Section 802 of the Mortgage Indenture, in addition to the provisions set forth in
Section 802 of the Mortgage Indenture, if an Event of Default arising from the failure

22

 

to pay principal of, or interest on, or any Make-Whole Amount relating to the Notes shall have occurred
and be continuing, then in every such case each Holder of Notes may declare the principal amount of
the Notes held by it to be due and payable immediately, by a notice in writing to the Company and
to the Trustee, and upon receipt by the Company or the Trustee of such notice of such declaration,
such principal amount, together with Make-Whole Amount and accrued interest, if any, thereon
(including, without limitation, interest accrued thereon at the applicable rate for overdue
payments), shall become immediately due and payable (subject to Section 821 of the Indenture).

ARTICLE FIVE

MISCELLANEOUS PROVISIONS

Section 5.01. Execution of Fifth Supplemental Indenture.

          Except as expressly amended and supplemented hereby, the Mortgage Indenture shall continue in
full force and effect in accordance with the provisions thereof and the Mortgage Indenture is in
all respects hereby ratified and confirmed. This Fifth Supplemental Indenture and all of its
provisions shall be deemed a part of the Mortgage Indenture in the manner and to the extent herein
and therein provided. The Notes executed, authenticated and delivered under this Fifth
Supplemental Indenture constitute a series of Securities and shall not be considered to be a part
of a series of securities executed, authenticated and delivered under any other supplemental
indenture entered into pursuant to the Mortgage Indenture.

Section 5.02. Effect of Headings.

          The Article and Section headings herein are for convenience only and shall not affect the
construction hereof.

Section 5.03. Successors and Assigns.

          All covenants and agreements in this Fifth Supplemental Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.

Section 5.04. Severability Clause.

          In case any provision in this Fifth Supplemental Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.

Section 5.05. Benefit of Fifth Supplemental Indenture.

          Except as otherwise provided in the Mortgage Indenture, nothing in this Fifth Supplemental
Indenture or in the Notes, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder and the Noteholders, any benefit or any legal or equitable
right, remedy or claim under this Fifth Supplemental Indenture.

23

 

Section 5.06. Execution and Counterparts.

          This Fifth Supplemental Indenture may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts shall together constitute but one and
the same instrument. Any such counterpart, as recorded or filed in any jurisdiction, may omit such
portions of Exhibit A hereto as shall not describe or refer to properties located in such
jurisdiction.

Section 5.07. Conflict with Mortgage Indenture.

          If any provision hereof limits, qualifies or conflicts with another provision of the Mortgage
Indenture, such provision of this Fifth Supplemental Indenture shall control, insofar as the rights
between the Company and the Noteholders are concerned.

Section 5.08. Recitals.

          The recitals contained herein shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for their correctness and makes no representations as to the validity or
sufficiency of this Fifth Supplemental Indenture.

Section 5.09. Governing Law.

          This Fifth Supplemental Indenture shall be governed by and construed in accordance with the
law of the State of New York (including, without limitation, Section 5-1401 of the New York General
Obligations Law or any successor to such statute), except that (i) to the extent that the Trust
Indenture Act shall be applicable, this Fifth Supplemental Indenture shall be governed by and
construed in accordance with the Trust Indenture Act and (ii) if the law of any jurisdiction
wherein any portion of the Mortgaged Property that is Real Property is located shall govern the
creation of a mortgage lien on and security interest in, or perfection, priority or enforcement of
the Lien of the Indenture or exercise of remedies with respect to, such portion of the Mortgaged
Property, this Fifth Supplemental Indenture shall be governed by and construed in accordance with
the law of such jurisdiction to the extent mandatory.

24

 

          IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be
duly executed as of the day and year first above written.

	 	 	 

	 

	 	MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC, a Michigan limited liability

company
	 
	 	 
	 

	 	By: Michigan Transco Holdings, L.P., sole member
	 
	 	 
	 

	 	     By: METC GP Holdings II, LLC, General Partner
	 
	 	 
	 

	 	          By: METC GP Holdings, Inc.,
sole member and sole manager
	 
	 	 
	 

	 	               By: ITC Holdings Corp., its sole owner

	 	 	 	 	 
	 	 	 
	 	By:  	                              /s/ Cameron M. Bready
 	 
	 	 	Cameron M. Bready, Senior Vice President, Treasurer and Chief Financial Officer 	 
	 

Drafted by:

Elizabeth B. Hardin

Milbank, Tweed, Hadley & McCloy LLP

1 Chase Manhattan Plaza

New York, NY 10005

After Recorded, Return to:

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

2 N. LaSalle, Suite 1020

Chicago, Illinois 60602

Attention: Global Corporate Trust

 

 

	 	 	 	 	 	 	 

	ACKNOWLEDGMENT
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	STATE OF MICHIGAN

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss.
	COUNTY OF OAKLAND

	 	 	)	 	 	 

          On the 20th day of April, 2010, before me, the undersigned notary public,
personally came Cameron M. Bready, to me known to be Senior Vice President, Treasurer and Chief
Financial Officer of ITC Holdings Corp., a corporation organized under the laws of the State of
Michigan, the sole owner of METC GP Holdings, Inc., a corporation organized under the laws of the
State of Michigan, which in turn is the sole member and sole manager of METC GP Holdings II, LLC, a
limited liability company organized under the laws of the State of Michigan, which in turn is the
General Partner of Michigan Transco Holdings, L.P., a limited partnership organized under the laws
of the State of Michigan, which in turn is the sole member of Michigan Electric Transmission
Company, LLC, a limited liability company organized under the laws of the State of Michigan, and
acknowledged that he executed the foregoing instrument in his authorized capacity, and that by his
signature on the instrument he, or the entity upon behalf of which he acted, executed the
instrument.

	 	 	 	 	 
	 	 	 
	 	By:  	                    /s/ Denise M. Juras
 	 
	 	 	Denise M. Juras, Notary Public	 
	 	 	Oakland County, Michigan 	 
	 	 	My Commission Expires October 29, 2014 Acting in the County of Oakland 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee

 	 
	 	By:  	/s/ Mary Callahan
 	 
	 	 	Name:  	Mary Callahan 	 
	 	 	Title:  	Vice President 	 

 

 

	 	 	 	 	 	 	 

	ACKNOWLEDGMENT
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	STATE OF ILLINOIS

	 	 	)	 	 	 
	 

	 	 	 	 	 	) ss.
	COUNTY OF COOK

	 	 	)	 	 	 

          On the 20th day of April, 2010, before me, the undersigned notary public,
personally came Mary Callahan, Vice President of The Bank of New York Mellon Trust Company, N.A., a
national banking association organized under the laws of the United States, and acknowledged to me
that she executed the foregoing instrument in her authorized capacity, and that by her signature on
the instrument she, or the entity upon behalf of which she acted, executed the instrument.

	 	 	 	 	 
	 	 	 
	 	By:  	                                                   /s/ T. Mosterd
 	 
	 	 	T. Mosterd
	 
	 	 	Notary Public State of Illinois 	 
	 	 	Qualified in Cook County 
My Commission Expires January 22, 2013
	 
	 

 

 

Schedule 1

          The recording information for the Original Mortgage Indenture, the First Supplemental
Indenture, the Second Supplemental Indenture and the Fourth Supplemental Indenture, each recorded
in the Offices of the Register of Deeds in the Michigan counties as indicated, is as follows:

	 	 	 	 	 	 	 	 	 
	 	 	 	 	First	 	Second	 	Fourth
	 	 	Original Mortgage	 	Supplemental	 	Supplemental	 	Supplemental
	County	 	Indenture	 	Indenture	 	Indenture	 	Indenture
	Alcona

	 	Instrument No.

200300006636; 

L395, P141
	 	Instrument No.

200300006637;

L395, P270
	 	Instrument No.

200300006638; 

L395, P336
	 	Instrument No.

200800003865;

L457, P1036
	 
	 	 	 	 	 	 	 	 
	Allegan

	 	L2609, P654
	 	L2610, P1
	 	L2610, P194
	 	Instrument No. 

2008023175 

L3281, P602
	 
	 	 	 	 	 	 	 	 
	Alpena

	 	L431, P340
	 	L431, P341
	 	L431, P342
	 	Instrument No. 

03078018 

L468, P684
	 
	 	 	 	 	 	 	 	 
	Antrim

	 	L00697, P0280
	 	L00697, P0404
	 	L00697, P0465
	 	Instrument No.

200800010254 

L786, P2867
	 
	 	 	 	 	 	 	 	 
	Arenac

	 	L423, P301
	 	L423, P444
	 	L423, P524
	 	L541, P212
	 
	 	 	 	 	 	 	 	 
	Barry

	 	Instrument No.

1120018
	 	Instrument No. 

1120019
	 	Instrument No.

1120020
	 	Instrument No.

20081215-

0011782
	 
	 	 	 	 	 	 	 	 
	Bay

	 	L2156, P585
	 	L2157, P249
	 	L2157, P004
	 	L2647, P508
	 
	 	 	 	 	 	 	 	 
	Branch

	 	L01000, P0600
	 	L01000, P0737
	 	L01000, P0811
	 	Instrument No.

2008-08600
	 
	 	 	 	 	 	 	 	 
	Calhoun

	 	L2765, P587
	 	L2765, P829
	 	L2766, P1
	 	L3421, P892
	 
	 	 	 	 	 	 	 	 
	Charlevoix

	 	L591, P042
	 	L591, P156
	 	L591, P207
	 	L0869, P0414
	 
	 	 	 	 	 	 	 	 
	Cheboygan

	 	L925, P483
	 	L925, P637
	 	L925, P727
	 	L1112, P918
	 
	 	 	 	 	 	 	 	 
	Clare

	 	L890, P333
	 	L890, P443
	 	L890, P490
	 	Instrument No.

200800009719 

L1098, P156
	 
	 	 	 	 	 	 	 	 
	Clinton

	 	Instrument No.

5048529
	 	Instrument No. 

5048530
	 	Instrument No.

5048531
	 	Instrument No.

5138207

I-1

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	First	 	Second	 	Fourth
	 	 	Original Mortgage	 	Supplemental	 	Supplemental	 	Supplemental
	County	 	Indenture	 	Indenture	 	Indenture	 	Indenture
	Crawford

	 	L663, P4
	 	L663, P115
	 	L663, P163
	 	L694, P129
	 
	 	 	 	 	 	 	 	 
	Eaton

	 	L1775, P271
	 	L1775, P449
	 	L1775, P564
	 	L2207, P0903
	 
	 	 	 	 	 	 	 	 
	Emmet

	 	L1032, P537
	 	L1032, P669
	 	L1032, P738
	 	Instrument No.

5060620 

B1108, P168
	 
	 	 	 	 	 	 	 	 
	Genesee

	 	Instrument No. 

200312160161714
	 	Instrument No.

200312160161715
	 	Instrument No.

200312160161716
	 	Instrument No. 

200812160082181
	 
	 	 	 	 	 	 	 	 
	Gladwin

	 	L709, P27
	 	L709, P151
	 	L709, P212
	 	L883, P873
	 
	 	 	 	 	 	 	 	 
	Grand Traverse

	 	L2049, P508
	 	L2049, P652
	 	L2049, P733
	 	Instrument No.

2008R-20555
	 
	 	 	 	 	 	 	 	 
	Gratiot

	 	L740, P595
	 	L740, P752
	 	L740, P846
	 	L858, P1452
	 
	 	 	 	 	 	 	 	 
	Hillsdale

	 	L1125, P517
	 	L1125, P643
	 	L1125, P706
	 	L1373, P218
	 
	 	 	 	 	 	 	 	 
	Ingham

	 	L3084, P73
	 	L3084, P74
	 	L3084, P75
	 	Instrument No.

2008-047041 

B3327, P1040
	 
	 	 	 	 	 	 	 	 
	Ionia

	 	L577, P7152
	 	L577, P7299
	 	L577, P7383
	 	L610, P4348
	 
	 	 	 	 	 	 	 	 
	Iosco

	 	L781, P793
	 	L782, P1
	 	L782, P79
	 	L964, P582
	 
	 	 	 	 	 	 	 	 
	Isabella

	 	L1216, P4
	 	L1216, P122
	 	L1216, P177
	 	L1458, P591
	 
	 	 	 	 	 	 	 	 
	Jackson

	 	L1767, P119
	 	L1767, P117
	 	L1767, P118
	 	Instrument No.

2524184 

L1911, P696
	 
	 	 	 	 	 	 	 	 
	Kalamazoo

	 	Instrument No.

2003-087140
	 	Instrument No.

2003-087142
	 	Instrument No.

2003-087141
	 	Instrument No.

2008-039292
	 
	 	 	 	 	 	 	 	 
	Kalkaska

	 	Instrument No.

3053445
	 	Instrument No. 

3053446
	 	Instrument No. 

3053447
	 	Instrument No. 

3088499
	 
	 	 	 	 	 	 	 	 
	Kent

	 	Instrument No. 

20040105- 

0000653
	 	Instrument No. 

20040105- 

0000654
	 	Instrument No. 

20040105- 

0000655
	 	Instrument No.

20081216- 

0106138
	 
	 	 	 	 	 	 	 	 
	Lake

	 	L281, P477
	 	L281, P598
	 	L281, P656
	 	L330, P319

I-2

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	First	 	Second	 	Fourth
	 	 	Original Mortgage	 	Supplemental	 	Supplemental	 	Supplemental
	County	 	Indenture	 	Indenture	 	Indenture	 	Indenture
	Leelanau

	 	L1045, P258
	 	L1045, P258
	 	L1045, P258
	 	L1045, P258
	 
	 	 	 	 	 	 	 	 
	Lenawee

	 	L2258, P769
	 	L2258, P770
	 	L2258, P771
	 	L2375, P632
	 
	 	 	 	 	 	 	 	 
	Livingston

	 	L4282, P0464
	 	L4282, P0602
	 	L4282, P0677
	 	Instrument No.

2008R-033965
	 
	 	 	 	 	 	 	 	 
	Manistee

	 	L890, P415
	 	L890, P578
	 	L890, P678
	 	Instrument No. 

2008R007239
	 
	 	 	 	 	 	 	 	 
	Mason

	 	L555, P2265
	 	L555, P2419
	 	L555, P2510
	 	Instrument No. 

2008R06641
	 
	 	 	 	 	 	 	 	 
	Mecosta

	 	L705, P2593
	 	L705, P2707
	 	L705, P2758
	 	Instrument No.

200800009891 

L0782, P2850
	 
	 	 	 	 	 	 	 	 
	Midland

	 	L1206, P4
	 	L1206, P160
	 	L1206, P253
	 	L1451, P208
	 
	 	 	 	 	 	 	 	 
	Missaukee

	 	Instrument No.

2003-06377
	 	Instrument No.

2003-06378
	 	Instrument No.

2003-06379
	 	Instrument No. 

2008-04378
	 
	 	 	 	 	 	 	 	 
	Monroe

	 	L2647, P657
	 	L2647, P833
	 	L2647, P935
	 	Instrument No.

2008R22325
	 
	 	 	 	 	 	 	 	 
	Montcalm

	 	L1149, P293
	 	L1149, P442
	 	L1149, P528
	 	L1426, P510
	 
	 	 	 	 	 	 	 	 
	Montmorency

	 	L244, P679
	 	L244, P804
	 	L244, P866
	 	Instrument No.

200800037674

L305, P573
	 
	 	 	 	 	 	 	 	 
	Muskegon

	 	L3581, P921
	 	L3581, P922
	 	L3581, P923
	 	L3797, P757
	 
	 	 	 	 	 	 	 	 
	Newaygo

	 	L404, P5495
	 	L404, P5687
	 	L404, P5816
	 	L433, P3422
	 
	 	 	 	 	 	 	 	 
	Oakland

	 	L31677, P1
	 	L31677, P128
	 	L31677, P196
	 	Instrument No.

215217 

L40774, P814
	 
	 	 	 	 	 	 	 	 
	Oceana

	 	GR 2004/822
	 	GR 2004/976
	 	GR 2004/1067
	 	GR2008/24361
	 
	 	 	 	 	 	 	 	 
	Ogemaw

	 	Instrument No.

3044799
	 	Instrument No.

3044800
	 	Instrument No. 

3044801
	 	Instrument No. 

3083352
	 
	 	 	 	 	 	 	 	 
	Oscoda

	 	L204, P332
	 	L204, P479
	 	L204, P563
	 	L208, P03034
	 
	 	 	 	 	 	 	 	 
	Otsego

	 	L0976, P078
	 	L0976, P222
	 	L0976, P303
	 	L1187, P72
	 
	 	 	 	 	 	 	 	 
	Ottawa

	 	L4372, P557
	 	L4373, P001
	 	L4373, P221
	 	Instrument No.

0044941

I-3

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	First	 	Second	 	Fourth
	 	 	Original Mortgage	 	Supplemental	 	Supplemental	 	Supplemental
	County	 	Indenture	 	Indenture	 	Indenture	 	Indenture
	 

	 	 	 	 	 	 	 	L5754, P426
	 
	 	 	 	 	 	 	 	 
	Presque Isle

	 	L383, P100
	 	L383, P232
	 	L383, P301
	 	Instrument No. 

200800008708

L469, P933
	 
	 	 	 	 	 	 	 	 
	Roscommon

	 	L997, P1285
	 	L997, P1404
	 	L997, P1460
	 	Instrument No. 

200800008515 

L1079, P21
	 
	 	 	 	 	 	 	 	 
	Saginaw

	 	L2269, P1263
	 	L2269, P1264
	 	L2269, P1265
	 	Instrument No.

2008035230 

L2516, P2158
	 
	 	 	 	 	 	 	 	 
	St. Joseph

	 	L1205, P86
	 	L1205, P196
	 	L1205, P243
	 	L1510, P1
	 
	 	 	 	 	 	 	 	 
	Shiawassee

	 	L1052, P721
	 	L1052, P722
	 	L1052, P723
	 	L1130, P0333
	 
	 	 	 	 	 	 	 	 
	Tuscola

	 	Instrument No.

200400846443, 

L980, P619
	 	Instrument No.

200400846444, 

L980, P772
	 	Instrument No.

200400846445,

L980, P862
	 	Instrument No. 

200800914506 

L1163, P891
	 
	 	 	 	 	 	 	 	 
	Van Buren

	 	L1403, P256
	 	L1403, P257
	 	L1403, P258
	 	Instrument No.

LR-3191975

L1511, P5
	 
	 	 	 	 	 	 	 	 
	Washtenaw

	 	L4352, P238
	 	L4352, P239
	 	L4352, P240
	 	Instrument No. 

5876781 

L4710, P182
	 
	 	 	 	 	 	 	 	 
	Wexford

	 	L530, P704
	 	L530, P834
	 	L531, P001
	 	Instrument No.

200800007690 

L616, P1393

I-4

 

Exhibit A

DESCRIPTION OF PROPERTIES

          The following properties of the Company, owned as of the date hereof, have been acquired by
the Company subsequent to the date of the Fourth Supplemental Indenture:

See Attached.

 

 

Exhibit B

SUBORDINATION TERMS

The unsecured permitted indebtedness evidenced by this instrument is subordinated and subject in
right of payment to the prior payment in full of all Senior Debt Obligations (as hereinafter
defined) of Michigan Electric Transmission Company, LLC, a limited liability company formed under
the laws of the State of Michigan (the “Company”). Each holder of this instrument, by its
acceptance hereof, agrees to and shall be bound by all the provisions hereof.

All capitalized terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Fifth Supplemental Indenture, dated as of April 20, 2010 (as in effect on
the date hereof, the “Supplemental Indenture”), between the Company and The Bank of New
York Mellon Trust Company, N.A. (as successor to JPMorgan Chase Bank, N.A.), as trustee (the
“Trustee”).

The term “Senior Debt Obligations”, as used herein, shall include all, loans, advances,
debts, liabilities and obligations, howsoever arising (whether or not evidenced by any note or
instrument and whether or not for the payment of money), direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising (collectively, as used herein,
“Obligations”) of the Company now or hereafter existing in respect of Senior Debt (as
defined herein) and any amendments, modifications, deferrals, renewals or extensions of any such
Senior Debt, or of any notes or evidences of indebtedness heretofore or hereafter issued in
evidence of or in exchange for any such Obligation, whether for principal, interest (including
interest payable in respect of any such Obligations subsequent to the commencement of any
proceeding against or with respect to the Company under any chapter of the Bankruptcy Code, 11
U.S.C. § 101 et seq. (the “Bankruptcy Code”), or any provision of corresponding bankruptcy,
insolvency or commercial reorganization legislation of any other jurisdiction, whether or not such
interest is an allowed claim enforceable against the debtor, and whether or not the holder of such
obligation would be otherwise entitled to receive dividends or payments with respect to any such
interest or any such proceeding), premium (including Make-Whole Amount), if any, fees, expenses or
otherwise.

The term “Senior Debt”, as used herein, shall mean (i) all Senior Secured Debt and (ii) all
unsecured Debt of the Company permitted to be incurred by the Company pursuant to the Mortgage
Indenture or the Supplemental Indenture which is not subject to any subordination terms whether or
not similar to those set forth in this instrument.

The term “Subordinated Debt”, as used herein, shall mean all Obligations of the Company
evidenced by this instrument owing to any Person now or hereafter existing hereunder (whether
created directly or acquired by assignment or otherwise), whether for principal, interest
(including, without limitation, interest accruing after the filing of a petition initiating any
bankruptcy proceeding described in the definition of Senior Debt Obligations, whether or not such
interest accrues after the filing of such petition for purposes of the Bankruptcy Code or is an
allowed claim in such proceeding), fees, expenses or otherwise.

 

 

On and after the Closing Date, no payment on account of principal, interest, fees, premium,
expenses or otherwise on this Subordinated Debt shall be made by the Company in cash or otherwise
unless (a) full payment of all amounts then due and payable on all Senior Debt Obligations has been
made, (b) such payment would be permitted by the Indenture and any Senior Debt Document (as defined
below) and (c) immediately after giving effect to such payment, there shall not exist any Default
or Event of Default. Any such payment permitted pursuant to this paragraph is hereinafter referred
to as a “Permitted Payment”. For the purposes of these provisions, no Senior Debt Obligations
shall be deemed to have been paid in full until the obligee of such Senior Debt Obligations shall
have received payment in full in cash.

Upon any payment or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, then and in any such event all principal, premium
and interest and all other amounts due or to become due upon all Senior Debt Obligations shall
first be paid in full before the holders of the Subordinated Debt shall be entitled to retain any
assets so paid or distributed in respect of the Subordinated Debt (whether for principal, premium,
interest or otherwise), and upon any such dissolution or winding up or liquidation or
reorganization, any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the holders of the Subordinated Debt would be
entitled, except as otherwise provided herein, shall be paid pro rata among the holders of Senior
Debt Obligations by the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the holders of the Subordinated
Debt if received by them. So long as any Senior Debt Obligations are outstanding, the holder of
this instrument shall not commence, or join with any creditor other than the Trustee or the Senior
Debt Parties (as hereinafter defined) in commencing, or directly or indirectly causing the Company
to commence, or assist the Company in commencing, any proceeding referred to in the preceding
sentence.

The holder of this instrument hereby irrevocably authorizes and empowers (without imposing any
obligation on) each Person (each such Person a “Senior Debt Party” and collectively, the
“Senior Debt Parties”) that has entered into an agreement, instrument, or other document
evidencing or relating to any Senior Debt Obligation (each such agreement, instrument or other
document, a “Senior Debt Document”) as a lender or creditor and such Senior Debt Party’s
representatives, under the circumstances set forth in the immediately preceding paragraph, to
demand, sue for, collect and receive every such payment or distribution described therein and give
acquittance therefor, to file claims and proofs of claims in any statutory or nonstatutory
proceeding, to vote such Senior Debt Party’s ratable share of the full amount of the Subordinated
Debt evidenced by this instrument in its sole discretion in connection with any resolution,
arrangement, plan of reorganization, compromise, settlement or extension and to take all such other
action (including, without limitation, the right to participate in any composition of creditors and
the right to vote such Senior Debt Party’s ratable share of the full amount of the Subordinated
Debt at creditors’ meetings for the election of trustees, acceptances of plans and otherwise), in
the name of the holder of the Subordinated Debt evidenced by this instrument or otherwise, as such
Senior Debt Party’s representatives may deem necessary or desirable for the enforcement of the
subordination provisions of this instrument. The holder of this instrument shall execute and
deliver to each Senior Debt Party and such holder’s representatives all such

2

 

further instruments confirming the foregoing authorization, and all such powers of attorney, proofs
of claim, assignments of claim and other instruments, and shall take all such other action as may
be reasonably requested by such holder or such holder’s representatives in order to enable such
holder to enforce all claims upon or in respect of such holder’s ratable share of the Subordinated
Debt evidenced by this instrument.

The holder of this instrument shall not, without the prior written consent of the Senior Debt
Parties, have any right to accelerate payment of, or institute any proceeding to enforce, the
Subordinated Debt so long as any Senior Debt Obligations are outstanding, unless and until all
Senior Debt Parties have accelerated payment thereof and commenced proceedings to enforce such
Senior Debt Obligations.

After the payment in full of all amounts due in respect of Senior Debt Obligations, the holder or
holders of the Subordinated Debt shall be subrogated to the rights of the Senior Debt Parties to
receive payments or distributions of cash, property or securities of the Company applicable to
Senior Debt Obligations until the principal of, premium on, interest on and all other amounts due
or to become due with respect to the Subordinated Debt shall be paid in full subject to the terms
and conditions of the Subordinated Debt or of any agreement among the holders of the Subordinated
Debt and other Subordinated Debt of the Company.

If any payment (other than a Permitted Payment) or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, shall be received by the holder of the
Subordinated Debt in such capacity before all Senior Debt Obligations are paid in full, such
payment or distribution will be held in trust for the benefit of, and shall be immediately paid
over pro rata among the Senior Debt Parties, for application to the payment in full of Senior Debt
Obligations, until all Senior Debt Obligations shall have been paid in full.

Nothing contained in this instrument is intended to or shall impair as between the Company, its
creditors (other than the Senior Debt Parties) and the holders of the Subordinated Debt, the
obligations of the Company to pay to the holders of the Subordinated Debt, as and when the same
shall become due and payable in accordance with their terms, or to affect the relative rights of
the holders of the Subordinated Debt and creditors of the Company (other than the Senior Debt
Parties).

The Senior Debt Parties shall not be prejudiced in their rights to enforce the subordination
contained herein in accordance with the terms hereof by any act or failure to act on the part of
the Company.

The holder of this instrument agrees to execute and deliver such further documents and to do such
other acts and things as the Senior Debt Parties may reasonably request in order fully to effect
the purposes of these subordination provisions. Each holder of this instrument by its acceptance
hereof authorizes and directs the trustee or other representative, if any, of the Subordinated Debt
represented by this instrument on its behalf to take such further action as may be necessary to
effectuate the subordination as provided herein and appoints such trustee or other representative,
if any, as its attorney-in-fact for any and all such purposes.

3

 

The subordination effected by these provisions, and the rights of the Senior Debt Parties, shall
not be affected by (i) any amendment of, or addition or supplement to, the Financing Agreements,
any other Senior Debt Document, or any other document evidencing or securing Senior Debt
Obligations, (ii) any exercise or non-exercise of any right, power or remedy under or in respect to
the Financing Agreements, any other Senior Debt Document, or any other document evidencing or
securing Senior Debt Obligations or (iii) any waiver, consent, release, indulgence, extension,
renewal, modification, delay, or other action, inaction or omission, in respect of the Financing
Agreements, any other Senior Debt Document, or any other document evidencing or securing Senior
Debt Obligations; whether or not any holder of any Subordinated Debt shall have had notice or
knowledge of any of the foregoing.

No failure on the part of any Senior Debt Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor all any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies provided by Law.

The holder of this instrument and the Company each hereby waive promptness, diligence, notice of
acceptance and any other notice with respect to any of the Senior Debt Obligations and these terms
of subordination and any requirement that the Trustee or any Senior Debt Party protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right to take any action
against the Company or any other Person or any Mortgaged Property.

These terms of subordination shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Senior Debt Obligations is rescinded or must otherwise be
returned by the Trustee or any Senior Debt Party upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, all as though such payment had not been made.

The provisions of these terms of subordination constitute a continuing agreement and shall (i)
remain in full force and effect until the indefeasible payment in full of the Senior Debt
Obligations and the termination or expiration of all obligations to extend credit under the Senior
Debt Documents, (ii) be binding upon the holder of this instrument, the Company and its successors,
transferees and assignees and (iii) inure to the benefit of, and be enforceable by, the Trustee and
each Senior Debt Party. Without limiting the generality of the foregoing clause (iii), each Senior
Debt Party may assign or otherwise transfer all or any portion of its rights and obligations under
all or any of the Senior Debt Documents to any other Person (to the extent permitted by the Senior
Debt Documents), and such other Person shall thereupon become vested with all the rights in respect
thereof granted to such Senior Debt Party herein or otherwise.

This instrument shall be governed by and construed in accordance with, the laws of the State of New
York.

4

 

Exhibit C

This Note has not been registered pursuant to the Securities Act of 1933, as amended (the
“Securities Act”), or pursuant to the securities laws of any state. Accordingly, this Note
may not be offered, sold or otherwise transferred (1) except in accordance with an applicable
exemption from the registration requirements of the Securities Act and any applicable state
securities laws or (2) unless this Note is registered under the Securities Act and any applicable
state securities laws.

MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC

5.64% Senior Secured Note due 2040

Original Interest Accrual Date: May 6, 2010

Stated Maturity: May 6, 2040

Interest Rate: 5.64% per annum

Interest Payment Dates: June 30 and December 31

Regular Record Dates: June 15 and December 15

This Note is not an Original Issue Discount Security

within the meaning of the within-mentioned Indenture.

This Note is a Debt Security within the

meaning of the within-mentioned Indenture.

 

	 	 	 

	Registered No. [RA - ]

	 	[DATE]
	$[               ]1

	 	PPN 59447# AD5

MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC, a limited liability company duly organized and
existing under the laws of the State of Michigan (herein called the “Company”, which term
includes any successor Corporation under the Indenture referred to below), for value received,
hereby promises to pay to [               ], or its registered assigns, the principal sum of
[                              ]
DOLLARS ($ ___) on the Stated Maturity specified above,
and to pay interest (a) thereon from the Original Interest Accrual Date specified above or from the
most recent Interest Payment Date to which interest has been paid or duly provided for,
semi-annually in arrears on the Interest Payment Dates specified above in each year, commencing on
June 30, 2010 and at Maturity, at the Interest Rate per annum specified above, until the principal
hereof is paid or duly provided for and (b) to the extent permitted by law, on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount, at a rate per annum from time to time equal to the greater of (i)
7.64% and (ii) 2.0% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A. from
time to time in New York, New York as its “base” or “prime” rate. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date shall, as provided in such
Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date specified above (whether or not a
Business Day) next preceding such Interest Payment Date. Notwithstanding the foregoing, interest
payable at Maturity shall be paid to the Person to whom principal shall be paid. Except as
otherwise provided in said Indenture, any such interest not so timely paid or duly provided for
shall forthwith cease to be payable to the Noteholder on such Regular Record Date and may either be
paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at
the close of business on a Special Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice of which shall be given to the Noteholders not less than 10 days prior
to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange or automated quotation system on which the
Securities of this series may be listed, and upon such notice as may be required by such exchange
or automated quotation system, all as more fully provided in said Indenture.

CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated therein referred to in the within-mentioned
Indenture.

Date of Authentication: May 6, 2010

 

			
	1	 	Reference is made to Schedule A attached hereto
with respect to the amount of principal paid hereon and the last date to which
interest has been paid hereon.

 

 

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

as Trustee

 	 
	 	By:  	 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 

Capitalized terms used in this Note and not otherwise defined herein shall have the meaning
assigned to such term in the Indenture.

Subject to the home office payment obligation set forth in Section 2.02(b) of the Supplemental
Indenture (referred to below), payment of the principal of and Make-Whole Amount, if any, on this
Note and interest hereon at Maturity shall be made upon presentation of this Note at the office or
agency of the Trustee in New York, New York at c/o The Bank of New York Mellon, Trust Services
Window, 101 Barclay Street, New York, New York 10286, or at such other office or agency as may be
designated for such purpose by the Company from time to time in accordance with the Indenture.
Subject to the home office payment obligation set forth in Section 2.02(b) of the Supplemental
Indenture, payment of interest on this Note (other than interest at Maturity) shall be made as set
forth in Section 307 of the Original Indenture (as defined below). Payment of the principal of and
Make-Whole Amount, if any, and interest on this Note, as aforesaid, shall be made in 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.

This Note is one of a duly authorized issue of securities of the Company (all such series of
securities herein called the “Securities”) issued and issuable in one or more series under and
equally secured by a First Mortgage Indenture, dated as of December 10, 2003 (such indenture as
originally executed and delivered herein called the “Original Indenture” and as
supplemented and modified by any and all indentures supplemental thereto, including the
Supplemental Indenture referred to below, being herein called the “Indenture”), and has
been issued pursuant to that certain Fifth Supplemental Indenture, dated as of April 20, 2010 (the
“Supplemental Indenture”), each of the Indenture and the Fifth Supplemental Indenture being
between the Company and The Bank of New York Mellon Trust Company, N.A. (as successor to JPMorgan
Chase Bank, N.A.), as trustee (herein called the “Trustee,” which term includes any
successor trustee under the Indenture), to which Indenture reference is hereby made for a
description of the property mortgaged, pledged and held in trust as security for payment of all
amounts due under this Note, the nature and extent of the security and the respective rights,
limitations of rights, duties and immunities of the Company, the Trustee and the Holders of the
Securities thereunder and of the terms and conditions upon which the Securities (including the
Securities of this series) are, and are to be, authenticated and delivered and secured. The
acceptance of this Note shall be deemed to constitute the consent and agreement by the Holder
hereof to all of the terms and provisions of the Indenture. This Note is one of the series of
Securities designated above.

Notwithstanding anything to the contrary in Section 113 of the Original Indenture, in the
Supplemental Indenture or in this Note, if the Stated Maturity or any Redemption Date of this Note
shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of
the Original Indenture or the Supplemental Indenture or this Note) payment of interest on or
principal (and premium, if any) of this Note due at the Stated Maturity or on any

2

 

Redemption Date thereof need not be made at such Place of Payment on such date, but may be made on
the next succeeding Business Day at such Place of Payment with the same force and effect as if made
on the Stated Maturity or on any Redemption Date thereof, provided that interest shall accrue on
the Outstanding principal amount of this Note due at the Stated Maturity or on any Redemption Date
thereof until the date of actual payment. Interest hereon will be computed on the basis of a
360-day year of twelve 30-day months.

This Note is subject to mandatory redemption under the circumstances set forth in Section 501(a) of
the Original Indenture and as set forth in Section 2.03 of the Supplemental Indenture. This Note
is subject to redemption at the option of the Company, in whole or in part, as set forth in Section
2.04 of the Supplemental Indenture.

If an Event of Default, as defined in the Indenture, occurs and is continuing, the principal of
this Note may be declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount) and with the effect provided in the Indenture.

The Original Indenture permits, with certain exceptions as therein provided, the Trustee to enter
into one or more supplemental indentures for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, the Indenture with the consent of the
Holders of a majority in aggregate principal amount of the Securities of all series then
Outstanding under the Indenture, considered as one class; provided, however, that if there shall be
Securities of more than one series Outstanding under the Indenture and if a proposed supplemental
indenture shall directly affect the rights of the Holders of Securities of one or more, but less
than all, of such series, then the consent only of the Holders of a majority in aggregate principal
amount of the Outstanding Securities of each series so directly affected, considered as separate
classes, shall be required; and provided, further, that if the Securities of any series shall have
been issued in more than one Tranche and if a proposed supplemental indenture shall directly affect
the rights of the Holders of Securities of one or more, but less than all, of such Tranches, then
the consent only of the Holders of a majority in aggregate principal amount of the Outstanding
Securities of all Tranches so directly affected, considered as one class, shall be required; and
provided, further, that the Original Indenture permits the Trustee to enter into one or more
supplemental indentures for limited purposes without the consent of any Holders of Securities and
for certain other purposes with the consent of all Holders of affected Securities. The Original
Indenture also contains provisions permitting the Holders of specified percentages in principal
amount of the Securities then Outstanding, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Note.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter
or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
and interest and any Make-Whole Amount on this Note at the times, place and rate, and in the coin
or currency, herein prescribed.

3

 

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of
this Note is registrable in the Security Register, upon surrender of this Note for registration of
transfer at the office or agency of the Trustee in New York, New York, which as of the date hereof
is located at c/o The Bank of New York Mellon, Trust Services Window, 101 Barclay Street, New York,
New York 10286, or such other office or agency as may be designated by the Company from time to
time in accordance with the Indenture, duly endorsed by, or accompanied by a written instrument of
transfer in the form attached hereto as Annex A duly executed by the Holder hereof, or his attorney
duly authorized in writing, and thereupon one or more new Securities of this series of authorized
denominations and of like tenor and aggregate principal amount, will be issued to the designated
transferee or transferees.

The Securities of this series are issuable only as registered Securities, without coupons, and in
denominations of $250,000 or any integral multiple thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of the same series and Tranche, of any authorized
denominations, as requested by the Holder surrendering the same, and of like tenor upon surrender
of the Note or Notes to be exchanged at the office or agency of the Trustee in New York, New York
at c/o The Bank of New York Mellon, Trust Services Window, 101 Barclay Street, New York, New York
10286, or such other office or agency as may be designated by the Company from time to time in
accordance with the Indenture.

No service charge shall be made for any such registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith in accordance with the Indenture.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose
name this Note is registered as the absolute owner hereof for all purposes, whether or not this
Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.

The Securities of this series are not entitled to the benefit of any sinking fund.

As provided in Section 2.05 of the Supplemental Indenture, except as may be agreed to by the Holder
hereof in connection with an offer made to all Holders of the Securities of this series on the same
terms and conditions, the Company shall not and shall not permit any Affiliate of the Company to
purchase, redeem or otherwise acquire, directly or indirectly, this Note, except upon the payment
or redemption of this Note in accordance with the terms of the Indenture. The Company will
promptly cause the Trustee to cancel this Note once acquired by it or any Affiliate of the Company
pursuant to any payment, redemption or purchase of this Note pursuant to any provision of the
Indenture and no Notes may be issued in substitution or exchange for this Note.

As provided in Section 1401 of the Original Indenture, no recourse shall be had for the payment of
the principal of or Make-Whole Amount, if any, or interest on any Securities, or any part thereof,
or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented
thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no
personal liability whatsoever shall attach to, or be incurred by, any incorporator, member,
manager, stockholder, officer, director or employee, as such, past, present or future of the

4

 

Company or of any predecessor or successor corporation (either directly or through the Company or a
predecessor or successor corporation), whether by virtue of any constitutional provision, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly
agreed and understood that the Indenture and all the Securities (including the Notes) are solely
corporate obligations and that any such personal liability is hereby expressly waived and released
as a condition of, and as part of the consideration for, the execution of the Indenture and the
issuance of the Securities (including the Notes).

Demand, presentment, protest and notice of non-payment and protest are hereby waived by the
Company.

This Note shall be governed by and construed in accordance with the law of the State of New York
(including, without limitation, Section 5-1401 of the New York General Obligations Law or any
successor to such statute), except that (i) to the extent that the Trust Indenture Act shall be
applicable, this Note shall be governed by and construed in accordance with the Trust Indenture Act
and (ii) if the law of any jurisdiction wherein any portion of the Mortgaged Property that is Real
Property is located shall govern the creation of a mortgage lien on and security interest in, or
perfection, priority or enforcement of the Lien of the Indenture or exercise of remedies with
respect to, such portion of the Mortgaged Property, this Note shall be governed by and construed in
accordance with the law of such jurisdiction to the extent mandatory.

Unless the certificate of authentication hereon has been executed by the Trustee or an
Authenticating Agent by manual signature, this Note shall not be entitled to any benefit as a
Security under the Indenture or be valid or obligatory for any purpose.

[The remainder of this page is intentionally left blank.]

5

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

	 	 	 	 	 
	 	MICHIGAN ELECTRIC TRANSMISSION COMPANY, LLC, a Michigan limited

liability company

 	 
	 	By:  	Michigan Transco Holdings, L.P., sole member
 	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                        METC GP Holdings II, LLC, General Partner
 	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                                   METC GP Holdings, Inc., sole member and sole manager
 	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                                              ITC Holdings Corp., its sole owner
 	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Cameron M. Bready, 	 
	 	 	Senior Vice President, Treasurer and

Chief Financial Officer 	 
	 

Date:

 

 

SCHEDULE A

SCHEDULE OF NOTATIONS

          The notations on the following table have been made by the holder of the within Note in
connection with the transfer thereof in accordance with Section 2.02(b) of the Supplemental
Indenture.

	 	 	 	 	 	 	 

	Date of Notation

	 	Amount of principal
paid on the within
Note
	 	Last date to which
interest has been
paid on the within
Note
	 	Notation by Holder
	 

	 	 
	 	 
	 	 

 

 

ANNEX A

FORM OF ASSIGNMENT

FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

  

Please print or typewrite name and address, including postal zip code of assignee

  

the within Note and all rights thereunder, hereby irrevocably constituting and appointing

                                                            
                                                                                                    attorney
to transfer said Note on the Security Register, upon surrender of said Note at the office or agency
of the Trustee in New York, New York, or such other office or agency as may be designated by the
Company from time to time in accordance with the Indenture, with full power of substitution in the
premises.

Dated:                                         

	 	 	 	 	 
	 	[NAME OF TRANSFEROR]

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	NOTICE: The signature to this assignment must

correspond with the name as written upon the face of

the within Note in every particular, without

alteration or enlargement or any change whatever.

 	 
	 	Signature Guarantee:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE GUARANTEE

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of
the Security Registrar, which requirements include membership or participation in the Security
Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be
determined by the Security Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.

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