Re: Second Amendment (the “Amendment”) under that certain Second Amended and Restated Credit Agreement dated as of September 15, 2005 by and among the financial institutions from time to time signatory thereto (each a “Lender”, and collectively the...
Exhibit
10.3
Execution
Copy
November
2, 2006
SEMCO
Energy, Inc.
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Re:
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Second
Amendment (the “Amendment”) under that certain Second Amended and Restated
Credit Agreement dated as of September 15, 2005 by and among the
financial
institutions from time to time signatory thereto (each a “Lender”, and
collectively the “Lenders”), LaSalle Bank Midwest National Association, as
Administrative Agent for the Lenders (in such capacity, “Agent”), and
SEMCO Energy, Inc. (“Company”), as amended from time to time prior to the
date hereof (the “Credit
Agreement”).
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Ladies
and Gentlemen:
Reference
is made to the Credit Agreement. Except as specifically defined to the contrary
herein, capitalized terms used in this Amendment shall have the meanings given
them in the Credit Agreement.
You
have
requested that the Lenders consent to modify (i) the calculation in the Credit
Agreement of the Maximum Leverage Ratio and the Minimum Consolidated Net Worth
Ratio to exclude certain charges arising from the implementation of FAS No.
158
and (ii) the Credit Agreement to permit the Company to obtain securitized
account receivable financings, subject to certain terms and conditions.
Based
on
the Agent’s receipt of the approval of the requisite Lenders (as attached to
this Amendment) and a closing certificate from you in form and substance
reasonably acceptable to the Agent, the Agent hereby confirms, for and on behalf
of the Lenders, the amendments of the Credit Agreement as follows:
1. The
definition of Consolidated Net Worth in Section 1.1 of the Credit Agreement
is
hereby amended by deleting it in its entirety and inserting the following
language in its place:
Consolidated
Net Worth
means, as of the date of any determination thereof, the stockholders’ capital
and surplus of the Company and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, and which shall include (whether or not
includible under GAAP) the principal amount of the Junior Capital, adding back
(a) an amount equal to all non-cash charges, less any tax deductions or credits
on account of such charges, taken by the Company in accordance with GAAP under
FAS No. 142 or FAS No. 144 after December 31, 2004 and (b) the non-cash charge
incurred on December 31, 2006 and posted to accumulated comprehensive income,
less any tax credits to accumulated comprehensive income on account of such
charge, as the result of adopting FAS No. 158.
2. The
definition of Funded Debt in Section 1.1 of the Credit Agreement is amended
by
deleting it in its entirety and inserting the following language in its
place:
Funded
Debt
of
any Person means, without duplication, (i) all Debt of such Person for borrowed
money or which has been incurred in connection with the acquisition of assets
in
each case having a final maturity of one or more than one year from the date
of
origin thereof (or which is renewable or extendible at the option of the obligor
for a period or periods more than one year from the date of origin), including
all principal payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, whether or not
the
obligation to make such payments shall constitute a current liability of the
obligor under GAAP and including any Debt or off balance sheet obligations
issued pursuant to a Securitization Transaction (whether by a Special Purpose
Subsidiary or otherwise), provided, however, that Funded Debt shall not include
(a) Junior Capital, (b) all outstanding Loans made to such Person pursuant
to
the Revolving Commitment and the aggregate amount of Debt relating to any
Permitted Securitization, provided, however, that the aggregate principal amount
excluded pursuant to this clause (b) shall not exceed $120,000,000 and (c)
any
notes of such Person evidencing Debt of such Person which when issued constitute
a current liability of such Person under GAAP, (ii) all Capitalized Rentals
of
such Person, and (iii) Off Balance Sheet Liabilities.
3. The
definition of Guaranty Event in Section 1.1 of the Credit Agreement is amended
by deleting it in its entirety and inserting the following language in its
place:
Guaranty
Event
means the failure at any time of the Company and the Guarantors, as of the
last
day of any Fiscal Quarter (determined on a consolidated basis for the Company
and the Guarantors but without regard to any Subsidiaries which are not
Guarantors), to constitute the source of at least seventy percent (70%) of
the
Consolidated Operating Income of the Company and its Subsidiaries (excluding
any
Special Purpose Subsidiary) for the four Fiscal Quarter period ending on such
date or to hold at least seventy percent (70%) of the Consolidated total assets
of the Company and its Subsidiaries (excluding any Special Purpose Subsidiary)
on such date.
4. The
following definition is inserted in Section 1.1 of the Credit Agreement in
the
appropriate alphabetical order:
Permitted
Securitization
shall mean the transfer or encumbrance of certain accounts receivable of the
Company or any Subsidiary to a Special Purpose Subsidiary conducted in
accordance with the following requirements:
| (a) |
The
disposition of such accounts receivable will not result in the aggregate
principal amount of Debt at any time issued and outstanding in respect
of
Permitted Securitizations being in excess of $155,000,000 less the
aggregate principal amount of the Revolving Commitment hereunder
and of
any term loans which may from time to time be evidenced hereby (giving
effect to any permanent reduction in the Revolving Commitment or
prepayment of any other loan made simultaneously with the closing
of such
Permitted Securitization);
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| (b) |
At
such time as the Company or a Subsidiary makes the initial transfer
of
accounts receivable to a Special Purpose Subsidiary in connection
with the
closing of such Permitted Securitization, the Company or such Subsidiary
shall itself actually receive (substantially contemporaneously with
such
disposition) cash in connection with any such Securitization Transaction
in an amount based on normal and customary advance rates (and taking
into
account typical deductions for market-based, arms-length Securitization
Transactions);
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| (c) |
Each
such disposition shall be without recourse to the Company or any
of its
Subsidiaries (except for customary clean up call provisions and customary
representations and warranties relating to the Company’s or any of its
Subsidiaries’ transfer of accounts receivable) and otherwise on normal and
customary terms and conditions for comparable asset-based Securitization
Transactions;
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| (d) |
Each
such Securitization Transaction shall be structured on the basis
of the
issuance of non-recourse (to the Company or its Subsidiaries other
than
the applicable Special Purpose Subsidiary) debt securities by a Special
Purpose Subsidiary; and
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| (e) |
Both
immediately before and immediately after each such disposition, no
Unmatured Event of Default or Event of Default (whether or not related
to
such disposition) shall have occurred and be
continuing.
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5. The
following definition is inserted in Section 1.1 of the Credit Agreement in
the
appropriate alphabetical order:
Securitization
Transaction(s)
shall mean a transfer of, or grant of a lien on, accounts receivable by Company
or any Subsidiary to a Special Purpose Subsidiary or other special purpose
or
limited purpose entity and the issuance (whether by such Special Purpose
Subsidiary or other special purpose or limited purpose entity or any other
Person) of debt or of any securities secured directly or indirectly by interests
in, or of trust or a comparable certificates or other securities directly or
indirectly evidencing interests in, such accounts receivable.
6. The
following definition is inserted in Section 1.1 of the Credit Agreement in
the
appropriate alphabetical order:
Special
Purpose Subsidiary
shall mean any wholly-owned direct or indirect Subsidiary of the Company
established for the sole purpose of conducting a Permitted Securitization and
otherwise established and operated in accordance with customary industry
practices. Special Purpose Subsidiary shall include, but is not limited to,
any
entity which constitutes a Qualifying Special Purpose Subsidiary under FASB
Statement 140.
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7. Section
10.1.10 of the Credit Agreement is hereby amended by deleting it in its entirety
and inserting the following language in its place:
Section
10.1.10 Other
Information.
(a)
Promptly from time to time, such other information concerning the Affiliated
Parties as any Lender or the Administrative Agent may reasonably request, and
(b) promptly following a Permitted Securitization, (i) copies of all
documentation related to such Permitted Securization and (ii) copies of all
notices issued by the Persons party to such Permitted Securitization promptly
following the delivery thereof.
8. Section
11.1(i) of the Credit Agreement is hereby amended by deleting it in its entirety
and inserting the following language in its place:
(i) Debt
issued in connection with a Permitted Securitization, in compliance with the
definition thereof, together with customary clean up call provisions in
connection with any Permitted Securitization;
9. Section
11.2 of the Credit Agreement is hereby amended by inserting the following
language as new clause (i) and renumbering existing clause (i) as clause
(j):
(i) any
Lien encumbering property interests, rights or proceeds which are subject of
a
transfer or encumbrance pursuant to a Permitted Securitization;
and
10. Section
11.9 of the Credit Agreement is hereby amended by deleting it in its entirety
and inserting the following language in its place:
Section
11.9 Inconsistent
Agreements.
Not, and not permit any other Affiliated Party to, enter into any agreement
containing any provision which would (a) be violated or breached by any
borrowing by the Company hereunder or by the performance by any Affiliated
Party
of any of its Obligations hereunder or under any other Loan Document, or (b)
create or permit to exist or become effective any encumbrance or restriction
on
the ability of any Subsidiary (other than a Special Purpose Subsidiary in
connection with a Permitted Securitization) to (i) pay dividends or make other
distributions to the Company or any other Subsidiary, or pay any Debt owed
to
the Company or any other Subsidiary, (ii) make loans or advances to any
Affiliated Party or (iii) transfer any of its assets or properties to any
Affiliated Party, other than (A) customary restrictions and conditions contained
in agreements relating to the sale of all or a substantial part of the assets
of
any Subsidiary pending such sale, provided
that
such restrictions and conditions apply only to the Subsidiary to be sold and
such sale is permitted hereunder (B) restrictions or conditions imposed by
any
agreement relating to purchase money Debt, Capital Leases, Junior Capital and
other Debt permitted by this Agreement, (C) customary provisions in leases
and
other contracts restricting the assignment thereof, (D) Liens securing
Indebtedness otherwise permitted to be incurred, under the provisions of Section
11.2 hereof that limit the right of the debtor to dispose of the assets subject
to such Liens; (E) provisions with respect to the disposition or distribution
of
assets or property in joint venture agreements asset sale agreements, stock
sale
agreements and other similar agreements entered into in the ordinary course
of
business; and (F) restrictions on deposits (to the extent permitted hereunder)
imposed by customers under contracts entered into in the ordinary course of
business.
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11. Section
10.12 of the Credit Agreement is hereby amended by inserting the following
language at the end of the Section:
Section
10.12 Guaranty
Event.
Within ninety (90) days of the occurrence of a Guaranty Event, the Company
shall
cause certain Subsidiaries approved of by the Administrative Agent (which
approval shall not be unreasonably withheld) to execute and deliver a Guaranty
(or execute and deliver joinder agreements thereto), together with such
certificates, resolutions, formation documents and opinions of counsel to the
Guarantors as the Administrative Agent may reasonably request, such that upon
execution and delivery of the Guaranty (or the applicable joinder agreements),
the Guarantors, together with the Company, are the source of at least seventy
percent (70%) of the Consolidated Operating Income of the Company and all its
Subsidiaries (excluding any Special Purpose Subsidiaries) for the four Fiscal
Quarter period most recently ended prior to such date and hold at least seventy
percent (70%) of the Consolidated total assets of the Company and all its
Subsidiaries (excluding any Special Purpose Subsidiaries) as of the last day
of
the Fiscal Quarter then most recently ended, provided,
further
in
no event shall a Special Purpose Subsidiary be required to become a Guarantor
hereunder or execute any other Loan Documents.
11. Section
11.11 of the Credit Agreement is hereby amended by inserting the following
language as new clause (j) and renumbering existing clause (j) as clause
(k):
(j) Investments
in any Subsidiary (including, without limitation, any Special Purpose
Subsidiary) from and after the date hereof consisting of (x) dispositions of
specific accounts receivable made pursuant to any Permitted Securitization
and
the resultant Debt issued by a Special Purpose Subsidiary as part of such
Permitted Securitization, in each case to the extent constituting Investments
hereunder; and (y) the repurchase or replacement from and after the date hereof
of accounts receivable pursuant to any representations or warranties or clean
up
call provisions included in such Permitted Securitization in accordance with
the
definition thereof.
12. Section
11.12 of the Credit Agreement is hereby amended by deleting it in its entirety
and inserting the following language in its place:
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Section
11.12 Restriction
of Amendments to Certain Documents.
Not
amend or otherwise modify, or waive any rights under any documents relating
to
the Junior Capital or any Permitted Securitization if, in any case, such
amendment, modification or waiver could be adverse to the interests of the
Lenders or would reasonably be expected to have a Material Adverse
Effect.
Except
as
expressly set forth herein, this Amendment shall not be deemed to amend or
alter
in any respect the terms and conditions of the Credit Agreement (including
without limitation all conditions and requirements for Advances and any
financial covenants) or any of the other Loan Documents, or to constitute a
waiver or release by any of the Lenders or the Agent of any right, remedy,
Unmatured Event of Default or Event of Default under the Credit Agreement or
any
of the other Loan Documents. Furthermore, this Amendment shall not affect in
any
manner whatsoever any rights and remedies of the Lenders or the Agent with
respect to any non-compliance by the Company with the Credit Agreement or the
other Loan Documents, whether in the nature of an Unmatured Event of Default
or
Event of Default, and whether now in existence or subsequently arising, all
of
which rights and remedies are expressly reserved.
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This
Amendment shall not become effective unless (and until) the Company has
countersigned and returned to the Agent (which
shall occur within five (5) Business Days from the date hereof or, after which
date, unless extended in writing by the Agent, this Amendment shall be deemed
to
have lapsed) a
duplicate original of this letter and the Company has satisfied any other
conditions to effectiveness contained herein.
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Very
truly yours,
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LASALLE
BANK MIDWEST NATIONAL
ASSOCIATION,
as Agent
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| By: | /s/ Xxxxxxx X. Xxxxxx | |
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| Its: | First Vice President | |
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Acknowledged
and agreed:
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SEMCO
ENERGY, INC.
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| By: | /s/ Xxxxxxx X. Xxxxxxx | |
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Xxxxxxx
X. Xxxxxxx
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| Its: | SVP & Chief Financial Officer | |
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| Date: | November 2, 2006 | |
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AUTHORIZATION
OF AMENDMENT
The
undersigned Lender hereby confirms its approval of the foregoing Amendment
on
the terms and conditions set forth therein.
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/s/
Xxxxxxx X. Xxxxxx
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LaSalle
Bank Midwest National Association
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| By: | /s/ Xxxxxxx X. Xxxxxx | |
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| Its: | First Vice President | |
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| Date: | November 2, 2006 | |
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AUTHORIZATION
OF AMENDMENT
The
undersigned Lender hereby confirms its approval of the foregoing Amendment
on
the terms and conditions set forth therein.
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FIFTH
THIRD BANK
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| By: | /s/ Xxxxx X. Xxxxxxxxx | |
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| Its: | Officer | |
| Date: | October 31, 2006 | |
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AUTHORIZATION
OF AMENDMENT
The
undersigned Lender hereby confirms its approval of the foregoing Amendment
on
the terms and conditions set forth therein.
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Huntington
National Bank
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[Lender]
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| By: | /s/ Xxxxx X. Xxxxxxx | |
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Xxxxx
X. Xxxxxxx
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| Its: | Vice President | |
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| Date: | November 02, 2006 | |
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AUTHORIZATION
OF AMENDMENT
The
undersigned Lender hereby confirms its approval of the foregoing Amendment
on
the terms and conditions set forth therein.
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U.S.
BANK NATIONAL ASSOCIATION
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| By: | /s/ Xxxxxxx X. Xxxxxx | |
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| Its: | Vice President | |
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| Date: | November 1, 2006 | |
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AUTHORIZATION
OF AMENDMENT
The
undersigned Lender hereby confirms its approval of the foregoing
Amendment on
the terms and conditions set forth therein.
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Comerica
Bank
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[Lender]
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| By: | /s/ Xxxxx X. Xxxxxx | |
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| Its: | Assistant Vice President | |
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| Date: | November 2, 2006 | |
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AUTHORIZATION
OF AMENDMENT
The
undersigned Lender hereby confirms its approval of the foregoing Amendment
on
the terms and conditions set forth therein.
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National
City Bank
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[Lender]
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| By: | /s/ Xxx Xxxxxx | |
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| Its: | Vice President | |
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| Date: | November 2, 2006 | |
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