EXHIBIT 10.31
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT, dated as of December 18, 2003, is entered
into by and between AMBAC ASSURANCE CORPORATION, a Wisconsin-domiciled stock
insurance company ("Ambac"), and NORTHERN INDIANA PUBLIC SERVICE COMPANY, a
corporation duly organized under the laws of the State of Indiana (the
"Company").
WHEREAS, pursuant to the Indenture of Trust, dated as of December 1,
2003 (the "Indenture"), between Jasper County, Indiana (the "Issuer") and
National City Bank of Indiana, as Trustee (the "Trustee"), the Issuer issued its
Pollution Control Refunding Revenue Bonds (Northern Indiana Public Service
Company Project) Series 2003 in the aggregate principal amount of $55,000,000
(the "Bonds");
WHEREAS, the Company entered into a Financing Agreement with the
Issuer, dated as of December 1, 2003 (the "Financing Agreement"), pursuant to
which the Issuer has loaned to the Company the proceeds of the Bonds and the
Company has agreed to make repayment in an amount sufficient, together with
other funds available for such purpose, to pay when due the principal of,
premium, if any, and interest on the Bonds;
WHEREAS, Ambac has made a commitment to issue its Financial Guaranty
Insurance Policy (the "Policy") to insure the scheduled payments of principal of
and interest on the Bonds, as specified in the Policy; and
WHEREAS, the Company understands that Ambac expressly requires the
delivery of this Agreement as part of the consideration for the delivery by
Ambac of the Policy;
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained and of the execution and delivery of the Policy, the Company
and Ambac agree as follows:
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ARTICLE I
DEFINITIONS; PREMIUM AND EXPENSES
Section 1.01. Definitions. Except as otherwise expressly provided herein or
unless the context otherwise requires, the terms which are capitalized herein
shall have the meanings specified in Annex B hereto.
Section 1.02. Premium. In consideration of Ambac agreeing to issue the Policy
hereunder, the Company hereby agrees to pay the Premium, as follows:
(a) $1,756,647.70 shall be payable as a lump sum upon delivery of
the Policy (the "Initial Premium");
(b) an amount equal to the product of the Annual Premium Rate and
the principal amount of Bonds outstanding on each December 18 (the "Annual
Premium") shall be payable annually in advance on each December 18, commencing
on December 18, 2004; provided, that the Annual Premium due on the December 18
immediately preceding the stated maturity date of the Bonds shall be calculated
on a pro rata basis to reflect the period from such December 18 to such stated
maturity date.
Once paid, no Premium is refundable in whole or in part for any reason,
including, without limitation, in the event that the Bonds are retired prior to
their stated maturity. To the extent that any payment of Annual Premium is not
paid when due, interest shall accrue on such unpaid amounts at a rate equal to
the Effective Interest Rate.
Section 1.03. Certain Other Expenses. The Company will pay all reasonable fees
and disbursements of Ambac's counsel related to any Company-requested
modification of any Bond Document or, if delivered pursuant to Section 3.01,
First Mortgage Bonds.
ARTICLE II
REIMBURSEMENT OBLIGATION; UNCONDITIONAL OBLIGATION
Section 2.01. Reimbursement Obligation. (a) The Company agrees to reimburse
Ambac, from any available funds, immediately and unconditionally upon demand,
for all amounts advanced by Ambac under the Policy. To the extent that any such
payment due hereunder is not paid when due, interest shall accrue on such unpaid
amounts at a rate equal to the Effective Interest Rate.
(b) The Company also agrees to reimburse Ambac immediately and
unconditionally upon demand for (i) all reasonable expenses incurred by Ambac in
connection with each Policy Payment and (ii) all reasonable expenses incurred by
Ambac in connection with the enforcement by Ambac of the Company's obligations
under any Bond Document or, if delivered pursuant to Section 3.01, First
Mortgage Bonds, together with interest on all such expenses from and including
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the date which is 30 days from the date a statement for such expenses is
received by the Company to the date of payment at the Effective Interest Rate.
Section 2.02. Unconditional Obligation. The obligations of the Company hereunder
are absolute and unconditional and will be paid or performed strictly in
accordance with this Agreement, irrespective of:
(a) any lack of validity or enforceability of, or any amendment or
other modification of, or waiver with respect to the Bonds, any other Bond
Document or, if delivered pursuant to Section 3.01, the First Mortgage Bonds;
(b) any exchange, release or nonperfection of any security
interest in property securing the Bonds, any other Bond Document , the First
Mortgage Bonds (if delivered pursuant to Section 3.01), or any obligations under
or related to the foregoing instruments and documents;
(c) any circumstances which might otherwise constitute a defense
available to, or discharge of, the Company under any Bond Document or otherwise
with respect to the Bonds or, if delivered pursuant to Section 3.01, the First
Mortgage Bonds; or
(d) whether or not the Company's obligations under the Bond
Documents or the obligations represented by the Bonds or, if delivered pursuant
to Section 3.01, the First Mortgage Bonds, are contingent or matured, disputed
or undisputed, liquidated or unliquidated.
ARTICLE III
COVENANTS AND REPRESENTATIONS OF THE COMPANY
Section 3.01. Negative Pledge; Delivery of Collateral. (a) The Company agrees
that, so long as any Bonds remain outstanding or any Reimbursement Obligations
remain unpaid,
(i) if at any time the Company shall incur Secured Debt, the
Company shall, concurrently with incurrence of such Secured Debt, grant
to the Trustee, for the benefit of the holders of the Bonds, a pari
passu lien on the Property that secures such Secured Debt, to secure
the Company's obligations under the Financing Agreement; and
(ii) the Company shall not incur or suffer to exist any
indebtedness to an affiliate the payment of which is secured by a lien
on any Property of the Company. As used in this Section 3.01(a)(ii),
the term "affiliate" means an entity controlling, controlled by, or
under common control with, the Company.
(b) In the event that the ratings assigned to the Company's senior
unsecured long-term debt are downgraded to "Ba1" or below, in the case of
Moody's, or "BB+" or below, in the case of S&P, the Company shall, within thirty
(30) days of such downgrade deliver First Mortgage Bonds to the Trustee for the
benefit of the holders of the Bonds, or grant a security interest to the
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Trustee for the benefit of the holders of the Bonds in utility assets acceptable
to Ambac, to secure the Company's obligations under the Financing Agreement.
Section 3.02. Reorganization; Allocation of Debt. The Company hereby agrees
that, in the event of a Reorganization, unless otherwise consented to by Ambac,
the obligations of the Company under, and in respect of, the Bond Documents and,
if delivered pursuant to Section 3.01, the First Mortgage Bonds, shall be
assumed by, and shall become direct and primary obligations of, a Regulated
Utility Company that holds substantially all of the assets that were held by the
Company prior to such Reorganization.
Section 3.03. Liquidity Facilities. For so long as the Policy remains in effect
or any Reimbursement Obligation or Premium remains unpaid, the Company will
ensure that whenever a Bond bears interest at a rate (other than an Auction Rate
(as defined in the Indenture)) that is not fixed to maturity, the obligation of
the Company to purchase, or provide funds for the purchase of, such Bonds at the
end of any interest rate period shall be supported by a standby bond purchase
agreement or other liquidity facility from a provider, and on terms and
conditions, acceptable to Ambac.
Section 3.04. Representations and Warranties. The Company represents and
warrants as follows:
(a) it is incorporated and validly existing under the laws of the
State of Indiana;
(b) it has the corporate power to enter into and perform its
obligations under or with respect to the Bond Documents to
which it is a party, to carry out the transactions
contemplated by the Bond Documents to which it is a party, to
own its property and assets, and to carry on its business as
now conducted or contemplated;
(c) it has taken all necessary action to authorize the entry into
and performance of its obligations under or with respect to
the Bond Documents to which it is a party and to perform
obligations under them;
(d) its obligations under the Bond Documents to which it is a
party are legal, valid, binding and enforceable in accordance
with their respective terms, except to the extent that the
enforceability of such obligations may be limited by any
applicable bankruptcy, insolvency, liquidation, rehabilitation
or other similar law or enactment now or hereafter enacted
affecting the enforcement of creditors' rights generally and
by general principles of equity;
(e) the execution by it of the Bond Documents to which it is a
party and the carrying out of the transactions under or
contemplated by them do not violate in any respect any
provision of:
(i) its constituent documents or any law, regulation or
order applicable to it; or
(ii) any other document or agreement which is binding upon
it or its assets;
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(f) to the best of its knowledge and belief no action or
administrative proceedings of or before any court or agency is
pending or is threatened which, if adversely determined, might
reasonably be expected to have a material adverse effect on
its ability to perform its obligations under the Bond
Documents to which it is a party;
(g) the Company has not withheld from Ambac any document,
information or other fact which would reasonably be expected
to be material to the decision of Ambac to enter into and
perform the obligations contained in the Policy;
(h) with respect to its obligations under the Bond Documents to
which it is a party it does not, nor do its assets, enjoy
immunity from any suit or execution;
(i) it has not taken any action, corporate or otherwise, nor does
it have actual notice that any other person has taken any
action in respect of:
(i) its winding up, dissolution, de-registration or
reorganization; or
(ii) the appointment to or over it, or any substantial
part of its assets, of any liquidator, provisional
liquidator, administrator, receiver, receiver and
manager, trustee or similar official.
ARTICLE IV
EVENTS OF DEFAULT; REMEDIES
Section 4.01. Events of Default. The following events shall constitute Events of
Default hereunder:
(a) The Company shall fail to pay to Ambac any amount payable
under Section 1.02, 1.03 or 2.01 hereof and such failure shall have continued
for a period in excess of ten days after receipt by the Company of written
notice thereof;
(b) Any representation or warranty made by the Company hereunder
or any statement in the application for the Policy or any report, certificate,
financial statement or other instrument provided in connection with the Policy
or herewith shall have been materially false at the time when made;
(c) The Company shall default in the observance or performance of
any covenant contained in Article III hereof;
(d) Except as otherwise provided in this Section 4.01, the Company
shall fail to perform any of its other obligations hereunder, provided that such
failure continues for more than thirty (30) days after receipt by the Company of
written notice of such failure to perform;
(d) The Company shall (i) voluntarily commence any proceeding or
file any petition seeking relief under the United States Bankruptcy Code or any
other Federal, state or foreign
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bankruptcy, insolvency or similar law, (ii) consent to the institution of, or
fail to controvert in a timely and appropriate manner, any such proceeding or
the filing of any such petition, (iii) apply for or consent to the appointment
of a receiver, paying agent, custodian, sequestrator or similar official for the
Company or for a substantial part of its property, (iv) file an answer admitting
the material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors, (vi) become unable,
admit in writing its inability or fail generally to pay its debts as they become
due or (vii) take action for the purpose of effecting any of the foregoing;
(e) An involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Company, or of a substantial part of its property, under the
United States Bankruptcy Code or any other Federal, state or foreign bankruptcy,
insolvency or similar law or (ii) the appointment of a receiver, paying agent,
custodian, sequestrator or similar official for the Company or for a substantial
part of its property; and such proceeding or petition shall continue undismissed
or unstayed for ninety (90) days or an order or decree approving or ordering any
of the foregoing shall continue unstayed and in effect for ninety (90) days; or
(f) An "Event of Default" under (and as defined in) the Indenture
shall occur.
Section 4.02. Remedies. If an Event of Default shall occur and be continuing,
then Ambac may take whatever action at law or in equity may appear necessary or
desirable, including, without limitation, legal action for the specific
performance of any covenant made by the Company herein, and, to the extent
applicable, the pursuit of remedies available under the Bond Documents or any
collateral delivered pursuant to Section 3.01 hereof, to collect the amounts
then due and thereafter to become due under this Agreement and the other Bond
Documents, or to enforce performance and observance of any obligation, agreement
or covenant of the Company under this Agreement and the other Bond Documents.
All rights and remedies of Ambac under this Section 4.02 are cumulative and the
exercise of any one remedy does not preclude the exercise of one or more of the
other available remedies under this Agreement, the other Bond Documents or any
collateral delivered pursuant to Section 3.01 hereof, whether now or hereafter
existing at law or in equity.
ARTICLE V
MISCELLANEOUS
Section 5.01. Certain Information and Notices to Ambac. The Company agrees that
while the Policy is in effect:
(a) the Company shall furnish to Ambac (i) as soon as practicable
after the filing thereof, a copy of each Form 10-K and Form 10-Q of the Company
and a copy of any audited financial statements and annual reports of the Company
and (ii) as promptly as practicable, such other information as Ambac shall
reasonably request; and
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(b) upon receipt of reasonable (but no more than thirty (30)
days') prior written notice, the Company will permit Ambac to discuss the
affairs, finances and accounts of the Company with appropriate officers of the
Company.
Section 5.02. Parties Interested Herein. Nothing in this Agreement expressed or
implied is intended or shall be construed to confer upon, or to give or grant
to, any person or entity, other than the Company and Ambac, any right, remedy or
claim under or by reason of this Agreement or any covenant, condition or
stipulation hereof, and all covenants, stipulations, promises and agreements in
this Agreement contained by and on behalf of the Company shall be for the sole
and exclusive benefit of the Company and Ambac.
Section 5.03. Amendment and Waiver. Any provision of this Agreement may be
amended, waived, supplemented, discharged or terminated only with the prior
written consent of the Company and Ambac.
Section 5.04. Successors and Assigns; Descriptive Headings.
(a) This Agreement shall bind, and the benefits thereof shall
inure to, the Company and Ambac and their respective successors and assigns;
provided, that the Company may not transfer or assign any or all of its rights
and obligations hereunder without the prior written consent of Ambac.
(b) The descriptive headings of the various provisions of this
Agreement are inserted for convenience of reference only and shall not be deemed
to affect the meaning or construction of any of the provisions hereof.
Section 5.05. Counterparts. This Agreement may be executed in any number of
copies and by the different parties hereto on the same or separate counterparts,
each of which fully-executed counterparts shall be deemed to be an original
instrument, and all of which shall constitute but one and the same instrument.
Section 5.06. Term. This Agreement shall expire upon the later of (i) the
expiration of the Policy in accordance with the terms thereof and (ii) the
repayment in full to Ambac of any amounts due and owing to it by the Company
under this Agreement or otherwise in respect of the Policy.
Section 5.07. Exercise of Rights. No failure or delay on the part of Ambac to
exercise any right, power or privilege under this Agreement or the other Bond
Documents or in respect of any collateral delivered pursuant to Section 3.01
hereof, and no course of dealing between Ambac and the Company or any other
party, shall operate as a waiver of any such right, power or privilege, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which Ambac would
otherwise have pursuant to law or equity. No notice to or demand
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on any party in any case shall entitle such party to any other or further notice
or demand in similar or other circumstances, or constitute a waiver of the right
of the other party to any other or further action in any circumstances without
notice or demand.
Section 5.08. Waiver. The Company waives any defense that this Agreement was
executed subsequent to the date of the Commitment, admitting and covenanting
that such Commitment was delivered pursuant to the Company's request and in
reliance on the Company's promise to execute this Agreement.
Section 5.09. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements and understandings of the parties hereto
with respect to the subject matter hereof, including but not limited to the
Commitment.
Section 5.10. Notices. All written notices to or upon the respective parties
hereto shall be deemed to have been given or made when actually received, or in
the case of telecopier machine owned or operated by a party hereto, when sent
and confirmed in writing by such machine as having been received, addressed as
specified below or at such other address as any of the parties hereto may
specify in writing to the others:
If to the Company:
Northern Indiana Public Service Company
801 E. 86th Avenue
Merrillville, IN 46410
Attention: Director, Corporate Finance
Fax: (219) 647-6180
If to Ambac:
Ambac Assurance Corporation
One State Street Plaza
New York, New York 10004
Attention: General Counsel
Fax: (212) 208-3558
Section 5.11. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York.
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this
Agreement to be duly executed and delivered as of the date first above written.
NORTHERN INDIANA PUBLIC SERVICE COMPANY
By: /s/ William M. O'Malley
Name: William M. O'Malley
Title: Vice President Finance
AMBAC ASSURANCE CORPORATION
By: /s/ Louis Iaconetti
Name: Louis Iaconetti
Title: Vice President
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ANNEX A
COMMITMENT
[Attached.]
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ANNEX B
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires, all capitalized terms shall
have the meaning as set out below.
"Agreement" means this Insurance Agreement.
"Annual Premium" has the meaning set forth in Section 1.02(b) of this Agreement.
"Annual Premium Rate" means
(i) in the event that the Rating is "AA-" or higher (in the case
of S&P) or "Aa3" or higher (in the case of Moody's), 0.20%;
(ii) in the event that the Rating is "A+", "A" or "A-" (in the case
of S&P) or "A1", "A2" or "A3" (in the case of Moody's), 0.25%;
(iii) in the event that the Rating is "BBB+" or "BBB" (in the case
of S&P) or "Baa1" or "Baa2" (in the case of Moody's), 0.30%;
(iv) in the event that the Rating is "BBB-" (in the case of S&P) or
"Baa3" (in the case of Moody's), 0.40%; and
(v) in the event that the Rating is "BB+" or lower (in the case of
S&P) or "Ba1" or lower (in the case of Moody's), 0.75%.
"Bond Documents" means the Indenture, the Financing Agreement, the Bonds and
this Agreement.
"Commitment" means that certain letter, dated December 3, 2003, attached hereto
as Annex A.
"Effective Interest Rate" means the "prime rate" announced by Citibank, N.A.,
from time to time, plus 1%.
"Event of Default" means an event of default set forth in Section 4.01 of this
Agreement.
"First Mortgage Bonds" means first mortgage bonds issued by the Company pursuant
to the Indenture, dated as of August 1, 1939, as amended and supplemented,
between the Company and BNY Midwest Trust Company, successor trustee to Harris
Trust and Savings Bank, or any other similar document or arrangement with
respect to the issuance by the Company of first mortgage bonds.
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"Moody's" means Moody's Investors Service, Inc.
"Policy Payment" means a payment by Ambac pursuant to the terms and conditions
of the Policy.
"Premium" means the Initial Premium and the Annual Premium payable by the
Company to Ambac pursuant to Section 1.02 hereof.
"Property" means any type of real, personal, tangible, intangible or mixed
property.
"Rating" mean the lower of the ratings assigned to the Company's senior,
unsecured non-credit-enhanced long-term debt by S&P and Moody's, determined as
of each date on which an Annual Premium is calculated.
"Regulated Utility Company" means a corporation engaged in the transmission and
distribution of electricity and natural gas, which is regulated by the
applicable public service commissions in all of the states that comprise its
service area.
"Reimbursement Obligations" means the amounts payable by the Company to Ambac
pursuant to the provisions of Section 2.01(a) and (b) hereof.
"Reorganization" means any reorganization of the Company, or any transfer of a
substantial portion of the assets of the Company, where as a result of such
reorganization or transfer, the Company ceases to be a Regulated Utility
Company.
"S&P" means Standard & Poor's Credit Market Services, a Division of The McGraw
Hill Companies, Inc.
"Secured Debt" means indebtedness the payment of which is secured by a mortgage,
security interest, lien or other encumbrance on any power generating,
transmission or distribution assets of the Company.
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