Exhibit 10.2
REIMBURSEMENT AGREEMENT
among
ARIZONA PUBLIC SERVICE COMPANY
THE BANKS PARTY HERETO
and
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and Issuing Bank
dated as of April 16, 2010
 
J.P. Morgan Securities Inc. and Union Bank, N.A.,
Joint Lead Arrangers and Joint Bookrunners

 

 

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TABLE OF CONTENTS

         
Section 1. Definitions; Accounting Terms
    2  
Section 2. Reimbursement
    14  
Section 3. Amendment and Restatement of Letter of Credit; Conditions to
Effectiveness; Transitional Provisions
    21  
Section 4. Adjustment of Maximum Drawing Amount; Terms of Drawing
    22  
Section 5. Obligations Absolute
    22  
Section 6. Representations and Warranties of the Company
    23  
Section 7. Affirmative Covenants
    26  
Section 8. Negative Covenants
    30  
Section 9. Reimbursement Events of Default
    32  
Section 10. Amendments and Waivers
    35  
Section 11. Notices
    35  
Section 12. No Waiver; Remedies
    37  
Section 13. Waiver of Right of Setoff
    37  
Section 14. Participations of the Banks
    37  
Section 15. Assignees; Participants
    39  
Section 16. Continuing Obligation; Binding Effect
    40  
Section 17. Extension of the Letter of Credit
    40  
Section 18. Limited Liability of the Banks
    41  
Section 19. Cost, Expenses and Taxes
    43  
Section 20. Administrative Agent; Issuing Bank
    43  
Section 21. Indemnification
    46  
Section 22. Confidentiality
    47  
Section 23. Severability
    48  
Section 24. Governing Law; Consent to Jurisdiction
    48  
Section 25. Headings
    49  
Section 26. Counterparts; Integration
    49  
Section 27. WAIVER OF JURY TRIAL
    49  
Section 28. No Advisory or Fiduciary Responsibility
    49  
Section 29. Waiver of Damages
    50  
Section 30. Government Regulations
    50  

         
SCHEDULE I
  —     Letter of Credit Commission Rates
SCHEDULE II
  —     Participation Amounts and Participation Percentages
EXHIBIT A
        Form of Amended and Restated Letter of Credit
EXHIBIT B
        Form of Assignment and Assumption

The Table of Contents is not a part of this Agreement.

 

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REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT among ARIZONA PUBLIC SERVICE COMPANY, JPMORGAN CHASE
BANK, N.A., as Administrative Agent and as Issuing Bank, and the BANKS listed on
the signature pages hereto, dated as of April 16, 2010. (Unless otherwise
indicated, all capitalized terms used herein have the meanings referred to or
set forth in Section 1.)
WHEREAS, the Company has entered into a Participation Agreement dated as of
August 1, 1986 (as amended and in effect on April 16, 2010, the “Participation
Agreement”) among the Company, U.S. Bank National Association (as successor to
State Street Bank and Trust Company, as successor to The First National Bank of
Boston), for itself and as Owner Trustee (together with its successors in such
capacity, the “Owner Trustee”), The Bank of New York Mellon (as successor to
JPMorgan, as successor to Chemical Bank), for itself and as Indenture Trustee
(together with its successors in such capacity, the “Indenture Trustee”), PVNGS
Funding Corp., Inc., PVNGS II Funding Corp., Inc. and Security Pacific Capital
Leasing Corporation, as Equity Participant (together with its successors and
assigns, the “Equity Participant”), relating to the acquisition of an undivided
interest in PVNGS Unit 2 through a trust for the benefit of the Equity
Participant which interest has been leased to the Company pursuant to a lease
dated as of August 1, 1986 between the Owner Trustee and the Company (as amended
and in effect on April 16, 2010, the “Facility Lease”);
WHEREAS, pursuant to Section 10(b)(3)(ix) of the Participation Agreement, the
Company has agreed to maintain at all times during the Basic Lease Term (as
defined in the Participation Agreement) an irrevocable letter of credit for the
benefit of the Equity Participant;
WHEREAS, in order to comply with the requirements of Section 10(b)(3)(ix) of the
Participation Agreement, the Company entered into a Reimbursement Agreement
dated as of August 1, 1986 (as amended and restated thereafter from time to time
prior to July 22, 2002, further amended and restated as of July 22, 2002, as
further amended and restated as of May 19, 2005, and in effect immediately prior
to April 16, 2010, the “Existing Reimbursement Agreement”) between the Company
and JPMorgan, pursuant to which JPMorgan issued to the Equity Participant its
irrevocable transferable letter of credit (such letter of credit, as amended and
restated and in effect from time to time before May 19, 2005, as further amended
and restated as of May 19, 2005, as further amended and restated as of April 16,
2010, and as the same may be amended in accordance with this Agreement and in
effect from time to time hereafter, and any successor Letter of Credit as
provided in such Letter of Credit, being referred to herein as the “Letter of
Credit”), to secure the payment of Rent (as defined in the Participation
Agreement) by the Company under the Facility Lease to the extent of the amount
available to be drawn from time to time under the Letter of Credit;
WHEREAS, the Letter of Credit will expire on May 19, 2010, if not extended; and
WHEREAS, the Company has requested that the Letter of Credit be deemed to be
issued pursuant to this Agreement as of the date hereof and immediately amended
and restated in substantially the form of Exhibit A hereto to provide, inter
alia, that the term of the Letter of

 

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Credit be extended for three years, and the Banks are willing to comply with
such requests on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and in order to induce the
Banks to agree to deem the Letter of Credit to be issued pursuant to this
Agreement and to amend and restate the Letter of Credit, including to extend the
term of the Letter of Credit, the parties hereto agree, upon satisfaction of the
conditions set forth in Section 3(b) below and subject to Section 3(c) below, as
follows:
Section 1. Definitions; Accounting Terms. (a) Definitions. Capitalized terms
used herein and not otherwise defined herein have the respective meanings
assigned thereto in Appendix A to the Facility Lease. The following terms as
used herein have the following respective meanings:
“ACC” means the Arizona Corporation Commission or any successor thereto.
“Administrative Agent” means JPMorgan, in its capacity as administrative agent
for the Banks hereunder, and its successors in such capacity.
“Administrative Questionnaire” means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Company) duly
completed by such Bank.
“Affiliate” means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person.
“Agent Parties” has the meaning given in Section 11(d).
“Agreement” means, when used with reference to this Agreement, this
Reimbursement Agreement, as the same may be amended in accordance with its terms
from time to time.
“Amended and Restated Letter of Credit” means the Amended and Restated
Irrevocable Transferable Letter of Credit No. P-010151 (formerly numbered as
S-1001), dated as of April 16, 2010, amending the Existing Letter of Credit,
substantially in the form of Exhibit A hereto.
“Applicable Booking Office” means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Applicable Booking
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Applicable Booking Office by notice to the Company
and the Administrative Agent.
“Assignee” has the meaning set forth in Section 15(a).
“Assignment and Assumption” means an assignment and assumption entered into by a
Bank and an Assignee (with the consent of any party whose consent is required by
Section 15), and accepted by the Administrative Agent, substantially in the form
of Exhibit B attached hereto.

 

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“Authorized Officer” means the chairman of the board, chief executive officer,
president, chief financial officer, chief operating officer, chief accounting
officer, treasurer, controller, any vice president or any assistant treasurer of
the Company.
“Bank” means (i) each bank or financial institution listed on the signature
pages hereof, each Assignee that becomes a Bank pursuant to Section 15(a), and
their respective successors, and (ii) the Issuing Bank with respect to its
Participation.
“Base Rate” means, for any day, a rate per annum equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect
on such day plus 1/2 of 1% and (c) the LIBO Rate for a one month interest period
on such day (or if such day is not a Business Day, the immediately preceding
Business Day) plus 1%. Any change in the Base Rate due to a change in the Prime
Rate, the Federal Funds Rate or the LIBO Rate shall be effective from and
including the effective date of such change in the Prime Rate, the Federal Funds
Rate or the LIBO Rate, respectively.
“Base Rate Margin” means a rate per annum determined in accordance with
Schedule I hereto.
“Business Day” means any day except (i) a Saturday or Sunday, (ii) any other day
on which commercial banks in New York, New York, Chicago, Illinois or the State
of California or, for purposes of Sections 2(a), 2(g) and 9(i) only, Phoenix,
Arizona, are authorized by law to close, or (iii) a day on which payments in
respect of the Letter of Credit cannot be funded via wire through the Federal
Reserve System.
“Capital Lease Obligations” means as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on the balance
sheet of such Person under GAAP and, for the purposes of this Agreement, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP.
“Code” means the Internal Revenue Code of 1986, as amended, or any successor
statute.
“Company” means Arizona Public Service Company, an Arizona corporation, and its
successors and permitted assigns.
“Company Materials” has the meaning given in Section 7(g).
“Consolidated” has the meaning set forth in Section 8(e).
“Consolidated Capitalization” has the meaning set forth in Section 8(e).
“Consolidated Indebtedness” has the meaning set forth in Section 8(e).
“Consolidated Net Worth” has the meaning set forth in Section 8(e).

 

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“Consolidated Subsidiary” means at any date any Subsidiary or other entity the
accounts of which would be consolidated with those of the Company in its
consolidated financial statements if such statements were prepared as of such
date.
“Date of Early Termination” has the meaning set forth in the Letter of Credit.
“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.
“Defaulting Bank” means any Bank, as reasonably determined by the Administrative
Agent or if the Administrative Agent is the Defaulting Bank, by the Required
Banks, that (a) has defaulted in its obligation to fund its Participation
Percentage in respect of a drawing under the Letter of Credit or any of its
other funding obligations under this Agreement, (b) has notified the Company,
the Administrative Agent, the Issuing Bank or any Bank in writing of its
intention not to fund its Participation Percentage in respect of a drawing under
the Letter of Credit or any of its other funding obligations under this
Agreement, (c) has otherwise failed to pay over to the Administrative Agent or
any other Bank any other amount required to be paid by it hereunder within three
(3) Business Days of the date when due, (d) has failed, within three
(3) Business Days after request by the Administrative Agent, or if the
Administrative Agent is the Defaulting Bank, by the Required Banks, to confirm
that it will comply with the terms of this Agreement relating to its obligations
to fund its Participation Percentage in respect of a drawing under the Letter of
Credit or any of its other funding obligations under this Agreement or (e) shall
(or whose parent company shall) generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or shall have had
any proceeding instituted by or against such Bank (or its parent company)
seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, administrator, assignee for
the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or custodian for, it or for any substantial part of
its property and, in the case of any such proceeding instituted against it (but
not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, administrator, assignee for
the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or custodian for it or for any substantial part of
its property) shall occur, or shall take (or whose parent company shall take)
any corporate action to authorize any of the actions set forth above in this
clause (e); provided that a Bank shall not be deemed to be a Defaulting Bank
solely by virtue of the ownership or assumption of any equity interest in any
Bank or any Person that directly or indirectly controls such Bank by a
governmental authority or an instrumentality thereof.
“Disbursement Advance” has the meaning set forth in Section 2(a).

 

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“Effective Date” has the meaning set forth in Section 3(b).
“Eligible Institution” means (i) a commercial bank or a savings and loan
association having a net worth in excess of $250,000,000 (or the equivalent in
any other currency), (ii) a Bank or an affiliate of a Bank or (iii) any other
Person which the Company designates as an Eligible Institution with the consent
of the Administrative Agent.
“Equity Participant” has the meaning set forth in the first recital hereto.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
“ERISA Affiliate” means any corporation or trade or business which is a member
of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Company or is under common control (within
the meaning of Section 414(c) of the Code) with the Company.
“Existing Letter of Credit” means the Letter of Credit, as amended and in effect
immediately prior to April 16, 2010.
“Existing Reimbursement Agreement” has the meaning set forth in the third
recital hereto.
“Facility Lease” has the meaning set forth in the first recital hereto.
“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if
necessary, to the nearest 1/100th of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (i) if such day is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (ii) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Administrative
Agent on such day as determined by the Administrative Agent.
“Fee Letter” means the Fee Letter dated as of March 17, 2010, among the Company,
JPMorgan, J.P. Morgan Securities Inc. and Union Bank, N.A.
“Financial Information” means the annual report of the Company on Form 10-K for
the year ended December 31, 2009, as filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, and
(ii) the Company’s current reports on Form 8-K filed January 25, 2010,
February 1, 2010, February 19, 2010, March 3, 2010 and March 4, 2010, as so
filed.
“GAAP” has the meaning given in Section 1(b).

 

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“Guarantee” means as to any Person, any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person or in any manner providing for the payment of any Indebtedness of any
other Person or otherwise protecting the holder of such Indebtedness against
loss (whether by virtue of partnership arrangements, agreements to keep well, to
purchase assets, goods, securities or services, or to take-or-pay or otherwise),
provided that the term “Guarantee” shall not include endorsements for collection
or deposit in the ordinary course of business. The term “Guarantee” used as a
verb has a corresponding meaning.
“Hedge Agreement” means any interest rate swap, cap or collar agreement,
interest rate future or option contract, currency swap agreement, currency
future or option contract, commodity future or option contract, commodity
forward contract or other similar agreement.
“Indebtedness” means as to any Person at any date (without duplication):
(a) indebtedness created, issued, incurred or assumed by such Person for
borrowed money or evidenced by bonds, debentures, notes or similar instruments;
(b) all obligations of such Person to pay the deferred purchase price of
property or services, excluding, however, trade accounts payable (other than for
borrowed money) arising in, and accrued expenses incurred in, the ordinary
course of business of such Person so long as such trade accounts payable are
paid within 180 days of the date incurred; (c) all Indebtedness secured by a
lien on any asset of such Person, to the extent such Indebtedness has been
assumed by, or is a recourse obligation of, such Person; (d) all Guarantees by
such Person; (e) all Capital Lease Obligations of such Person; and (f) the
amount of all reimbursement obligations of such Person (whether contingent or
otherwise) in respect of letters of credit, bankers’ acceptances, surety or
other bonds and similar instruments in support of Indebtedness.
“Indemnified Party” has the meaning set forth in Section 21.
“Indenture Trustee” has the meaning set forth in the first recital hereto.
“Instruction” has the meaning set forth in Section 18(b).
“ISP” means International Standby Practices 1998 (International Chamber of
Commerce Publication No. 590).
“Issuing Bank” means JPMorgan and its successors in their capacity as issuer of
the Letter of Credit.
“JPMorgan” means JPMorgan Chase Bank, N.A., a national banking association, in
its individual capacity, and its successors and assigns.
“LC Disbursement” has the meaning given in Section 2(a).
“Letter of Credit” has the meaning set forth in the third recital hereto.
“Letter of Credit Commission Rate” means a rate per annum determined in
accordance with Schedule I hereto.

 

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“LIBO Rate” means, as of any date of determination, the rate appearing on
Reuters Screen LIBOR01 Page (or on any successor or substitute page of such
service, or any successor to or substitute for such service, providing rate
quotations comparable to those currently provided on such page of such service,
as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to deposits in dollars in the
London interbank market) at approximately 11:00 a.m., London time, on such date
of determination, as the rate for deposits in dollars with a one-month maturity.
In the event that such rate is not available at such time for any reason, then
the “LIBO Rate” shall be the rate at which deposits in dollars in an amount
equal to $5,000,000 and for a one-month maturity are offered by the principal
London office of the Administrative Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, on such date
of determination.
“Lien” means any lien, security interest or other charge or encumbrance of any
kind, including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on title
to real property.
“Material Subsidiary” means, at any time, a Subsidiary of the Company which as
of such time meets the definition of a “significant subsidiary” included as of
April 16, 2010 in Regulation S-X of the Securities and Exchange Commission or
whose assets at such time exceed 10% of the assets of the Company and the
Subsidiaries (on a consolidated basis).
“Maximum Credit Amount” means, at any date, the Maximum Credit Amount, as
defined in the Letter of Credit.
“Maximum Drawing Amount” means, at any date, the Maximum Drawing Amount, as
defined in the Letter of Credit.
“Multiemployer Plan” means a plan defined as such in Section 3(37) of ERISA to
which contributions have been made by the Company or any ERISA Affiliate within
any of the preceding five plan years and which is covered by Title IV of ERISA.
“1986 Order” means Decision No. 55120, dated July 24, 1986, of the ACC.
“Other Taxes” has the meaning set forth in Section 2(e).
“Owner Trustee” has the meaning set forth in the first recital hereto.
“Parent” means, as to any Bank, any Person controlling such Bank.
“Participant” has the meaning set forth in Section 15(b).
“Participation” means a participating interest of a Bank in the credit
represented by the Letter of Credit including, without limitation, the interest
therein retained by the Issuing Bank after giving effect to all participating
interests therein granted by it pursuant to Section 14(a), but prior to giving
effect to any interest therein granted to any Participant pursuant to
Section 15(b).
“Participation Agreement” has the meaning set forth in the first recital hereto.

 

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“Participation Amount” means, with respect to any Bank, the amount set forth in
Schedule II hereto opposite the name of such Bank therein, as such amount may be
changed by reason of an assignment by or to such Bank in accordance with
Section 15(a). Such amount shall be reduced from time to time by such Bank’s
ratable share of each reduction of the Maximum Credit Amount.
“Participation Percentage” means, with respect to any Bank at any time, the
percentage equivalent of a fraction (i) the numerator of which is the
Participation Amount of such Bank at such time and (ii) the denominator of which
is the Maximum Credit Amount at such time.
“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
“Permitted Lien” of the Company or any Material Subsidiary means any of the
following:
(i) Liens for taxes, assessments or other governmental charges or levies not at
the time delinquent or thereafter payable without penalty or being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been made;
(ii) Liens imposed by or arising by operation of law, such as Liens of carriers,
warehousemen, mechanics, materialmen and landlords incurred in the ordinary
course of business, including, without limitation, landlord’s liens arising
under Arizona law under leases entered into by the Company in the 1986 sale and
leaseback transactions with respect to PVNGS Unit 2 and securing the payment of
rent under such leases, in each case, for sums not overdue for a period of more
than 30 days or being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been made;
(iii) Liens incurred in the ordinary course of business in connection with
worker’s compensation, unemployment insurance or other forms of governmental
insurance or benefits or other similar statutory obligations;
(iv) Liens to secure obligations on surety or appeal bonds;
(v) Liens on cash deposits in the nature of a right of setoff, banker’s lien,
counterclaim or netting of cash amounts owed arising in the ordinary course of
business on deposit accounts, commodity accounts or securities accounts;
(vi) easements, restrictions, reservations, licenses, covenants, and other
defects of title that are not, in the aggregate, materially adverse to the use
of such property for the purpose for which it is used;
(vii) Liens securing claims against or other obligations of any Person other
than the Company or any Subsidiary of the Company neither assumed nor guaranteed
by the Company or any Subsidiary of the Company nor on which the Company or any
Subsidiary of the Company customarily pays interest, existing upon real estate
or rights

 

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in or relating to real estate acquired by the Company or any Subsidiary of the
Company for use in the operation of the business of the Company or any
Subsidiary of the Company, including, without limitation, for the generation,
transmission or distribution of electric energy, transportation, telephonic,
telegraphic, radio, wireless or other electronic communication or any other
purpose;
(viii) rights reserved to or vested in and Liens on assets arising out of
obligations or duties to any municipality or public authority with respect to
any right, power, franchise, grant, license or permit, or by any provision of
law;
(ix) rights reserved to or vested in others to take or receive any part of the
power pursuant to firm power commitment contracts, purchased power contracts,
tolling agreements and similar agreements, coal, gas, oil or other minerals,
timber or other products generated, developed, manufactured or produced by, or
grown on, or acquired with, any property of the Company;
(x) rights reserved to or vested in any municipality or public authority to
control or regulate any property of the Company, or to use such property in a
manner that does not materially impair the use of such property for the purposes
for which it is held by the Company;
(xi) security interests granted in favor of the lessors in the Company’s
Decommissioning Trust Agreement (PVNGS Unit 2) dated as of January 31, 1992
(such agreement, as amended or otherwise modified from time to time, being the
“Unit 2 Trust Agreement”) entered into in connection with the PVNGS Unit 2 sale
leaseback transaction to secure the Company’s obligations in respect of the
decommissioning of PVNGS Unit 2 or related facilities;
(xii) Liens that may exist with respect to the Unit 2 Trust Agreement (other
than as described in clause (xi) above) or with respect to either of the
Company’s Decommissioning Trust Agreement (PVNGS Unit 1) or Decommissioning
Trust Agreement (PVNGS Unit 3), each dated as of July 1, 1991, as amended or
otherwise modified from time to time, relating to the Company’s obligation to
set aside funds for the decommissioning and retirement from service of such
Units;
(xiii) pledges of pollution control bonds and related rights to secure the
Company’s reimbursement obligations in respect of letters of credit, bond
insurance, and other credit or liquidity enhancements supporting pollution
control bond transactions, provided that such pollution control bonds are not
secured by any other assets of the Company or any Material Subsidiary;
(xiv) rights and interests of Persons other than the Company or any Material
Subsidiary (including, without limitation, acquisition rights), related
obligations of the Company or any Material Subsidiary and restrictions on it or
its property arising out of contracts, agreements and other instruments to which
the Company or any Material Subsidiary is a party that relate to the common
ownership or joint use of property or other use of property for the benefit of
one or more third parties or that allow a third

 

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party to purchase property of the Company or any Material Subsidiary and all
Liens on the interests of Persons other than the Company or any Material
Subsidiary in such property;
(xv) transfers of operational or other control of facilities to a regional
transmission organization or other similar body and Liens on such facilities to
cover expenses, fees and other costs of such an organization or body;
(xvi) Liens established on specified bank accounts of the Company to secure the
Company’s reimbursement obligations in respect of letters of credit supporting
commercial paper issued by the Company and similar arrangements for collateral
security with respect to refinancings or replacements of the same;
(xvii) rights of transmission users or any regional transmission organizations
or similar entities in transmission facilities;
(xviii) Liens on property of the Company sold in a transaction permitted by
Section 8(a) hereof to another Person pursuant to a conditional sales agreement
where the Company retains title;
(xix) Liens created under this Agreement;
(xx) Liens on cash or cash equivalents not to exceed $200,000,000 (A) deposited
in margin accounts with or on behalf of futures contract brokers or paid over to
other contract counterparties, or (B) pledged or deposited as collateral to a
contract counterparty to secure obligations with respect to (1) contracts (other
than for Indebtedness) for commercial and trading activities in the ordinary
course of business for the purchase, transmission, distribution, sale, storage,
lease or hedge of any energy or energy related commodity or (2) Hedge
Agreements;
(xxi) Liens granted on cash or cash equivalents to defease Indebtedness of the
Company or any of its Subsidiaries;
(xxii) Liens granted on cash or cash equivalents constituting proceeds from any
sale or disposition of assets that is not prohibited by Section 8(a) deposited
in escrow accounts or otherwise withheld or set aside to secure obligations of
the Company or any Subsidiary providing for indemnification, adjustment of
purchase price or any similar obligations, in each case, in an amount not to
exceed the amount of gross proceeds received by the Company or any Subsidiary in
connection with such sale or disposition;
(xxiii) Liens, deposits and similar arrangements to secure the performance of
bids, tenders or contracts (other than contracts for borrowed money), public or
statutory obligations, performance bonds and other obligations of a like nature
incurred in the ordinary course of business by the Company or any of its
Subsidiaries;
(xxiv) rights of lessees arising under leases entered into by the Company or any
of its Subsidiaries as lessor, in the ordinary course of business;

 

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(xxv) any Liens on or reservations with respect to governmental and other
licenses, permits, franchises, consents and allowances;
(xxvi) Liens on property which is the subject of a Capital Lease Obligation
designating the Company or any of its Subsidiaries as lessee and all right,
title and interest of the Company or any of its Subsidiaries in and to such
property and in, to and under such lease agreement, whether or not such lease
agreement is intended as a security;
(xxvii) licenses of intellectual property entered into in the ordinary course of
business;
(xxviii) Liens solely on any cash earnest money deposits made by the Company or
any of its Subsidiaries in connection with any letter of intent or purchase
agreement permitted hereunder;
(xxix) deposits or funds established for the removal from service of operating
facilities and coal mines and related facilities or other similar facilities
used in connection therewith; and
(xxx) Liens on cash deposits used to secure letters of credit under defaulting
lender provisions in credit or reimbursement facilities;
provided, however, that no Lien in favor of the PBGC shall, in any event, be a
Permitted Lien.
“Person” means an individual, a corporation, a partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
“Plan” means an employee benefit plan within the meaning of Section 3(3) of
ERISA established or maintained by the Company or any ERISA Affiliate which is
covered by Title IV of ERISA, other than a Multiemployer Plan.
“Platform” has the meaning given in Section 7(g).
“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective; provided, however
that in the event that there is a successor to JPMorgan in its capacity as
Administrative Agent pursuant to Section 20(a)(v), then the term “Prime Rate” as
used in this Agreement shall mean the prime rate, base rate or other analogous
rate of the new Administrative Agent.
“PVNGS” means the Palo Verde Nuclear Generating Station.
“PWCC” means Pinnacle West Capital Corporation, an Arizona corporation and its
successors.

 

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“Reimbursement Default” means any event or condition which constitutes a
Reimbursement Event of Default or which with the giving of notice or the lapse
of time or both would, unless cured or waived, become a Reimbursement Event of
Default.
“Reimbursement Event of Default” has the meaning set forth in Section 9.
“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.
“Reportable Event” means any of the events set forth in Section 4043 of ERISA,
other than events for which the 30 day notice period has been waived under the
final regulations issued under Section 4043, as in effect as of the date of this
Agreement (the “Section 4043 Regulations”). Any changes made to the Section 4043
Regulations that become effective after the Effective Date shall have no impact
on the definition of Reportable Event as used herein unless otherwise amended by
the Company and the Banks.
“Required Banks” means, at any time, Banks with Participation Percentages
aggregating more than 50% at such time exclusive of any Defaulting Bank;
provided that if after application of such provision, any Bank shall hold more
than 50% of the aggregate Participation Percentages of all Banks at such time
(and if there is more than one Bank at such time), “Required Banks” shall mean
such Bank plus one additional Bank.
“Sale Leaseback Obligation Bonds” means PVNGS II Funding Corp.’s (i) 8.00%
Secured Lease Obligation Bonds, Series 1993, due 2015; (ii) any other bonds
issued by or on behalf of the Company in connection with a sale/leaseback
transaction; and (iii) any refinancing or refunding of the obligations specified
in subclauses (i) and (ii) above.
“Standard Letter of Credit Practice” means, for the Issuing Bank, any domestic
or foreign law or letter of credit practices generally and customarily
applicable in the city in which the Issuing Bank issued the Letter of Credit
other than any such practices that conflict with the express terms of the Letter
of Credit or this Agreement. Such practices shall be (i) of banks that regularly
issue letters of credit in the particular city and (ii) required or permitted
under the ISP.
“Stated Termination Date” means April 16, 2013 or such later date to which such
Stated Termination Date shall have been extended pursuant to Section 17.
“Subsequent Order” means any decision, order or ruling of the ACC issued after
April 16, 2010 that amends, supersedes or otherwise modifies the 1986 Order or
any successor decision, order or ruling.
“Subsidiary” of any Person means any corporation of which more than 50% of the
issued and outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned or controlled by such Person, such Person
and one or more of its other Subsidiaries, or one or more of such Person’s other
Subsidiaries.

 

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“Taxes” has the meaning set forth in Section 2(e).
“Termination Date” means the earliest of (i) the date on which the Issuing Bank
pays a drawing under the Letter of Credit for the lesser of the Maximum Drawing
Amount and the Maximum Credit Amount, (ii) if a drawing is not requested by the
Equity Participant after a notice of termination is given under the Letter of
Credit, the Date of Early Termination, (iii) if a drawing is requested by the
Equity Participant after a notice of termination is given under the Letter of
Credit, the date on which the Issuing Bank pays such drawing, (iv) the date on
which the Company delivers a certificate to the Issuing Bank certifying that the
Company has paid the amounts due under Section 9(c) of the Facility Lease (so
long as the Equity Participant shall have acknowledged such payment by its
express confirmation thereof in, and its countersignature to, such certificate),
(v) the date on which the Company delivers a certificate to the Issuing Bank
certifying that the Company has paid the amounts due under Section 9(d) of the
Facility Lease (so long as the Equity Participant shall have acknowledged such
payment by its express confirmation thereof in, and its countersignature to,
such certificate), and (vi) the latest of (x) the Stated Termination Date,
(y) if a certificate in strict conformity with the terms and conditions of the
Letter of Credit is presented on the Stated Termination Date at such time and at
such office as specified in the fifth paragraph of the Letter of Credit, the
date on which the Issuing Bank is required to honor the drawing in accordance
with the provisions of such paragraph pursuant to such presentation, and (z) if
a corrected certificate in strict conformity with the terms and conditions of
the Letter of Credit is presented on the date specified in, and in accordance
with, the provisions of the sixth paragraph of the Letter of Credit, the date on
which the Issuing Bank is required to honor the drawing in accordance with the
provisions of such paragraph pursuant to such presentation.
“United States” means the United States of America, including the States and the
District of Columbia, but excluding its territories and possessions.
“Voting Stock” means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
“Wholly-Owned Subsidiary” of any Person means any corporation of which all
shares of the issued and outstanding capital stock (other than any director’s
qualifying shares) having ordinary voting power to elect a majority of the Board
of Directors of such corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned or controlled by such Person, such Person and one or more of
its other Subsidiaries, or one or more of such Person’s other Subsidiaries.
(b) Accounting Terms. Unless otherwise specified herein, all accounting terms
used herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder shall
be prepared, in accordance with generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Company’s independent public accountants) with the most
recent audited Consolidated financial statements of the Company delivered to the

 

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Administrative Agent (“GAAP”). If at any time any change in GAAP or in the
interpretation thereof would affect the computation of any financial ratio or
requirement set forth in this Agreement, and either the Company or the Required
Banks shall so request, the Administrative Agent, the Banks and the Company
shall negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP or in the interpretation
thereof (subject to the approval of the Required Banks); provided that, until so
amended, such ratio or requirement shall continue to be computed in accordance
with GAAP prior to such change therein.
Section 2. Reimbursement. (a) Subject to the following sentence, the Company
agrees to reimburse the Issuing Bank by making a payment to the Administrative
Agent for the account of the Issuing Bank for the full amount of any drawing
that the Issuing Bank shall have paid under the Letter of Credit (each an “LC
Disbursement”) prior to or immediately upon making by the Issuing Bank of each
such LC Disbursement on the date of each such LC Disbursement; provided that any
moneys received from the Company in connection with any LC Disbursement shall be
applied solely for the purpose of reimbursement of the related LC Disbursement.
If the Company does not reimburse such LC Disbursement in full on or prior to
the date such LC Disbursement is made by the times provided for herein, such LC
Disbursement shall constitute an advance (a “Disbursement Advance”). The Company
promises to pay to the Administrative Agent, for the account of the Issuing Bank
and, to the extent a Bank made a payment pursuant to Section 14 hereof to
reimburse the Issuing Bank, such Bank, each Disbursement Advance on the earliest
of (i) the fifth (5th) Business Day after the Issuing Bank shall have made the
applicable LC Disbursement and (ii) the Stated Termination Date. The unpaid
amount of any Disbursement Advance shall bear interest, for each day from and
including the date the LC Disbursement giving rise to such Disbursement Advance
is made to but excluding the date that the Company reimburses such Disbursement
Advance in full:
(i) from and including the date such relevant LC Disbursement is made until but
excluding the earlier of (x) the date the Administrative Agent, for the benefit
of the Issuing Bank and, to the extent a Bank made payment pursuant to
Section 14 hereof to reimburse the Issuing Bank, such Bank, shall have received
reimbursement from the Company of such Disbursement Advance and all unpaid
amounts under this clause (i) and (y) the fifth Business Day after such relevant
LC Disbursement is made, payable on demand, at a rate per annum equal to the
Base Rate plus the Base Rate Margin, and
(ii) together with interest on any amount not paid by the Company when due under
clause (i) above, from and including the fifth Business Day after the relevant
LC Disbursement is made until such Disbursement Advance is paid in full, payable
on demand, at a rate per annum equal to 2% per annum above the Base Rate plus
the Base Rate Margin;
provided that such interest rate shall in no event be higher (with respect to
each amount due and payable hereunder, from the date such amount is due and
payable until the date such amount is paid in full) than the maximum rate
permitted by applicable law. Interest accrued pursuant to this paragraph shall
be for the account of the Issuing Bank, except that interest accrued on and
after the date of payment by any Bank pursuant to Section 14 to reimburse the
Issuing Bank shall be for the account of such Bank to the extent of such
payment.

 

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(b) The Company agrees to pay to the Administrative Agent for the account of the
Banks ratably in proportion to their Participation Percentages a letter of
credit commission computed at the Letter of Credit Commission Rate on the
Maximum Credit Amount of the Letter of Credit from and including the Effective
Date to, but excluding, the Termination Date. Such commission accrued through
and including the last day of March, June, September and December of each year
shall be payable in arrears on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date.
(c) The Company agrees to pay to the Administrative Agent for the account of the
Issuing Bank a fronting fee at the rate per annum heretofore mutually agreed by
the Company and the Issuing Bank pursuant to the Fee Letter, on the Maximum
Credit Amount of the Letter of Credit from and including the Effective Date to,
but excluding, the Termination Date. Such fronting fee accrued through and
including the last day of March, June, September and December of each year shall
be payable in arrears on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date. The Company
agrees to pay to the Issuing Bank for its account (i) on or before the fifth
Business Day after the Issuing Bank shall have paid any drawing under the Letter
of Credit, a drawing fee (inclusive of any wire-transfer fees) in an amount
equal to $135, (ii) on or before the date of any extension of the Letter of
Credit pursuant to Section 17, an amendment fee, if any, in an amount mutually
agreed upon between the Issuing Bank and the Company, and (iii) on or before the
date of any transfer of the Letter of Credit, a transfer fee, if any, in an
amount set forth on Exhibit 3 to the Letter of Credit.
(d) (i) If after April 16, 2010, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall impose,
modify or deem applicable any reserve, special deposit or similar requirement
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System) against letters of credit issued by or
assets held by, deposits with or for the account of, or credit extended by, any
Bank or shall impose on any Bank any other condition regarding this Agreement or
the Letter of Credit or its Participation therein, and the result of any of the
foregoing is to increase the cost to such Bank of the issuance or maintenance of
the Letter of Credit or its Participation therein, or to reduce the amount of
any sum received or receivable by such Bank under this Agreement with respect
thereto, by an amount deemed by such Bank to be material, then within 30 days
after demand by such Bank (with a copy to the Administrative Agent), the Company
shall pay to the Administrative Agent for the account of such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(ii) If any Bank shall have determined that, after April 16, 2010, the adoption
of any applicable law, rule or regulation regarding capital adequacy, or any
change in any such law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or

 

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comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank’s
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 30 days after
demand by such Bank (with a copy to the Administrative Agent), the Company shall
pay to such Bank such additional amount or amounts as will compensate such Bank
(or its Parent) for such reduction.
(iii) Each Bank will notify the Company and the Administrative Agent of any
event of which it has knowledge, occurring after April 16, 2010 which will
entitle such Bank to compensation pursuant to clause (i) or (ii) of this
Section 2(d) as promptly as practicable, but in any event within 90 days after
such Bank obtains knowledge thereof; provided that, if such Bank fails to give
such notice within 90 days after it obtains knowledge of such an event, such
Bank shall, with respect to compensation payable in respect of any costs
resulting from such event, only be entitled to payment for costs incurred on and
after the date that such Bank does give such notice. A certificate of any Bank
claiming compensation under this Section 2(d) and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of demonstrable error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
(e) For the purposes of this Section 2(e), the following terms have the
following meanings:
“Taxes” means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by the Company
pursuant to this Agreement, and all liabilities with respect thereto, excluding
(i) in the case of each Bank and the Administrative Agent, taxes imposed on or
measured by its net income, and franchise or similar taxes imposed on it, by the
United States, or by the jurisdiction (or any political subdivision thereof)
under the laws of which such Bank or the Administrative Agent (as the case may
be) is organized or does business or in which its principal executive office is
located or, in the case of each Bank, in which its Applicable Booking Office is
located, (ii) any branch profits taxes imposed by the United States or any
similar tax imposed by any other jurisdiction in which the Company is located,
(iii) any backup withholding that is required by the Internal Revenue Code to be
withheld from amounts payable to a Bank that has failed to comply with
Section 2(e)(iii)(2)(A), and (iv) in the case of each Bank, any United States
withholding tax imposed with respect to any payment by the Company pursuant to
this Agreement, but only up to the rate (if any) at which United States
withholding tax would apply to such payments to such Bank at the time such Bank
first becomes a party to this Agreement.
“Other Taxes” means any present or future stamp or documentary taxes and any
other excise or property taxes, or similar charges or levies, which arise from
any payment made pursuant to this Agreement or from the execution or delivery
of, or otherwise with respect to, this Agreement or the Letter of Credit.

 

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(i) Any and all payments by the Company to or for the account of any Bank or the
Administrative Agent hereunder shall be made without deduction for any Taxes or
Other Taxes; provided that, if the Company shall be required by law to deduct
any Taxes or Other Taxes from any such payments, (A) the sum payable shall be
increased as necessary so that after making all required deductions for any
Taxes or Other Taxes (including deductions applicable to additional sums payable
under this Section) such Bank or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (B) the Company shall make such deductions, (C) the
Company shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law and (D) the Company shall
furnish to the Administrative Agent the original or a certified copy of a
receipt evidencing payment thereof.
(ii) The Company agrees to indemnify each Bank and the Administrative Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section) paid by such Bank or the Administrative Agent (as the case
may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be paid within
30 days after such Bank or the Administrative Agent (as the case may be) makes
demand therefor. Such demand shall be made as promptly as practicable, but in
any event within 90 days after such Bank obtains actual knowledge of such event;
provided, however, that if any Bank fails to make such demand within 90 days
after such Bank obtains knowledge of such event, such Bank shall, with respect
to compensation payable in respect of such event, not be entitled to
compensation in respect of the costs and losses incurred between the 90th day
after such Bank obtains actual knowledge of such event and the date such Bank
makes such demand.
(iii)
(1) Each Bank shall deliver to the Company and to the Administrative Agent, at
the time or times prescribed by applicable laws or when reasonably requested by
the Company or the Administrative Agent, such properly completed and executed
documentation prescribed by applicable laws or by the taxing authorities of any
jurisdiction and such other reasonably requested information as will permit the
Company or the Administrative Agent, as the case may be, to determine
(A) whether or not payments made hereunder are subject to Taxes, (B) if
applicable, the required rate of withholding or deduction, and (C) such Bank’s
entitlement to any available exemption from, or reduction of, applicable Taxes
in respect of all payments to be made to such Bank by the Company pursuant to
this Agreement or otherwise to establish such Bank’s status for withholding tax
purposes in the applicable jurisdiction.
(2) Without limiting the generality of the foregoing:
(A) any Bank that is a “United States Person” within the meaning of Section
7701(a)(30) of the Internal Revenue Code, and not an exempt recipient described
in Section 6049(b)(4) of the Internal Revenue Code, shall

 

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deliver to the Company and the Administrative Agent executed originals of
Internal Revenue Service Form W-9 or such other documentation or information
prescribed by applicable laws or reasonably requested by the Company or the
Administrative Agent as will enable the Company or the Administrative Agent, as
the case may be, to determine whether or not such Bank is subject to backup
withholding or information reporting requirements; and
(B) each Bank that is organized under the laws of a jurisdiction other than the
United States (including each State thereof and the District of Columbia) (a
“Foreign Bank”) that is entitled under the Internal Revenue Code or any
applicable treaty to an exemption from or reduction of withholding tax with
respect to payments hereunder shall deliver to the Company and the
Administrative Agent (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Bank becomes a Bank
under this Agreement (and from time to time thereafter upon the request of the
Company or the Administrative Agent, but only if such Foreign Bank is legally
entitled to do so), whichever of the following is applicable
(I) executed originals of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is a
party,
(II) executed originals of Internal Revenue Service Form W-8ECI,
(III) executed originals of Internal Revenue Service Form W-8IMY and all
required supporting documentation,
(IV) in the case of a Foreign Bank claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Internal Revenue Code, (x) a
certificate to the effect that such Foreign Bank is not (A) a “bank” within the
meaning of section 881(c)(3)(A) of the Internal Revenue Code, (B) a “10 percent
shareholder” of the Company within the meaning of section 881(c)(3)(B) of the
Internal Revenue Code, or (C) a “controlled foreign corporation” described in
section 881(c)(3)(C) of the Internal Revenue Code and (y) executed originals of
Internal Revenue Service Form W-8BEN, or
(V) executed originals of any other form prescribed by applicable laws as a
basis for claiming exemption from or a reduction in United States Federal
withholding tax together with such supplementary documentation as may be
prescribed by applicable laws to permit the Company or the Administrative Agent
to determine the withholding or deduction required to be made.
(3) Each Bank shall promptly notify the Company and the Administrative Agent of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction.

 

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(iv) For any period with respect to which a Bank has failed to provide the
Company or the Administrative Agent with the appropriate forms pursuant to
Section 2(e)(iii) (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided, but only to the extent that the Bank has complied with
the law as changed by such treaty, law or regulation), such Bank shall not be
entitled to indemnification under Section 2(e)(ii) or (iii) with respect to
Taxes imposed by the United States; provided that if a Bank, which is otherwise
exempt from or subject to a reduced rate of withholding tax, becomes subject to
Taxes because of its failure to deliver a form required hereunder, the Company
shall take such steps as such Bank shall reasonably request to assist such Bank
to recover such Taxes.
(v) If the Company is required to pay additional amounts to or for the account
of any Bank pursuant to this Section, then such Bank will change the
jurisdiction of its Applicable Booking Office if, in the reasonable judgment of
such Bank, such change (A) will eliminate or reduce any such additional payment
which may thereafter accrue and (B) is not otherwise materially disadvantageous
to such Bank.
(f) If (x) the Company is required pursuant to Section 2(d) or 2(e) to make any
additional payment to any Bank (any Bank so affected an “Affected Bank”) or
(y) any Bank becomes a Defaulting Bank, the Company may elect to replace the
Participation Percentage and Participation of such Affected Bank or Defaulting
Bank, as applicable, provided that no Reimbursement Event of Default shall have
occurred and be continuing at the time of such replacement, and provided further
that, concurrently with such replacement, (i) another bank or other entity which
is reasonably satisfactory to the Company, the Issuing Bank and the
Administrative Agent shall agree, as of such date, to purchase for cash (to the
extent of the principal amount of such Affected Bank’s or Defaulting Bank’s, as
applicable, Disbursement Advances and accrued interest and fees and other
reimbursable amounts then due and payable) and otherwise assume the
Participation Percentage and Participation of, and other obligations then due
to, such Affected Bank or Defaulting Bank, as applicable, pursuant to an
Assignment and Assumption and to become a Bank for all purposes under this
Agreement and to assume all obligations of such Affected Bank or Defaulting
Bank, as applicable, to be replaced as of such date and to comply with the
requirements of Section 15 applicable to assignments, (ii) the Company shall pay
to such Affected Bank or Defaulting Bank, as applicable, in same day funds on
the day of such replacement all interest, fees and other amounts then accrued
but unpaid to such Affected Bank or Defaulting Bank, as applicable, by the
Company hereunder to and including the date of replacement, including without
limitation payments due to such Affected Bank or Defaulting Bank, as applicable,
under Sections 2(d) and 2(e), in each case to the extent not paid by the
purchasing Bank, and (iii) concurrently with the effectiveness of such
replacement, such Affected Bank or Defaulting Bank, as applicable, shall be
released with respect to its Participation Percentage, such Participation
Percentage shall be terminated, and Disbursement Advances assigned by such
Affected Bank or Defaulting Bank, as applicable, and shall cease to be a Bank
hereunder but shall continue to be entitled to the benefits of, and subject to,
those provisions of this Agreement which survive payment of all amounts payable
pursuant to Section 2 and termination of the Letter of Credit and this
Agreement.

 

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(g) The Company shall make each payment hereunder to the Administrative Agent at
its Chicago office, not later than 2:00 p.m. (New York City time) on the date
when due in lawful money of the United States of America and in Federal or other
funds immediately available in Chicago. Whenever any payment under this
Section 2 shall be due on a day which is not a Business Day, the date for
payment thereof shall be extended to the next succeeding day that is a Business
Day. If the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(h) Computations of the letter of credit commission, the fronting fee referred
to in Section 2(c), and interest based on the Prime Rate shall be made by the
Administrative Agent on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days (including the first day but excluding the
last day) elapsed. Computations of all other interest hereunder shall be made by
the Administrative Agent on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) elapsed.
(i) Provided that the Company shall have delivered notice thereof to the
Administrative Agent not less than three Business Days prior to any proposed
termination, the Company may terminate this Agreement (other than those
provisions which expressly survive termination hereof) upon (i) payment in full
of all amounts payable under Section 2, together with accrued and unpaid
interest thereof, (ii) cancellation and return of the Letter of Credit, and
(iii) the payment in full of all reimbursable expenses and other obligations
under this Agreement together with accrued and unpaid interest thereon. No such
termination will be made unless the Equity Participant will be provided with a
substitute letter of credit as and to the extent required by the Participation
Agreement at such time or unless the Equity Participant shall otherwise consent.
(j) Notwithstanding any provision of this Agreement to the contrary, if any Bank
becomes a Defaulting Bank, then the following provisions shall apply for so long
as such Bank is a Defaulting Bank:
(i) the Company shall not be required to pay any letter of credit commission to
such Defaulting Bank pursuant to Section 2(b) with respect to such Defaulting
Bank’s Participation Percentage; provided that, without prejudice to any rights
or remedies of the Issuing Bank or any Bank hereunder, the letter of credit
commission payable under Section 2(b) with respect to such Defaulting Bank’s
Participation Percentage shall be payable to the Issuing Bank until such
Defaulting Lender shall cease to be a Defaulting Lender hereunder. For the
avoidance of doubt, it is being understood that, the interest payable by the
Company pursuant to Section 2(a) shall continue to be payable to the applicable
Banks, including the Defaulting Bank, to the extent the Defaulting Bank has
funded its Participation Percentage and would be entitled to such interest had
it not become a Defaulting Bank;
(ii) the Participation Percentage of such Defaulting Bank shall not be included
in determining whether the Required Banks have taken or may take any action
hereunder (including any consent to any amendment or waiver pursuant to
Section 10), other than any waiver, amendment or modification requiring the
consent of all Banks or of each affected Bank;

 

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(iii) for the avoidance of doubt, the Company shall retain and reserve its other
rights and remedies respecting each Defaulting Bank; and
(iv) in the event that the Administrative Agent, the Company and the Issuing
Bank each agrees that a Defaulting Bank has adequately remedied all matters that
caused such Bank to be a Defaulting Bank, then this Section 2(i) shall no longer
apply in respect of such rehabilitated Defaulting Bank.
Section 3. Amendment and Restatement of Letter of Credit; Conditions to
Effectiveness; Transitional Provisions. (a) On the terms and conditions herein
set forth, the Issuing Bank agrees to execute and deliver to the Equity
Participant on the Effective Date, or, if all of the conditions precedent to the
effectiveness of this Agreement shall not have been satisfied by 3:00 p.m., New
York City time, on the Effective Date, on the next succeeding Business Day, the
Amended and Restated Letter of Credit substantially in the form of Exhibit A
hereto, amending and restating the Existing Letter of Credit.
(b) This Agreement shall become effective on the date (the “Effective Date”) on
which all of the following conditions shall have been satisfied (or waived in
accordance with Section 10):
(i) receipt by the Administrative Agent of a counterpart of this Agreement
signed by each party hereto;
(ii) receipt by the Administrative Agent of fees payable by the Company on or
before the Effective Date in such amounts and for the accounts of such parties
as heretofore mutually agreed pursuant to the Fee Letter;
(iii) receipt by the Administrative Agent of evidence to its satisfaction that
all amounts accrued and unpaid under the Existing Reimbursement Agreement to
(but not including) the Effective Date payable by any party thereto have been
paid and the Existing Reimbursement Agreement shall have been terminated;
(iv) receipt by the Administrative Agent of an opinion of Snell & Wilmer L.L.P.,
special counsel for the Company, dated the Effective Date, in form and substance
satisfactory to the Administrative Agent;
(v) receipt by the Administrative Agent of copies, certified by the Secretary,
an Associate Secretary or an Assistant Secretary of the Company, of the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby;
(vi) receipt by the Administrative Agent of a certificate of the Secretary, an
Associate Secretary or an Assistant Secretary of the Company, dated the
Effective Date, certifying the names and true signatures of the officers of the
Company authorized to sign this Agreement;
(vii) receipt by the Administrative Agent of a certificate, dated the Effective
Date, signed by an Authorized Officer to the effect that (x) (A) no Default or
Event of

 

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Default under the Facility Lease, and (B) no Reimbursement Default, in each
case, shall have occurred and be continuing on the Effective Date or would
result from the amendment and restatement of the Letter of Credit pursuant to
clause (a) of this Section 3; and (y) that the representations and warranties of
the Company set forth in Section 6 of this Agreement shall be true and correct
on and as of the Effective Date as though made on and as of such date;
(viii) receipt by the Administrative Agent of certified copies of all approvals,
authorizations, orders or consents of, or notices to or registrations with, any
governmental body or agency, if any, required for the Company to enter into this
Agreement;
(ix) receipt by the Administrative Agent of such other approvals, opinions or
documents as the Administrative Agent may reasonably request; and
(x) receipt by the Administrative Agent of all documents the Administrative
Agent may reasonably request relating to the existence of the Company, the
corporate authority for and the validity of this Agreement and any other matters
relevant hereto;
provided that all documents (or copies thereof) to be delivered to the
Administrative Agent on or before the Effective Date shall be provided to each
Bank and shall be in form and substance satisfactory to the Required Banks.
(c) Promptly after this Agreement becomes effective, the Administrative Agent
shall give notice thereof and of the Effective Date to each party hereto.
Immediately upon the effectiveness of this Agreement, (1) (A) the Existing
Letter of Credit shall be deemed to be issued pursuant to this Agreement,
(B) the undrawn amount of the Existing Letter of Credit and any unreimbursed
amount of disbursements with respect to the Existing Letter of Credit shall be
subject to reimbursement hereunder and (C) the provisions of this Agreement
shall apply to the Existing Letter of Credit, and the Company and the Banks
hereby expressly acknowledge their respective obligations hereunder with respect
to the Existing Letter of Credit, and (2) the Issuing Bank will be obligated to
amend and restate the Letter of Credit as provided in clause (a) of this
Section 3 and each party hereto will be bound by the provisions of this
clause (c).
Section 4. Adjustment of Maximum Drawing Amount; Terms of Drawing. The Maximum
Drawing Amount shall be modified as specified in the third paragraph of the
Letter of Credit and drawings under the Letter of Credit shall be subject to the
other terms and conditions set forth in the Letter of Credit.
Section 5. Obligations Absolute. The payment obligations of the Company under
this Agreement shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability or legal effect of this Agreement,
the Letter of Credit or any of the Transaction Documents or Financing Documents;
(ii) any amendment or waiver of or any consent to depart from all or any of this
Agreement, the Transaction Documents or Financing Documents;

 

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(iii) the existence of any claim, set-off, defense or other rights which the
Company may have at any time against the Equity Participant, the Owner Trustee
or any transferee of the Letter of Credit (or any persons or entities for whom
any of the foregoing may be acting), the Administrative Agent, any Bank, any
Participant or any other person or entity, whether in connection with this
Agreement, the Transaction Documents or Financing Documents, the transactions
contemplated hereby or thereby or any unrelated transaction; provided that
nothing herein shall prevent the assertion of such claim by separate suit or
compulsory counterclaim;
(iv) any statement or any other document presented under the Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;
(v) payment by the Issuing Bank under the Letter of Credit against presentation
of a certificate which does not comply with the terms of the Letter of Credit;
or
(vi) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing.
Section 6. Representations and Warranties of the Company. The Company represents
and warrants as of the Effective Date as follows:
(a) Corporate Existence. Each of the Company and each Material Subsidiary:
(i) is a corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation; (ii) has all requisite corporate power
necessary to own its assets and carry on its business as presently conducted;
(iii) has all governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as presently conducted, if
the failure to have any such license, authorization, consent or approval is
reasonably likely to have a material adverse effect on the financial condition
or financial prospects of the Company and its Consolidated Subsidiaries, taken
as a whole, and except as disclosed in the Financial Information or by written
notice delivered to the Banks prior to the execution and delivery of this
Agreement and except that (A) the Company from time to time may make minor
extensions of its lines, plants, services or systems prior to the time a related
franchise, certificate of convenience and necessity, license or permit is
procured, (B) from time to time communities served by the Company may become
incorporated and considerable time may elapse before such a franchise is
procured, (C) certain such franchises may have expired prior to the
renegotiation thereof, (D) certain minor defects and exceptions may exist which,
individually and in the aggregate, are not material and (E) certain franchises,
certificates, licenses and permits may not be specific as to their geographical
scope); and (iv) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would have a material adverse effect on the
financial condition or financial prospects of the Company and its Consolidated
Subsidiaries, taken as a whole. All of the issued and outstanding common stock
of the Company is owned by PWCC.
(b) Noncontravention, Etc. The execution, delivery, and performance by the
Company of this Agreement are within the Company’s corporate powers, have been
duly

 

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authorized by all necessary corporate action, and do not (i) contravene the
Company’s charter or by-laws, (ii) contravene any Applicable Law or any
contractual restriction binding on or affecting the Company, or (iii) cause the
creation or imposition of any Lien upon the assets of the Company or any
Material Subsidiary.
(c) Approvals. No authorization or approval or other action by, and no notice to
or filing or registration with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Company of this
Agreement, except for (w) the 1986 Order which has been duly issued by the ACC
and is in full force and effect in the form originally issued, (x) such other
Governmental Actions as have been duly obtained, given or accomplished, (y) the
filing with the ACC of a copy of this Agreement within five business days of the
execution hereof, in accordance with the 1986 Order and (z) as may be required
under Applicable Law not now in effect. The execution, delivery, and performance
by the Company of this Agreement do not require the consent or approval of the
Equity Participant or the Owner Trustee (except as specified in this Agreement)
or PWCC or any trustee or holder of any indebtedness or other obligation of the
Company, other than such consents and approvals as have been duly obtained,
given or accomplished. No Governmental Action by any Federal, Arizona or New
York Governmental Authority relating to the Securities Act, the Securities
Exchange Act, the Trust Indenture Act, the Federal Power Act, the Atomic Energy
Act, the Nuclear Waste Act, the Holding Company Act, the Arizona Public Utility
Act, energy or nuclear matters, public utilities, the environment, health and
safety or PVNGS Unit 2 is or will be required in connection with the
participation by the Administrative Agent, any Bank or any Participant in the
consummation of the transactions contemplated by this Agreement, except such
Governmental Actions (A) as have been, duly obtained, given or accomplished or
(B) as may be required by Applicable Law not now in effect.
(d) Binding Agreement. This Agreement is a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
subject, however, to the application by a court of general principles of equity
and to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights generally.
(e) Litigation. There is no pending or (to the knowledge of an Authorized
Officer of the Company) threatened action or proceeding affecting the Company or
any of its Subsidiaries before any court, governmental agency or arbitrator,
that, if adversely determined, would be reasonably likely to have a material
adverse effect on the financial condition or financial prospects of the Company
and its Consolidated Subsidiaries, taken as a whole, except as disclosed in the
Financial Information or by written notice delivered to the Banks prior to the
execution and delivery of this Agreement.
(f) Financial Statements. The balance sheet of the Company and its Consolidated
Subsidiaries as of December 31, 2009 and the related statements of income and
cash flows of the Company and its Consolidated Subsidiaries for the fiscal year
then ended, copies of which have been furnished to the Banks, fairly present in
all material respects the financial condition of the Company and its
Consolidated Subsidiaries as of such date and the results of operations and cash
flows of the Company and its Consolidated Subsidiaries for such fiscal year, all
in accordance with GAAP (except as disclosed therein). Since December 31, 2009,
there has been no material

 

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adverse change in the financial condition or financial prospects of the Company
and its Consolidated Subsidiaries, taken as a whole, except as disclosed in the
Financial Information or by written notice delivered to the Banks prior to the
execution and delivery of this Agreement.
(g) ERISA. The Company and the ERISA Affiliates have fulfilled their respective
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and have not incurred any
liability to the PBGC or any Plan or Multiemployer Plan, other than liability to
the PBGC for premiums prior to the due date for such premiums and liability to
any Plan maintained by the Company or an ERISA Affiliate or to any Multiemployer
Plan for contributions prior to the due date for such contributions which shall
be paid in accordance with the provisions of the minimum funding standards of
ERISA and the Code.
(h) Taxes. The Company and its Subsidiaries have filed all United States Federal
income tax returns and all other material tax returns which are required to be
filed by them and have paid all taxes due pursuant to such returns or pursuant
to any assessment received by the Company or any of its Subsidiaries, except to
the extent that (i) such taxes are being contested in good faith and by
appropriate proceedings and appropriate reserves for the payment thereof have
been maintained by the Company and its Subsidiaries in accordance with GAAP or
(ii) the failure to make such filings or such payments is not reasonably likely
to have a material adverse effect on the financial condition or the financial
prospects of the Company and its Consolidated Subsidiaries, taken as a whole.
The charges, accruals and reserves on the books of the Company and its Material
Subsidiaries as set forth in the most recent financial statements of the Company
delivered to the Banks pursuant to Section 6(f) in respect of taxes and other
governmental charges are, in the opinion of the Company, adequate.
(i) Environmental. The operations and properties of the Company and its
Subsidiaries comply in all material respects with all environmental laws, the
noncompliance with which would have a material adverse effect on the financial
condition or financial prospects of the Company and its Consolidated
Subsidiaries taken as a whole, except as disclosed in the Financial Information
or by written notice delivered to the Banks prior to the execution and delivery
of this Agreement.
(j) Investment Company. The Company is not an “investment company”, or a company
“controlled” by an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended.
(k) No Material Misstatements or Omissions. The Financial Information did not as
of the date furnished, contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements made therein, in the
light of the circumstances under which they were or shall be made, not
misleading; provided that with respect to any projected financial information,
forecasts, estimates or forward-looking information, the Company represents only
that such information and materials have been prepared in good faith on the
basis of assumptions believed to be reasonable at the time of preparation of
such forecasts, and no representation or warranty is made as to the actual
attainability of any such projections, forecasts, estimates or forward-looking
information.

 

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(l) No Amendments. Except as provided to the Banks prior to the Effective Date,
there has been no amendment or waiver of, or consent with respect to, the
payment obligations of the Company under any Transaction Document or Financing
Document since March 17, 1993.
Section 7. Affirmative Covenants. So long as a drawing is available under the
Letter of Credit or the Company shall have any obligation to pay any amount
hereunder to or for the account of the Administrative Agent or any Bank, the
Company will, unless the Required Banks shall otherwise consent in writing:
(a) Preservation of Corporate Existence, Business, Etc. (i) Preserve and
maintain its corporate existence, rights (charter and statutory) and franchises
(other than “franchises” as described in Arizona Revised Statutes,
Section 40-283 or any successor provision) reasonably necessary in the normal
conduct of its business, if the failure to maintain such rights and privileges
is reasonably likely to have a material adverse effect on the financial
condition or financial prospects of the Company and its Consolidated
Subsidiaries taken as a whole, and use its commercially reasonable efforts to
preserve and maintain such franchises reasonably necessary in the normal conduct
of its business, except that (A) the Company from time to time may make minor
extensions of its lines, plants, services or systems prior to the time a related
franchise, certificate of convenience and necessity, license or permit is
procured, (B) from time to time communities served by the Company may become
incorporated and considerable time may elapse before such a franchise is
procured, (C) certain such franchises may have expired prior to the
renegotiation thereof, (D) certain minor defects and exceptions may exist which,
individually and in the aggregate, are not material and (E) certain franchises,
certificates, licenses and permits may not be specific as to their geographical
scope; provided, however, that the Company may consummate any merger or
consolidation permitted under Section 8(b).
(ii) Continue to conduct the same general type of business conducted on
April 16, 2010.
(b) Compliance with Laws, Etc. (i) Comply, and cause each Material Subsidiary to
comply, in all material respects with all applicable laws, rules, regulations
and orders of governmental or regulatory authorities if the failure to comply
would have a material adverse effect on the financial condition or financial
prospects of the Company and its Consolidated Subsidiaries, taken as a whole.
(ii) Comply at all times with the 1986 Order and any Subsequent Order, unless
the failure to so comply could not affect the validity or enforceability of the
indebtedness of the Company pursuant to this Agreement.
(c) Payment of Taxes and Claims. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent, all
taxes, assessments and governmental charges or levies imposed on it or its
property; provided that neither the Company nor any of its Subsidiaries shall be
required to pay or discharge any such tax, assessment, charge or levy (i) that
is being contested in good faith and by proper proceedings and as to which
adequate reserves are being maintained in accordance with GAAP or (ii) if the
failure to pay such tax, assessment, charge or levy is not reasonably likely to
have a material

 

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adverse effect on the financial condition or financial prospects of the Company
and its Consolidated Subsidiaries, taken as a whole.
(d) Maintenance of Insurance. Maintain, and cause each Material Subsidiary to
maintain, insurance, either with responsible and reputable insurance companies
or associations, or through its own program of self-insurance, in such amounts
and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Company or such Material Subsidiary operates.
(e) Visitation Rights. Permit, and cause each of its Subsidiaries to permit, at
any reasonable time and from time to time, any Bank or any of its agents or
representatives to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Company and any of its
Subsidiaries, and to discuss the affairs, finances and accounts of the Company
and any of its Subsidiaries with any of their respective officers or directors;
provided that the Company and its Subsidiaries reserve the right to restrict
access to any of its properties in accordance with reasonably adopted procedures
relating to safety and security; and provided further that the costs and
expenses incurred by any Bank or its agents or representatives in connection
with any such examinations, copies, abstracts, visits or discussions shall be,
upon the occurrence and during the continuation of a Reimbursement Default, for
the account of the Company and, in all other circumstances, for the account of
such Bank.
(f) Keeping of Books; Maintenance of Property. Keep, and cause each Material
Subsidiary to keep, (i) proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each such Subsidiary in a manner that permits the
preparation of financial statements in accordance with GAAP and (ii) all
property useful and necessary in its business in good working order and
condition (ordinary wear and tear excepted), it being understood that this
covenant relates only to the working order and condition of such properties and
shall not be construed as a covenant not to dispose of properties.
(g) Reporting Requirements. Furnish to each of the Banks:
(i) as soon as available and in any event within 60 days after the end of each
of the first three fiscal quarters of each fiscal year of the Company, (A) for
each such fiscal quarter of the Company, statements of income and cash flows of
the Company and its Consolidated Subsidiaries for such fiscal quarter and the
related balance sheet of the Company and its Consolidated Subsidiaries as at the
end of such fiscal quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding fiscal quarter in the preceding
fiscal year and (B) for the period commencing at the end of the previous fiscal
year and ending with the end of such fiscal quarter, statements of income and
cash flows of the Company and its Consolidated Subsidiaries for such period
setting forth in each case in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year; provided that so long as the
Company remains subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended, the Company may provide, in satisfaction of the
requirements of this first sentence of this Section 7(g)(i), its report on Form
10-Q for such fiscal quarter. Each set of financial statements provided under
this Section 7(g)(i) shall be accompanied by a

 

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certificate of an Authorized Officer, which certificate shall state that said
financial statements fairly present in all material respects the financial
condition and results of operations and cash flows of the Company and its
Consolidated Subsidiaries in accordance with GAAP, consistently applied (except
as disclosed therein), as at the end of, and for, such period (subject to normal
year-end audit adjustments);
(ii) as soon as available and in any event within 90 days after the end of each
fiscal year of the Company, statements of income, changes in common stock equity
and cash flows of the Company and its Consolidated Subsidiaries for such year
and the related balance sheets of the Company and its Consolidated Subsidiaries
as at the end of such year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year; provided that, so long as
the Company remains subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, the Company may provide, in satisfaction of
the requirements of this first sentence of this Section 7(g)(ii), its report on
Form 10-K for such fiscal year. Each set of financial statements provided
pursuant to this Section 7(g)(ii) shall be accompanied by an opinion thereon of
independent certified public accountants of recognized national standing, which
opinion shall state that said financial statements fairly present in all
material respects the financial condition and results of operations and cash
flows of the Company and its Consolidated Subsidiaries as at the end of, and
for, such fiscal year, in accordance with GAAP consistently applied (except as
disclosed therein);
(iii) as soon as possible and in any event within five days after an Authorized
Officer knows of the occurrence of any Reimbursement Default continuing on the
date of such statement, a statement of an Authorized Officer setting forth
details of such Reimbursement Default and the action which the Company has taken
and proposes to take with respect thereto;
(iv) as soon as possible, and in any event within ten days after an Authorized
Officer knows that any of the events or conditions specified below with respect
to any Plan or Multiemployer Plan have occurred or exist, a statement signed by
an Authorized Officer setting forth details respecting such event or condition
and the action, if any, which the Company or its ERISA Affiliate proposes to
take with respect thereto (and a copy of any report or notice required to be
filed with or given to the PBGC by the Company or an ERISA Affiliate with
respect to such event or condition):
(A) any Reportable Event; provided that a failure to meet the minimum funding
standard of Section 412 of the Code or Section 302 of ERISA shall be a
reportable event regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code;
(B) the filing under Section 4041(c) of ERISA of a notice of intent to terminate
any Plan in a distress termination or the termination of any Plan in a distress
termination;
(C) the institution by the PBGC of proceedings under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any

 

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Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan:
(D) the complete or partial withdrawal by the Company or any ERISA Affiliate
under Part 1 of Subtitle E of Title IV of ERISA from a Multiemployer Plan, or
the receipt by the Company or any ERISA Affiliate of notice from a Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA; and
(E) the institution of a proceeding by a fiduciary of any Multiemployer Plan
against the Company or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 45 days;
(v) promptly after (A) any amendment or modification of the 1986 Order or
(B) the promulgation, amendment or modification of any Subsequent Order by the
ACC, a copy thereof;
(vi) promptly after the sending or filing thereof, copies of all reports and
registration statements (other than exhibits thereto and registration statements
on Form S-8 or its equivalent) which the Company or any of its Subsidiaries
files with the Securities and Exchange Commission or any national securities
exchange;
(vii) as soon as practicable and in any event within 30 days after the execution
thereof, a copy of each amendment, waiver or consent relating to the payment
obligations of the Company under any Transaction Document or Financing Document;
(viii) promptly after an Authorized Officer becomes aware of the occurrence
thereof, notice of any change by Moody’s or S&P of their respective Ratings or
of the cessation (or subsequent commencement) by Moody’s or S&P of publication
of their respective Ratings (as such terms are defined on Schedule I hereto);
and
(ix) such other information respecting the condition or operations, financial or
otherwise, of the Company or any of its Subsidiaries as the Administrative Agent
at the request of any Bank may from time to time reasonably request.
The Company will furnish to the Banks, at the time it furnishes each set of
financial statements pursuant to Section 7(g)(i) or 7(g)(ii) above, a
certificate of an Authorized Officer (x) to the effect that no Reimbursement
Default has occurred and is continuing (or, if any Reimbursement Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action that the Company has taken and proposes to take with
respect thereto) and (y) setting forth in reasonable detail the computations
necessary to determine whether the Company is in compliance with Section 8(e) as
of the end of the relevant fiscal quarter or fiscal year.
Information required to be delivered pursuant to Sections 7(g)(i), (ii) and
(vi) above shall be deemed to have been delivered on the date on which the
Company provides notice to the

 

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Administrative Agent that such information has been posted on the Company’s
parent’s website on the Internet at www.pinnaclewest.com, at
sec.gov/edaux/searches.htm or at another website identified in such notice and
accessible by the Banks without charge; provided that (i) such notice may be
included in a certificate delivered pursuant to Section 7(g)(i) or (ii) and
(ii) the Company shall deliver paper copies of the information referred to in
Section 7(g)(i), (ii), and (vi) to any Bank which requests such delivery.
Notwithstanding anything contained herein, in every instance the Company shall
be required to provide to the Banks copies (which copies may be in electronic
PDF format) of certificates of Authorized Officers required under Section 7(g).
Subject to the confidentiality provisions set forth in Section 22, the Company
hereby acknowledges that the Administrative Agent may make available to the
Banks materials and/or information provided by or on behalf of the Company
hereunder (collectively, “Company Materials”) by posting the Company Materials
on IntraLinks or another similar electronic system (the “Platform”).
(h) Filing with ACC. File a copy of this Agreement, as executed by each of the
parties hereto, with the ACC within five business days of the execution hereof.
Section 8. Negative Covenants. So long as a drawing is available under the
Letter of Credit or the Company shall have any obligation to pay any amount
hereunder to or for the account of the Administrative Agent or any Bank, the
Company will not, without the written consent of the Required Banks:
(a) Sale of Assets. Sell, lease, transfer or otherwise dispose of, or permit any
of its Material Subsidiaries to sell, lease, transfer or otherwise dispose of,
any assets, or grant any option or other right to purchase, lease or otherwise
acquire any assets to any Person other than the Company or any Subsidiary of the
Company, except (i) dispositions in the ordinary course of business, including,
without limitation, sales or other dispositions of electricity and related and
ancillary services, other commodities, emissions credits and similar mechanisms
for reducing pollution, and damaged, obsolete, worn out or surplus property no
longer required or useful in the business or operations of the Company or any of
its Subsidiaries, (ii) sale or other disposition of patents, copyrights,
trademarks or other intellectual property that are, in the Company’s reasonable
judgment, no longer economically practicable to maintain or necessary in the
conduct of the business of the Company or its Subsidiaries and any license or
sublicense of intellectual property that does not interfere with the business of
the Company or any Material Subsidiary, (iii) in a transaction authorized by
clause (b) of this Section, (iv) individual dispositions occurring in the
ordinary course of business which involve assets with a book value not exceeding
$5,000,000, (v) sales of assets during the term of this Agreement having an
aggregate book value not to exceed 30% of the total of all assets properly
appearing on the most recent balance sheet of the Company provided pursuant to
Section 6(f) or 7(g)(ii) hereof and (vi) any Lien permitted under Section 8(c).
(b) Mergers, Etc. Merge or consolidate with or into any Person, or permit any
Material Subsidiary to do so, except that:
(i) any Material Subsidiary may merge with any Wholly-Owned Subsidiary of the
Company;

 

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(ii) any Material Subsidiary may merge into the Company; and
(iii) the Company may merge with, and any Material Subsidiary may merge with,
any other Person;
provided that, in each case, immediately after giving effect to such proposed
transaction, no Reimbursement Default would exist; and provided further that, in
the case of any such merger to which the Company is a party, the Company is the
surviving corporation and in the case of any such merger to which any Material
Subsidiary and any other Person are the parties, such Material Subsidiary is the
surviving corporation.
(c) Negative Pledge. Create or suffer to exist, or permit any of its Material
Subsidiaries to create or suffer to exist, any Lien on or with respect to any of
its properties, whether now owned or hereafter acquired, or assign, or permit
any of its Material Subsidiaries to assign, any right to receive income, other
than:
(i) Permitted Liens;
(ii) Liens upon or in, or conditional sales agreements or other title retention
agreements with respect to, any real or personal property acquired or held by
the Company or any Subsidiary in the ordinary course of business to secure the
purchase price of such property, or the construction of or improvements to such
property, or to secure Indebtedness incurred solely for the purpose of financing
the acquisition, construction or improvement of such property to be subject to
such Liens (including any Liens placed on such property within 180 days after
the latest of the acquisition, completion of construction or improvement of such
property), or Liens existing on such property at the time of its acquisition
(other than any such Liens created in contemplation of such acquisition that
were not incurred to finance the acquisition of such property) or extensions,
renewals, refundings or replacements of any of the foregoing for the same or a
lesser amount, provided, however, that no such Lien shall extend to or cover any
properties of any character other than the property being acquired, constructed
or improved and proceeds, improvements and replacements thereof and no such
extension, renewal, refunding or replacement shall extend to or cover any
properties not theretofore subject to the Lien being extended, renewed, refunded
or replaced;
(iii) assignments of the right to receive income, and Liens on property, of a
Person existing at the time such Person is merged into or consolidated with the
Company or any Subsidiary of the Company or becomes a Subsidiary of the Company;
(iv) Liens with respect to the leases and related documents entered into by the
Company in connection with PVNGS Unit 2 and Liens with respect to the leased
interests and related rights if the Company reacquires ownership in any of those
interests or acquires any of the equity or owner participants’ interests in the
trusts that hold title to such leased interests, whether or not it also directly
assumes the Sale Leaseback Obligation Bonds, and Liens on the Company’s
interests in the trusts that hold title to such leased interests and related
rights in the event that the Company acquires any of the equity or owner
participants’ interests in such trusts pursuant to a “special transfer” under

 

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the Company’s existing PVNGS Unit 2 sale and leaseback transactions and any
Liens resulting or deemed to have resulted if the PVNGS Unit 2 leases are
required to be accounted for as capital leases in accordance with GAAP;
(v) other assignments of the right to receive income and Liens securing
Indebtedness or claims in an aggregate principal amount not to exceed 20% of the
Company’s total assets as stated on the most recent balance sheet of the Company
provided pursuant to Section 6(f) and 7(g) hereof at any time outstanding; and
(vi) the replacement, extension or renewal of any Lien permitted by clause
(iii) or (iv) above upon or in the same property theretofore subject thereto or
the replacement, extension or renewal (without increase in the amount or change
in any direct or contingent obligor) of the Indebtedness secured thereby.
(d) Assignment of Transaction Documents or Financing Documents. Enter into any
assignment of the Company’s obligations under any of the Transaction Documents
or Financing Documents.
(e) Indebtedness. Permit Consolidated Indebtedness to exceed 65% of Consolidated
Capitalization at any time.
“Consolidated” refers to the consolidation of accounts in accordance with GAAP.
“Consolidated Capitalization” means, at any date, the sum as of such date of
Consolidated Indebtedness and Consolidated Net Worth.
“Consolidated Indebtedness” means, at any date, the Indebtedness of the Company
and its Consolidated Subsidiaries determined on a Consolidated basis as of such
date.
“Consolidated Net Worth” means, at any date, the sum as of such date of (a) the
par value (or value stated on the books of the Company) of all classes of
capital stock of the Company and its Subsidiaries, excluding the Company’s
capital stock owned by the Company and/or its Subsidiaries, plus (or minus in
the case of a surplus deficit) (b) the amount of the Consolidated surplus,
whether capital or earned, of the Company, determined in accordance with GAAP as
of the end of the most recent calendar month (excluding the effect on the
Company’s accumulated other comprehensive income/loss of the ongoing application
of Accounting Standards Codification Topic 815).
Section 9. Reimbursement Events of Default. If any of the following events
(“Reimbursement Events of Default”) shall occur and be continuing:
(i) The Company shall fail to pay when due any amount payable under Section 2(a)
or fail to pay any other amount payable under Section 2 within five (5) Business
Days after the same becomes due and payable; or
(ii) The Company shall fail to perform or observe (A) any term, covenant or
agreement contained in Section 7(a)(ii), 7(g)(iv), 8(a), 8(b), 8(c) or 8(e), or
(B) any term, covenant or agreement contained in this Agreement (other than
those covered by

 

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clause (i) above or subclause (A) of this clause (ii) or Section 7(e) or
Section 19) on its part to be performed or observed if the failure to perform or
observe such term, covenant or agreement shall remain unremedied for 30 days
after written notice thereof shall have been given to the Company by the
Administrative Agent; or
(iii) Any representation or warranty made by the Company herein or by the
Company (or any of its officers) in any certificate delivered in connection with
this Agreement shall prove to have been false or misleading in any material
respect when made; or
(iv) Any material provision of this Agreement shall at any time for any reason
cease to be valid and binding upon the Company, or shall be declared to be null
and void, or the validity or enforceability thereof shall be contested by the
Company or any governmental agency or authority, or the Company shall deny that
it has any or further liability or obligation under this Agreement; or
(v) (A) The Company or any of its Material Subsidiaries shall fail to pay
(1) any principal of or premium or interest on any Indebtedness that is
outstanding in a principal amount of at least $35,000,000 in the aggregate (but
excluding Indebtedness outstanding hereunder), or (2) an amount, or post
collateral as contractually required in an amount, of at least $35,000,000 in
respect of any Hedge Agreement, of the Company or such Material Subsidiary (as
the case may be), in each case, when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise),
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness or Hedge
Agreement; or (B) any event of default shall exist under any agreement or
instrument relating to any such Indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or
(vi) The Company or any of its Material Subsidiaries shall fail to pay any
principal of or premium or interest in respect of any operating lease in respect
of which the payment obligations of the Company have a present value of at least
$35,000,000, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
such operating lease, if the effect of such failure is to terminate, or to
permit the termination of, such operating lease; or
(vii) The Company or any of its Material Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Company or
any of its Material Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
Debtor Relief Law, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property and, in the case of any such
proceeding instituted against it

 

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(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur; or
the Company or any of its Material Subsidiaries shall take any corporate action
to authorize any of the actions set forth above in this clause (vii); or
(viii) Judgments or orders for the payment of money that exceeds any applicable
insurance coverage (the insurer of which shall be rated at least “A” by A.M.
Best Company) by more than $35,000,000 in the aggregate shall be rendered
against the Company or any Material Subsidiary and such judgments or orders
shall continue unsatisfied or unstayed for a period of 45 days; or
(ix) (A) Any “person” or “group” (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, but excluding any
employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of 30% or more of the equity securities of PWCC entitled
to vote for members of the board of directors of PWCC; or (B) during any period
of 24 consecutive months, a majority of the members of the board of directors of
PWCC cease (other than due to death or disability) to be composed of individuals
(1) who were members of that board on the first day of such period, (2) whose
election or nomination to that board was approved by individuals referred to in
clause (1) above constituting at the time of such election or nomination at
least a majority of that board or (3) whose election or nomination to that board
was approved by individuals referred to in clauses (1) and (2) above
constituting at the time of such election or nomination at least a majority of
that board; or (C) PWCC shall cease for any reason to own, directly or
indirectly 80% of the Voting Stock of the Company; or
(x) An event or condition specified in Section 7(g)(iv) shall occur or exist
with respect to any Plan or Multiemployer Plan and, as a result of such event or
condition, together with all other such events or conditions, the Company or any
ERISA Affiliate shall incur or in the opinion of the Required Banks shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or the
PBGC (or any combination of the foregoing) which is, in the determination of the
Required Banks, likely to exceed $35,000,000 in the aggregate; or
(xi) any change in Applicable Law or any Governmental Action shall occur which
has the effect of making the transactions contemplated by the Transaction
Documents unauthorized, illegal or otherwise contrary to Applicable Law; or
(xii) any event specified in subsection (vii), (viii) or (x) of Section 15 of
the Facility Lease shall occur; or

 

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(xiii) the Company shall fail to make, or cause to be made, any payment
specified in Section 15(i) of the Facility Lease equal to or exceeding
$1,000,000 within the periods specified in that Section.
then, in every such event the Issuing Bank may, and if instructed to do so by
the Required Banks the Issuing Bank shall, by notice to the Company and the
Equity Participant, terminate the Letter of Credit as provided therein. The
Administrative Agent shall give notice to the Company under Section 9(ii)
promptly upon being requested to do so by the Required Banks and will promptly
notify each Bank of any such notice given at the request of the Required Banks.
Section 10. Amendments and Waivers. No modification, amendment or waiver of any
provision of this Agreement or the Letter of Credit or any consent to the
assignment of the Company’s obligations under any of the Transaction Documents
or the Financing Documents shall be effective unless the same shall be in
writing and signed by (or with the written consent of) the Company and the
Required Banks (and, if the rights or duties of the Issuing Bank or the
Administrative Agent are affected thereby, by it); provided that no such
modification, amendment, waiver or consent shall, unless signed by (or with the
written consent of) each Bank affected thereby, (i) increase the Maximum Credit
Amount or Maximum Drawing Amount or subject any Bank to any additional
obligation under this Agreement or the Letter of Credit, (ii) reduce the
principal of or rate of interest on any reimbursement obligation or reduce the
letter of credit commission payable under Section 2(b), (iii) postpone the date
fixed for any payment of principal of or interest on any reimbursement
obligation or any payment of such letter of credit commission, (iv) extend the
Stated Termination Date or the Termination Date or (v) change the definition of
Required Banks or the provisions of this Section 10 or any provision of this
Agreement that requires action by all the Banks. Any waiver of any provision of
this Agreement or the Letter of Credit shall be effective only in the specific
instance and for the specific purpose for which given.
Section 11. Notices. (a) All notices, requests, demands and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile transmission, electronic transmission (subject to
Section 11(c) below), or similar transmission) and mailed, sent or delivered:
(i) if to the Company, in the case of deliveries, to its street address at 400
North Fifth Street, Phoenix, Arizona 85004; in the case of mailings, to its
mailing address at P.O. Box 53999, Phoenix, Arizona 85072-3999, and in the case
of facsimile transmission, to telecopy no. (602) 250-5640, in each case to the
attention of the Treasurer; and in the case of electronic mail, to
lee.nickloy@pinnaclewest.com;
(ii) if to the Administrative Agent, in the case of deliveries or mailings, to
its address at JPMorgan Chase Bank, N.A., 10 S. Dearborn St., Mail Code
IL1-0090, Chicago, IL 60603, and in the case of facsimile transmission, to
telecopy no. (312) 732-1762, in each case to the attention of Nancy Barwig; and
in the case of electronic mail, to nancy.r.barwig@jpmorgan.com; with a copy to
its address at JPMorgan Chase Bank, N.A., 10 S. Dearborn St., Mail Code
IL1-0874, Chicago, IL 60603, and in the case of facsimile transmission, to
telecopy no. (312) 325-3150, in each case to the attention of Lisa Tverdek; and
in the case of electronic mail, to lisa.tverdek@jpmorgan.com;

 

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(iii) if to the Issuing Bank, in the case of deliveries or mailings, to its
address at JPMorgan Chase Bank, N.A., 300 South Riverside Plaza, Mail Code
IL1-0236, Chicago, IL 60606-0236, Attention: Standby Letter of Credit Unit, and
in the case of facsimile transmission, to telecopy no. (312) 233-2266 and
telephone No.: (800) 634-1969, Option 1, in each case to the attention of
Manager – Immediate Action Required; and in the case of electronic mail, to
standbylc.chi.mc@jpmchase.com; with a copy to its address at JPMorgan Chase
Bank, N.A., 10 S. Dearborn St., Mail Code IL1-1650, Chicago, IL 60603, and in
the of case facsimile transmission, to telecopy no. (312) 732-2729 and telephone
no. (312) 732-2592, in each case to the attention of Phyllis Huggins; and in the
case of electronic mail, to phyllis.huggins@jpmorgan.com;
(iv) if to any other Bank, at such address, electronic mail address, or telecopy
number as shall be designated by it in its Administrative Questionnaire;
or, as to each party, to such other person and/or to such other address or
number as shall be designated by such party in a written notice to each other
party. All such notices, requests, demands and other communications shall be
effective when mailed or sent, addressed as aforesaid (subject to Section 11(c)
below in the case of electronic communications), except that notices to the
Administrative Agent shall not be effective until received by the Administrative
Agent and any notice to the Equity Participant pursuant to Section 9 shall not
be effective until received by the Equity Participant. Notices of any
Reimbursement Default shall be sent by the Company to the Administrative Agent
by facsimile transmission.
(b) As promptly as practicable after receipt by the Administrative Agent of any
notice or other communication delivered hereunder by the Company, the
Administrative Agent shall furnish a copy thereof to each Bank, to the extent
such notice or other communication is not otherwise required by the terms
thereof to be delivered by the Company to each Bank.
(c) Notices and other communications to the Administrative Agent, the Banks and
the Issuing Bank hereunder may be delivered or furnished by electronic
communications (including e-mail and internet or intranet websites) pursuant to
procedures approved by the Administrative Agent and agreed by the Company;
provided that the foregoing shall not apply to notices pursuant to Sections 2,
14 or 17 unless otherwise agreed by the Administrative Agent and the applicable
Bank or to notices pursuant to the Letter of Credit. The Administrative Agent
and the Company may, each in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications. Unless the Administrative Agent
and the Company shall otherwise agree, notices and other communications sent to
an electronic mail address shall be deemed received upon the sender’s receipt of
an acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return electronic mail or other written
acknowledgement); provided that (x) if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (y) notices or communications
posted to an Internet website shall be deemed received upon the deemed receipt
by the intended recipient at its electronic mail address as described in
immediately foregoing clause (x) of notification that such notice or
communication is available and identifying the website address therefor.

 

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(d) The Platform is provided “as is” and “as available.” The Agent Parties (as
defined below) do not warrant the accuracy or completeness of the Company
Materials or the adequacy of the Platform, and expressly disclaim any liability
for errors in or omissions from the Company Materials. No warranty of any kind,
express or implied or statutory, is made by any Agent Party in connection with
the Company Materials or the Platform. In no event shall the Administrative
Agent, its Affiliates, or any partners, directors, officers, employees, agents
and advisors of the Administrative Agent or of its Affiliates (collectively, the
“Agent Parties”) have any liability to the Company, any Bank or any other Person
for losses, claims, damages, liabilities or expenses of any kind (whether in
tort, contract or otherwise) arising out of the Company’s or the Administrative
Agent’s transmission of Company Materials through the Internet, except to the
extent that such losses, claims, damages, liabilities or expenses are determined
by a court of competent jurisdiction by a final and nonappealable judgment to
have resulted from the gross negligence or willful misconduct of such Agent
Party.
Section 12. No Waiver; Remedies. No failure on the part of the Administrative
Agent or any Bank to exercise, and no delay in exercising, any right, power, or
privilege hereunder shall operate as a waiver thereof; nor shall 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.
Section 13. Waiver of Right of Setoff. The Administrative Agent and each Bank
hereby waive any right to set off and apply any and all deposits (general or
special, time or demand, provisional or final) and collateral at any time held
and other indebtedness at any time owing by it to or for the credit or the
account of the Company if there shall be a drawing under the Letter of Credit at
any time during the pendency of any proceeding by or against the Company seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, custodian, trustee or other similar official for it
or for any substantial part of its property (collectively the “bankruptcy
events”), against any and all of the obligations of the Company now or hereafter
existing in respect of any reimbursement obligation of the Company set forth in
Section 2(a), provided that any such waiver shall be deemed ineffective as and
to the extent that the Administrative Agent and each Bank receive, after any of
the bankruptcy events occur, an unqualified opinion of nationally-recognized
counsel with bankruptcy law experience (which counsel shall be mutually
satisfactory to the Administrative Agent and the Equity Participant, each of
which shall use its best efforts to agree on such counsel), that non-waiver
would not, as a result of the application of bankruptcy or similar laws as then
in effect, lead to the Administrative Agent or any Bank being refused,
prevented, permanently enjoined or restrained from or delayed in fulfilling its
obligation under the Letter of Credit. This Section 13 shall not constitute a
waiver of any right of setoff if there shall be a drawing under the Letter of
Credit at any time other than that described in this Section 13.
Section 14. Participations of the Banks. (a) The Issuing Bank hereby sells to
each other Bank, and each Bank hereby severally purchases from the Issuing Bank,
as of the Effective Date, a Participation in an amount equal to such Bank’s
Participation Percentage of the Letter of Credit and in each drawing thereunder,
all on the terms and conditions set forth herein. Each Bank

 

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acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of the Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of the Letter of Credit or the
occurrence and continuance of a Reimbursement Event of Default, and that each
such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.
(b) If at any time on or after the Effective Date the Company shall fail to
reimburse any LC Disbursement prior to or immediately upon making thereof by the
Issuing Bank, such LC Disbursement shall constitute a Disbursement Advance in
accordance with Section 2(a), and the Administrative Agent shall promptly (but
in any event no later than 2:30 p.m., New York City time, on the date payment is
due from the Banks under this Section 14(b)) advise each Bank thereof and of the
amount due from the Company and the amount of such Bank’s Participation therein,
and each Bank shall pay, no later than 4:00 p.m. (New York City time) on such
date such Bank’s Participation Percentage of such amount by transferring the
same in immediately available funds to the Administrative Agent for the account
of the Issuing Bank at the Administrative Agent’s address specified in
Section 11. With respect to any such LC Disbursement, each Bank agrees that the
Issuing Bank shall have no responsibility to the Banks other than obtaining the
certificates referred to in the Letter of Credit and notifying each Bank
thereof. The Administrative Agent shall promptly credit each Bank’s account with
such Bank’s Participation Percentage of (i) all amounts representing principal
of, or interest on, any Disbursement Advances, in each case in respect of which
such Bank has funded its Participation Percentage in accordance with the
foregoing provisions of this Section 14(b) and (ii) letter of credit commissions
payable to each Bank pursuant to Section 2(b) of this Agreement and accruing on
and after the Effective Date, but, in the case of both clause (i) and
clause (ii), only if, when and to the extent received by the Administrative
Agent from the Company. All such payments shall be made if, when and to the
extent the Administrative Agent receives payment from the Company in respect of
any Disbursement Advance and of the letter of credit commission pursuant to
Section 2(b) of this Agreement, and in the same funds in which such amounts are
received, by credit to an account at a bank located in the United States of
America as each Bank shall designate in writing to the Administrative Agent.
(c) If the Administrative Agent should for any reason make any payment to any
Bank in anticipation of the receipt of funds from the Company and such funds are
not received by the Administrative Agent from the Company on the date payment is
due, then such Bank shall, on demand by the Administrative Agent, forthwith
return to the Administrative Agent any such amounts transferred to such Bank by
the Administrative Agent in respect of such Bank’s Participation plus interest
thereon from the day such amounts were transferred by the Administrative Agent
to such Bank to but not including the day such amounts are returned by such Bank
at a rate per annum equal to the Federal Funds Rate. If the Administrative Agent
is required at any time to return to the Company or to a trustee, receiver,
liquidator, custodian or other similar official any portion of the payments made
by the Company to the Administrative Agent for the account of any Bank, then
such Bank shall, on demand by the Administrative Agent, forthwith return to the
Administrative Agent any such payments transferred to such Bank by the
Administrative Agent in respect of such Bank’s Participation, but without
interest on such payments (unless the Administrative Agent is required to pay
interest on such amounts to the Person recovering such payments).

 

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(d) Each Bank agrees that if it should receive any amount due to it under this
Agreement in respect of its Participation other than from the Administrative
Agent, such Bank will remit all of the same to the Administrative Agent to
distribute to the Banks pursuant to this Agreement, and such Bank’s
Participation shall be adjusted to reflect such remittance. Each Bank further
agrees to send the Administrative Agent a copy of any notice sent by such Bank
to the Company hereunder.
(e) Each Bank acknowledges and represents that it has made its own independent
appraisal of the Company, and the business, affairs and financial condition of
the Company, based on such documents and information as such Bank has deemed
appropriate, and each Bank will continue to be responsible for making its own
independent appraisal of such matters, based on such documents and information
as such Bank shall deem appropriate at the time, and has not relied upon and
will not hereafter rely upon the Administrative Agent or any other Bank or any
information prepared, distributed or otherwise made available by the
Administrative Agent for such appraisal or other assessment or review of the
Company. Each Bank represents, and in granting a Participation to such Bank it
is specifically understood and agreed, that such Bank is acquiring its
Participation in the Letter of Credit for its own account in the ordinary course
of its commercial banking business and not with a view to, or for sale in
connection with, any distribution thereof.
Section 15. Assignees; Participants. (a) Each Bank shall have the right, with
the prior written consent of the Company (which shall not be unreasonably
withheld, and shall not be required if a Reimbursement Event of Default has
occurred and is continuing) and the prior written consent of the Administrative
Agent and the Issuing Bank, to assign all or a pro rata portion of all of its
rights and obligations under its Participation at any time and from time to time
to one or more Eligible Institutions (each an “Assignee”); provided that
(i) each such Assignee shall assume such rights and obligations and agree, for
the benefit of each other party hereto, to be bound by the provisions of, and
perform the obligations of a Bank under, this Agreement, pursuant to an
Assignment and Assumption and (ii) the aggregate amount of the Participation or
Participations assigned to each such Assignee pursuant to this Section 15(a)
shall not be less than $5,000,000. Each Bank shall give prompt notice to the
Administrative Agent and the Company of each such assignment made by it. For the
avoidance of doubt, no assignment by JPMorgan pursuant to this Section 15 shall
affect its rights and obligations in its capacity as Issuing Bank.
(b) (i) Each Bank shall also have the right, without the consent of the Company,
to grant participating interests in its Participation at any time and from time
to time to one or more other financial institutions or other Persons (other than
a natural person or the Company or any of the Company’s Affiliates or
Subsidiaries) (each a “Participant”); provided that (A) such Bank’s obligations
under this Agreement shall remain unchanged, (B) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Company, the Administrative Agent and the other Banks shall continue
to deal solely and directly with such Bank in connection with such Bank’s rights
and obligations under this Agreement. Each such participation granted by a Bank
shall be evidenced by a participation agreement in form acceptable to such Bank.
Each such participation agreement shall provide that such Bank shall retain the
sole right to exercise its rights under this Agreement and to enforce the
obligations owed to it hereunder pursuant to its Participation including,
without

 

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limitation, the right to consent to any modification, amendment or waiver of any
provision of this Agreement or the Letter of Credit or any assignment of the
Company’s obligations under any of the Transaction Documents or the Financing
Documents; provided that any such participation agreement may provide that such
Bank will not, without the consent of the Participant, consent to any
modification, amendment or waiver of this Agreement or the Letter of Credit that
(w) increases the Maximum Credit Amount or Maximum Drawing Amount or subjects
such Bank to any additional obligation under this Agreement or the Letter of
Credit, (x) reduces the principal of or rate of interest on any reimbursement
obligation or reduces the letter of credit commission payable under
Section 2(b), (y) postpones the date fixed for any payment of principal of or
interest on any reimbursement obligation or any payment of such letter of credit
commission or (z) extends the Stated Termination Date or the Termination Date,
in each case subject to such participation.
(ii) Subject to clause (iii) below, the Company agrees that each Participant
shall be entitled to the benefits of Sections 2(d) and 2(e) to the same extent
as if it were a Bank and had acquired its interest by assignment pursuant to
Section 15(a).
(iii) A Participant shall not be entitled to receive any greater payment under
Section 2(d) or 2(e) than the applicable Bank would have been entitled to
receive with respect to the participating interest granted to such Participant,
unless the granting of such interest to such Participant is made with the
Company’s prior written consent. A Participant organized under the laws of a
jurisdiction outside the United States shall not be entitled to the benefits of
Section 2(d) or 2(e) unless the Company is notified of the participating
interest granted to such Participant and such Participant agrees, for the
benefit of the Company, to comply with Section 2(d) or 2(e) as though it were a
Bank.
Section 16. Continuing Obligation; Binding Effect. The obligations of the
Company under this Agreement shall continue until the later of (i) the
Termination Date and (ii) the date upon which all amounts due and owing to the
Administrative Agent or any Bank hereunder shall have been paid in full. The
obligation of the Company to reimburse the Administrative Agent, the Issuing
Bank and the Banks pursuant to Sections 2(d), 2(e), 19 and 21 hereof and the
obligations of the parties pursuant to Sections 22, 24 and 27 hereof shall
survive the termination of the Letter of Credit and this Agreement. This
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors. The Company shall not have the right to
assign its rights hereunder or any interest herein to any Person without the
prior written consent of the Issuing Bank and each Bank. The Issuing Bank shall
not have the right to assign its rights as the Issuing Bank hereunder without
the prior written consent of the Company (which shall not be unreasonably
withheld) and each Bank.
Section 17. Extension of the Letter of Credit. At least 105 days but not more
than 180 days before the Stated Termination Date, the Company may request the
Administrative Agent in writing (each such request being irrevocable and
binding), with a copy to the Issuing Bank and each Bank, to extend for not less
than three years, nor more than eight years (or, if earlier, the end of the
Basic Lease Term or as otherwise required under the Participation Agreement),
the Stated Termination Date, specifying the terms and conditions, including
fees, to be applicable to such extension. Within 45 days after receiving such
extension request (or such later date as the Company may authorize in writing,
but in no event later than 60 days before the Stated

 

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Termination Date), each Bank shall notify the Administrative Agent and the
Company of its consent or nonconsent to such extension request, and if any Bank
shall give no such notice, it shall be deemed not to have consented to such
extension request. No such requested extension shall be effective without the
consent of all the Banks. The consent of any Bank shall be in its sole
discretion and shall be conditional upon no Reimbursement Default or
Reimbursement Event of Default existing as of the date of such extension and the
preparation, execution and delivery of legal documentation in form and substance
satisfactory to such Bank and its counsel, incorporating substantially the terms
and conditions contained in the extension request as the same may be modified by
agreement among the Company, and the Banks, and evidence satisfactory to it of
the due authorization and validity thereof.
Section 18. Limited Liability of the Banks.
(a) The Company assumes all risks of the acts or omissions of the Equity
Participant and any beneficiary or transferee of the Letter of Credit with
respect to its use of the Letter of Credit. None of the Administrative Agent,
the Issuing Bank and the Banks, nor their respective Affiliates nor any officer,
director, employee or agent of any of the foregoing shall be liable or
responsible for: (a) the use which may be made of the Letter of Credit or any
acts or omissions of the Equity Participant or any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such documents shall prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by the
Issuing Bank against presentation of documents which do not comply with the
terms of the Letter of Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit, except that the Company shall have a claim against the Issuing Bank,
and the Issuing Bank shall be liable to the Company, to the extent, but only to
the extent, of any direct, as opposed to special, indirect, consequential or
punitive, damages or losses suffered by the Company which the Company proves
were caused by the Issuing Bank’s gross negligence or willful misconduct in
(i) honoring a presentation that does not strictly comply with the Letter of
Credit, (ii) failing to honor a presentation that strictly complies with the
Letter of Credit or (iii) retaining any document presented for purposes of
drawing under the Letter of Credit. In no event shall the Issuing Bank be deemed
to have failed to act with due diligence or reasonable care if the Issuing
Bank’s conduct is in accordance with Standard Letter of Credit Practice and in
accordance with this Agreement. In furtherance and not in limitation of the
foregoing, the Issuing Bank may accept documents that appear on their face to be
in order, without responsibility for further investigation, regardless of any
notice or information to the contrary unless the Equity Participant and the
Company have notified the Issuing Bank in writing prior to a drawing under the
Letter of Credit that such documents do not comply with the Letter of Credit.
(b) Without limiting any other provision of this Agreement, the Issuing Bank and
each other Indemnified Party (if applicable), shall not be responsible to the
Company for, and the Issuing Bank’s rights and remedies against the Company and
the Company’s obligation to reimburse the Issuing Bank shall not be impaired by:
(i) honor of a presentation under the Letter of Credit which on its face
strictly complies with the terms of the Letter of Credit; (ii) honor of a
presentation of any documents presented for purposes of drawing under the Letter
of Credit (a “Drawing Document”) which appear on their face to have been signed,
presented or issued (X)

 

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by any purported successor or transferee of any beneficiary or other party
required to sign, present or issue the Drawing Documents or (Y) under a new name
of the beneficiary; (iii) acting upon any communication or instruction (whether
oral, telephonic, written, telegraphic, facsimile or electronic) (each an
“Instruction”) that is unauthorized and that is (x) received pursuant to the
express terms of the Letter of Credit or (y) any other Instruction regarding the
Letter of Credit or error in computer transmission that in either case the
Indemnified Party, in Good Faith, believes to have been given by a Person or
entity authorized to give such Instruction; (iv) any errors, omissions,
interruptions or delays in transmission or delivery of any message, advice or
document (regardless of how sent or transmitted) or for reasonable errors in
interpretation of technical terms made in good faith after advice of counsel or
in translation; (v) any delay in giving or failing to give any notice; (vi) any
acts, omissions or fraud by, or the solvency of, any beneficiary, any nominated
Person or any other Person other than the Issuing Bank or an Indemnified Party;
(vii) any breach of contract between the beneficiary and the Company or any of
the parties to the underlying transaction; (viii) assertion or waiver of any
provision of the ISP which primarily benefits an issuer of a letter of credit,
including, any requirement that any Drawing Document be presented to it at a
particular hour or place, except to the extent such provisions of the ISP
conflict with the express provisions of the Letter of Credit or this Agreement;
(ix) dishonor of any presentation for which the Company is unable or unwilling
to reimburse or indemnify the Issuing Bank (provided that the Company
acknowledges that if the Issuing Bank shall later be required to honor the
presentation, the Company shall be liable therefor in accordance with Article 2
hereof); and (x) acting or failing to act as required or permitted under
Standard Letter of Credit Practice. For purposes of this Section 18(b), “Good
Faith” means honesty in fact in the conduct of the transaction concerned. For
the avoidance of doubt, it is understood that this Section 18(b) shall not be
construed to limit the Issuing Bank’s liability for damages caused by the
Issuing Bank’s gross negligence or willful misconduct as otherwise provided for
in this Agreement.
(c) The Company shall notify the Administrative Agent and the Issuing Bank of
(i) any noncompliance with any Instruction given by the Company with respect to
the Letter of Credit or any amendment thereto, any other irregularity with
respect to the text of the Letter of Credit or any amendment thereto or any
claim of an unauthorized, fraudulent or otherwise improper Instruction given by
the Company with respect to the Letter of Credit or any amendment thereto, in
each case within ten (10) Business Days after an Authorized Officer of the
Company becomes aware of the receipt by the Company of a copy of the Letter of
Credit or any such amendment and (ii) any objection the Company may have to the
Issuing Bank’s honor or dishonor of any presentation under the Letter of Credit
or any other action or inaction taken or proposed to be taken by the Issuing
Bank under or in connection with this Agreement or the Letter of Credit, within
ten (10) Business Days after an Authorized Officer of the Company becomes aware
of the objectionable action or inaction. To the extent allowed by applicable
law, the failure to so notify the Issuing Bank within said times shall discharge
the Issuing Bank from any loss or liability that the Issuing Bank could have
avoided or mitigated had it received such notice, to the extent that the Issuing
Bank could be held liable for damages hereunder; provided that the foregoing
shall not be construed to excuse the Issuing Bank from liability to the Company
to the extent of any direct damages (as opposed to consequential damages, claims
in respect of which are hereby waived by the Company to the extent permitted by
applicable law) suffered by the Company that are caused by the Issuing Bank’s
failure to exercise care when determining whether drafts and other documents
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with the terms thereof or by the Issuing Bank’s gross negligence or willful
misconduct; provided, further, that, if the Company shall not provide such
notice to the Issuing Bank within twenty (20) Business Days of the date of
receipt, the Issuing Bank shall have no liability whatsoever for such
noncompliance, irregularity, action or inaction and the Company shall be
precluded from raising such noncompliance, irregularity or objection as a
defense or claim against Issuing Bank. For the avoidance of doubt, it is
understood that this Section 18(c) shall not be construed to limit the Issuing
Bank’s liability for damages caused by the Issuing Bank’s gross negligence or
willful misconduct as otherwise provided for in this Agreement.
Section 19. Cost, Expenses and Taxes. The Company agrees to pay not later than
30 days after demand therefor (a) all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution, delivery,
filing, recording and administration of this Agreement and any other documents
which may be delivered in connection with this Agreement and any waiver or
consent under, or amendment of, this Agreement, the Fee Letter or any of the
Transaction Documents or Financing Documents, including, without limitation, the
reasonable fees and out-of-pocket expenses of one firm of attorneys for the
Administrative Agent (and any additional firms required to address matters in
respect of which such firm is precluded from representation as a result of
conflicts) and local counsel who may be retained by said counsel, with respect
thereto and with respect to advising the Administrative Agent as to its rights
and responsibilities under this Agreement; (b) as to the Administrative Agent,
the Issuing Bank and each Bank, all reasonable costs and expenses (including
reasonable counsel fees and expenses) in connection with (i) the enforcement of
this Agreement and such other documents which may be delivered in connection
with this Agreement or (ii) any action or proceeding relating to a court order,
injunction or other process or decree restraining or seeking to restrain the
Issuing Bank from paying any amount under the Letter of Credit; and (c) as to
the Administrative Agent and the Issuing Bank, all reasonable costs and expenses
(including reasonable counsel fees and expenses) in connection with each
transfer of the Letter of Credit in accordance with its terms. In addition, the
Company shall pay any and all stamp, documentary, filing, recording or other
similar taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing and recording of this Agreement and such other
documents, and agrees to save the Administrative Agent and each Bank harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees, provided that the
Administrative Agent and each Bank agree promptly to notify the Company of any
such taxes and fees which are incurred by the Administrative Agent or such Bank.
To the extent permitted by applicable law, the foregoing provisions shall
supersede any costs and expenses provisions set forth in Section 8.02 of the
ISP.
Section 20. Administrative Agent; Issuing Bank. (a)
(i) Each Bank irrevocably appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with all such powers as are reasonably incidental thereto.
(ii) The Administrative Agent shall not have any duties or obligations except
those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
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whether a Reimbursement Event of Default has occurred and is continuing, (b) the
Administrative Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated herein that the Administrative Agent is required to
exercise in writing as directed by the Required Banks (or such other number or
percentage of the Banks as shall be necessary under the circumstances as
provided in Section 10), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Company or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Banks (or such other number
or percentage of the Banks as shall be necessary under the circumstances as
provided in Section 10), or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Reimbursement Event of Default unless and until written notice
thereof is given to the Administrative Agent by the Company or a Bank, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate, report or
other document delivered hereunder or in connection with this Agreement,
(iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth in this Agreement, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Section 3 or elsewhere in this Agreement, other than to confirm receipt
of items expressly required to be delivered to the Administrative Agent.
(iii) The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing reasonably believed by it to be
genuine and correct and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone (except when a writing is expressly required) and reasonably believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon.
(iv) The Administrative Agent may perform any and all its duties and exercise
its rights and powers hereunder by or through any one or more sub-agents
appointed by the Administrative Agent in the exercise of reasonable care.
(v) Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Banks and the Company. Upon any such resignation, the
Required Banks shall have the right, with the prior written approval of the
Company (which approval will not be unreasonably withheld or delayed and which
shall be required only so long as no Reimbursement Event of Default shall be
continuing), to appoint a successor. If no successor shall have been so
appointed by the Required Banks and shall have accepted such appointment within
30 days after the retiring Administrative Agent gives notice of its resignation,
then the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent which shall be a commercial bank having capital
and retained earnings of at least $100,000,000 or an Affiliate of any such
commercial bank. Upon the acceptance of its appointment as Administrative Agent

 

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hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Company to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Company and such successor. After the
Administrative Agent’s resignation hereunder, the provisions of this Section 20
and Sections 19 and 21 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub agents and their respective Affiliates in respect
of any actions taken or omitted to be taken by any of them while it was acting
as Administrative Agent.
(vi) Each Bank acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Bank and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Bank and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement or related agreement or any document
furnished hereunder.
(b) The Administrative Agent and its Affiliates may accept deposits from, make
loans or otherwise extend credit to, and generally engage in any kind of
business with, the Company, the Equity Participant and their respective
Subsidiaries and Affiliates and receive payment on such loans or extensions of
credit and otherwise act with respect thereto freely and without accountability
in the same manner as if this Agreement and the transactions contemplated hereby
were not in effect.
(c) The Administrative Agent may consult with legal counsel (who may be counsel
for the Company), independent public accountants and other experts as it may
select and shall not be liable for any action taken or omitted to be taken by it
in good faith in accordance with the advice of such counsel, accountants or
experts.
(d) It is understood that the Issuing Bank will exercise and give the same care
and attention to the Letter of Credit as it gives to its other letters of credit
and loans for its own account and that the Issuing Bank shall have no obligation
to the Company or any other Bank and no duty or responsibility with respect to
this Agreement or the Letter of Credit, except as expressly provided herein and
in the Letter of Credit. Without limiting the generality of the foregoing, the
Issuing Bank shall not be required to take any action with respect to any
Reimbursement Default, except as expressly provided in Section 9 hereof. The
Issuing Bank shall not be liable for any action taken or not taken at the
request or with the approval of the Required Banks (or all the Banks, as
applicable) or for the performance or non-performance of the obligations of any
other party under this Agreement or any Transaction Document or Financing
Document or any other document contemplated thereby. It is further understood
that: (i) except as expressly limited by the provisions of this Agreement, the
Issuing Bank retains the sole right to exercise its rights and enforce the
obligations of the Company under this Agreement, and the Issuing Bank may use
its sole discretion with respect to exercising or refraining from exercising any
rights or taking or refraining from taking any actions which may be vested in it
or which it may be entitled to take or assert under this Agreement or any of the
Transaction

 

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Documents or Financing Documents (including, without limitation, the giving of
any notice to any Person of any Reimbursement Event of Default under this
Agreement except as provided in Section 9); and (ii) the Issuing Bank shall not,
in the absence of gross negligence or willful misconduct, be under any liability
to any other Bank with respect to anything which the Issuing Bank may do or
refrain from doing in the exercise of its best judgment or which it may deem to
be necessary or desirable. Neither the Administrative Agent nor the Issuing Bank
shall incur any liability by acting in reliance upon any written communication
or any telephone conversation which it reasonably believes to be genuine and
correct or to have been signed, sent or made by the proper Person. Neither the
Administrative Agent nor the Issuing Bank shall have any obligation to make any
claim on, or assert any lien upon, or assert any setoff against, any property
held by it and, if it elects to do so, it may in its discretion apply the same
against indebtedness of the Company other than the Company’s obligations under
this Agreement; provided that, to the extent any funds received pursuant to any
of the foregoing are applied to the obligations of the Company under
Section 2(a) or 2(b) hereof, each Bank shall be entitled to receive its pro rata
share thereof in accordance with Section 14(b) above. Any such setoff or other
action in respect of any reimbursement obligation of the Company set forth in
Section 2(a) will be subject to Section 13.
Section 21. Indemnification. (a) To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Administrative Agent, the Issuing
Bank, each Bank, their respective affiliates and correspondents and each of
their respective directors, officers, employees and agents (each such party, an
“Indemnified Party”) from and against any and all claims, suits, judgments,
costs, losses, fines, penalties, damages, liabilities, and expenses, including
expert witness fees and reasonable legal fees, charges and disbursements of any
counsel (including in-house counsel fees and allocated costs) for any
Indemnified Party (“Costs”) (except to the extent any such Costs are expressly
stated in this Agreement to be payable by the Indemnified Party or to the extent
expressly limited pursuant to Sections 2(d), 2(e), 2(f), 7(e), 18(a) and 19),
arising out of, in connection with, or as a result of: (i) the Letter of Credit
or any pre-advice of its issuance; (ii) any action or proceeding arising out of
or in connection with the Letter of Credit or this Agreement (whether
administrative, judicial or in connection with arbitration), including any
action or proceeding to compel or restrain any presentation or payment under the
Letter of Credit, or for the wrongful dishonor of or honoring a presentation
under the Letter of Credit; (iii) any Instruction that is unauthorized and that
is (x) received pursuant to the express terms of the Letter of Credit or (y) any
other Instruction regarding the Letter of Credit or error in computer
transmission that in either case the Indemnified Party reasonably believed to be
authorized; (iv) any third party seeking to enforce the rights of an applicant,
beneficiary, nominated person, transferee or assignee of proceeds of the Letter
of Credit; (v) the fraud, forgery or illegal action of parties other than the
Indemnified Party (including, for the avoidance of doubt, any fraud, forgery or
illegal action by any party in connection with any transfer of the Letter of
Credit); (vi) the enforcement against the Company of this Agreement or any
rights or remedies under or in connection with this Agreement or the Letter of
Credit; (vii) the Administrative Agent’s or the Issuing Bank honoring any
presentation upon or during the continuance of any Reimbursement Event of
Default or for which the Company is unable or unwilling to make any payment to
the Administrative Agent, the Issuing Bank or any Bank as required under this
Agreement; (viii) the acts or omissions, whether rightful or wrongful, of any
present or future de jure or de facto governmental or regulatory authority or
cause or event beyond the control of such Indemnified Party; in each case,
including that

 

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resulting from the Administrative Agent’s or the Issuing Bank’s own negligence,
provided, however, that such indemnity shall not be available to any Person
claiming indemnification under (i) through (viii) above to the extent that such
Costs are found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted directly from the gross negligence or willful
misconduct of the Indemnified Party claiming indemnity, in which case any fees
or expenses previously paid or advanced by the Company to such Indemnified Party
in respect of such indemnified obligation (if any) will be returned by such
Indemnified Party. Without limitation of the foregoing, the Company shall not be
required to indemnify the Issuing Bank or its Related Parties pursuant to this
Section for any Costs to the extent solely caused by (i) the Issuing Bank’s
willful misconduct or gross negligence in determining whether documents
presented under the Letter of Credit comply with the terms of the Letter of
Credit or (ii) its willful failure to make lawful payment under the Letter of
Credit after presentation to it by the beneficiary of the Letter of Credit of
documents strictly complying with the terms and conditions of the Letter of
Credit. If and to the extent that the obligations of Company under this
paragraph are unenforceable for any reason, Company shall make the maximum
contribution to the Costs permissible under applicable law.
(b) To the extent permitted by applicable law, the foregoing provisions shall
supersede any indemnity provisions set forth in Section 8.01(b) of the ISP.
(c) To the extent that the Administrative Agent or the Issuing Bank is not
reimbursed and indemnified by the Company under this Agreement, each Bank will
reimburse and indemnify the Administrative Agent and the Issuing Bank on demand
for and against such Bank’s Participation Percentage of any and all claims,
demands, liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including fees and
disbursements of counsel) of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent or the Issuing
Bank in any way relating to or arising out of this Agreement, the Fee Letter,
the Letter of Credit, or any of the Transaction Documents or Financing Documents
or any action taken or omitted to be taken by the Administrative Agent or the
Issuing Bank hereunder or thereunder, or the transactions contemplated hereby
and thereby or the enforcement of any of the terms hereof and thereof; provided
that such Bank shall not be liable for any portion of such claims, demands,
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, out-of-pocket expenses or disbursements resulting from the gross
negligence or willful misconduct of the Administrative Agent or the Issuing Bank
or which are expressly excluded from the indemnification by the Company by the
proviso to the first sentence of Section 21(a), or by the second sentence of
Section 21(a) of this Agreement. Each Bank’s obligations under this
Section 21(c) shall survive the termination of this Agreement and the Letter of
Credit. If the Administrative Agent or the Issuing Bank is reimbursed by the
Company for any amounts previously received from any Bank pursuant to this
Section 21(c), it will promptly pay to such Bank its proportionate share of any
amounts so received.
Section 22. Confidentiality. (a) The Administrative Agent and each Bank agree
(on behalf of themselves and each of their Affiliates, directors, officers,
employees and representatives) to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all non-public information
provided to them by the Company or any Subsidiary of the Company in connection
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Bank nor any of their Affiliates, directors, officers, employees and
representatives shall use any such information for any purpose or in any manner
other than pursuant to the terms contemplated by this Agreement, except to the
extent such information (a) was or becomes generally available to the public
other than as a result of a disclosure by the Administrative Agent or any Bank,
or (b) was or becomes available on a non-confidential basis from a source other
than the Company, provided that such source is not bound by a confidentiality
agreement with the Company known to the Administrative Agent or affected Bank
after reasonable inquiry; provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process; (ii) to counsel for the Administrative Agent or
any Bank; (iii) to bank examiners, auditors or accountants, on a confidential
basis; (iv) to the Administrative Agent or any other Bank; (v) by the
Administrative Agent or any Bank to an Affiliate thereof who is bound by this
Section 22; provided that any such information delivered to an Affiliate shall
be for the purposes related to the extension of credit represented by this
Agreement and the administration and enforcement thereof and for no other
purpose; (vi) in connection with any litigation relating to enforcement of this
Agreement or (vii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first enters into a confidentiality agreement with the respective
Bank, which confidentiality agreement shall contain terms substantially similar
to the terms set forth in this Section 22. Each Bank and the Administrative
Agent agree, unless specifically prohibited by applicable law or court order, to
notify the Company of any request for disclosure of any such non-public
information (x) by any governmental authority or representative thereof (other
than any such request in connection with an examination of the financial
condition of the Company by such governmental authority) or (y) pursuant to
legal process. The obligations under this Section 22 shall survive for two
(2) years after termination of this Agreement.
(b) This Agreement is intended to provide express authorization to each of the
Banks and their Affiliates (and each employee, representative, or other agent of
each Bank and its respective Affiliates) to disclose to any and all Persons,
without limitation of any kind, the “tax treatment” and “tax structure” (in each
case, within the meaning of Treasury Regulation Section 1.6011-4) of the
transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are provided to the Banks or any of their
Affiliates (and any such employees, representatives or other agents) relating to
such tax treatment and structure; provided, that, with respect to any document
or similar item that in either case contains information concerning the tax
treatment or tax structure of the transactions contemplated hereby as well as
other information, this authorization shall only apply to such portions of the
documents or similar item that relate to the tax treatment or tax structure of
the transactions contemplated hereby.
Section 23. Severability. Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
Section 24. Governing Law; Consent to Jurisdiction. (a) This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.

 

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(b) Each party hereto submits to the nonexclusive jurisdiction of the Supreme
Court of the State of New York sitting in New York County and of the United
States District Court of the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement or for recognition or enforcement of any judgment, and each
party hereto hereby agrees, to the fullest extent permitted by law, that all
claims in respect of any such action or proceeding may be heard and determined
in such New York State or, to the extent permitted by law, in such Federal
court. Nothing in this Agreement shall affect any right that any party hereto
may otherwise have to bring action or proceeding relating to this Agreement in
the courts of any jurisdiction.
Section 25. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
Section 26. Counterparts; Integration. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement, the Fee Letter, that certain Commitment Agreement dated as of
March 17, 2010 between JPMorgan, J.P. Morgan Securities Inc., Union Bank, N.A.,
and the Company, that certain Letter Agreement between the Issuing Bank and the
Company dated as of April 16, 2010 constitute the entire agreement and
understanding among the parties hereto and, subject to Section 3(c), supersede
any and all prior agreements and understandings, oral or written, relating to
the subject matter hereof.
Section 27. WAIVER OF JURY TRIAL. TO THE EXTENT ALLOWED BY LAW, EACH OF THE
COMPANY, THE BANKS AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 28. No Advisory or Fiduciary Responsibility. In connection with all
aspects of each transaction contemplated hereby (including in connection with
any amendment, waiver or other modification hereof or any syndication of the
credit facility provided hereunder), the Company acknowledges and agrees that:
(i) (A) the arranging and other services regarding this Agreement provided by
the Administrative Agent are arm’s-length commercial transactions between the
Company and its Affiliates, on the one hand, and the Administrative Agent and
its Affiliates, on the other hand, (B) it has consulted its own legal,
accounting, regulatory and tax advisors to the extent it has deemed appropriate,
and (C) it is capable of evaluating, and understands and accepts, the terms,
risks and conditions of the transactions contemplated hereby; (ii) (A) the
Administrative Agent and the Company each is and has been acting solely as a
principal and, except as expressly agreed in writing by the relevant parties,
has not been, is not, and will not be acting as an advisor, agent or fiduciary
for any other party hereto, any Affiliates of any other party hereto, or any
other Person and (B) none of the Administrative Agent or the Company has any
obligation to each other or to their respective Affiliates with respect to the
transactions contemplated hereby except those obligations expressly set forth
herein; and (iii) the Administrative Agent and its Affiliates may be engaged in
a broad range of transactions that involve interests that differ from those of
the Company and its Affiliates, and the Administrative Agent has no obligation
to disclose any of such interests to the Company or its Affiliates. To the

 

49

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fullest extent permitted by law, the Administrative Agent and the Company hereby
waive and release any claims that they may have against each other with respect
to any breach or alleged breach of agency or fiduciary duty in connection with
any aspect of any transaction contemplated hereby. Each of the Administrative
Agent and the Banks acknowledge and agree that it has consulted its own legal,
accounting, regulatory and tax advisors to the extent it has deemed appropriate.
Section 29. Waiver of Damages. To the extent allowed by law, no party hereto
shall have any liability with respect to, and each party hereto hereby waives,
releases and agrees not to sue for, any special, indirect, consequential or
punitive damages or losses suffered by such party in connection with, arising
out of, or in any way related to this Agreement, the Letter of Credit or the
transactions contemplated hereby or thereby regardless of whether such party
shall have been advised of the possibility of such damages or losses or of the
form of action in which such damages or losses may be claimed.
Section 30. Government Regulations. The Company agrees to provide documentary
and other evidence of the Company’s identity as may be requested by any Bank at
any time to enable such Bank to verify the Company’s identity or to comply with
any applicable law or regulation, including, without limitation, Section 326 of
the USA Patriot Act of 2001, 31 U.S.C. Section 5318.
Signature Pages Follow

 

50

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.

            ARIZONA PUBLIC SERVICE COMPANY
      By:   /s/ James R. Hatfield         Name:   James R. Hatfield       
Title:   Senior Vice President and Chief Financial Officer   

 

 

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            JPMORGAN CHASE BANK, N.A.,
as Administrative Agent, Issuing Bank and as a Bank
      By:   /s/ Nancy R. Barwig         Name:   Nancy R. Barwig        Title:  
Vice President   

 

 

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            UNION BANK, N.A., as a Bank
      By:   /s/ Pascal Uttinger         Name:   Pascal Uttinger        Title:  
Vice President   

 

 

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SCHEDULE I
The “Letter of Credit Commission Rate” and the “Base Rate Margin” for any day is
the rate set forth below (in basis points per annum) under the column
corresponding to the Status that exists on such day:

                                          Status   Level I     Level II    
Level III     Level IV     Level V  
 
                                       
Base Rate Margin
    100.0       150.0       175.0       200.0       250.0  
Letter of Credit Commission Rate
    200.0       250.0       275.0       300.0       350.0  

For purposes of this Schedule, the following terms have the following meanings:
“Level I Status” exists at any date if, at such date, the higher of the two
Ratings is:
A- or higher by S&P or A3 or higher by Moody’s.
“Level II Status” exists at any date if, at such date, (i) Level I Status does
not exist and (ii) the higher of the two Ratings is:
BBB+ or higher by S&P or Baa1 or higher by Moody’s.
“Level III Status” exists at any date if, at such date, (i) neither Level I
Status nor Level II Status exists and (ii) the higher of the two Ratings is:
BBB or higher by S&P or Baa2 or higher by Moody’s.
“Level IV Status” exists at any date if, at such date, (i) none of Level I
Status, Level II Status and Level III Status exists and (ii) the higher of the
two Ratings is:
BBB- or higher by S&P or Baa3 or higher by Moody’s.
“Level V Status” exists at any date if, at such date, no other Status exists.
“Moody’s” means Moody’s Investors Service, Inc., and any successor thereto.
“Rating Agencies” means Moody’s and S&P.
“Ratings” means the credit ratings assigned to the senior unsecured long-term
debt securities of the Company without third-party credit enhancement by the
Rating Agencies. If there is no rating assigned to debt securities, the
corporate credit rating will be used; and if Moody’s or S&P shall not have in
effect any rating assigned to senior unsecured long-term debt securities of the
Company or corporate credit rating (other than by circumstances referred to in
the last sentence of this definition), then such Rating Agency shall be deemed
to have established

Schedule I-1

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a Rating in Level V. Any rating assigned to any other debt security of the
Company shall be disregarded. The rating in effect at any date is that in effect
at the close of business on such date. In the case of split ratings from S&P or
Moody’s, the rating to be used to determine which pricing level applies is the
higher of the two (e.g., BBB+/Baa2 results in Level II Status); provided that if
the split is more than one full rating category, the rating category next below
that of the higher of the two rating categories will be used (e.g., BBB+/Baa3
results in Level III Status, and A-/Baa3 results in Level II Status). If the
rating system of Moody’s or S&P shall change, or if either such Rating Agency
shall cease to be in the business of rating corporate debt obligations, the
Company, the Administrative Agent and the Banks shall negotiate in good faith to
amend this definition to reflect such changed rating system or the
unavailability of ratings from such Rating Agency and, pending the effectiveness
of any such amendment, the Letter of Credit Commission Rate and the Base Rate
Margin shall be determined by reference to the Rating most recently in effect
prior to such change or cessation.
“S&P” means Standard & Poor’s Financial Services LLC, a division of The
McGraw-Hill Companies, Inc., and any successor thereto.
“Status” refers to the determination of which of Level I Status, Level II
Status, Level III Status, Level IV Status or Level V Status exists at any date.

Schedule I-2

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SCHEDULE II

                  Bank   Participation Percentage     Participation Amount  
 
 
JPMorgan Chase Bank, N.A.
    51.46682890154 %   $ 14,060,240.49                    
Union Bank, N.A.
    48.53317109846 %   $ 13,258,793.51  

Schedule II-1

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EXHIBIT A
AMENDED AND RESTATED
IRREVOCABLE TRANSFERABLE LETTER OF CREDIT
No. P-010151
(formerly numbered as S-1001)
Originally Issued August 18, 1986
Amended and Restated
April 16, 2010
Security Pacific Capital Leasing Corporation
555 California Street, 4th Floor
Mail Code: CA5-705-04-01
San Francisco, California 94104
Attention: Anita Garfagnoli
Dear Sirs:
We hereby establish, at the request of Arizona Public Service Company (the
“Company”), in your favor, our Irrevocable Transferable Letter of Credit
No. P-010151 (formerly numbered as S-1001) (the “Letter of Credit”), in a
maximum amount at any date (the “Maximum Credit Amount”) equal to the amount
shown opposite the period including such date in the Table of Maximum Credit
Amounts attached hereto as Schedule II-A, effective immediately and expiring at
5:00 p.m. (New York City time) on the Termination Date. Capitalized terms used
herein and in Schedules II-A, II-B and III and Exhibits 1, 2, 3 and 4 hereto
shall have the meanings set forth in Schedule I hereto. This Letter of Credit is
issued in connection with the leasing of an undivided interest in Unit 2 of the
Palo Verde Nuclear Generating Station to the Company pursuant to a Facility
Lease dated as of August 1, 1986 (the “Facility Lease”) as amended and in effect
on the date hereof, between the Company and U.S. Bank National Association (as
successor to State Street Bank and Trust Company, as successor to The First
National Bank of Boston), as Owner Trustee under a trust agreement with you.
We hereby irrevocably authorize you to draw on us, in accordance with the terms
and conditions hereinafter set forth, an amount not in excess of the amount
shown opposite the period including the date of such drawing (the “Date of
Drawing”) in the Table of Maximum Drawing Amounts attached hereto as
Schedule II-B as such amounts are modified from time to time in accordance with
the next paragraph. Such amounts, as modified in accordance with the next
paragraph, are hereinafter referred to collectively as the “Maximum Drawing
Amounts” and individually as the “Maximum Drawing Amount”. A drawing in respect
of a payment hereunder honored by us shall not exceed the lesser of the Maximum
Drawing Amount applicable on the Date of Drawing and the Maximum Credit Amount
applicable on the Date of Drawing. All payments hereunder shall be made from our
own general funds.

Exhibit A - Page 1

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The Maximum Drawing Amounts shall be modified from time to time as follows:
(a) upon payment by the Issuing Bank of each drawing under the Letter of Credit,
the Maximum Drawing Amounts applicable to each Date of Drawing subsequent to
such payment shall be automatically reduced by an amount equal to the amount of
the drawing so paid and shall not be reinstated; and
(b) if adjustments are made to Modified Special Casualty Values, corresponding
adjustments shall be made to the Maximum Drawing Amounts shown in Schedule II-B,
(as theretofore reduced pursuant to clause (a) above), provided that if any such
adjustment of Modified Special Casualty Values would cause the Maximum Drawing
Amount for any period to exceed the Maximum Credit Amount for such period,
(minus, the amount of any drawing theretofore honored by us hereunder), such
Maximum Credit Amount (as so reduced) shall apply for such period and provided
further that adjustments pursuant to this clause (b) shall be effective
automatically upon receipt by us of a notice from you in the form of Exhibit 1
hereto.
Upon receipt of a notice in the form of Exhibit 1 hereto, we will promptly issue
an amendment to this irrevocable transferable letter of credit containing a
revised Schedule II-B reflecting the adjustments contained in such notice.
Funds under this Letter of Credit are available to you against presentation on
or prior to the Termination Date of your drawing in the form of a completed
certificate signed by you in the form of Exhibit 2 attached hereto. Such
certificate shall be dated the date of its presentation and shall be presented
(x) by facsimile (at facsimile number (312) 233-2266 or alternately to (312)
954-2458), Attention: Manager, without further need of documentation, including
the original of this Letter of Credit, or (y) at our Chicago office specified
below, in each case, it being understood that each certificate so submitted is
to be the sole operative instrument of drawing. You shall use your best efforts
to give telephonic notice of a drawing to the Issuing Bank at its Standby
Service Unit, (at: (312) 954-5973 or alternately to 1-800-634-1969, Option 1) on
the day of such drawing (but such notice shall not be a condition to drawing
hereunder and you shall have no liability for not doing so). If we receive such
certificate as provided herein, in strict conformity with the terms and
conditions of this Letter of Credit, prior to 10:00 a.m. (New York City time) on
any Business Day, (notwithstanding any provision of Rule 5.01 of the
International Standby Practices, ICC Publication No. 590 (the “ISP98”) to the
contrary, which provisions of the ISP98 are hereby expressly waived), we will
honor the drawing on the same Business Day. If we receive such certificate as
provided herein on or after 10:00 a.m. and prior to 5:00 p.m. (New York City
time) on any Business Day, all in strict conformity with the terms and
conditions of this Letter of Credit, we will honor the drawing on the next
Business Day. Payment under this Letter of Credit will be made by wire transfer
of federal funds to your account with any bank located in the United States of
America or by deposit of immediately available funds into a designated account
that you maintain with us.
Notwithstanding any provision of Section 5-108(b) of the New York Uniform
Commercial Code (the “NY UCC”) or Rule 5.01 of the ISP98 to the contrary, which
provisions are hereby expressly waived, if the presentation of such certificate
is not in strict conformity with the terms and conditions of this Letter of
Credit, we will give you prompt notice prior to the time we would have been
obliged to make payment as set forth in the preceding paragraph by

Exhibit A - Page 2

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facsimile transmission addressed to you at the fax number set forth in the next
succeeding paragraph, effective upon confirmation, that we have refused such
non-conforming certificate, and stating all discrepancies in respect of which
the Issuing Bank refuses such non-conforming certificate. If you correct such
non-conforming demand by presentation of the certificate corrected to be in
strict conformity with the terms and conditions of the Letter of Credit, then we
will honor the drawing and make payment in accordance with the terms provided
herein based upon the time such corrected certificate is presented, provided
that you may make only one such corrected demand with respect to any such
non-conforming demand, and provided further that any such correction and
presentation of such conforming demand is effected on or prior to the Stated
Termination Date, and provided further that for purposes of determining whether
such certificate has been timely presented, the corrected certificate shall be
deemed to have been presented on the date the non-conforming certificate was
presented.
Notwithstanding any other provision of this Letter of Credit, we shall have the
right, upon the occurrence of any of the events listed in Schedule III hereto,
to terminate this Letter of Credit by delivering to you a written notice in the
form of Exhibit 4 hereto indicating the date of such termination (the “Date of
Early Termination”), provided that on or before the Date of Early Termination
you will have the right to draw once an amount not in excess of the lesser of
the Maximum Credit Amount and the Maximum Drawing Amount in accordance with the
procedures described herein. The written notice referred to in the preceding
sentence shall be given by facsimile transmission addressed to you at Security
Pacific Capital Leasing Corporation, 555 California Street, 4th Floor, Mail
Code: CA5-705-04-01, San Francisco, California 94104; Attention: Anita
Garfagnoli; Fax: 415-765-7373 (or to such other address or facsimile number
designated by you by written notice delivered to us at least 15 days prior to
the notice of early termination) and shall be effective upon receipt of the
appropriate confirmation of the facsimile transmission. We will also forward a
copy of such notice by overnight delivery service to the address set forth
above. The Date of Early Termination specified in such written notice shall be:
(a) in the case of events specified in paragraphs A and G of Schedule III, not
earlier than ten days after such notice is given, and
(b) in the case of all other events specified in Schedule III, not earlier than
30 days after such notice is given.
Upon the Termination Date this Letter of Credit shall automatically terminate
and be delivered to the Issuing Bank for cancellation. Failure to deliver said
Letter of Credit will have no effect on the Termination Date, and the Letter of
Credit will still be considered terminated.
Notwithstanding the provisions of Section 5-112(b)(2) of the NY UCC that permit
the Issuing Bank to refuse to recognize or carry out a transfer of this Letter
of Credit if the transferee has failed to comply with any other requirement
relating to transfer imposed by the Issuing Bank which is within the standard
practice referred to in Section 5-108(e) of the NY UCC or is otherwise
reasonable under the circumstances, which provisions are hereby expressly
waived, this Letter of Credit may be transferred in its entirety more than once,
but in each case only to the successor Equity Participant under the Trust
Agreement dated as of August 1, 1986 between yourself and U.S. Bank National
Association (as successor to State Street Bank and Trust

Exhibit A - Page 3

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Company, as successor to The First National Bank of Boston). Any transfer
request must be effected by presenting to the Issuing Bank the attached form of
Exhibit 3 hereto signed by the transferor and by the transferee accompanied by
the original of this Letter of Credit and any amendments thereto (which
presentation of an appropriately completed Exhibit 3 shall be conclusive
evidence of such transferee’s authority without any inquiry by us into the terms
of the Trust Agreement). Upon the Issuing Bank’s endorsement of such transfer,
the transferee instead of the transferor shall, without necessity of further
action, be entitled to all the benefits of and rights under this Letter of
Credit in the transferor’s place.
Notwithstanding any provision of Rule 3.12 of the ISP98 to the contrary, which
provisions are hereby expressly waived, upon the Issuing Bank’s receipt of its
standard certificate duly executed by you certifying that the original of this
Letter of Credit has been lost, destroyed or mutilated, the Issuing Bank shall
provide a true copy of original (which copy shall be marked as such) of this
Letter of Credit to you without affecting the Company’s obligations to the
Issuing Bank to reimburse. Upon delivery of such copy, any requirement that the
original be presented hereunder shall be deemed to be a reference to such copy.
Except as expressly stated herein, this Letter of Credit is governed by, and
construed in accordance with the ISP98. As to matters not governed by the ISP98,
this Letter of Credit shall be governed by and construed in accordance with the
laws of the State of New York, including without limitation the NY UCC as in
effect in the State of New York, without regard to principles of conflict of
laws (other than Sections 5.1401 and 5.1402 of the General Obligations Law of
the State of New York).
Communications with respect to this Letter of Credit shall be in writing,
specifically referring to the number of this Letter of Credit, and addressed and
presented to the Issuing Bank at JPMorgan Chase Bank, N.A., 300 South Riverside
Plaza, Mail Code IL1-0236, Chicago, Il 60606-0236, Attention: Standby Letter of
Credit Unit. For telephone assistance, please contact the Standby Client Service
Unit at 1-800-634-1969, select Option 1, and have this Letter of Credit number
available.
By your acceptance of this Letter of Credit, we hereby notify you of our
agreement to the terms and conditions of Section 13 of the Reimbursement
Agreement.
This Letter of Credit sets forth in full our undertaking, and such undertaking
shall not in any way be modified, amended, amplified or limited by reference to
any document, instrument or agreement referred to herein, except only Schedules
I, II-A, II-B and III and Exhibits 1, 2, 3 and 4 hereto and the notices referred
to herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement except as set forth above.

Exhibit A - Page 4

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This Letter of Credit No. P-010151 (formerly numbered as S-1001) amends and
restates our Letter of Credit No. S-1001 dated as of August 15, 1986, as
heretofore amended.

            JPMORGAN CHASE BANK, N.A.
      By:              Name:           Title:      

Exhibit A - Page 5

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EXHIBIT 1
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
JPMorgan Chase Bank, N.A.
300 South Riverside Plaza
Mail Code IL1-0236
Chicago, IL 60606-0236
Attn: Standby Letter of Credit Unit
Dear Sirs:
Reference is made to that certain amended and restated irrevocable transferable
Letter of Credit bearing Letter of Credit No. P-010151 (formerly numbered as
S-1001) dated April 16, 2010 (the “Letter of Credit”), which has been
established by you in favor of Security Pacific Capital Leasing Corporation (the
“Equity Participant”).
The undersigned, a duly authorized representative of the Equity Participant,
hereby certifies that Modified Special Casualty Values have been adjusted and
the amounts shown on Schedule II-B to the Letter of Credit should be modified,
in accordance with the terms of clauses (a) and (b) of the third paragraph of
the Letter of Credit, to the amounts shown in Appendix A hereto.
We request that you amend the Letter of Credit to replace the current
Schedule II-B to the Letter of Credit with the revised Schedule II-B attached
hereto. All other terms and conditions as stated in the Letter of Credit will
remain unchanged. Except as otherwise set forth herein, the Letter of Credit
shall remain effective and in full force.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Letter of Credit.

     
 
   
 
  [Name of Equity Participant]
 
   
 
   
 
  [Name and Title of Authorized
 
   
 
   
 
  Representative of Equity Participant]

Letter of Credit – Exhibit 1

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EXHIBIT 2
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
CERTIFICATE
JPMorgan Chase Bank, N.A.
300 South Riverside Plaza
Mail Code IL1-0236
Chicago, IL 60606-0236
Attn: Standby Letter of Credit Unit
Facsimile number (312) 233-2266
Alternately to (312) 954-2458
The undersigned, a duly authorized representative of Security Pacific Capital
Leasing Corporation (the “Equity Participant”), as beneficiary under that
certain amended and restated irrevocable transferable Letter of Credit
No. P-010151 (formerly numbered as S-1001) dated April 16, 2010, established by
JPMorgan Chase Bank, N.A. (the “Issuing Bank”) and issued pursuant to that
certain Reimbursement Agreement dated as of April 16, 2010 between Arizona
Public Service Company (the “Company”), the Issuing Bank and the other Banks
named therein, hereby certifies as follows:
1. We hereby demand payment in the amount of $                     .
2. An Event of Default under the Facility Lease has occurred and is continuing.
3. The amount demanded hereby does not exceed the Maximum Drawing Amount
available under the Letter of Credit on the date hereof, as determined in
accordance with the terms of the Letter of Credit.
4. Payment by the Issuing Bank pursuant to this drawing shall be made to
                    , ABA Number                                   , Account
Number                                    , Attention:
                                  , Re:                                   .
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Letter of Credit.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
               , 20_____.

     
 
   
 
  [Name of Equity Participant]

Letter of Credit – Exhibit 2

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  [Name and Title of Authorized
 
  Representative of Equity Participant]

Letter of Credit – Exhibit 2

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EXHIBIT 3
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
REQUEST FOR TRANSFER

     
JPMorgan Chase Bank, N.A.
  [Date]
300 South Riverside Plaza
   
Mail Code IL1-0236
   
Chicago, IL 60606-0236
   

Attn: Standby Letter of Credit Unit
Re: JPMorgan Chase Bank, N.A. Irrevocable Transferable Letter of Credit
No. P-010151 (formerly numbered as S-1001) dated April 16, 2010.
We, the undersigned “Transferor”, hereby irrevocably transfer all of our rights
to draw under the above referenced Letter of Credit (“Credit”) in its entirety
to:

     
NAME OF TRANSFEREE
   
 
   
 
  (Print Name and complete address of the Transferee) “Transferee”
 
   
ADDRESS OF TRANSFEREE
   
 
   
 
   
 
   
 
   
CITY, STATE/COUNTRY ZIP
   
 
   

In accordance with ISP98 (as defined in the Credit), Rule 6, regarding transfer
of drawing rights, all rights of the undersigned Transferor in such Credit are
transferred to the Transferee, who shall have the sole rights as beneficiary
thereof, including sole rights relating to any amendments whether increases or
extensions or other amendments and whether now existing or hereafter made. All
amendments are to be advised directly to the Transferee without necessity of any
consent of or notice to the undersigned Transferor.
The original Credit, including amendments to this date, is attached and the
undersigned Transferor requests that you endorse an acknowledgment of this
transfer on the reverse thereof. The undersigned Transferor requests that you
notify the Transferee of this Credit in such form and manner as you deem
appropriate, and the terms and conditions of the Credit as transferred. The
undersigned Transferor acknowledges that you incur no obligation to process the
transfer requested hereunder if the transfer is to a prohibited person named by
the United States Department of Treasury’s Office of Foreign Assets Control
Regulations.
The Transferor and the Transferee hereby request that you advise the Transferee
of the terms and conditions of this transferred Credit and these instructions.
In the event that the authorized signatory for either the Transferor or the
Transferee is a financial institution, a corporation or a partnership composed
of financial institutions or corporations, a secretary or incumbency certificate
certifying that such signatory is duly empowered to act in the name and on
behalf of such Transferor or Transferee, as applicable, must accompany this
Letter of Credit – Exhibit 3

 

 

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Request for Transfer, and, in such case, the requirement that such signatory’s
signature be guaranteed shall be deemed to be waived.
Payment of transfer fee of U.S. $3,500 is for the account of the Company (as
defined in the Credit) who agrees to pay you on demand any expense or cost you
may incur in connection with the transfer. Receipt of such transfer fee shall
not constitute consent to effect the transfer of the Credit on terms other than
as expressly set forth in the Credit and this Request for Transfer.
Transferor represents and warrants to you that (i) our execution, delivery, and
performance of this request for transfer (a) are within our powers, (b) have
been duly authorized, (c) constitute our legal, valid, binding and enforceable
obligation, (d) do not contravene any charter provision, by-law, resolution,
contract, or other undertaking binding on or affecting us or any of our
properties, (e) to the best of Transferor’s knowledge, such transfer does not
require any notice, filing or other action to, with, or by any governmental
authority, (f) the enclosed Credit is original and complete, (g) there is no
outstanding demand or request for payment or transfer under the Credit affecting
the rights to be transferred which remains outstanding as of the date hereof,
(h) in the event that the Transferee’s signature is not guaranteed, to the best
of Transferor’s knowledge, the Transferee is a financial institution, a
corporation or a partnership composed of financial institutions or corporations
and (i) to the best of Transferor’s knowledge, based on information provided by
the Transferee, the Transferee’s name and address are correct and complete and
the Transferee’s use of the Credit as transferred and the transactions
underlying the Credit and the requested transfer do not violate any applicable
United States or other law, rule or regulation.
The effective date of the transfer shall be the date hereafter on which you
effect the requested transfer by acknowledging and endorsing this request and
giving notice thereof to Transferee.
WE WAIVE ANY RIGHT TO TRIAL BY JURY THAT WE MAY HAVE IN ANY ACTION OR PROCEEDING
RELATING TO OR ARISING OUT OF THIS TRANSFER.
This request is made subject to ISP98 and is subject to and shall be governed by
the laws of the State of New York, without regard to principles of conflict of
laws.

Sincerely yours,
 
(Print Name of Transferor)
 
(Transferor’s Authorized Signature)
 
(Print Authorized Signers Name and Title)

SIGNATURE GUARANTEED
Signature(s) with title(s) conform(s) with that/those on file with us for this
individual, entity or company and signer(s) is/are authorized to execute this
agreement. We attest that the individual, company or entity has been identified
by us in compliance with USA PATRIOT Act procedures of our bank.
 
(Print Name of Bank)
 
(Address of Bank)
 
(City, State, Zip Code)
 
(Print Name and Title of Authorized Signer)
 
(Authorized Signature)
 
(Telephone Number)
 
(Date)

Letter of Credit – Exhibit 3

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

 

     
 
(Telephone Number/Fax Number)
   

Acknowledged:
 
(Print Name of Transferee)
 
(Transferee’s Authorized Signature)
 
(Print Authorized Signers Name and Title)
 
(Telephone Number/Fax Number)
Acknowledged as of                     , 20_____:
JPMorgan Chase Bank, N.A.

         
By:
       
 
 
 
Name:    
 
  Title:    

SIGNATURE GUARANTEED
Signature(s) with title(s) conform(s) with that/those on file with us for this
individual, entity or company and signer(s) is/are authorized to execute this
agreement. We attest that the individual, company or entity has been identified
by us in compliance with USA PATRIOT Act procedures of our bank.
 
(Print Name of Bank)
 
(Address of Bank)
 
(City, State, Zip Code)
 
(Print Name and Title of Authorized Signer)
 
(Authorized Signature)
 
(Telephone Number)
 
(Date)

Letter of Credit – Exhibit 3

 

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EXHIBIT 4
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
NOTICE OF TERMINATION
Date:                      __, 20__
Security Pacific Capital Leasing Corporation
555 California Street, 4th Floor
Mail Code: CA5-705-04-01
San Francisco, California 94104
Attention: Anita Garfagnoli
Dear Sir:
Reference is made to that certain amended and restated irrevocable transferable
Letter of Credit bearing Letter of Credit No. P-010151 (formerly numbered as
S-1001) dated April 16, 2010, which has been established by us in your favor.
We hereby give notice to you that the above referenced Letter of Credit will be
terminated in accordance with its terms on                       _____, 20_____,
pursuant to the occurrence of one or more of the events described in
Schedule III to the Letter of Credit as follows:
[Insert the description of the event(s) of default]

            Very truly yours,

JPMORGAN CHASE BANK, N.A.
      By:           Name:           Title:      

Letter of Credit – Exhibit 4

 

 

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SCHEDULE I
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
The following terms have the following meanings for purposes of the Letter of
Credit and the Schedules and Exhibits thereto. Terms defined in the Letter of
Credit have the meanings given to them therein. Terms defined by reference to
the Facility Lease have the meanings assigned to them therein from time to time.
“Administrative Agent” means JPMorgan, in its capacity as administrative agent
for the Banks under the Reimbursement Agreement, and its successors in such
capacity.
“Applicable Law” has the meaning assigned to it in the Facility Lease.
“Bank” means (i) each bank or financial institution listed on the signature
pages of the Reimbursement Agreement, each Assignee that becomes a Bank pursuant
to Section 15(a) of the Reimbursement Agreement, and their respective
successors, and (ii) the Issuing Bank with respect to its Participation.
“Business Day” means any day except (i) a Saturday or Sunday, (ii) any other day
on which commercial banks in New York, New York, Chicago, Illinois or the State
of California are authorized by law to close, or (iii) a day on which payments
in respect of the Letter of Credit cannot be funded via wire through the Federal
Reserve System.
“Capital Lease Obligations” means as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on the balance
sheet of such Person under generally accepted accounting principles and, for the
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with generally accepted
accounting principles.
“Code” means the Internal Revenue Code of 1986, as amended, or any successor
statute.
“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.
“Defaulting Bank” means any Bank, as reasonably determined by the Administrative
Agent or if the Administrative Agent is the Defaulting Bank, by the Required
Banks, that (a) has defaulted in its obligation to fund its Participation
Percentage in respect of a drawing under the Letter of Credit or any of its
other funding obligations under the Reimbursement Agreement, (b) has notified
the Company, the Administrative Agent, the Issuing Bank or any Bank in writing
of its intention not to fund its Participation Percentage in respect of a
drawing under the Letter of Credit or any of its other funding obligations under
the Reimbursement Agreement, (c) has otherwise failed to pay over to the
Administrative Agent or any other Bank any other amount required to be paid by
it thereunder within three (3) Business Days of the date when due, (d) has
failed, within three (3) Business Days after request by the Administrative
Agent, or if the
Letter of Credit – Schedule I - Page 1

 

 

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Administrative Agent is the Defaulting Bank, by the Required Banks, to confirm
that it will comply with the terms of the Reimbursement Agreement relating to
its obligations to fund its Participation Percentage in respect of a drawing
under the Letter of Credit or any of its other funding obligations under the
Reimbursement Agreement or (e) shall (or whose parent company shall) generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or shall have had any proceeding instituted by or against
such Bank (or its parent company) seeking to adjudicate it as bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, administrator, assignee for the benefit of creditors or similar Person
charged with reorganization or liquidation of its business or custodian for, it
or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 30 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
administrator, assignee for the benefit of creditors or similar Person charged
with reorganization or liquidation of its business or custodian for it or for
any substantial part of its property) shall occur, or shall take (or whose
parent company shall take) any corporate action to authorize any of the actions
set forth above in this clause (e); provided that a Bank shall not be deemed to
be a Defaulting Bank solely by virtue of the ownership or assumption of any
equity interest in any Bank or any Person that directly or indirectly controls
such Bank by a governmental authority or an instrumentality thereof.
“Equity Participant” means Security Pacific Capital Leasing Corporation, as
Equity Participant, and its successors and assigns.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
“ERISA Affiliate” means any corporation or trade or business which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Company or is under common control (within the
meaning of Section 414(c) of the Code) with the Company.
“Governmental Action” has the meaning assigned to it in the Facility Lease.
“Guarantee” means as to any Person, any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person or in any manner providing for the payment of any Indebtedness of any
other Person or otherwise protecting the holder of such Indebtedness against
loss (whether by virtue of partnership arrangements, agreements to keep well, to
purchase assets, goods, securities or services, or to take-or-pay or otherwise),
provided that the term “Guarantee” shall not include endorsements for collection
or deposit in the ordinary course of business. The term “Guarantee” used as a
verb has a corresponding meaning.
Letter of Credit – Schedule I - Page 2

 

 

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“Hedge Agreement” means any interest rate swap, cap or collar agreement,
interest rate future or option contract, currency swap agreement, currency
future or option contract, commodity future or option contract, commodity
forward contract or other similar agreement.
“Indebtedness” means as to any Person at any date (without duplication):
(a) indebtedness created, issued, incurred or assumed by such Person for
borrowed money or evidenced by bonds, debentures, notes or similar instruments;
(b) all obligations of such Person to pay the deferred purchase price of
property or services, excluding, however, trade accounts payable (other than for
borrowed money) arising in, and accrued expenses incurred in, the ordinary
course of business of such Person so long as such trade accounts payable are
paid within 180 days of the date incurred; (c) all Indebtedness secured by a
lien on any asset of such Person, to the extent such Indebtedness has been
assumed by, or is a recourse obligation of, such Person; (d) all Guarantees by
such Person; (e) all Capital Lease Obligations of such Person; and (f) the
amount of all reimbursement obligations of such Person (whether contingent or
otherwise) in respect of letters of credit, bankers’ acceptances, surety or
other bonds and similar instruments in support of Indebtedness.
“Issuing Bank” means JPMorgan and its successors in their capacity as issuer of
the Letter of Credit.
“JPMorgan” means JPMorgan Chase Bank, N.A., a national banking association, in
its individual capacity, and its successors and assigns.
“Material Subsidiary” means, at any time, a Subsidiary of the Company which as
of such time meets the definition of a “significant subsidiary” included as of
April 16, 2010 in Regulation S-X of the Securities and Exchange Commission or
whose assets at such time exceed 10% of the assets of the Company and the
Subsidiaries (on a consolidated basis).
“Modified Special Casualty Value” has the meaning assigned to it in the Facility
Lease.
“Multiemployer Plan” means a plan defined as such in Section 3(37) of ERISA to
which contributions have been made by the Company or any ERISA Affiliate within
any of the preceding five plan years and which is covered by Title IV of ERISA.
“Participant” has the meaning set forth in Section 15(b) of the Reimbursement
Agreement.
“Participation” means a participating interest in the credit represented by the
Letter of Credit including, without limitation, the interest therein retained by
the Issuing Bank after giving effect to all participating interests therein
granted by it pursuant to Section 14(a) of the Reimbursement Agreement, but
prior to giving effect to any interest therein granted to any Participant
pursuant to Section 15(b) of the Reimbursement Agreement.
“Participation Amount” means, with respect to any Bank, the amount set forth in
Schedule II to the Reimbursement Agreement opposite the name of such Bank
therein, as such amount may be changed by reason of an assignment by or to such
Bank in accordance with Section 15(a). Such amount shall be reduced from time to
time by such Bank’s ratable share of each reduction of the Maximum Credit
Amount.
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“Participation Percentage” means, with respect to any Bank at any time, the
percentage equivalent of a fraction (i) the numerator of which is the
Participation Amount of such Bank at such time and (ii) the denominator of which
is the Maximum Credit Amount at such time.
“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
“Person” means an individual, a corporation, a partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
“Plan” means an employee benefit plan within the meaning of Section 3(3) of
ERISA established or maintained by the Company or any ERISA Affiliate which is
covered by Title IV of ERISA, other than a Multiemployer Plan.
“Reimbursement Agreement” means the Reimbursement Agreement dated as of
April 16, 2010 among Arizona Public Service Company, the Banks party thereto,
the Administrative Agent and the Issuing Bank, and as the same may be amended
and restated from time to time thereafter.
“Required Banks” means, at any time, Banks with Participation Percentages
aggregating more than 50% at such time exclusive of any Defaulting Bank;
provided that if after application of such provision, any Bank shall hold more
than 50% of the aggregate Participation Percentages of all Banks at such time
(and if there is more than one Bank at such time), “Required Banks” shall mean
such Bank plus one additional Bank.
“Stated Termination Date” means April 16, 2013 or such later date to which such
Stated Termination Date shall have been extended pursuant to Section 17 of the
Reimbursement Agreement.
“Subsidiary” of any Person means any corporation of which more than 50% of the
issued and outstanding capital stock having ordinary voting power to elect a
majority of the Board of Directors of such corporation (irrespective of whether
at the time capital stock of any other class or classes of such corporation
shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned or controlled by such Person, such Person
and one or more of its other Subsidiaries, or one or more of such Person’s other
Subsidiaries.
“Termination Date” means the earliest of (i) the date on which the Issuing Bank
pays a drawing under the Letter of Credit for the lesser of the Maximum Drawing
Amount and the Maximum Credit Amount, (ii) if a drawing is not requested by the
Equity Participant after a notice of termination is given under the Letter of
Credit, the Date of Early Termination, (iii) if a drawing is requested by the
Equity Participant after a notice of termination is given under the Letter of
Credit, the date on which the Issuing Bank pays such drawing, (iv) the date on
which the Company delivers a certificate to the Issuing Bank certifying that the
Company has paid the amounts due under Section 9(c) of the Facility Lease (so
long as the Equity Participant shall have acknowledged such payment by its
express confirmation thereof in, and its countersignature to, such certificate),
(v) the date on which the Company delivers a certificate to the Issuing Bank
Letter of Credit – Schedule I - Page 4

 

 

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

 

certifying that the Company has paid the amounts due under Section 9(d) of the
Facility Lease (so long as the Equity Participant shall have acknowledged such
payment by its express confirmation thereof in, and its countersignature to,
such certificate), and (vi) the latest of (x) the Stated Termination Date,
(y) if a certificate in strict conformity with the terms and conditions of the
Letter of Credit is presented on the Stated Termination Date at such time and at
such office as specified in the fifth paragraph of the Letter of Credit, the
date on which the Issuing Bank is required to honor the drawing in accordance
with the provisions of such paragraph pursuant to such presentation, and (z) if
a corrected certificate in strict conformity with the terms and conditions of
the Letter of Credit is presented on such date as specified in, and in
accordance with the provisions of, the sixth paragraph of the Letter of Credit,
the date on which the Issuing Bank is required to honor the drawing in
accordance with the provisions of such paragraph pursuant to such presentation.
“Transaction Documents” means the Participation Agreement, the Refinancing
Agreement, the Indemnity Agreement, the Escrow Deposit Agreement, the Facility
Lease, the Trust Agreement, the Indenture, the Decommissioning Trust Agreement,
the Tax Indemnification Agreement, the Mortgage Release, the Assignment and
Assumption, the Purchase Documents, any ground lease contemplated by
Section 10(b)(3)(xvii) of the Participation Agreement and the Notes, each as
defined in the Facility Lease.
“Voting Stock” means capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or
persons performing similar functions) of such Person, even if the right so to
vote has been suspended by the happening of such a contingency.
Letter of Credit – Schedule I - Page 5

 

 

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SCHEDULE II-A
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
TABLE OF MAXIMUM CREDIT AMOUNTS
SECURITY PACIFIC CAPITAL LEASING CORPORATION

          APPLICABLE PERIOD   MAXIMUM CREDIT AMOUNT  
 
 
From April 16, 2010 through June 30, 2010
  $ 27,319,034.00  
 
 
From July 1, 2010 through January 10, 2011
  $ 27,319,034.00  
 
 
From January 11, 2011 through June 30, 2011
  $ 23,205,135.00  
 
 
From July 1, 2011 through January 10, 2012
  $ 23,205,135.00  
 
 
From January 11, 2012 through June 30, 2012
  $ 18,890,092.00  
 
 
From July 1, 2012 through January 10, 2013
  $ 18,890,092.00  
 
 
From January 11, 2013 through April 16, 2013
  $ 14,192,420.00  

Letter of Credit - Schedule II-A - Page 1

 

 

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SCHEDULE II-B
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
TABLE OF MAXIMUM DRAWING AMOUNTS
SECURITY PACIFIC CAPITAL LEASING CORPORATION

          APPLICABLE PERIOD   MAXIMUM DRAWING AMOUNT  
 
 
From April 16, 2010 through June 30, 2010
  $ 27,167,373.00  
 
 
From July 1, 2010 through January 10, 2011
  $ 27,319,034.00  
 
 
From January 11, 2011 through June 30, 2011
  $ 23,046,045.00  
 
 
From July 1, 2011 through January 10, 2012
  $ 23,205,135.00  
 
 
From January 11,2012 through June 30, 2012
  $ 18,724,101.00  
 
 
From July 1, 2012 through January 10, 2013
  $ 18,890,092.00  
 
 
From January 11, 2013 through April 16, 2013
  $ 14,192,420.00  

Letter of Credit - Schedule II - B

 

 

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SCHEDULE III
TO JPMORGAN CHASE BANK, N.A. LETTER OF CREDIT NO. P-010151
The Issuing Bank shall have the right upon the occurrence of any of the events
listed below to terminate the Letter of Credit in accordance with the terms of
the Letter of Credit:
(A) The Company shall fail to pay when due any amount payable under Section 2(a)
of the Reimbursement Agreement or fail to pay any other amount payable under
Section 2 of the Reimbursement Agreement within five (5) Business Days after the
same becomes due and payable; or
(B) The Company shall fail to perform or observe (i) any term, covenant or
agreement contained in Section 7(a)(ii), 7(g)(iv), 8(a), 8(b), 8(c) or 8(e) of
the Reimbursement Agreement, or (ii) any term, covenant or agreement contained
in the Reimbursement Agreement (other than those covered by clause (A) above or
subclause (i) of this clause (B) or Section 7(e) or Section 19 of the
Reimbursement Agreement) on its part to be performed or observed if the failure
to perform or observe such term, covenant or agreement shall remain unremedied
for 30 days after written notice thereof shall have been given to the Company by
the Administrative Agent; or
(C) Any representation or warranty made by the Company in the Reimbursement
Agreement or by the Company (or any of its officers) in any certificate
delivered in connection with the Reimbursement Agreement shall prove to have
been false or misleading in any material respect when made; or
(D) Any material provision of the Reimbursement Agreement shall at any time for
any reason cease to be valid and binding upon the Company, or shall be declared
to be null and void, or the validity or enforceability thereof shall be
contested by the Company or any governmental agency or authority, or the Company
shall deny that it has any or further liability or obligation under the
Reimbursement Agreement; or
(E) (i) The Company or any of its Material Subsidiaries shall fail to pay
(a) any principal of or premium or interest on any Indebtedness that is
outstanding in a principal amount of at least $35,000,000 in the aggregate (but
excluding Indebtedness owing under the Reimbursement Agreement), or (b) an
amount, or post collateral as contractually required in an amount, of at least
$35,000,000 in respect of any Hedge Agreement, of the Company or such Material
Subsidiary (as the case may be), in each case, when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Indebtedness or Hedge Agreement; or (ii) any event of default shall exist under
any agreement or instrument relating to any such Indebtedness and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or
(F) The Company or any of its Material Subsidiaries shall fail to pay any
principal of or premium or interest in respect of any operating lease in respect
of which the payment obligations of the Company have a present value of at least
$35,000,000, when the same
Letter of Credit - Schedule III - page 1

 

 

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becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in such operating lease, if the
effect of such failure is to terminate, or to permit the termination of, such
operating lease; or
(G) The Company or any of its Material Subsidiaries shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Company or
any of its Material Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
Debtor Relief Law, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or the Company or any of its Material Subsidiaries shall
take any corporate action to authorize any of the actions set forth above in
this clause (G); or
(H) Judgments or orders for the payment of money that exceeds any applicable
insurance coverage (the insurer of which shall be rated at least “A” by A.M.
Best Company) by more than $35,000,000 in the aggregate shall be rendered
against the Company or any Material Subsidiary and such judgments or orders
shall continue unsatisfied or unstayed for a period of 45 days; or
(I) (i) Any “person” or “group” (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended, but excluding any
employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of 30% or more of the equity securities of PWCC entitled
to vote for members of the board of directors of PWCC; or (ii) during any period
of 24 consecutive months, a majority of the members of the board of directors of
PWCC cease (other than due to death or disability) to be composed of individuals
(a) who were members of that board on the first day of such period, (b) whose
election or nomination to that board was approved by individuals referred to in
clause (a) above constituting at the time of such election or nomination at
least a majority of that board or (c) whose election or nomination to that board
was approved by individuals referred to in clauses (a) and (b) above
constituting at the time of such election or nomination at least a majority of
that board; or (iii) PWCC shall cease for any reason to own, directly or
indirectly 80% of the Voting Stock of the Company; or
(J) An event or condition specified in Section 7(g)(iv) of the Reimbursement
Agreement shall occur or exist with respect to any Plan or Multiemployer Plan
and, as a result of such event or condition, together with all other such events
or conditions, the Company or any ERISA Affiliate shall incur or in the opinion
of the Required Banks shall be reasonably likely to incur a liability to a Plan,
a Multiemployer Plan or the PBGC (or any combination of the
Letter of Credit - Schedule III - page 2

 

 

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foregoing) which is, in the determination of the Required Banks, likely to
exceed $35,000,000 in the aggregate; or
(K) any change in Applicable Law or any Governmental Action shall occur which
has the effect of making the transactions contemplated by the Transaction
Documents unauthorized, illegal or otherwise contrary to Applicable Law; or
(L) any event specified in subsection (vii), (viii) or (x) of Section 15 of the
Facility Lease shall occur; or
(M) the Company shall fail to make, or cause to be made, any payment specified
in Section 15(i) of the Facility Lease equal to or exceeding $1,000,000 within
the periods specified in that Section.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Letter of Credit. This Letter of Credit
No. P-010151 (formerly numbered as S-1001) amends and restates our Letter of
Credit No. S-1001 dated as of August 15, 1986, as heretofore amended.
Letter of Credit - Schedule III - page 3

 

 

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EXHIBIT B

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement (the “Assignment and Assumption”) is
dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee]
(the “Assignee”). Capitalized terms used herein or in Annex 1 hereto but not
defined herein or therein shall have the meanings given to them in the
Reimbursement Agreement identified below (as amended, the “Reimbursement
Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee.
The Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed
to and incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Terms and Conditions and the
Reimbursement Agreement, as of the Effective Date inserted by the Administrative
Agent as contemplated below, the interest in and to all of the Assignor’s rights
and obligations in its capacity as a Bank under the Reimbursement Agreement and
any other documents or instruments delivered pursuant thereto that represents
the amount and percentage interest identified below of all of the Assignor’s
outstanding rights and obligations under the respective facilities identified
below (including without limitation any guaranties included in such facilities
and, to the extent permitted to be assigned under applicable law, all claims
(including without limitation contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity), suits, causes of
action and any other right of the Assignor against any Person whether known or
unknown arising under or in connection with the Reimbursement Agreement, any
other documents or instruments delivered pursuant thereto or the loan
transactions governed thereby) (the “Assigned Interest”). Such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment and Assumption, without representation or warranty by the
Assignor.

             
1.
  Assignor:        
 
     
 
   
 
           
2.
  Assignee:        
 
     
 
   
 
           
 
      [and is an Affiliate/Approved    
 
      Fund of [identify Bank]]1    
 
           
3.
  Company:   Arizona Public Service Company    
 
 
4.
  Administrative   JPMorgan Chase Bank, N.A., as Administrative    

 

      1  
Select as applicable.

Exhibit B - page 1

 

 

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  Agent:   Agent under the Reimbursement Agreement    
 
           
5.
  Assignee:        
 
     
 
   
 
           
6.
  Reimbursement Agreement:   The Reimbursement Agreement dated as of April 16,
2010 among Arizona Public Service Company, the Banks party thereto, JPMorgan
Chase Bank, N.A., as Issuing Bank and as Administrative Agent.
 
           
7.
  Assigned Interest:        

                            Aggregate Amount of               Participation  
Amount of   Percentage Assigned of       Percentages/   Participation  
Participation       Disbursement   Percentage/   Percentage / Aggregate      
Advances for all   Disbursement   Disbursement   Facility Assigned   Banks*  
Advances Assigned*   Advances2  
Letter of Credit Facility
  $       $                            %

             
8.
  Trade Date:     3  
 
     
 
   

Effective Date:                     , 20_____  [TO BE INSERTED BY ADMINISTRATIVE
AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE
ADMINISTRATIVE AGENT.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
 

      *  
Amount to be adjusted by the counterparties to take into account any payments or
prepayments made between the Trade Date and the Effective Date.
  2  
Set forth, to at least 9 decimals, as a percentage of the Participation
Percentages/Disbursement Advances of all Banks thereunder.
  3  
Insert if satisfaction of minimum amounts is to be determined as of the Trade
Date.

Exhibit B - page 2

 

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  By:        
 
     
 
Title:    
 
                ASSIGNEE    
 
                [NAME OF ASSIGNEE]    
 
           
 
  By:        
 
     
 
Title:    

          [Consented to and]4 Accepted:    
 
        JPMORGAN CHASE BANK, N.A., as
Administrative Agent    
 
       
By:
       
 
 
 
Title:    
 
        [Consented to:]5    
 
        ARIZONA PUBLIC SERVICE COMPANY    
 
       
By:
       
 
 
 
Title:    

 

      4  
To be added only if the consent of the Administrative Agent is required by the
Reimbursement Agreement.
  5  
To be added only if the consent of the Company is required by the terms of the
Reimbursement Agreement.

Exhibit B - page 3

 

 

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ANNEX 1
TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free
and clear of any lien, encumbrance or other adverse claim and (iii) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby. Neither the Assignor nor any of its officers, directors, employees,
agents or attorneys shall be responsible for (i) any statements, warranties or
representations made in or in connection with the Reimbursement Agreement,
(ii) the execution, legality, validity, enforceability, genuineness,
sufficiency, perfection, priority, collectibility, or value of the Reimbursement
Agreement, (iii) the financial condition of the Company, any of its Subsidiaries
or Affiliates or any other Person obligated in respect of the Reimbursement
Agreement, (iv) the performance or observance by the Company, any of its
Subsidiaries or Affiliates or any other Person of any of their respective
obligations under the Reimbursement Agreement, (v) inspecting any of the
property, books or records of the Company, or any guarantor, or (vi) any
mistake, error of judgment, or action taken or omitted to be taken in connection
with the LC Disbursements or the Reimbursement Agreement.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Bank under the Reimbursement Agreement, (ii) from and
after the Effective Date, it shall be bound by the provisions of the
Reimbursement Agreement as a Bank thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Bank thereunder, (iii) agrees that its
payment instructions and notice instructions are as set forth in Schedule 1 to
this Assignment and Assumption, (iv) confirms that none of the funds, monies,
assets or other consideration being used to make the purchase and assumption
hereunder are “plan assets” as defined under ERISA and that its rights, benefits
and interests in and under the Reimbursement Agreement will not be “plan assets”
under ERISA, (v) agrees to indemnify and hold the Assignor harmless against all
losses, costs and expenses (including, without limitation, reasonable attorneys’
fees) and liabilities incurred by the Assignor in connection with or arising in
any manner from the Assignee’s non-performance of the obligations assumed under
this Assignment and Assumption, (vi) it has received a copy of the Reimbursement
Agreement, together with copies of financial statements and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Administrative Agent or any other
Bank, and (vii) attached as Schedule 1 to this Assignment and Assumption is any
documentation required to be delivered by the Assignee with respect to its tax
status pursuant to the terms of the Reimbursement Agreement, duly completed and
executed by the Assignee and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other
Exhibit B - page 4

 

 

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Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Reimbursement Agreement, and (ii) it will perform in accordance
with their terms all of the obligations which by the terms of the Reimbursement
Agreement are required to be performed by it as a Bank.
2. Payments. The Assignee shall pay the Assignor, on the Effective Date, the
amount agreed to by the Assignor and the Assignee. From and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to but excluding the
Effective Date and to the Assignee for amounts which have accrued from and after
the Effective Date.
3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.
Exhibit B - page 5

 

 

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ADMINISTRATIVE QUESTIONNAIRE
Exhibit B - page 6

 

 

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US AND NON-US TAX INFORMATION REPORTING REQUIREMENTS
Exhibit B - page 7