Exhibit 4(a)





Exhibit 4(a)




Execution Version




 

 








LOAN AGREEMENT




dated as of




March 1, 2010




among




TUCSON ELECTRIC POWER COMPANY,

as Borrower,




THE LENDERS PARTY HERETO,




and




JPMORGAN CHASE BANK, N.A.,

as Administrative Agent




 

 








 


 









 











TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I Definitions
	 	 	1	 
	SECTION 1.01. Defined Terms
	 	 	1	 
	SECTION 1.02. Classification of Loans and Borrowings
	 	 	14	 
	SECTION 1.03. Terms Generally
	 	 	14	 
	SECTION 1.04. Accounting Terms; GAAP
	 	 	15	 
	SECTION 1.05. Pro Forma Calculations
	 	 	15	 
	 
	 	 	 	 
	ARTICLE II The Credits
	 	 	15	 
	SECTION 2.01. Commitments
	 	 	15	 
	SECTION 2.02. Loans and Borrowings
	 	 	16	 
	SECTION 2.03. Requests for Borrowing on the Effective Date
	 	 	16	 
	SECTION 2.04. [Reserved]
	 	 	17	 
	SECTION 2.05. Funding of Borrowings
	 	 	17	 
	SECTION 2.06. Interest Elections
	 	 	18	 
	SECTION 2.07. Termination of Commitments
	 	 	19	 
	SECTION 2.08. Repayment of Loans; Evidence of Debt
	 	 	19	 
	SECTION 2.09. Prepayment of Loans
	 	 	19	 
	SECTION 2.10. [Reserved]
	 	 	20	 
	SECTION 2.11. Interest
	 	 	20	 
	SECTION 2.12. Alternate Rate of Interest
	 	 	21	 
	SECTION 2.13. Increased Costs
	 	 	21	 
	SECTION 2.14. Break Funding Payments
	 	 	22	 
	SECTION 2.15. Taxes
	 	 	23	 
	SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
	 	 	23	 
	SECTION 2.17. Mitigation Obligations; Replacement of Lenders
	 	 	25	 
	SECTION 2.18. Defaulting Lenders
	 	 	26	 
	 
	 	 	 	 
	ARTICLE III Representations and Warranties
	 	 	26	 
	SECTION 3.01. Organization; Powers
	 	 	26	 
	SECTION 3.02. Authorization; Enforceability
	 	 	26	 
	SECTION 3.03. Governmental Approvals; No Conflicts
	 	 	26	 
	SECTION 3.04. Financial Condition; No Material Adverse Change; Secured Indebtedness
	 	 	27	 
	SECTION 3.05. Properties
	 	 	27	 
	SECTION 3.06. Litigation and Environmental Matters
	 	 	28	 
	SECTION 3.07. Compliance with Laws and Agreements
	 	 	28	 
	SECTION 3.08. Federal Regulations
	 	 	28	 
	SECTION 3.09. Investment Company Status
	 	 	28	 
	SECTION 3.10. Taxes
	 	 	29	 
	SECTION 3.11. ERISA
	 	 	29	 
	SECTION 3.12. Security Documents
	 	 	29	 
	SECTION 3.13. Disclosure
	 	 	30	 
	SECTION 3.14. Solvency
	 	 	30	 
	SECTION 3.15. Labor Matters
	 	 	30	 
	SECTION 3.16. Anti-Terrorism Laws
	 	 	30	 






 


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	 	 	Page	 
	 
	 	 	 	 
	ARTICLE IV Conditions
	 	 	31	 
	SECTION 4.01. Effective Date
	 	 	31	 
	SECTION 4.02. Each Credit Event
	 	 	33	 
	 
	 	 	 	 
	ARTICLE V Affirmative Covenants
	 	 	33	 
	SECTION 5.01. Financial Statements and Other Information
	 	 	33	 
	SECTION 5.02. Notices of Material Events
	 	 	36	 
	SECTION 5.03. Existence; Conduct of Business
	 	 	36	 
	SECTION 5.04. Payment of Obligations
	 	 	36	 
	SECTION 5.05. Maintenance of Properties; Insurance
	 	 	36	 
	SECTION 5.06. Books and Records; Inspection Rights
	 	 	37	 
	SECTION 5.07. Compliance with Laws and Agreements
	 	 	37	 
	SECTION 5.08. Use of Proceeds
	 	 	37	 
	SECTION 5.09. Environmental Laws
	 	 	37	 
	SECTION 5.10. Further Assurances
	 	 	38	 
	 
	 	 	 	 
	ARTICLE VI Negative Covenants
	 	 	38	 
	SECTION 6.01. Indebtedness
	 	 	38	 
	SECTION 6.02. Liens
	 	 	38	 
	SECTION 6.03. Fundamental Changes
	 	 	39	 
	SECTION 6.04. Sale of Assets
	 	 	40	 
	SECTION 6.05. Restricted Payments
	 	 	40	 
	SECTION 6.06. Cash Coverage Ratio
	 	 	41	 
	SECTION 6.07. Leverage Test
	 	 	41	 
	SECTION 6.08. Amendments to Documents
	 	 	41	 
	SECTION 6.09. Sale Leaseback Transactions
	 	 	41	 
	SECTION 6.10. Release of Collateral under the Mortgage Indenture
	 	 	41	 
	SECTION 6.11. Transactions with Affiliates
	 	 	42	 
	SECTION 6.12. Limitation on Hedge Agreements
	 	 	42	 
	SECTION 6.13. Restrictive Agreements
	 	 	42	 
	 
	 	 	 	 
	ARTICLE VII Events of Default
	 	 	42	 
	 
	 	 	 	 
	ARTICLE VIII The Administrative Agent
	 	 	45	 






 


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	 	 	Page	 
	 
	 	 	 	 
	ARTICLE IX Miscellaneous
	 	 	47	 
	SECTION 9.01. Notices
	 	 	47	 
	SECTION 9.02. Waivers; Amendments
	 	 	48	 
	SECTION 9.03. Expenses; Indemnity; Damage Waiver
	 	 	49	 
	SECTION 9.04. Successors and Assigns
	 	 	50	 
	SECTION 9.05. Survival
	 	 	53	 
	SECTION 9.06. Counterparts; Integration; Effectiveness
	 	 	53	 
	SECTION 9.07. Severability
	 	 	54	 
	SECTION 9.08. Right of Setoff
	 	 	54	 
	SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process
	 	 	54	 
	SECTION 9.10. WAIVER OF JURY TRIAL
	 	 	55	 
	SECTION 9.11. Headings
	 	 	55	 
	SECTION 9.12. Confidentiality
	 	 	55	 
	SECTION 9.13. Interest Rate Limitation
	 	 	56	 
	SECTION 9.14. Patriot Act Notice
	 	 	56	 
	 
	 	 	 	 
	SCHEDULES:
	 	 	 	 
	Schedule 1.01 — Pricing Schedule
	 	 	 	 
	Schedule 2.01 — Commitments
	 	 	 	 






	 	 	 
	EXHIBITS:	 	 
	 
	Exhibit A —

	 	Form of Assignment and Assumption
	Exhibit B —

	 	Form of Bond Delivery Agreement
	Exhibit C —

	 	[Reserved]
	Exhibit D —

	 	Form of Tenth Supplemental Indenture
	Exhibit E-1 —

	 	Form of Opinion of Raymond S. Heyman, Esq., General Counsel for the Borrower
	Exhibit E-2 —

	 	Form of Opinion of Morgan, Lewis & Bockius LLP, New York counsel for the Borrower
	Exhibit E-3 —

	 	Form of Opinion of Rodey, Dickason, Sloan, Akin & Robb, PA, special New Mexico counsel for the Borrower







 


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This LOAN AGREEMENT, dated as of March 1, 2010 among TUCSON ELECTRIC POWER COMPANY, an Arizona
corporation, the LENDERS from time to time party hereto and JPMORGAN CHASE BANK, N.A., as
Administrative Agent.




The parties hereto agree as follows:



ARTICLE I

Definitions




SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:



“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to
the Alternate Base Rate.




“ACC” means the Arizona Corporation Commission.



“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied
by (b) the Statutory Reserve Rate.



“Administrative Agent” means JPMorgan, in its capacity as administrative agent for the
Lenders.



“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.



“Affiliate” means, with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.



“Aggregate Commitments” means the total of the Lenders’ Commitments hereunder. The
Aggregate Commitments shall in no event exceed $30,000,000.00.



“Agreement” means this Loan Agreement, dated as of March 1, 2010, by and among the
Borrower, the Lenders from time to time party hereto and the Administrative Agent.



“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of
(a) the Reference Rate in effect on such day, (b) the Federal Funds Effective 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%; provided that,
for the avoidance of doubt, the LIBO Rate for any day shall be based on the rate appearing on
Reuters Screen LIBOR01 Page (or on any successor or substitute page of such page) at approximately
11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the
Reference Rate, the Federal Funds Effective Rate or the LIBO Rate shall be
effective from and including the effective date of such change in the Reference Rate, the
Federal Funds Effective Rate or the LIBO Rate, respectively.


 


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“Anti-Terrorism Laws” has the meaning provided in Section 3.16(a).



“Applicable Margin” means, for any day, with respect to any Eurodollar Loan or ABR
Loan, as the case may be, the applicable percentage per annum determined in accordance with the
Pricing Schedule attached hereto as Schedule 1.01.



“Applicable Percentage” means for any Lender on any date of determination, the
percentage obtained by dividing such Lender’s Commitment on such date by the total of the
Commitments on such date; provided, that in the event that the Commitments have been
terminated, each Lender’s Applicable Percentage shall be calculated on the basis of the Commitments
in effect immediately prior to such termination, giving effect to any assignments;
provided, further, that when a Defaulting Lender shall exist, “Applicable
Percentage” shall mean the percentage of the total Commitments (disregarding any Defaulting
Lender’s Commitment) represented by such Lender’s Commitment.




“Applicable Rate” means:




(i) in the case of each ABR Loan, a rate per annum equal at all times to the sum of the
Alternate Base Rate in effect from time to time plus the Applicable Margin in effect from
time to time; and




(ii) in the case of each Eurodollar Loan, a rate per annum during each Interest Period
equal at all times to the sum of the Adjusted LIBO Rate for such Interest Period plus the
Applicable Margin in effect from time to time during such Interest Period.



“Approved Fund” means, with respect to any Lender that is a fund that invests in
commercial loans, any other fund that invests in commercial loans and is managed or advised by the
same investment advisor as such Lender or by an Affiliate of such investment advisor.



“Assignment and Assumption” means an Assignment and Assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required by Section 9.04),
and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by
the Administrative Agent.



“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.



“Bond Delivery Agreement” means the Bond Delivery Agreement, dated as of March 1,
2010, between the Borrower and the Administrative Agent, in the form attached hereto as Exhibit B.



“Borrower” means Tucson Electric Power Company, an Arizona corporation.


 


2









 





“Borrowing” means Loans of the same Type, made (or deemed made), converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect.



“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with
Section 2.03.



“Business Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain closed;
provided that, when used in connection with a Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in
the London interbank market.



“Capital Lease Investment” of any Person means the aggregate outstanding capitalized
amount of Capital Lease Obligations of the Borrower and the Consolidated Subsidiaries that are
owned by such Person and in respect of which such Person has the right to receive all future
payments to be made.



“Capital Lease Obligations” of any Person means the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in accordance with GAAP.



“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all equivalent
ownership interests in a Person (other than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.



“Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender
or by such Lender’s holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after the date of this
Agreement.



“Change in Control” means the failure of UniSource Energy to own and control, of
record and beneficially, directly or indirectly, Capital Stock of the Borrower representing 100% of
the aggregate ordinary voting power of the Borrower, free and clear of all Liens.




“Code” means the Internal Revenue Code of 1986, as amended from time to time.



“Collateral” means the Collateral Mortgage Bonds and any and all “Collateral”, as
defined in any applicable Security Document.


 


3









 





“Collateral Mortgage Bonds” means the First Mortgage Bonds, Collateral Series H of
2010, issued pursuant to the terms of this Agreement and the Tenth Supplemental Indenture and
delivered to the Administrative Agent pursuant to a Bond Delivery Agreement.



“Commitment” means, with respect to each Lender, the commitment of such Lender to make
Loans hereunder on the Effective Date. The initial amount of each Lender’s Commitment is set forth
on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have
assumed its Commitment, as applicable. The initial aggregate amount of the Commitments is
$30,000,000.



“Consolidated EBITDA” means, for any fiscal period, with respect to the Borrower and
the Consolidated Subsidiaries, Consolidated Net Income for such period plus, to the extent
deducted in computing such Consolidated Net Income, without duplication, the sum of (a) income tax
expense, (b) interest expense, (c) depreciation and amortization expense, (d) any extraordinary or
non-recurring losses and (e) other noncash items reducing Consolidated Net Income, minus,
to the extent added in computing such Consolidated Net Income, without duplication, the sum of (i)
interest income, (ii) any extraordinary or non-recurring gains and (iii) other noncash items
increasing Consolidated Net Income, all as determined on a consolidated basis in accordance with
GAAP.



“Consolidated Interest Expense” means, for any fiscal period, the aggregate of all
payments by the Borrower and the Consolidated Subsidiaries for such period that, in accordance with
GAAP, are or should be included in “interest paid, net of amounts capitalized” and “capital lease
interest paid” reflected in the statement of cash flows for the Borrower and the Consolidated
Subsidiaries, less the amount of capital lease interest income paid to the Borrower or any
Consolidated Subsidiary for such period that is not reflected in Consolidated EBITDA for such
period, all as determined on a consolidated basis in accordance with GAAP.



“Consolidated Net Income” means, for any fiscal period, net income of the Borrower and
the Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.



“Consolidated Subsidiary” means, at any date, each Subsidiary the accounts of which
would be consolidated with those of the Borrower in the Borrower’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date.



“Consolidated Total Indebtedness” means, as of the last day of any fiscal quarter, (a)
the sum (without duplication) for the Borrower and the Consolidated Subsidiaries as of such day of
(i) the aggregate outstanding principal amount of the Loans, (ii) the aggregate outstanding
principal amount of other Indebtedness for borrowed money (including Guarantees thereof), (iii) the
principal amount of all obligations in respect of Hedging Agreements of the Borrower and the
Consolidated Subsidiaries (computed as set forth in the penultimate sentence of the definition of
“Material Indebtedness”) and (iv) the aggregate outstanding capitalized amount of Capital Lease
Obligations, minus (b) the sum (without duplication) as of such day of (i) the aggregate
outstanding capitalized amount of the Capital Lease Investments of the Borrower and the
Consolidated Subsidiaries as of such day and (ii) to the extent included in clause (a)(ii) above,
any Treasury Indebtedness of the Borrower and the Consolidated Subsidiaries as of such day,
all as determined on a consolidated basis in accordance with GAAP.


 


4









 





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



“Credit Exposure” means, with respect to any Lender at any time, the aggregate
outstanding principal of such Lender’s Loans at such time.



“Default” means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.



“Defaulting Lender” means any Lender, as determined by the Administrative Agent, that
has (a) failed to fund any portion of its Loans within three (3) Business Days of the date required
to be funded by it hereunder, (b) notified the Borrower, the Administrative Agent or any Lender in
writing that it does not intend to comply with any of its funding obligations under this Agreement
or has made a public statement to the effect that it does not intend to comply with its funding
obligations under this Agreement or under other agreements in which it commits to extend credit,
(c) failed, within three (3) Business Days after request by the Administrative Agent, to confirm
that it will comply with the terms of this Agreement relating to its obligations to fund
prospective Loans, (d) otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within three (3) Business Days of the date
when due, unless the subject of a good faith dispute, or (e) (i) become or is insolvent or has a
parent company that has become or is insolvent or (ii) become the subject of a bankruptcy or
insolvency proceeding, or has had a receiver, conservator, trustee, administrator, assignee for the
benefit of creditors or similar Person charged with reorganization or liquidation of its business
or custodian, appointed for it, or has taken any action in furtherance of, or indicating its
consent to, approval of or acquiescence in any such proceeding or appointment or has a parent
company that has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar
Person charged with reorganization or liquidation of its business or custodian appointed for it, or
has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence
in any such proceeding or appointment.



“Disclosure Documents” means the Borrower’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2009, as filed with the Securities and Exchange Commission.




“dollars” or “$” refers to lawful money of the United States of America.



“Effective Date” means the date on which the conditions specified in Section 4.01 are
satisfied (or waived in accordance with Section 9.02).



“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into
by any Governmental Authority, relating in any way to the environment,
preservation or reclamation of natural resources, the management, release or threatened
release of any Hazardous Material or to health and safety matters.


 


5









 





“Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the
Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any contract, agreement
or other consensual arrangement pursuant to which liability is assumed or imposed with respect to
any of the foregoing.



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



“ERISA Affiliate” means any trade or business (whether or not incorporated) that,
together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.



“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or
the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC
of any notice of its intent to institute proceedings to terminate any Plan or to appoint a trustee
to administer any Plan under Section 4042 of ERISA or the providing of notice by a plan
administrator of the intent to terminate any Plan under Section 4041 of ERISA; (f) the incurrence
by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any
ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the
meaning of Title IV of ERISA.



“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.




“Event of Default” has the meaning assigned to such term in Article VII.


 


6









 





“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any
other recipient of any payment to be made by or on account of any obligation of the Borrower
hereunder, (a) income or franchise taxes imposed on (or measured by) its net income
by the United States of America, or by the jurisdiction under the laws of which such recipient
is organized or in which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located, (b) any branch profits taxes imposed by the United States
of America or any similar tax imposed by any other jurisdiction in which such recipient is located
and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.17(b)), any withholding tax that is imposed by the United States of
America on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.15(d), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending office (or assignment),
to receive additional amounts from the Borrower with respect to such withholding tax pursuant to
Section 2.15(a).




“Executive Order” has the meaning provided in Section 3.16(a).



“Fair Value” means, with respect to any assets or property owned by the Borrower or
any of the Consolidated Subsidiaries, the fair market value thereof as determined from time to time
by the Board of Directors (or a duly constituted committee thereof) of the Borrower or such
Consolidated Subsidiary in good faith.



“Federal Funds Effective Rate” means, for any day, the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business Day, the average
of the quotations for such day for such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by it.




“Final Maturity Date” means September 1, 2011.



“Financial Officer” means the chief financial officer, principal accounting officer,
treasurer or controller of the Borrower.



“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction
other than the United States of America.




“GAAP” means generally accepted accounting principles in the United States of America.



“Governmental Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.



“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct



 


7









 






or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such Indebtedness or other obligation of the
payment thereof, (c) to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or
letter of guaranty issued to support such Indebtedness or obligation; provided, that the
term Guarantee shall not include endorsements for collection or deposit in the ordinary course of
business.



“Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.



“Hedging Agreement” means any interest rate protection agreement, foreign currency
exchange agreement or other interest or currency exchange rate hedging arrangement.



“Indebtedness” of any Person means, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property acquired by such
Person, (e) all obligations of such Person in respect of the deferred purchase price of property or
services (excluding current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by
such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all
obligations, contingent or otherwise, of such Person as an account party in respect of letters of
credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such Indebtedness provide that
such Person is not liable therefor.




“Indemnified Taxes” means Taxes other than Excluded Taxes.



“Index Debt” means the long-term, senior secured Indebtedness of the Borrower issued
under the Mortgage Indenture that is not guaranteed by any other Person or subject to any other
credit enhancement.



“Interest Election Request” means a request by the Borrower to convert or continue a
Loan in accordance with Section 2.06.


 


8









 





“Interest Payment Date” means (a) with respect to any ABR Loan, the last Business Day
of each March, June, September and December, commencing with March 31, 2010 and the Maturity Date,
and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months’ duration, each day prior to the last day of such Interest Period
that occurs at intervals of three months’ duration after the first day of such Interest Period.



“Interest Period” means, with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing (which initially shall be the date on which such Borrowing
is made and thereafter shall be the effective date of the most recent conversion or continuation of
such Borrowing) and ending on the numerically corresponding day in the calendar month that is seven
or fourteen days or one, two, three or six months thereafter, as the Borrower may elect;
provided, that (i) if any Interest Period would end on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case such Interest Period
shall end on the next preceding Business Day and (ii) any Interest Period that commences on the
last Business Day of a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last Business Day of the
last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall be the effective
date of the most recent conversion or continuation of such Borrowing.




“JPMorgan” means JPMorgan Chase Bank, N.A., a national banking association.



“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall
have become a party hereto pursuant to an Assignment and Assumption, other than any such Person
that ceases to be a party hereto pursuant to an Assignment and Assumption.



“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
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, two (2) Business
Days prior to the commencement of such Interest Period, as the rate for deposits in Dollars with a
maturity comparable to such Interest Period. In the event that such rate is not available at such
time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate at which deposits in Dollars in an amount equal to
$5,000,000 and for a maturity comparable to such Interest Period 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, two (2) Business Days prior to the commencement of
such Interest Period.



“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same economic effect as
any of the foregoing) relating to such asset and (c) in the case of securities, any purchase
option, call or similar right of a third party with respect to such securities.


 


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“Lien of the Mortgage Indenture” has the meaning assigned to the phrases “Lien of this
Indenture” and “lien hereof” in the Mortgage Indenture.



“Loan Documents” means this Agreement, any promissory notes delivered pursuant to
Section 2.08(e), the Bond Delivery Agreement, the Tenth Supplemental Indenture, the Collateral
Mortgage Bonds and the other Security Documents.



“Loans” means the loans made (or deemed made) by the Lenders to the Borrower pursuant
to this Agreement.



“Material Adverse Effect” means a material adverse effect on (a) the financial
condition, results of operations, business or prospects of the Borrower and the Subsidiaries taken
as a whole, (b) the ability of the Borrower to perform any of its obligations under any Loan
Document or the Mortgage Indenture or (c) the rights of or benefits available to the Lenders (or
any agent or trustee on behalf of the Lenders) under any Loan Document or the Mortgage Indenture.



“Material Indebtedness” means, collectively, as of any date, (i) the Indebtedness
under the Revolving Credit Agreement and (ii) other Indebtedness (other than the Loans), or
obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and
the Significant Subsidiaries in an aggregate principal amount exceeding $20,000,000. For purposes
of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or
any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be
required to pay if such Hedging Agreement were terminated at such time. “Material Indebtedness”
shall not include at any time any Indebtedness that is non-recourse to the Borrower and its
Significant Subsidiaries.



“Maturity Date” means the earlier of (i) the Final Maturity Date and (ii) the date
upon which amounts payable under this Agreement are accelerated pursuant to Article VII or
otherwise.




“Moody’s” means Moody’s Investors Service, Inc., and its successors.



“Mortgage Bonds” means the Borrower’s Mortgage Bonds issued under the Mortgage
Indenture.



“Mortgage Indenture” means the Indenture of Mortgage and Deed of Trust, dated as of
December 1, 1992, between the Borrower and The Bank of New York Mellon (formerly known as The Bank
of New York) (as successor in trust to Bank of Montreal Trust Company), as trustee.



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


 


10









 





“Obligations” means (a)(i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the
Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (ii) all other monetary obligations, including fees, costs, expenses
and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the
Borrower under this Agreement and the other Loan Documents; and (b) the due and punctual
performance of all other covenants, agreements, obligations and liabilities of the Borrower under
or pursuant to this Agreement and the other Loan Documents.



“Other Taxes” means any and all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any payment made under any
Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any
Loan Document.




“Participant” has the meaning assigned to such term in Section 9.04(e).




“Patriot Act” has the meaning assigned to such term in Section 9.14.



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



“Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.



“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.




“Rating Agencies” means each of Moody’s and S&P.



“Reference Rate” means the rate of interest per annum publicly announced from time to
time by JPMorgan Chase Bank, N.A. 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.




“Register” has the meaning set forth in Section 9.04(c).




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



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


 


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“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.



“Required Lenders” means, at any time, Lenders having Credit Exposures or Commitments
representing a majority of the sum of the total Credit Exposures or the Aggregate Commitments at
such time.



“Requirement of Law” means, as to any Person, the Certificate of Incorporation and
By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its property or assets or to which such
Person or any of its property or assets is subject.



“Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any shares of any class of Capital Stock of the
Borrower, or any payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of Capital Stock of the Borrower or any option,
warrant or other right to acquire any such shares of Capital Stock of the Borrower.



“Revolving Credit Agreement” means that certain Amended and Restated Credit Agreement,
dated as of August 11, 2006, by and among the Borrower, the lenders from time to time party
thereto, the issuing banks from time to time party thereto, The Bank of New York Mellon (formerly
known as The Bank of New York) and JPMorgan Chase Bank, N.A., as co-syndication agents, Wells Fargo
Bank, National Association and The Royal Bank of Scotland plc (as successor in interest to ABN AMRO
Bank N.V.), as co-documentation agents, and Union Bank, N.A. (formerly known as Union Bank of
California, N.A.), as administrative agent.



“Sale Leaseback” means any transaction or series of related transactions pursuant to
which the Borrower or any of its Subsidiaries sells, transfers or otherwise disposes of any
property, real or personal, whether now owned or hereafter acquired, and thereafter rents or leases
such property or other property that it intends to use for substantially the same purpose or
purposes as the property being sold, transferred or disposed of.




“San Carlos” means San Carlos Resources Inc., an Arizona corporation.



“S&P” means Standard & Poor’s Financial Services LLC, a division of The McGraw-Hill
Companies, Inc., and its successors.



“Security Documents” means the Mortgage Indenture, the Tenth Supplemental Indenture,
the Collateral Mortgage Bonds, the Bond Delivery Agreement, and each other security agreement or
other instrument or document executed and delivered pursuant to Section 5.10 or pursuant to any of
the foregoing documents to secure any of the Obligations.


 


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“Significant Subsidiary” means (a) San Carlos, (b) any Subsidiary that directly or
indirectly owns or Controls any other Significant Subsidiary and (c) any other Subsidiary of the
Borrower whose direct or indirect proportionate share of consolidated total assets as of the end of
the most recent fiscal quarter for which financial statements have been delivered pursuant to
Section 5.01 was greater than or equal to 15% of the consolidated total assets as of such date of
the Borrower and the Consolidated Subsidiaries, taken as a whole. For purposes of making the
determinations required by this definition, revenues and assets of foreign Subsidiaries shall be
converted into dollars at the rates used in preparing the consolidated balance sheet of the
Borrower included in the applicable financial statements.



“Solvent” means, with respect to any Person, as of any date of determination, that (a)
the amount of the “present fair saleable value” of the assets of such Person will, as of such date,
exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as
such quoted terms are determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of
such Person will, as of such date, be greater than the amount that will be required to pay the
liability of such Person on its debts as such debts become absolute and matured, (c) such Person
will not have, as of such date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For purposes of this
definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to
payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise to a right to
payment, whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.



“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board with respect to the Adjusted LIBO Rate, for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D). Such
reserve percentages shall include those imposed pursuant to Regulation D. Eurodollar Loans shall
be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available from time to time
to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any reserve percentage.



“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity the accounts of
which would be consolidated with those of the parent in the parent’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50% of the equity or
more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent.



“Subsidiary” means any subsidiary of the Borrower.


 


13









 





“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.



“Tenth Supplemental Indenture” means Supplemental Indenture No. 10 under the Mortgage
Indenture, in the form attached hereto as Exhibit D.



“Transactions” means the execution, delivery and performance by the Borrower of this
Agreement and the other Loan Documents, the borrowing of Loans, the use of the proceeds thereof,
the issuance of Collateral Mortgage Bonds to the Administrative Agent under the Tenth Supplemental
Indenture and the Bond Delivery Agreement.



“Treasury Indebtedness” means, with respect to any Person, the aggregate outstanding
principal amount of Indebtedness of such Person and its subsidiaries that is owned by such Person
or its subsidiaries and in respect of which such Person or one or more of its subsidiaries has the
right to receive, pursuant to the terms of such Indebtedness, all future principal, interest and
other payments to be made with respect thereto.



“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Adjusted LIBO Rate or the Alternate Base Rate.




“UniSource Energy” means UniSource Energy Corporation, an Arizona corporation.



“Utility Business” means the business of producing, developing, generating,
transmitting, distributing, selling or supplying electrical energy for any purpose, or any business
incidental thereto or necessary in connection therewith, or any business reasonably desirable in
connection therewith which the ACC or other utility regulatory body shall have authorized the
Borrower to enter.



“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.



SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement,
Loans may be classified and referred to by Type (e.g., a “Eurodollar Loan”).
Borrowings also may be classified and referred to by Type (e.g., a “Eurodollar
Borrowing”).



SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The
word “will” shall be construed to have the same meaning and effect as the word “shall”. The word
“law” shall be construed as referring to all statutes, rules, regulations, codes and other laws
(including official rulings and interpretations thereunder having the force of law or with which
affected Persons customarily comply), and all judgments, orders and decrees, of all Governmental
Authorities. Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring



 


14









 






to such agreement, instrument or other document as from time to time amended, restated,
supplemented or otherwise modified (subject to any restrictions on such amendments, restatements,
supplements or modifications set forth herein), (b) any definition of or reference to any statute,
rule or regulation shall be construed as referring thereto as from time to time amended,
supplemented or otherwise modified (including by succession of comparable successor laws), (c) any
reference herein to any Person shall be construed to include such Person’s successors and assigns,
(d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed
to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all
references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) the words “asset”
and “property” shall be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities, accounts and contract
rights.



SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if the Borrower notifies the Administrative Agent
that the Borrower requests an amendment to any provision hereof (including the effects of the
application or discontinuance of the application of accounting for the effects of regulation to all
or any portion of the Borrower’s operations) to eliminate the effect of any change occurring after
the date hereof in GAAP or in the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is given before or after
such change in GAAP or in the application thereof, then such provision shall be interpreted on the
basis of GAAP as in effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in accordance herewith.
Notwithstanding any other provision contained herein, all terms of an accounting or financial
nature used herein shall be construed, and all computations of amounts and ratios referred to
herein shall be made, without giving effect to any election under Accounting Standards Codification
825-10-25 (previously referred to as Statement of Financial Accounting Standards 159) (or any other
Accounting Standards Codification or Financial Accounting Standard having a similar result or
effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair
value”, as defined therein.



SECTION 1.05. Pro Forma Calculations. All pro forma calculations permitted or
required to be made by the Borrower or any Subsidiary pursuant to this Agreement shall (a) include
only those adjustments that would be permitted or required by Regulation S-X under the Securities
Act of 1933, as amended, and (b) be certified to by a Financial Officer as having been prepared in
good faith based upon assumptions believed to be reasonable.



ARTICLE II

The Credits




SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, on
the Effective Date each Lender agrees to make a Loan to the Borrower in a principal
amount equal to such Lender’s Commitment. Amounts repaid or prepaid in respect of the Loans
may not be reborrowed.


 


15









 






SECTION 2.02. Loans and Borrowings.



(a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders on
the Effective Date ratably in accordance with their respective Commitments. The failure of any
Lender to make any Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender’s failure to make Loans as required.



(b) Subject to Section 2.12, the Borrowing shall be comprised entirely of ABR Loans or
Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may
make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this Agreement.



(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing
shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than
$5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than $1,000,000. Borrowings of more
than one Type may be outstanding at the same time; provided that there shall not at any
time be more than a total of three (3) Eurodollar Borrowings outstanding.



(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled
to request any Loans other than the initial Loans on the Effective Date, and shall not be entitled
to elect to convert or continue, any Eurodollar Borrowing if the Interest Period requested with
respect thereto would end after the Final Maturity Date.



SECTION 2.03. Requests for Borrowing on the Effective Date. The Borrower shall notify
the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing,
not later than 1:00 p.m., New York City time, three (3) Business Days before the Effective Date
(with customary indemnities and other provisions acceptable to the Administrative Agent in the
event such Borrowing shall not occur on the Effective Date) or (b) in the case of an ABR Borrowing,
not later than 1:00 p.m., New York City time, on the Effective Date. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or
facsimile or other electronic imaging to the Administrative Agent of a written Borrowing Request in
a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance with Section 2.02:




(i) the aggregate amount of the requested Borrowing;




(ii) the date of such Borrowing, which shall be a Business Day;


 


16









 






(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;




(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of the term
“Interest Period”; and




(v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.



If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an
ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar
Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s
duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the amount of such
Lender’s Loan to be made as part of the requested Borrowing.



SECTION 2.04. [Reserved].



SECTION 2.05. Funding of Borrowings.



(a) Each Lender shall make the Loan to be made by it hereunder on the Effective Date by wire
transfer of immediately available funds by 1:00 p.m., New York City time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The
Administrative Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received, in like funds, to an account of the Borrower designated by the Borrower in the
applicable Borrowing Request.



(b) Unless the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may in its sole discretion assume
that such Lender has made such share available on such date in accordance with paragraph (a) of
this Section and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share of the applicable
Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower
severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount
with interest thereon, for each day from and including the date such amount is made available to
the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case
of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included
in such Borrowing.


 


17









 






SECTION 2.06. Interest Elections.



(a) Each Borrowing of Loans initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to
convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The
Borrower may elect different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.



(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative
Agent of such election by telephone by the time that a Borrowing Request would be required under
Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic Interest Election Request
shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile or other
electronic imaging to the Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Borrower.



(c) Each telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:



(i) the Borrowing to which such Interest Election Request applies and, if different options
are being elected with respect to different portions thereof, the portions thereof to be allocated
to each resulting Borrowing (in which case the information to be specified pursuant to clauses
(iii) and (iv) below shall be specified for each resulting Borrowing);



(ii) the effective date of the election made pursuant to such Interest Election Request, which
shall be a Business Day;




(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and



(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a period contemplated by
the definition of the term “Interest Period”.



If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an
Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one
month’s duration.



(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall
advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.



(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such
Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, (i) if an Event of
Default has occurred and is continuing (A) no outstanding Borrowing
may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period
applicable thereto.


 


18









 





SECTION 2.07. Termination of Commitments. The Commitments shall terminate upon the
funding of the Loans in accordance with Sections 2.05 and 4.01.




SECTION 2.08. Repayment of Loans; Evidence of Debt.



(a) The Borrower hereby unconditionally promises to pay to the Administrative Agent (i) for
the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date and
(ii) for the account of each Lender all accrued and unpaid interest on the Loans and all other
Obligations on the Maturity Date.



(b) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.



(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount
of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the
amount of any principal or interest due and payable or to become due and payable from the Borrower
to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.



(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be prima facie evidence of the existence and amounts of the
obligations recorded therein; provided that the failure of any Lender or the Administrative
Agent to maintain such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loans in accordance with the terms of this Agreement.



(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such
event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to
the order of such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times (including after assignment pursuant
to Section 9.04) be represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).




SECTION 2.09. Prepayment of Loans.



(a) The Borrower shall have the right at any time and from time to time to prepay any
Borrowing, in whole or in part, without premium or penalty (subject, in the case of any prepayment
of a Eurodollar Borrowing, to Section 2.14), subject to prior notice in accordance with paragraph
(c) of this Section.


 


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(b) Prior to any optional or mandatory prepayment of Loans hereunder, the Borrower shall
select the Loans to be prepaid and shall specify such selection in the notice of such prepayment
pursuant to paragraph (c) of this Section.



(c) The Borrower shall notify the Administrative Agent by telephone (confirmed by facsimile or
other electronic imaging) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, three (3) Business Days before the date
of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New
York City time, one (1) Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid. Promptly following receipt of any such notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing
shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same
Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to
the extent required by Section 2.11 and by any amounts required to be paid pursuant to Section 2.14
in connection with such prepayment.



SECTION 2.10. [Reserved].



SECTION 2.11. Interest.



(a) The Borrower shall pay interest on the unpaid principal amount of each Loan owing to each
Lender from the date of such Loan until such principal amount shall be paid in full, at the
Applicable Rate for such Loan.



(b) Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event
of Default, (i) each ABR Loan shall bear interest at a rate of 2.0% per annum in excess of the rate
set forth in paragraph (a) of this Section and (ii) each Eurodollar Loan shall bear interest at a
rate of 2.0% per annum in excess of the rate set forth in paragraph (a) of this Section until the
Interest Period applicable thereto shall have expired and thereafter at a per annum rate equal to
the Applicable Rate for ABR Loans plus 2.0%. In addition, if any principal of or interest on any
Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at
stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as
well as before judgment, at a rate per annum equal to (A) in the case of overdue principal of any
Loan, 2.0% plus the rate otherwise applicable to such Loan as provided in paragraph (a) of this
Section or (B) in the case of any other amount, 2.0% plus the Applicable Rate for ABR Loans.



(c) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan; provided that (A) interest accrued pursuant to paragraph (b) of this Section
shall be payable on demand, (B) in the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable on the date of such repayment
or prepayment and (C) in the event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.


 


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(d) All interest hereunder shall be computed on the basis of a year of 360 days, except that
interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Reference Rate shall be computed on the basis of a year of 365 days (or 366 days in a
leap year), and in each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate
shall be determined by the Administrative Agent, and such determination shall be conclusive absent
manifest error.



SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:



(a) the Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO
Rate or LIBO Rate, as applicable, for such Interest Period; or



(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or
LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost
to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest
Period;



then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone or facsimile or other electronic imaging as promptly as practicable thereafter and, until
the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise
to such notice no longer exist, (i) any Interest Election Request that requests the conversion of
any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as
an ABR Borrowing.




SECTION 2.13. Increased Costs.




(a) If any Change in Law shall:



(i) impose, modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by, any Lender or the
Administrative Agent (except any such reserve requirement reflected in the Adjusted LIBO Rate,
where applicable); or



(ii) impose on any Lender, the Administrative Agent or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender;



and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
reduce the amount of any sum received or receivable by such Lender or the Administrative Agent
hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender
or the Administrative Agent, as the case may be, such additional amount or amounts as will
compensate such Lender or the Administrative Agent, as the case may be, for such additional costs
incurred or reduction suffered.


 


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(b) If any Lender determines that any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on such Lender’s capital or on the capital of
such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such
Lender to a level below that which such Lender or such Lender’s holding company could have achieved
but for such Change in Law (taking into consideration such Lender’s policies and the policies of
such Lender’s holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender
or such Lender’s holding company for any such reduction suffered.



(c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such
Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days
after receipt thereof.



(d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section
shall not constitute a waiver of such Lender’s right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender pursuant to this Section for any
increased costs or reductions incurred more than 270 days prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of
such Lender’s intention to claim compensation therefor; provided further that, if
the Change in Law giving rise to such increased costs or reductions is retroactive, then the
270-day period referred to above shall be extended to include the period of retroactive effect
thereof.



SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto,
(d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period
applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, or (e) the
revocation of any notice of prepayment pursuant to Sections 2.07 and 2.09, then, in any such event,
the Borrower shall compensate each applicable Lender for the loss, cost and expense attributable to
such event. In the case of a Eurodollar Loan, such loss, cost or expense to any applicable Lender
shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would have been the
Interest Period for such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would bid were it to bid,
at the commencement of such period, for dollar deposits of a comparable amount and period from
other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error.


 


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The Borrower shall pay such Lender the amount shown as due on any such certificate within ten
(10) days after receipt thereof.




SECTION 2.15. Taxes.



(a) Any and all payments by or on account of any obligation of the Borrower hereunder or under
any other Loan Document shall be made free and clear of and without deduction for any Indemnified
Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or Lender receives an amount
equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.



(b) The Borrower shall indemnify the Administrative Agent and each Lender within ten (10) days
after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by
or on account of any obligation of the Borrower hereunder or under any other Loan Document
(including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts
payable under this Section) and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or by the Administrative Agent
on its own behalf or on behalf of a Lender shall be conclusive absent manifest error.



(c) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the
original or a certified copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.



(d) Any Foreign Lender shall deliver to the Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by applicable law, such properly completed and executed
documentation prescribed by the law of the jurisdiction in which the Borrower is located, or any
treaty to which such jurisdiction is a party, or reasonably requested by the Borrower as will
permit such payments to be made without withholding.



(e) In addition, the Borrower or the Administrative Agent shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.




SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.



(a) The Borrower shall make each payment required to be made by it hereunder or under any
other Loan Document (whether of principal, interest or fees, or of amounts payable under Section
2.13, 2.14 or 2.15, or otherwise) prior to 1:00 p.m., New York City time, on the date when due, in
immediately available funds, without set-off, counterclaim,



 


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recoupment or deduction of any kind. Any amounts received after such time on any date may, in
the discretion of the Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its at its address listed in Section 9.01(a) (or such other office as the
Administrative Agent shall from time to time designate to the Borrower), except that payments
pursuant to Sections 2.13, 2.14, 2.15 and 9.03 shall be made directly to the Persons entitled
thereto and payments pursuant to other Loan Documents shall be made to the Persons specified
therein. The Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following receipt thereof. If
any payment hereunder or under any other Loan Document shall be due on a day that is not a Business
Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, such interest shall be payable for the period of such extension.
All payments under each Loan Document shall be made in dollars.



(b) If at any time insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall
be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal then due hereunder, ratably among the
parties entitled thereto in accordance with the amount of principal then due to such parties.



(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Loans resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued
interest thereon than the proportion received by any other Lender, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participations are purchased and all
or any portion of the payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a participation in any of
its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate
thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower
rights of set-off and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of the Borrower in the amount of such participation.



(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of the Lenders
hereunder that the Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in



 


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accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the
amount due. In such event, if the Borrower has not in fact made such payment, then each of the
Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the Administrative Agent, at
the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation.



(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section
2.05(b) or 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for
the account of such Lender to satisfy such Lender’s obligations under such Sections until all such
unsatisfied obligations are fully paid.




SECTION 2.17. Mitigation Obligations; Replacement of Lenders.



(a) If (i) any Lender requests compensation under Section 2.13, (ii) the Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.15 or (iii) any Lender becomes a Defaulting Lender, then such Lender
shall use reasonable efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i)
would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by any Lender in connection with any such designation or assignment.



(b) If (i) any Lender requests compensation under Section 2.13, (ii) the Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.15, (iii) any Lender becomes a Defaulting Lender, or (iv) any Lender
has not consented to a proposed amendment, waiver or modification under this Agreement that
requires the consent of all Lenders and which has been approved by Required Lenders, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 9.04), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have
received the prior written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any
such assignment resulting from a claim for compensation under Section 2.13 or payments required to
be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation
or payments. A Lender shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender
or otherwise, the circumstances entitling the Borrower to require such assignment and
delegation cease to apply.


 


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SECTION 2.18. Defaulting Lenders. Notwithstanding any provision of this Agreement to
the contrary, if any Lender becomes a Defaulting Lender, then (until such time as the
Administrative Agent and the Borrower have agreed that a Defaulting Lender has adequately remedied
all matters that caused such Lender to be a Defaulting Lender) the Commitment and Credit Exposure
of such Defaulting Lender shall not be included in determining whether all Lenders or the Required
Lenders have taken or may take any action hereunder (including any consent to any amendment or
waiver pursuant to Section 9.02); provided that any waiver, amendment or modification
requiring the consent of all Lenders or each affected Lender which affects such Defaulting Lender
differently than other affected Lenders shall require the consent of such Defaulting Lender.



ARTICLE III

Representations and Warranties





The Borrower represents and warrants to the Administrative Agent and the Lenders that:



SECTION 3.01. Organization; Powers. The Borrower and each of its Consolidated
Subsidiaries is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite corporate, partnership, limited liability
company or other applicable organizational power and authority to carry on its business as now
conducted and, except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to do business, in and
is in good standing, in every jurisdiction where such qualification is required.



SECTION 3.02. Authorization; Enforceability. The Transactions are within the
Borrower’s organizational powers and have been duly authorized by all necessary corporate and, if
required, stockholder action. This Agreement has been duly executed and delivered by the Borrower
and constitutes, the Mortgage Indenture constitutes, and each other Loan Document to which the
Borrower is to be a party, when executed and delivered by the Borrower (and, in the case of the
Collateral Mortgage Bonds, authenticated by the trustee therefor), will constitute, a legal, valid
and binding obligation of the Borrower, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of whether considered in a
proceeding in equity or at law.



SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other action by, any
Governmental Authority, except for (i) such approvals of the ACC that have been obtained and are in
full force and effect, and (ii) filings necessary to perfect Liens created under the Loan Documents
(other than the Lien of the Mortgage Indenture, in respect of which all requisite filings have been
made), (b) will not violate any Requirement of Law, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon the Borrower or any of its
Consolidated Subsidiaries or its assets (including the Revolving Credit Agreement),
or give rise to a right thereunder to require any payment to be made by the Borrower or any of
its Consolidated Subsidiaries, and (d) will not result in the creation or imposition of any Lien on
any asset of the Borrower or any of its Consolidated Subsidiaries, except Liens created under the
Loan Documents or under the Mortgage Indenture.


 


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SECTION 3.04. Financial Condition; No Material Adverse Change; Secured Indebtedness.



(a) The audited consolidated balance sheet and related statements of income, stockholders’
equity and cash flows of the Borrower and its Consolidated Subsidiaries for the fiscal year ended
December 31, 2009 and the most recent financial statements delivered by the Borrower pursuant to
Section 5.01(a) or (b), in each case, present fairly, in all material respects, the financial
position and results of operations and cash flows of the Borrower and its Consolidated Subsidiaries
as of such dates and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the statements delivered pursuant to
Section 5.01(a). Neither the Borrower nor any of its Consolidated Subsidiaries had, at the date of
the most recent balance sheet referred to above, any Guarantee, contingent liability or liability
for taxes, or any long-term lease or unusual forward or long-term commitment, including any
interest rate or foreign currency swap or exchange transaction, which, in any case, is material to
the Borrower and its Consolidated Subsidiaries, taken as a whole, and which is not reflected in the
foregoing statements or in the notes thereto. During the period from December 31, 2009 to and
including the Effective Date there has been no sale, transfer or other disposition by the Borrower
or any of its Consolidated Subsidiaries of any part of its business or property, and no purchase or
other acquisition of any business or property (including any Capital Stock of any other Person),
which, in either case, is material in relation to the consolidated financial condition of the
Borrower and its Consolidated Subsidiaries taken as a whole at December 31, 2009.



(b) Since December 31, 2009, there has been no material adverse change in the financial
condition, results of operations, business or prospects of the Borrower and its Consolidated
Subsidiaries, taken as a whole.



(c) As of the Effective Date, there is $490,600,000 in aggregate principal amount of Mortgage
Bonds outstanding.




SECTION 3.05. Properties.



(a) Other than as explicitly disclosed in the Disclosure Documents, each of the Borrower and
its Consolidated Subsidiaries has good title to, or valid leasehold interests in, and enjoys
peaceful and undisturbed possession of, all its real and personal property material to its
business, except for minor defects in title that do not interfere with its ability to conduct its
business as currently conducted or to utilize such properties for their intended purposes.



(b) Each of the Borrower and its Consolidated Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by the Borrower and its Subsidiaries does not
infringe upon the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.


 


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SECTION 3.06. Litigation and Environmental Matters.



(a) Except as explicitly disclosed in the Disclosure Documents, there are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any of its Consolidated
Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and
that, if adversely determined, would, individually or in the aggregate, result in a Material
Adverse Effect or (ii) that involve any of the Loan Documents, the Mortgage Indenture or the
Transactions.



(b) Except as explicitly disclosed in the Disclosure Documents, and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, neither the Borrower nor any of its Consolidated Subsidiaries (i) has
failed to comply with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.



(c) Since the date of this Agreement, there has been no change in the status of any matter
disclosed in the Disclosure Documents that, individually or in the aggregate, has resulted in, or
materially increased the likelihood of, a Material Adverse Effect.



SECTION 3.07. Compliance with Laws and Agreements. Except as explicitly disclosed in
the Disclosure Documents, each of the Borrower and its Consolidated Subsidiaries is in compliance
with all Requirements of Law, including the Fair Labor Standards Act, the Americans with
Disabilities Act, the Foreign Corrupt Practices Act and Anti-Terrorism Laws, applicable to it or
its property and all indentures, agreements and other instruments binding upon it or its property,
except where the failure to be in compliance, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.



SECTION 3.08. Federal Regulations. No part of the proceeds of any Loans will be used
for “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the
quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose
that violates the provisions of the regulations of the Board. If requested by any Lender or the
Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1
referred to in Regulation U.




SECTION 3.09. Investment Company Status.



(a) Neither the Borrower nor any of its Consolidated Subsidiaries is an “investment company”
or a company “controlled” by an “investment company” as defined in, or subject to regulation under,
the Investment Company Act of 1940.


 


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(b) The Borrower is not subject to regulation under any Requirement of Law (other than
Regulation X of the Board and Requirements of Law pertaining to utility regulation) which limits
its ability to incur Indebtedness.



SECTION 3.10. Taxes. Each of the Borrower and its Consolidated Subsidiaries has
timely filed or caused to be filed all Tax returns and reports required to have been filed and has
paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are
being contested in good faith by appropriate proceedings and for which the Borrower or such
Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that
the failure to do so could not reasonably be expected to result in a Material Adverse Effect.



SECTION 3.11. ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse Effect. The
present value of all accumulated benefit obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the
most recent financial statements reflecting such amounts, exceed the fair market value of the
assets of such Plan by an amount that has resulted or could reasonably be expected to result in a
Material Adverse Effect. The present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial statements reflecting such
amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount that
has resulted or could reasonably be expected to result in a Material Adverse Effect.




SECTION 3.12. Security Documents.



(a) (i) The Collateral Mortgage Bonds have been validly issued and authenticated and are
entitled to the benefits of the Mortgage Indenture and secured by the Lien of the Mortgage
Indenture. Upon delivery of the Collateral Mortgage Bonds to the Administrative Agent under a Bond
Delivery Agreement and at all times thereafter, the Collateral Mortgage Bonds will be “Outstanding”
and the Administrative Agent will be the “Holder” of the Collateral Mortgage Bonds for all purposes
of the Mortgage Indenture. The Mortgage Indenture constitutes a valid mortgage lien on and a valid
and perfected security interest in the properties or franchises described therein as being subject
to the Lien of the Mortgage Indenture. As of the Effective Date no material properties or
franchises subject to the Lien of the Mortgage Indenture have been released from such Lien, and, as
of any subsequent date, no such properties or franchises shall have been released from the Lien of
the Mortgage Indenture except in accordance with the terms thereof and hereof.



(ii) The Collateral Mortgage Bonds are not required to be registered under the Securities Act
of 1933, as amended. The Mortgage Indenture conforms to the requirements of the Trust Indenture
Act of 1939, as amended.


 


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(b) The provisions of the Security Documents not covered by paragraph (a) above are effective
to create, in favor of the Administrative Agent for the benefit of the secured parties thereunder,
legal, valid and enforceable Liens on or in all of the Collateral subject thereto,
and all necessary deliveries of property to the Administrative Agent and all necessary and
appropriate recordings and filings have been made in all necessary and appropriate public offices
so that the Liens created by such Security Documents constitute perfected Liens on or in all
rights, titles, estates and interests of the Borrower and any applicable Subsidiaries in the
Collateral covered thereby, prior and superior to all other Liens and all necessary and appropriate
consents to the creation and perfection of such Liens have been obtained. No mortgage or financing
statement or other instrument or recordation covering all or any part of the Collateral is on file
in any recording office which has not been terminated or released, except as may have been filed in
favor of the Administrative Agent.



SECTION 3.13. Disclosure. The Borrower has disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject,
and all other matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of the reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower to the Administrative
Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document
or delivered hereunder (as modified or supplemented by, and taken together with, other information
so furnished) contains any misstatement of a material fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to forward looking statements, the
Borrower represents only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time and notes that there can be no assurance that such
expectations, beliefs or projections will be achieved or accomplished and that such projections are
subject to an increasing degree of uncertainty as they relate to later periods of time.




SECTION 3.14. Solvency. On the Effective Date, the Borrower is Solvent.



SECTION 3.15. Labor Matters. There are no strikes or other labor disputes against the
Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened that
(individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect.
Hours worked by and payment made to employees of the Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with
such matters that (individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect. All payments due from the Borrower or any of its Subsidiaries on account
of employee health and welfare insurance that (individually or in the aggregate) could reasonably
be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability
on the books of the Borrower or the relevant Subsidiary.




SECTION 3.16. Anti-Terrorism Laws.



(a) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates is in
violation of any Requirement of Law relating to terrorism or money laundering (“Anti-Terrorism
Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24,
2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.


 


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(b) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates is any
of the following:



(i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the
Executive Order;



(ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed
on the Annex to, or is otherwise subject to the provisions of, the Executive Order;



(iii) a Person with whom the Borrower is prohibited from dealing or otherwise engaging in any
transaction by any Anti-Terrorism Law;



(iv) a Person who commits, threatens or conspires to commit or supports “terrorism” as defined
in the Executive Order; or



(v) a Person that is named as a “specially designated national or blocked person” on the most
current list published by the U.S. Treasury Department Office of Foreign Assets Control at its
official website or any replacement website or other replacement official publication of such list.



(c) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates (i)
conducts any business or engages in making or receiving any contribution of funds, goods or
services to or for the benefit of any Person described in clause (b)(i), (ii), (iii) or (v) above
or, to the knowledge of the Borrower, clause (b)(iv) above; (ii) deals in, or otherwise engages in
any transaction relating to, any property or interest in property blocked pursuant to the Executive
Order; or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has
the purposes of evading or avoiding, or attempts to violate, any of the prohibitions set forth in
any Anti-Terrorism Law.



(d) No broker or other agent is acting for the benefit of the Borrower or any of its
Affiliates, or benefiting in any capacity, in each case in connection with the Loan Documents.



ARTICLE IV

Conditions




SECTION 4.01. Effective Date. This Agreement, and the obligations of the Lenders to
make Loans shall not become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):



(a) The Administrative Agent (or its counsel) shall have received from each party hereto
either (i) a counterpart of this Agreement signed on behalf of such party or (ii) evidence
satisfactory to the Administrative Agent (which may include transmission by facsimile or other
electronic imaging of a signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.



(b) The Administrative Agent shall have received a favorable written opinion (addressed to the
Administrative Agent and the Lenders and dated the Effective Date) of each of


 


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(i) Raymond S. Heyman, Esq., General Counsel for the Borrower, substantially in the form of
Exhibit E-1, (ii) Morgan, Lewis & Bockius LLP, New York counsel for the Borrower, substantially in
the form of Exhibit E-2, and (iii) Rodey, Dickason, Sloan, Akin & Robb, PA, special New Mexico
counsel for the Borrower, substantially in the form of Exhibit E-3, and covering such other matters
relating to the Borrower, the Loan Documents, the Mortgage Indenture, the Lien of the Mortgage
Indenture or the Transactions as the Required Lenders shall reasonably request. The Borrower
hereby requests such counsel to deliver such opinions.



(c) The Administrative Agent shall have received such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to the organization, existence
and good standing of the Borrower, the authorization of the Transactions and any other legal
matters relating to the Borrower, the Loan Documents, the Mortgage Indenture, the Lien of the
Mortgage Indenture or the Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.



(d) The conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be satisfied, and
the Administrative Agent shall have received a certificate, dated the Effective Date and signed by
the President, a Vice President or a Financial Officer, confirming compliance with such conditions
as of the Effective Date.



(e) The Administrative Agent shall have received, to the extent invoiced, reimbursement or
payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder
or under any other Loan Document.



(f) The Administrative Agent shall have received copies of any amendments or supplements to
the Mortgage Indenture, certified by an authorized officer of the Borrower as being a true, correct
and complete copy thereof and as being in full force and effect.



(g) The Borrower and its Subsidiaries shall have outstanding no indebtedness or preferred
stock other than (a) the Obligations, (b) the Indebtedness described in the most recent financial
statements of the Borrower and its Consolidated Subsidiaries referenced in Section 3.04(a) and (c)
Indebtedness under the Revolving Credit Agreement incurred subsequent to December 31, 2009.



(h) All requisite Governmental Authorities (including, without limitation, the ACC and all
other regulatory authorities) and third parties shall have approved or consented to this Agreement
and the other Loan Documents and the other transactions contemplated hereby and thereby to the
extent required, no stay of any applicable regulatory approval shall have been issued and there
shall be no litigation or other governmental, administrative or judicial action, actual or
threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions
on this Agreement and the other Loan Documents or the Transactions.



(i) The Administrative Agent and the Lenders shall have received all documentation and other
information required by bank regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including without limitation the Patriot Act.


 


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(j) The Capital Stock of the Borrower (to the extent owned by UniSource Energy, which owns all
Capital Stock of the Borrower) shall all be free and clear of any Liens.



SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing shall be subject to the satisfaction of the following conditions:



(a) The representations and warranties of the Borrower set forth in this Agreement and the
other Loan Documents shall be true and correct on and as of the date of such Borrowing, both before
and after giving effect thereto and the application of the proceeds thereof, as though made on and
as of such date (except where such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall have been true and correct as of such
earlier date).



(b) At the time of and immediately after giving effect to such Borrowing, no Default or Event
of Default shall have occurred and be continuing.



Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the
date thereof as to the matters specified in paragraphs (a) and (b) of this Section.



ARTICLE V

Affirmative Covenants




Until the Aggregate Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees and other amounts payable hereunder have been paid in full, the
Borrower covenants and agrees with the Administrative Agent and the Lenders that:



SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish
to the Administrative Agent (and the Administrative Agent will, promptly after its receipt thereof,
forward such copies to the Lenders):



(a) as soon as available and in any event within 60 days after the end of each of the first
three fiscal quarterly periods of each fiscal year of the Borrower (commencing with the fiscal
quarter ending March 31, 2010), or 15 days after the date on which its quarterly report for such
fiscal quarterly period is required to be filed with the Securities and Exchange Commission,
whichever is later, consolidated statements of income of the Borrower and its Consolidated
Subsidiaries for such period and for the period from the beginning of the respective fiscal year to
the end of such period, consolidated statements of cash flows of the Borrower and its Consolidated
Subsidiaries from the beginning of the applicable fiscal year to the end of such period and the
related consolidated balance sheets as of the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the corresponding period in the
preceding fiscal year, accompanied by a certificate of a Financial Officer of the Borrower, which
certificate shall state that the financial statements fairly present in all material respects the
consolidated financial condition and results of operations, as the case may be, of the Borrower and
its Consolidated Subsidiaries in accordance with GAAP, consistently applied (except where noted),
as of the end of, and for, such period (subject to normal year-end audit adjustments and the
absence of footnotes);


 


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(b) as soon as available and in any event within 105 days after the end of each fiscal year of
the Borrower (commencing with the fiscal year ending December 31, 2010, or 15 days after the date
on which its annual report for such fiscal year is required to be filed with the Securities and
Exchange Commission, whichever is later, consolidated statements of income and cash flows of the
Borrower and its Consolidated Subsidiaries for such year and the related consolidated balance
sheets as of the end of such year, setting forth in each case in comparative form the corresponding
consolidated figures for the preceding fiscal year, and accompanied by an opinion of independent
public accountants of recognized national standing selected by the Borrower, which opinion shall
not contain any qualification or exception as to the scope of such audit and shall state that the
consolidated financial statements fairly present in all material respects the consolidated
financial condition and results of operations of the Borrower and its Consolidated Subsidiaries as
of the end of, and for, such fiscal year and have been prepared in accordance with GAAP,
consistently applied (except where noted);



(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a
certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.06 and 6.07 and (iii) stating whether any change in GAAP
or in the application thereof not disclosed in any prior such certificate has occurred since
December 31, 2009 and, if any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate;



(d) concurrently with any delivery of financial statements under clause (b) above, a
certificate of the accounting firm that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by accounting rules or
guidelines);



(e) promptly upon their becoming available, copies of all registration statements (other than
on Form S-8 or any successor form) and regular periodic reports, if any, that the Borrower shall
have filed pursuant to Section 13(a) or 15 of the Securities Exchange Act of 1934, as amended, with
the Securities and Exchange Commission (or any governmental agency substituted therefor) or filed
with any national securities exchange;



(f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of
all financial statements, reports and proxy statements so mailed;



(g) promptly upon their becoming available, copies of all current reports on Form 8-K filed by
the Borrower with the Securities and Exchange Commission, and all similar reports filed with any
national securities exchange;



(h) promptly upon their becoming available, copies of (i) any certified resolutions of the
Board of Directors of the Borrower and net earnings certificates delivered under the Mortgage
Indenture in connection with the issuance of Mortgage Bonds upon the basis of net property
additions or deposits of cash; any certificates of a Financial Officer under either Indenture with
respect to amounts charged to replacement reserve, detailing insurance on the



 


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Borrower’s property or showing compliance by the Borrower with the covenants contained in such
Indenture; any supplemental indentures to either Indenture; any redemption notices under either
Indenture; and any notices of defaults under either Indenture or accelerations of Mortgage Bonds;
(ii) any notices of default under the documentation for any Sale Leaseback of the Borrower or any
Consolidated Subsidiary, any notices of non-payment of rent or any other material amounts owing
under any such Sale Leaseback documentation and any notices of acceleration of any amounts due
under any such Sale Leaseback documentation; and (iii) any written notices from the ACC of
non-compliance by the Borrower or any of its Consolidated Subsidiaries with any material ACC
decision or with any other rules, regulations or orders of the ACC, and any written notices of any
extraordinary audit or investigation by the ACC into the business, affairs or operations of the
Borrower or any of its Consolidated Subsidiaries;



(i) as soon as practicable and in any event within five (5) Business Days after the Borrower
receives written notice of an upgrading or a downgrading of the Index Debt by any Rating Agency, a
notice of such upgrading or downgrading;



(j) if requested by the Administrative Agent, concurrently with any delivery of financial
statements under clause (a) or (b) above, consolidating statements of income and cash flows for the
applicable periods and the consolidating balance sheets as of the end of such periods, accompanied
(i) in the case of a delivery of financial statements under clause (a) above, by a certificate of a
Financial Officer of the Borrower, which certificate shall state that such financial statements
fairly present in all material respects the consolidating financial condition and results of
operations, as the case may be, of the Borrower and its Consolidated Subsidiaries in accordance
with GAAP, consistently applied (except where noted), as of the end of, and for, the applicable
period (subject to normal year-end audit adjustments), and (ii) in the case of a delivery of
financial statements under clause (b) above, by (A) a certificate of a Financial Officer of the
Borrower, which certificate shall state that such consolidating financial statements fairly present
in all material respects the financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries as of the end of, and for, the applicable fiscal year and have been
prepared in accordance with GAAP, consistently applied (except where noted), and (B) a certificate
of the independent public accountants referred to in clause (i) of paragraph (b) above, which
certificate should state that such consolidating financial statements are the consolidating
financial statements that served as the basis for the audited consolidated financial statements in
respect of which such accountants delivered the opinion referred to in such clause (i); and



(k) promptly following any request therefor, such other information regarding the operations,
business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the
terms of any Loan Document or the Mortgage Indenture, as the Administrative Agent or any Lender may
reasonably request.



So long as the Borrower is subject to the financial reporting requirements of the Securities
Exchange Act of 1934, as amended, and the financial statements contained in any quarterly or annual
reports filed with the Securities and Exchange Commission in accordance with such Act and the rules
and regulations promulgated thereunder, such financial statements may be delivered by the Borrower
in satisfaction of its obligations to deliver consolidated financial statements pursuant to clauses
(a) or (b), as the case may be, of this Section 5.01.


 


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SECTION 5.02. Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:




(a) the occurrence of any Default;



(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator
or Governmental Authority against or affecting the Borrower or any Affiliate thereof as to which
there is a reasonable possibility of an adverse determination and that, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;



(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, could reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount exceeding $25,000,000; and



(d) any other development that results in, or could reasonably be expected to result in, a
Material Adverse Effect.



Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer
or other executive officer of the Borrower setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect thereto.



SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each
of its Consolidated Subsidiaries to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence and the rights, licenses, permits, privileges
and franchises material to the conduct of its business, except to the extent the failure to do so
could not reasonably be expected to result in a Material Adverse Effect; provided that the
foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.03.



SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its
Consolidated Subsidiaries to, pay its obligations, including Tax liabilities and assessments
(including water assessments by the Arizona State Land Department), that, if not paid, could
reasonably be expected to result in a Material Adverse Effect, before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its
books adequate reserves with respect thereto to the extent required by and otherwise in accordance
with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected
to result in a Material Adverse Effect.



SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause
each of its Consolidated Subsidiaries to, (a) keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and tear excepted;
provided that the Borrower or any of its Consolidated Subsidiaries may discontinue the
operation of any of its properties to the extent, in the judgment of the Borrower, it is no longer
advisable to operate such property, or to the extent the Borrower or such Subsidiary intends to
sell or otherwise dispose of such property, which disposition is not prohibited by Section 6.04;
and (b) maintain, with financially sound and reputable insurance companies, or through its own
program of self-insurance, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in the same or similar
locations.


 


36









 





SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause
each of its Consolidated Subsidiaries to, keep proper books of record and account in which entries
are made of all dealings and transactions in relation to its business and activities, all in
accordance with customary and prudent business practices. The Borrower will, and will cause each
of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any
Lender, upon reasonable prior notice, to visit and inspect its properties, and, subject to
contractual or statutory limitations regarding confidential or proprietary information, to examine
and make extracts from its books and records, and to discuss its affairs, finances and condition
with its officers, all at such reasonable times and as often as reasonably requested.



SECTION 5.07. Compliance with Laws and Agreements. The Borrower will, and will cause
each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property (including, without limitation, ERISA and
Environmental Laws), in each case except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse Effect.



SECTION 5.08. Use of Proceeds . The proceeds of the Loans will be used only for
general corporate purposes. No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the regulations of the Board,
including Regulations U and X.




SECTION 5.09. Environmental Laws.



(a) The Borrower will, and will cause each of its Consolidated Subsidiaries to, comply with,
and use commercially reasonable efforts to insure compliance by all tenants and subtenants, if any,
with, all Environmental Laws, and will, and will cause each of its Consolidated Subsidiaries to,
obtain and comply with and maintain, and use commercially reasonable efforts to insure that all
tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals,
registrations or permits required by Environmental Laws, except to the extent that failure to do so
could not reasonably be expected to have a Material Adverse Effect;



(b) The Borrower will, and will cause each of its Consolidated Subsidiaries to, conduct and
complete all investigations, studies, sampling and testing, and all remedial, removal and other
actions required under Environmental Laws, except to the extent that the failure to take such
actions could not reasonably be expected to have a Material Adverse Effect, and promptly comply
with all lawful orders and directives of all Governmental Authorities respecting Environmental
Laws, except to the extent that the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not reasonably be expected to have a
Material Adverse Effect.


 


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SECTION 5.10. Further Assurances. The Borrower will, and will cause each of its
Consolidated Subsidiaries to, execute any and all further documents, financing statements,
agreements and instruments, and take all such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust and other documents),
which may be required under any applicable law, or which the Administrative Agent or the Required
Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents
or under the Mortgage Indenture or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Mortgage Indenture or the Security Documents or the validity or
priority of any such Lien, all at the expense of the Borrower. The Borrower also agrees to provide
to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to
the Administrative Agent as to the perfection and priority of the Liens created or intended to be
created by the Security Documents or by or under the Mortgage Indenture.



ARTICLE VI

Negative Covenants




Until the Aggregate Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees and other amounts payable hereunder have been paid in full, the
Borrower covenants and agrees with the Administrative Agent and the Lenders that:




SECTION 6.01. Indebtedness. The Borrower will not permit:



(a) the aggregate principal amount of Mortgage Bonds outstanding at any time to exceed
$840,000,000; provided that there shall be disregarded for purposes of any determination
under this paragraph the principal amount of any outstanding Mortgage Bonds which (A) are to be
redeemed or paid at maturity within 90 days after the date of such determination or (B) evidence or
secure the Borrower’s obligations in respect of industrial development revenue bonds of the same
principal amount (or related reimbursement obligations) which are to be redeemed or paid at
maturity within 90 days after the date of such determination; provided, however,
that (1) in the case of any such redemption, either irrevocable and unconditional notice of
redemption shall have been given or irrevocable and unconditional instructions shall have been
given to the related trustee to give such notice of redemption and (2) in the case of any such
redemption or payment, cash in an amount sufficient to redeem or repay the Mortgage Bonds to be
disregarded (or the obligations evidenced or secured thereby) shall have been deposited with the
applicable trustee for the redemption or payment thereof; or



(b) the aggregate amount of Guarantees by the Borrower and the Consolidated Subsidiaries
(other than Guarantees by the Borrower or any Consolidated Subsidiary of Indebtedness or
obligations of the Borrower or a Consolidated Subsidiary) outstanding at any time to exceed
$30,000,000.



SECTION 6.02. Liens. The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on the Mortgaged Property (as defined in the
Mortgage Indenture) now owned or hereafter acquired by the Borrower, or any income therefrom, prior
to the Lien of the Mortgage Indenture, except Permitted Encumbrances and Prepaid Liens (as such
terms are defined in the Mortgage Indenture) and any other Liens expressly permitted pursuant to
Section 5 of Article IV of the Mortgage Indenture.


 


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SECTION 6.03. Fundamental Changes.



(a) The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, merge
into or consolidate with any other Person, or permit any other Person to merge into or consolidate
with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) its assets as an entirety or substantially as an entirety, or all or substantially
all of the Capital Stock of any of its Consolidated Subsidiaries (in each case, whether now owned
or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and
immediately after giving effect thereto no Default shall have occurred and be continuing (i) any
Person may merge into the Borrower in a transaction in which the Borrower is the surviving
corporation, (ii) any Consolidated Subsidiary may merge with any other Consolidated Subsidiary, and
(iii) the Borrower may merge with or into or consolidate with or transfer its assets as an entirety
or substantially as an entirety to any Person, so long as (A) immediately prior to and immediately
after giving effect to such merger, consolidation or transfer, the Person with or into which the
Borrower shall ultimately merge or consolidate or to whom the Borrower shall ultimately transfer
its assets as an entirety or substantially as an entirety is in the Utility Business; (B) the
Required Lenders shall have determined (so long as such determination is exercised in good faith
and after consultation with the Borrower) that the rating of the first mortgage bonds (or bonds
otherwise denominated that benefit from a first Lien on such Person’s utility assets, or, if such
Person has no first mortgage bonds, the rating of the senior unsecured long-term Indebtedness of
such Person that is not guaranteed and does not benefit from any other credit enhancement) of the
surviving Person of any such merger, consolidation, acquisition or transfer of assets shall be at
least BBB- or higher by S&P and Baa3 or higher by Moody’s (unless the requirements of this clause
(B) shall have been waived by the Required Lenders); provided that the requirement of this
clause (B) shall be deemed to have been satisfied if, prior to the consummation of any such merger,
consolidation or transfer, the Borrower shall have delivered written evidence from each such Rating
Agency to the effect that, upon such merger, consolidation or transfer, the applicable rating of
such surviving Person would be equal to or higher than the ratings specified in this clause (B);
(C) in the case of any merger or consolidation or transfer of assets in which the Borrower is not
the surviving corporation, the Person formed by any such consolidation or transfer of assets or
into which the Borrower shall be merged or consolidated or to which such assets are transferred
shall have executed an agreement in form reasonably satisfactory to the Administrative Agent
containing an assumption by the surviving Person of the due and punctual performance of each
obligation, agreement, covenant and condition of each of the Loan Documents and the Mortgage
Indenture to be performed or complied with by the Borrower; and (D) the Administrative Agent shall
have received an opinion of counsel, in form and substance reasonably satisfactory to the
Administrative Agent and its counsel, with respect to the due authorization, execution, delivery,
validity and enforceability of the assumption agreement referred to in clause (C) of this Section
6.03, of the enforceability and continuation of the Liens created pursuant to the Security
Documents and such other matters as the Required Lenders may reasonably require.



(b) The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, engage
to any material extent in any business other than the Utility Business.


 


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SECTION 6.04. Sale of Assets.



(a) The Borrower will not, and will not permit any of its Consolidated Subsidiaries to,
convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or
assets (including leasehold interests), whether now owned or hereafter acquired, except:




(i) inventory and other property in the ordinary course of business;




(ii) sales of accounts receivable;



(iii) property, businesses or assets (including receivables and leasehold interests) with an
aggregate Fair Value not in excess of $250,000,000; provided that the aggregate Fair Value
of such property, businesses or assets permitted to be disposed of pursuant to this clause (iii)
shall be increased on a dollar for dollar basis by the aggregate amount of each reduction of the
“Aggregate Commitments” under the Revolving Credit Agreement in respect of which the Borrower shall
have given the Administrative Agent, for the benefit of the Lenders, written evidence of the
Borrower’s agreement not to issue Indebtedness under the Mortgage Indenture based upon the Mortgage
Bonds retired in connection with such reduction;



(iv) property in connection with any securitization (e.g., stranded costs) or sale of
assets required by law; and



(v) any sale of the Borrower’s assets as an entirety or substantially as an entirety in
accordance with Section 6.03, provided that any assets of the Borrower not included in such
sale shall be deemed to have been disposed of in a transaction subject to the limitations of this
Section 6.04, including the dollar limit set forth in clause (iii) above;



provided, that any Consolidated Subsidiary may convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets to the Borrower or any other
Consolidated Subsidiary. Investments by the Borrower and the Consolidated Subsidiaries in, and
contributions by the Borrower and the Consolidated Subsidiaries to, Consolidated Subsidiaries shall
be deemed not to constitute transfers of assets subject to the limitations of this Section 6.04 to
the extent such investments or contributions are made in cash.



(b) Without limitation of subsection (a) above, the Borrower will not, and will not permit any
of its Consolidated Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of
all or substantially all of its generating assets (including leasehold interests), whether now
owned or hereafter acquired, except as required by applicable law.




SECTION 6.05. Restricted Payments.



(a) The Borrower will not declare or make, or agree to pay or make, directly or indirectly,
any Restricted Payment at any time that any Default has occurred and is continuing or would occur
as a result of such action, except that (i) the Borrower may declare and pay dividends with respect
to its capital stock payable solely in additional shares of its common stock and (ii) the Borrower
may make Restricted Payments pursuant to and in accordance with stock
option plans or other benefit plans for management or employees of the Borrower and its
Subsidiaries.


 


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(b) The Borrower will not, and will not permit any Consolidated Subsidiary to, directly or
indirectly, purchase or acquire any Capital Stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing) of, make any loans
or advances to, Guarantee any obligations of, or make any investment or otherwise acquire any other
interest in, any Affiliate of the Borrower (other than a Consolidated Subsidiary) (each of the
foregoing, an “Affiliate Investment”), at any time that a Default has occurred and is
continuing or, as a result of the making of such Affiliate Investment, would occur or would be
deemed to occur pursuant to the next sentence. For purposes of determining whether a Default would
be deemed to occur under Section 6.06 or 6.07 as a result of an Affiliate Investment, the
applicable computations shall be made as if the Affiliate Investment were a dividend and did not
result in the creation of any asset.



SECTION 6.06. Cash Coverage Ratio. The Borrower will not permit the ratio of (a)
Consolidated EBITDA to (b) Consolidated Interest Expense, in each case for the twelve-month period
ended on the last day of any fiscal quarter commencing with the fiscal quarter ended December 31,
2009, to be less than 2.25 to 1.0.



SECTION 6.07. Leverage Test. The Borrower will not permit the ratio of (a)
Consolidated Total Indebtedness at the last day of any fiscal quarter to (b) Consolidated EBITDA
for the twelve-month period ended on such date to be greater than 4.00, commencing with the fiscal
quarter ended December 31, 2009.



SECTION 6.08. Amendments to Documents. The Borrower will not, and will not permit any
Consolidated Subsidiary to, amend, modify or change, or consent or agree to any amendment,
modification or change to, the Mortgage Indenture or the Tenth Supplemental Indenture, without the
prior written consent of the Required Lenders, provided that (i) such consent shall not be
required in connection with any amendment of the Mortgage Indenture for which the Mortgage
Indenture does not require the consent of any bondholder and (ii) such consent shall not be
unreasonably withheld with respect to any amendment of the Mortgage Indenture that has been
approved by bondholders entitled to vote under the Mortgage Indenture who hold bonds in an
aggregate principal amount greater than the principal amount of the Collateral Mortgage Bonds.



SECTION 6.09. Sale Leaseback Transactions. The Borrower will not, and will not permit
any of its Subsidiaries to, enter into any Sale Leaseback if the aggregate annual basic rent
payments under all Sale Leasebacks entered into by the Borrower and its Subsidiaries after the date
hereof would exceed $20,000,000 in any fiscal year after giving effect to such Sale Leaseback.



SECTION 6.10. Release of Collateral under the Mortgage Indenture. The Borrower will
not, and will not permit any of its Subsidiaries to, permit any asset (including any cash) to be
released from the Lien of the Mortgage Indenture other than in accordance with the terms and
provisions of the Mortgage Indenture.


 


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SECTION 6.11. Transactions with Affiliates. The Borrower will not, and will not
permit any of the Consolidated Subsidiaries to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage
in any other transactions with, any of its Affiliates which are not Consolidated Subsidiaries,
except (a) at prices and on terms and conditions not less favorable to the Borrower or such
Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b)
transactions between or among the Borrower and the Consolidated Subsidiaries not involving any
other Affiliate, (c) any Restricted Payment permitted by Section 6.05(a), (d) shared corporate or
administrative services and staffing with Affiliates, including accounting, legal, human resources
and treasury operations, provided on customary terms for similarly situated companies, (e) tax
sharing arrangements on customary terms for similarly situated companies, (f) customary fees paid
to members of the board of directors of the Borrower and the Consolidated Subsidiaries who are not
officers of the Borrower or any Subsidiary and (g) transactions to acquire, either through asset
purchases, mergers or purchases of Capital Stock, the business and operations of Southwest Energy
Solutions, Inc. or Millennium Environmental Group, Inc.



SECTION 6.12. Limitation on Hedge Agreements. The Borrower will not, and will not
permit any of the Consolidated Subsidiaries to, enter into any Hedge Agreement other than Hedge
Agreements entered into in the ordinary course of business.



SECTION 6.13. Restrictive Agreements. The Borrower will not, and will not permit any
of its Consolidated Subsidiaries to, directly or indirectly, enter into, incur or permit to exist
any agreement or other arrangement that prohibits, restricts or imposes any condition upon the
ability of any Consolidated Subsidiary to pay dividends or other distributions with respect to any
shares of its Capital Stock or to make or repay loans or advances to the Borrower or any other
Consolidated Subsidiary or to Guarantee Indebtedness of the Borrower or any other Consolidated
Subsidiary; provided that the foregoing shall not apply to restrictions and conditions (i)
imposed by law, (ii) imposed by any Loan Document, (iii) contained in agreements entered into after
the Effective Date which contain restrictions no more restrictive than those contained in the Loan
Documents and (iv) contained in agreements relating to the sale of a Subsidiary pending such sale;
provided in the case of this clause (iv) such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder.



ARTICLE VII

Events of Default





If any of the following events (“Events of Default”) shall occur:



(a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or
otherwise;



(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in clause (a) of this Article) payable under this Agreement or
any other Loan Document, when and as the same shall become due and payable, and such failure shall
continue unremedied for a period of five (5) days;


 


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(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any
Consolidated Subsidiary in or in connection with any Loan Document or any amendment or modification
thereof or waiver thereunder, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any amendment or modification
thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made
or deemed made;



(d) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in Section 5.02, 5.03 (with respect to the Borrower’s existence) or 5.08 or in Article
VI;



(e) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this
Article), and such failure shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent to the Borrower (which notice will be given at the request of any
Lender);



(f) the Borrower or any Significant Subsidiary shall fail to make any payment of principal
(regardless of amount) in respect of any Material Indebtedness, when and as the same shall become
due and payable;



(g) any event or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits (with or without the giving of notice, the
lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent
on its or their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption (other than pursuant to provisions permitting the tendering of
such Indebtedness from time to time for repurchase or redemption without regard to the occurrence
or non-occurrence of any event or condition) or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or assets securing such
Indebtedness;



(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any
Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or
(ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any Significant Subsidiary or for a substantial part of its assets,
and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be entered;



(i) the Borrower or any Significant Subsidiary shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under any Federal, state
or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii)
consent to the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for
the
Borrower or any Significant Subsidiary or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose
of effecting any of the foregoing;


 


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(j) the Borrower or any Significant Subsidiary shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;



(k) one or more judgments for the payment of money in an aggregate amount in excess of
$20,000,000 shall be rendered against the Borrower, any Significant Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Significant Subsidiary to enforce
any such judgment;



(l) an ERISA Event shall have occurred that, when taken together with all other ERISA Events
that have occurred, has resulted or could reasonably be expected to result in a Material Adverse
Effect;



(m) (i) any Lien purported to be created under any Security Document or the Mortgage Indenture
shall cease to be, or shall be asserted by the Borrower or any Consolidated Subsidiary not to be, a
valid and perfected Lien on any collateral subject thereto, with the priority required by the
applicable Security Document or the Mortgage Indenture, as applicable, except (A) as a result of
the sale or other disposition of the applicable Collateral in a transaction permitted under the
Loan Documents or (B) as a result of the Administrative Agent’s failure to maintain possession of
any stock certificates, promissory notes or other instruments delivered to it under any Security
Document, or (ii) any Collateral Mortgage Bond shall for any reason (x) cease to be entitled to the
benefits of the Mortgage Indenture or to be secured by the Lien of the Mortgage Indenture equally
and ratably with all other bonds, if any, outstanding under the Mortgage Indenture or (y) cease to
be a legal, valid and binding obligation of the Borrower;




(n) any Change in Control shall occur; or



(o) any material provision of this Agreement or any other Loan Document to which the Borrower
is a party shall for any reason, except to the extent permitted by the express terms hereof or
thereof, cease to be valid and binding on or enforceable against the Borrower, or the Borrower
shall so assert in writing;



then, and in every such event (other than an event with respect to the Borrower described in clause
(h) or (i) of this Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, in each case by notice
to the Borrower, take any or all of the following actions, at the same or different times: (i)
terminate the Aggregate Commitments, and thereupon the Aggregate Commitments shall terminate
immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in
which case any principal not so declared to be due and payable may thereafter be declared to be due
and payable), and thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the



 


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Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Borrower, and (iii)
deliver a notice of redemption under the Tenth Supplemental Indenture stating that such notice is
being delivered pursuant to this Article VII; in case of any event with respect to the Borrower
described in clause (h) or (i) of this Article, the Aggregate Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrower accrued hereunder and the cash collateral
referred to in clause (v) above, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.



ARTICLE VIII

The Administrative Agent




Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and
authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers
as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such
actions and powers as are reasonably incidental thereto.



The bank serving as the Administrative Agent hereunder shall have the same rights and powers
in its capacity as a Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.



The Administrative Agent shall not have any duties or obligations except those expressly set
forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of
whether a 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 by the Loan Documents that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except
as expressly set forth in the Loan Documents, 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
Borrower 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 Lenders (or such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful
misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender,
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 any Loan Document,
(ii) the contents of any certificate, report or other document delivered hereunder or in connection
herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or
conditions set



 


45









 






forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of
any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt
of items expressly required to be delivered to the Administrative Agent.



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 believed by it to be genuine 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 and
believed by it to be made by the proper Person, and shall not incur any liability for relying
thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall not be liable for
any action taken or not taken by it in accordance with the advice of any such counsel, accountants
or experts.



The Administrative Agent may perform any and all its duties and exercise its rights and powers
by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the preceding paragraphs
shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any
such sub-agent, and shall apply to their respective activities in connection with the syndication
of the credit facilities provided for herein as well as activities as Administrative Agent.



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 Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation
with the Borrower, to appoint a successor. If no successor shall have been so appointed by the
Required Lenders 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 Lenders, appoint a successor Administrative Agent, which shall be any commercial
bank organized under the laws of the United States of America or any State thereof having a
combined capital and surplus and undivided profits of not less than $500,000,000, or an Affiliate
of any such bank.



Upon the acceptance of its appointment as Administrative Agent 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 Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the Administrative Agent’s resignation hereunder,
the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such
retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of
any actions taken or omitted to be taken by any of them while it was acting as Administrative
Agent.


 


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Each Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender 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
Lender also acknowledges that it will, independently and without reliance upon the Administrative
Agent or any other Lender 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, any other Loan Document or related agreement or any document furnished
hereunder or thereunder.



Except with respect to the exercise of setoff rights of any Lender, in accordance with Section
9.08, the proceeds of which are applied in accordance with this Agreement, each Lender agrees that
it will not take any action, nor institute any actions or proceedings, against the Borrower or with
respect to any Loan Document, without the prior written consent of the Required Lenders or, as may
be provided in this Agreement or the other Loan Documents, with the consent of the Administrative
Agent.



The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Administrative Agent)
authorized to act for, any other Lender. The Administrative Agent shall have the exclusive right
on behalf of the Lenders to enforce the payment of the principal of and interest on any Loan after
the date such principal or interest has become due and payable pursuant to the terms of this
Agreement.



ARTICLE IX

Miscellaneous





SECTION 9.01. Notices.



(a) Except in the case of notices and other communications expressly permitted to be given by
telephone (and subject to paragraph (b) below), all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by facsimile or other electronic imaging, as follows:



(i) if to the Borrower, to it at One South Church Avenue, Tucson, Arizona 85701, Attention of
Chief Financial Officer (Facsimile No.: (520) 884-3612);



(ii) if to the Administrative Agent, to 10 S. Dearborn Street, Floor 7, Mail Code IL1-0010,
Chicago, IL 60603, Attention: April Ybed (Facsimile No.: (312) 385-7096); with a copy, except with
respect to the Borrowing Request and any Interest Election Request, to JPMorgan Chase Bank, N.A. at
10 S. Dearborn Street, Floor 10, Mail Code IL1-0874, Chicago, IL 60603, Lisa Tverdek (Facsimile
No.: (312) 325-3238) and 10 S. Dearborn Street, Floor 9, Mail Code IL1-0090, Chicago, IL 60603,
Attention: Nancy Barwig (Facsimile No.: (312) 732-1762); and



(iii) if to any Lender, to it at its address (or facsimile number) set forth in its
Administrative Questionnaire.


 


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(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not apply to notices pursuant to Article II unless
otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent
or the Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or communications.



(c) Any party hereto may change its address or facsimile number for notices and other
communications hereunder by notice to the other parties hereto. All notices and other
communications given to any party hereto in accordance with the provisions of this Agreement shall
be deemed to have been given on the date of receipt.




SECTION 9.02. Waivers; Amendments.



(a) No failure or delay by the Administrative Agent or any Lender in exercising any right or
power hereunder or under any other Loan Document or the Mortgage Indenture shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights and remedies of
the Administrative Agent and the Lenders hereunder and under the other Loan Documents and the
Mortgage Indenture are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph
(b) of this Section, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the generality of the foregoing,
the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.



(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may
be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or
agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and
the Administrative Agent with the consent of the Required Lenders or, in the case of any other Loan
Document, pursuant to an agreement or agreements in writing entered into by the Administrative
Agent and the Borrower, in each case with the consent of the Required Lenders or, in the case of
the Tenth Supplemental Indenture or the Collateral Mortgage Bonds, in each case with the consent of
the Required Lenders and as provided by the Mortgage Indenture with the Administrative Agent
exercising the rights of the holder of the Collateral Mortgage Bonds and acting at the direction of
the Required Lenders; provided that no such agreement shall (i) increase the Commitment of
any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan
or reduce the rate of interest thereon, or reduce any fees payable hereunder, or change the
definition of “Applicable Margin”, in each case without the written consent of each Lender affected
thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any
interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or



 


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postpone the scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of each Lender, (v)
change any of the provisions of this Section or the definition of “Required Lenders” or any other
provision of any Loan Document specifying the number or percentage of Lenders required to waive,
amend or modify any rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender, or (vi) release all or any portion of the Collateral
Mortgage Bonds or release all or substantially all of any other Collateral from the Liens of the
Security Documents without the consent of each Lender, in each case except for any such release
expressly permitted hereunder or under any Security Document; provided further that
no such agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the Administrative Agent.
Notwithstanding the foregoing, any provision of this Agreement requiring the consent of a Lender
unwilling to provide such consent may be amended by an agreement in writing entered into by the
Borrower, the Required Lenders and the Administrative Agent if (1) by the terms of such agreement
the Commitment of each such opposing Lender shall terminate upon the effectiveness of such
amendment and (2) at the time such amendment becomes effective, each such opposing Lender receives
payment in full of the principal of and interest accrued on each Loan made by it and all other
amounts owing to it or accrued for its account under the Loan Documents.




SECTION 9.03. Expenses; Indemnity; Damage Waiver.



(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates (including due diligence expenses and the reasonable fees,
charges and disbursements of counsel for the Administrative Agent) in connection with the
arrangement and syndication of the credit facilities provided for herein, the preparation,
execution, delivery and administration of the Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby
shall be consummated); (ii) all out-of-pocket expenses and charges of the Administrative Agent and
its Affiliates in connection with any evaluations of Collateral conducted by it; and (iii) all
out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees,
charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection
with the enforcement or protection of its rights in connection with the Loan Documents, including
its rights under this Section, or in connection with the Loans made hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of
such Loans.



(b) The Borrower shall indemnify the Administrative Agent and each Lender, and each Related
Party of any of the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including the fees, charges and disbursements of any counsel for any
Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or
as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument
contemplated hereby, the performance by the parties to the Loan Documents of their respective
obligations thereunder or the consummation of the Transactions or any other transactions
contemplated thereby, (ii) any Loan or the use of the proceeds therefrom,


 


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(iii) any actual or alleged presence or release of Hazardous Materials on or from any property
owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability
related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted primarily from the
gross negligence or willful misconduct of such Indemnitee.



(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the
Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to
pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against the Administrative Agent
in its capacity as such.



(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or the use of the proceeds
thereof.



(e) All amounts due under this Section shall be payable promptly after delivery to the
Borrower of a reasonably detailed statement therefor.




SECTION 9.04. Successors and Assigns.



(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns permitted hereby, except that the
Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void). Nothing in this Agreement, expressed or implied,
shall be construed to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the
Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.



(b) Any Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment and the Loans owing
to it); provided that (i) except in the case of an assignment to a Lender, an Affiliate of
a Lender or an Approved Fund of any Lender, the Administrative Agent must give its prior written
consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the
case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, the
Borrower must give its prior written consent to such assignment (which consent



 


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shall not be unreasonably withheld), (iii) except in the case of an assignment to a Lender, an
Affiliate of a Lender or an Approved Fund of any Lender, or an assignment of the entire remaining
amount of the assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Administrative Agent) shall be in an aggregate
amount of not less than $5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing and recordation fee
of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire; and provided further that any consent of the
Borrower otherwise required under this paragraph shall not be required if an Event of Default shall
have occurred and be continuing Subject to acceptance and recording thereof pursuant to paragraph
(d) of this Section, from and after the effective date specified in each Assignment and Assumption
the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and
the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment
and Assumption, be released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights
or obligations under this Agreement that does not comply with this paragraph shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section.



(c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall
maintain at one of its offices in the City of New York a copy of each Assignment and Assumption
delivered to it and a register for the recordation of the names and addresses of the Lenders, and
the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower and any Lender at any reasonable time and from time to
time upon reasonable prior notice.



(d) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning
Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph
(b) of this Section and any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption and record the
information contained therein in the Register. No assignment shall be effective for purposes of
this Agreement unless it has been recorded in the Register as provided in this paragraph.


 


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(e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell
participations to one or more banks or other entities (a “Participant”) in all or a portion
of such Lender’s rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); provided that (i) such
Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such obligations and (iii)
the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve
any amendment, modification or waiver of any provision of the Loan Documents; provided that
such agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the first proviso to
Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and
2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant
to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.16(c) as though it were a Lender.



(f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or
2.15 than the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such Participant is
made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified
of the participation sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.15(d) as though it were a Lender.



(g) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any
Lender that is a fund that invests in bank loans, such Lender may, without the consent of the
Borrower or the Administrative Agent, assign or pledge all or any portion of its rights under this
Agreement, including the Loans and notes or any other instrument evidencing its rights as a Lender
under this Agreement, to any holder of, trustee for, or any other representative of holders of,
obligations owed or securities issued by, such fund, as security for such obligations or
securities; provided that any foreclosure or similar action by such trustee or
representative shall be subject to the provisions of this Section 9.04(b) concerning assignments.



(h) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting
Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such
in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower,
the option to provide to the Borrower all or any part of any Loan that such Granting Lender would
otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the
Granting Lender shall be obligated to make such Loan pursuant to the terms



 


52









 






hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting
Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party
hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting Lender). In
furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one day after the
payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it
will not institute against, or join any other person in instituting against, such SPC in connection
with its activities as an SPC hereunder any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under the laws of the United States or any State thereof. In addition,
notwithstanding anything to the contrary in this Section 9.04, any SPC may (A) with notice to, but
without the prior written consent of, the Borrower and the Administrative Agent and without paying
any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting
Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent)
providing liquidity and/or credit support to or for the account of such SPC to support the funding
or maintenance of Loans and (ii) disclose on a confidential basis consistent with the provisions of
Section 9.12 any non-public information relating to its Loans to any rating agency, commercial
paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC.
The provisions of this Section relating any SPC may not be amended without the written consent of
such SPC.



SECTION 9.05. Survival. All covenants, agreements, representations and warranties
made by the Borrower in the Loan Documents and in the certificates or other instruments delivered
in connection with or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the execution and delivery of
the Loan Documents and the making of any Loans regardless of any investigation made by any such
other party or on its behalf and notwithstanding that the Administrative Agent or any Lender may
have had notice or knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement
is outstanding and unpaid is outstanding and so long as any Commitment has not expired or
terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article VIII shall survive
and remain in full force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans and the Aggregate Commitments or the termination of this
Agreement or any provision hereof.



SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different counterparts), each of which
shall constitute an original, but all of which when taken together shall constitute a single
contract. This Agreement and the other Loan Documents constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof
which, when taken together, bear the signatures of each of the other parties hereto, and thereafter
shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page of this
Agreement by facsimile or other electronic imaging shall be effective as delivery of a manually
executed counterpart of this Agreement.


 


53









 





SECTION 9.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.



SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other obligations at any
time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against
any of and all the obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of setoff) which such
Lender may have.




SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.



(a) This Agreement shall be construed in accordance with and governed by the law of the State
of New York.



(b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property,
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 any
Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees 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. Each of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan
Document shall affect any right that the Administrative Agent or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan Document against the
Borrower or its properties in the courts of any jurisdiction.



(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court.


 


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(d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will
affect the right of any party to this Agreement to serve process in any other manner permitted by
law.



SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.



SECTION 9.11. Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect
the construction of, or be taken into consideration in interpreting, this Agreement.



SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders
agrees to maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and
agents, including accountants, auditors, legal counsel and other advisors (it being understood that
the Persons to whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the extent requested by
any regulatory authority (including any self-regulatory authority, such as the National Association
of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with
the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the same as those of
this Section, to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction relating to the
Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a
source other than the Borrower. For the purposes of this Section, “Information” means all
information received from the Borrower relating to the Borrower or its business, other than any
such information that is available to the Administrative Agent or any Lender on a nonconfidential
basis prior to disclosure by the Borrower; provided that, in the case of information
received from the Borrower after the Effective Date, such information is clearly identified at the
time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section shall be considered to
have complied with its obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to its own
confidential information.


 


55









 





SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges
and other amounts which are treated as interest on such Loan under applicable law (collectively the
“Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be
contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance
with applicable law, the rate of interest payable in respect of such Loan hereunder, together with
all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent
lawful, the interest and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be increased (but not
above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.



SECTION 9.14. Patriot Act Notice. Each Lender and the Administrative Agent (for
itself and not on behalf of any other party) hereby notifies the Borrower that, pursuant to the
requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001
(the “Patriot Act”), it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the Borrower and other
information that will allow such Lender or the Administrative Agent, as applicable, to identify the
Borrower in accordance with the Patriot Act.


 


56









 





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



	 	 	 	 	 
	 	TUCSON ELECTRIC POWER COMPANY

 	 
	 	By:  	/s/ Kentton C. Grant
 	 
	 	 	Name:  	Kentton C. Grant 	 
	 	 	Title:  	Vice President 	 
	 
	 	JPMORGAN CHASE BANK, N.A., as 

Administrative Agent and as a Lender

 	 
	 	By:  	/s/ Nancy R. Barwig
 	 
	 	 	Name:  	Nancy R. Barwig 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Loan Agreement





 


S-1









 







SCHEDULE 1.01




PRICING SCHEDULE





The “Applicable Margin” for any day are the respective annual percentage rates set forth below
in the applicable row under the column corresponding to the Status that exists on such day:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	≥A-/A3	 	 	BBB+/Baa1	 	 	BBB/Baa2	 	 	≤BBB-/Baa3	 
	Status	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Level 4	 
	Applicable Margin
— Eurodollar Loans
	 	 	1.75	%	 	 	2.00	%	 	 	2.25	%	 	 	2.75	%
	Applicable Margin
— ABR Loans
	 	 	0.75	%	 	 	1.00	%	 	 	1.25	%	 	 	1.75	%







For purposes of this Pricing Schedule, the following terms have the following meanings:



“Level 1 Status” exists at any date if, at such date, the Index Debt is rated either
A- or higher by S&P or A3 or higher by Moody’s.



“Level 2 Status” exists at any date if, at such date, the Index Debt is rated either
BBB+ or higher by S&P or Baa1 or higher by Moody’s and (ii) Level 1 Status does not exist.



“Level 3 Status” exists at any date if, at such date (i) the Index Debt is rated
either BBB or higher by S&P or Baa2 or higher by Moody’s and (ii) neither Level 1 Status nor Level
2 Status exists.




“Level 4 Status” exists at any date if, at such date, no other Status exists.



“Status” refers to the determination of which of Level 1 Status, Level 2 Status, Level
3 Status or Level 4 Status, exists at any date.



Notwithstanding the foregoing, if the Index Debt is split-rated and the ratings differential
is two or more ratings levels, the Status shall be determined assuming that (a) the higher rating
is equal to the midpoint of the two ratings (e.g., for a split rating of BBB+/Baa3, BBB is the
midpoint and will be deemed to be the higher rating, and for a split rating of BB/Baa1, Baa3 is the
midpoint and will be deemed to be the higher rating) or (b) if there is no exact midpoint, the
higher rating is equal to the higher of the two middle intermediate ratings (e.g., for a split
rating of BBB+/Ba1, BBB is the higher of the two middle intermediate ratings and will be deemed to
be the higher rating, and for a split rating of BB/Baa2, Baa3 is the higher of the two middle
intermediate ratings and will be deemed to be the higher rating).


 


 









 





If at any time the Index Debt is unrated by Moody’s or S&P, Level 4 Status shall exist;
provided that if the reason that there is no such Moody’s rating or S&P rating results from Moody’s
or S&P, as the case may be, ceasing to issue debt ratings generally, then the Borrower and the
Administrative Agent may select another nationally-recognized rating agency to substitute for
Moody’s or S&P, as applicable, for purposes of the foregoing Schedule (and all references herein to
Moody’s or S&P, as applicable, shall refer to such substitute rating agency), and until a
substitute nationally-recognized rating agency is so selected the Status shall be determined by
reference to the rating most recently in effect prior to such cessation.



The Applicable Margin shall be increased or decreased in accordance with the foregoing
Schedule upon any change in the applicable ratings of the Index Debt. The ratings of the Index
Debt in effect at any date are those in effect at the close of business on such date.




 


2