Exhibit 4.3






Exhibit
4.3




[Execution Version]




 

 








SECOND AMENDED AND RESTATED CREDIT AGREEMENT




dated as of



November 9, 2010



among



TUCSON ELECTRIC POWER COMPANY,

as Borrower,



THE LENDERS PARTY HERETO,



THE ISSUING BANKS PARTY HERETO,



JPMORGAN CHASE BANK, N.A., SUNTRUST BANK

and WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Co-Syndication Agents,



BANK OF AMERICA, N.A. and U.S. BANK NATIONAL ASSOCIATION,

as Co-Documentation Agents,




and



UNION BANK, N.A.,

as Administrative Agent



 

 








UNION BANK, N.A., J.P. MORGAN SECURITIES LLC, SUNTRUST ROBINSON

HUMPHREY, INC. and WELLS FARGO SECURITIES, LLC

as Joint Lead Arrangers





 


 









 











TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I Definitions	 	 	1	 
	 
	 	 	 	 	 	 
	SECTION 1.01.
	 	Defined Terms	 	 	1	 
	SECTION 1.02.
	 	Classification of Loans and Borrowings	 	 	20	 
	SECTION 1.03.
	 	Terms Generally	 	 	20	 
	SECTION 1.04.
	 	Accounting Terms; GAAP	 	 	20	 
	SECTION 1.05.
	 	Pro Forma Calculations	 	 	20	 
	 
	 	 	 	 	 	 
	ARTICLE II The Credits	 	 	21	 
	 
	 	 	 	 	 	 
	SECTION 2.01.
	 	Revolving Commitments	 	 	21	 
	SECTION 2.02.
	 	Loans and Borrowings	 	 	21	 
	SECTION 2.03.
	 	Requests for Revolving Borrowings	 	 	22	 
	SECTION 2.04.
	 	Letters of Credit	 	 	22	 
	SECTION 2.05.
	 	Funding of Borrowings	 	 	31	 
	SECTION 2.06.
	 	Interest Elections	 	 	31	 
	SECTION 2.07.
	 	Termination and Reduction of Commitments	 	 	33	 
	SECTION 2.08.
	 	Repayment of Loans; Evidence of Debt	 	 	33	 
	SECTION 2.09.
	 	Prepayment of Loans	 	 	34	 
	SECTION 2.10.
	 	Fees	 	 	35	 
	SECTION 2.11.
	 	Interest	 	 	36	 
	SECTION 2.12.
	 	Alternate Rate of Interest	 	 	37	 
	SECTION 2.13.
	 	Increased Costs	 	 	38	 
	SECTION 2.14.
	 	Break Funding Payments	 	 	39	 
	SECTION 2.15.
	 	Taxes	 	 	39	 
	SECTION 2.16.
	 	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	 	 	40	 
	SECTION 2.17.
	 	Mitigation Obligations; Replacement of Lenders	 	 	42	 
	SECTION 2.18.
	 	Illegality	 	 	43	 
	SECTION 2.19.
	 	New Lenders	 	 	43	 
	SECTION 2.20.
	 	Defaulting Lenders	 	 	43	 
	 
	 	 	 	 	 	 
	ARTICLE III Representations and Warranties	 	 	46	 
	 
	 	 	 	 	 	 
	SECTION 3.01.
	 	Organization; Powers	 	 	46	 
	SECTION 3.02.
	 	Authorization; Enforceability	 	 	46	 
	SECTION 3.03.
	 	Governmental Approvals; No Conflicts	 	 	46	 
	SECTION 3.04.
	 	Financial Condition; No Material Adverse Change; Secured Indebtedness	 	 	47	 
	SECTION 3.05.
	 	Properties	 	 	47	 
	SECTION 3.06.
	 	Litigation and Environmental Matters	 	 	48	 
	SECTION 3.07.
	 	Compliance with Laws and Agreements	 	 	48	 
	SECTION 3.08.
	 	Federal Regulations	 	 	48	 





 


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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	SECTION 3.09.
	 	Investment Company Status	 	 	49	 
	SECTION 3.10.
	 	Taxes	 	 	49	 
	SECTION 3.11.
	 	ERISA	 	 	49	 
	SECTION 3.12.
	 	Security Documents	 	 	49	 
	SECTION 3.13.
	 	Disclosure	 	 	50	 
	SECTION 3.14.
	 	Solvency	 	 	50	 
	SECTION 3.15.
	 	Labor Matters	 	 	50	 
	SECTION 3.16.
	 	Anti-Terrorism Laws	 	 	50	 
	 
	 	 	 	 	 	 
	ARTICLE IV Conditions Precedent	 	 	51	 
	 
	 	 	 	 	 	 
	SECTION 4.01.
	 	Effective Date	 	 	51	 
	SECTION 4.02.
	 	Each Credit Event	 	 	54	 
	 
	 	 	 	 	 	 
	ARTICLE V Affirmative Covenants	 	 	55	 
	 
	 	 	 	 	 	 
	SECTION 5.01.
	 	Financial Statements; Ratings Change and Other Information	 	 	55	 
	SECTION 5.02.
	 	Notices of Material Events	 	 	57	 
	SECTION 5.03.
	 	Existence; Conduct of Business	 	 	58	 
	SECTION 5.04.
	 	Payment of Obligations	 	 	58	 
	SECTION 5.05.
	 	Maintenance of Properties; Insurance	 	 	58	 
	SECTION 5.06.
	 	Books and Records; Inspection Rights	 	 	58	 
	SECTION 5.07.
	 	Compliance with Laws and Agreements	 	 	58	 
	SECTION 5.08.
	 	Use of Proceeds and Letters of Credit	 	 	59	 
	SECTION 5.09.
	 	Environmental Laws	 	 	59	 
	SECTION 5.10.
	 	Further Assurances	 	 	59	 
	 
	 	 	 	 	 	 
	ARTICLE VI Negative Covenants	 	 	60	 
	 
	 	 	 	 	 	 
	SECTION 6.01.
	 	Liens	 	 	60	 
	SECTION 6.02.
	 	Fundamental Changes	 	 	60	 
	SECTION 6.03.
	 	Sale of Assets	 	 	61	 
	SECTION 6.04.
	 	Restricted Payments	 	 	62	 
	SECTION 6.05.
	 	Leverage Ratio	 	 	62	 
	SECTION 6.06.
	 	Amendments to Documents	 	 	62	 
	SECTION 6.07.
	 	Release of Collateral under the Mortgage Indenture	 	 	63	 
	SECTION 6.08.
	 	Transactions with Affiliates	 	 	63	 
	 
	 	 	 	 	 	 
	ARTICLE VII Events of Default	 	 	63	 
	 
	 	 	 	 	 	 
	ARTICLE VIII The Administrative Agent	 	 	66	 





 


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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE IX Miscellaneous	 	 	69	 
	 
	 	 	 	 	 	 
	SECTION 9.01.
	 	Notices	 	 	69	 
	SECTION 9.02.
	 	Waivers; Amendments	 	 	69	 
	SECTION 9.03.
	 	Expenses; Indemnity; Damage Waiver	 	 	71	 
	SECTION 9.04.
	 	Successors and Assigns	 	 	72	 
	SECTION 9.05.
	 	Survival	 	 	76	 
	SECTION 9.06.
	 	Counterparts; Integration; Effectiveness	 	 	76	 
	SECTION 9.07.
	 	Severability	 	 	77	 
	SECTION 9.08.
	 	Right of Setoff	 	 	77	 
	SECTION 9.09.
	 	Release of Collateral Mortgage Bonds	 	 	77	 
	SECTION 9.10.
	 	Governing Law; Jurisdiction; Consent to Service of Process	 	 	77	 
	SECTION 9.11.
	 	WAIVER OF JURY TRIAL	 	 	78	 
	SECTION 9.12.
	 	Headings	 	 	78	 
	SECTION 9.13.
	 	Confidentiality	 	 	78	 
	SECTION 9.14.
	 	Interest Rate Limitation	 	 	79	 
	SECTION 9.15.
	 	Patriot Act Notice	 	 	79	 
	 
	 	 	 	 	 	 
	SCHEDULES:	 	 	 	 
	 
	 	 	 	 	 	 
	Schedule 1.01 —
	 	Pricing Schedule	 	 	 	 
	Schedule 2.01 —
	 	Commitments	 	 	 	 
	Schedule 2.04A —
	 	Existing Revolving Letters of Credit	 	 	 	 
	Schedule 2.04B —
	 	Existing Revenue Bond Letters of Credit	 	 	 	 
	 
	 	 	 	 	 	 
	EXHIBITS:	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit A —
	 	Form of Assignment and Assumption	 	 	 	 
	Exhibit B —
	 	Form of Bond Delivery Agreement	 	 	 	 
	Exhibit C-1 —
	 	Form of Revenue Bond Pledge Agreement	 	 	 	 
	Exhibit C-2 —
	 	Form of Revenue Bond Pledge Agreement (Custodian)	 	 	 	 
	Exhibit D —
	 	Form of Eleventh 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 SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 9, 2010, among TUCSON
ELECTRIC POWER COMPANY, an Arizona corporation, the lenders listed on the signature pages hereto as
“Existing Lenders” (the “Existing Lenders”), the lenders listed on the signature pages
hereto as “New Lenders” (the “New Lenders”), the other LENDERS from time to time party
hereto, the ISSUING BANKS party hereto, JPMORGAN CHASE BANK, N.A., SUNTRUST BANK and WELLS FARGO
BANK, NATIONAL ASSOCIATION, as Co-Syndication Agents, BANK OF AMERICA, N.A. and U.S. BANK NATIONAL
ASSOCIATION, as Co-Documentation Agents, and UNION BANK, N.A. (formerly known as Union Bank of
California, N.A.), as Administrative Agent.



RECITALS




The Borrower, the Existing Lenders, the issuing banks 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 N.V. (formerly known
as 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, previously entered into that certain Amended
and Restated Credit Agreement, dated as of August 11, 2006 (as amended, supplemented or otherwise
modified from time to time prior to the date hereof, the “Existing Credit Agreement”). The
parties hereto desire to amend and restate the Existing Credit Agreement, on the terms and
conditions set forth herein.



NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the parties hereto hereby agree that the Existing Credit Agreement is hereby amended and restated
in its entirety, without novation, as follows:



ARTICLE I

Definitions




SECTION 1.01. Defined Terms. As used in this Agreement (including the recitals
hereto), 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 Union Bank, N.A. (formerly known as Union Bank of
California, N.A.), 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.



“Agents” means the Co-Documentation Agents, the Co-Syndication Agents and the
Administrative Agent.



“Aggregate Commitment” means, with respect to each Lender, such Lender’s Revolving
Commitment and Revenue Bond Commitment, in an aggregate amount no greater than (i) the amount set
forth opposite such Lender’s name on Schedule 2.01, or (ii) if such Lender has entered into one or
more Assignment and Assumptions, the amount set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 9.04(c), in each case as such amount may be reduced
from time to time pursuant to Section 2.07. “Aggregate Commitments” means the total of the
Lenders’ Aggregate Commitments hereunder. The Aggregate Commitments shall in no event exceed
$540,587,047.19.



“Agreement” means this Second Amended and Restated Credit Agreement, dated as of
November 9, 2010, by and among the Borrower, the Lenders party hereto, the Issuing Banks party
hereto, the Co-Documentation Agents, the Co-Syndication Agents 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 Adjusted LIBO Rate for an Interest Period of one month
beginning on such day (or, if such day is not a Business Day, the immediately preceding Business
Day) plus 1.0%. Any change in the Alternate Base Rate due to a change in the Reference Rate, the
Federal Funds Effective Rate or the Adjusted 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
Adjusted LIBO Rate, respectively.




“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 (i) for any Revenue Bond Lender on any date of
determination, the percentage obtained by dividing such Revenue Bond Lender’s Revenue Bond
Commitment on such date by the total of the Revenue Bond Commitments on such date, and multiplying
the quotient so obtained by 100%; provided, that in the event that the Revenue Bond
Commitments have been terminated, each Revenue Bond Lender’s Applicable Percentage shall be
calculated on the basis of the Revenue Bond Commitments in effect immediately prior to such
termination; and (ii) for any Revolving Lender on any date of determination, the percentage
obtained by dividing such Revolving Lender’s Revolving Commitment on such date by the total of the
Revolving Commitments on such date, and multiplying the quotient so obtained by 100%;
provided, that in the event that the Revolving Commitments have been terminated, each
Revolving Lender’s Applicable Percentage shall be calculated on the basis of the Revolving
Commitments in effect immediately prior to such termination, giving effect to any assignments.


 


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“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.



“Arrangers” means Union Bank, J.P. Morgan Securities LLC, SunTrust Robinson Humphrey,
Inc. and Wells Fargo Securities, LLC, as Joint Lead Arrangers for the credit facilities established
by this Agreement.



“Assignment and Assumption” means an assignment and assumption agreement 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.



“Authorized Officer” means the president, any vice president, the chief financial
officer, the principal accounting officer, the treasurer or the controller of the Borrower.



“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 the date
hereof, between the Borrower and the Administrative Agent, substantially in the form of Exhibit B,
executed and delivered pursuant to the terms of this Agreement in connection with the issuance of
the Collateral Mortgage Bonds.




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



“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 Revolving Borrowing in
accordance with Section 2.03.


 


3









 





“Business Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City or Los Angeles, California 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.



“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative
Agent, for the benefit of the Administrative Agent or the Issuing Banks (as applicable) and the
Lenders, as collateral for the Revolving LC Exposure and Revenue Bond LC Exposure or the
obligations of the Lenders to fund participations in respect thereof (as the context may require),
cash or deposit account balances or, if the Issuing Bank(s) benefitting from such collateral shall
agree in its sole discretion, other credit support, in each case pursuant to documentation in form
and substance satisfactory to (a) the Administrative Agent and (b) the applicable Issuing Banks.
“Cash Collateral” shall have a meaning correlative to the foregoing and shall include the
proceeds of such cash collateral and other credit support.



“Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement (including, without limitation, any regulations adopted under the Dodd-Frank Act
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 any Issuing Bank (or, for purposes of Section 2.13(b),
by any lending office of such Lender or by such Lender’s or such Issuing Bank’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.



“Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are Revolving Loans or Revenue Bond Loans,
and when used in reference to any Commitment, refers to whether such Commitment is a Revolving
Commitment or a Revenue Bond Commitment.


 


4









 






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



“Co-Documentation Agents” means Bank of America, N.A. and U.S. Bank National
Association, in their capacity as co-documentation agents for the Lenders.



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



“Collateral Mortgage Bonds” means the First Mortgage Bonds, Collateral Series I,
substantially in the form attached to the Eleventh Supplemental Indenture.



“Commitment Fee Rate” means, for any day, the applicable percentage per annum
determined in accordance with the Pricing Schedule attached hereto as Schedule 1.01.



“Consolidated Net Worth” means, at any date, the sum as of such date of (a) the par
value (or value stated on the books of the Borrower) of all classes of Capital Stock of the
Borrower and its Subsidiaries, excluding the Borrower’s Capital Stock owned by the Borrower and/or
its Subsidiaries, plus (or minus in the case of a surplus deficit) (b) the amount
of consolidated surplus, whether capital or earned, of the Borrower, determined in accordance with
GAAP as of the date of determination (excluding the effect on the Borrower’s accumulated other
comprehensive income/loss of the ongoing application of Accounting Standards Codification Topic
815).



“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 Capitalization” means, with respect to the Borrower at any time,
the sum of Consolidated Net Worth and Consolidated Total Indebtedness of the Borrower at such time.



“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 and LC Disbursements, (ii) the
aggregate outstanding principal amount of other Indebtedness for borrowed money (including
Guarantees thereof) and (iii) 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; provided, however, that
there shall be disregarded for purposes of the determination of Consolidated Total Indebtedness the
aggregate outstanding principal amount of any Indebtedness for borrowed money of the
Borrower or any of its Subsidiaries for which (1) cash


 


5









 







 in an amount sufficient to repay and
discharge in full such Indebtedness on its scheduled maturity date or redemption date shall have
been irrevocably deposited in trust with a trustee, escrow agent, paying agent or similar agent for
the payment thereof on such maturity date or redemption date (as the case may be), and (2) the
Borrower or such Subsidiary (as the case may be) shall have irrevocably instructed such trustee,
escrow agent, paying agent or similar agent (as the case may be) to apply all such cash to the
repayment and discharge of such Indebtedness on such maturity date or redemption date (as the case
may be).



“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.



“Co-Syndication Agents” means JPMorgan Chase Bank, N.A., SunTrust Bank and Wells Fargo
Bank, National Association, in their capacity as co-syndication agents for the Lenders.



“Credit Exposure” means, with respect to any Lender at any time, the sum of such
Lender’s Revolving Credit Exposure and its Revenue Bond Credit Exposure at such time.



“Debtor Relief Laws” means the Bankruptcy Code of the United States and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency. reorganization or similar debtor relief laws of the United
States or other applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally



“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, subject to Section 2.20(b), any Lender that, as determined
by the Administrative Agent, (a) has failed to fund any portion of its Revolving Loans hereunder,
within three (3) Business Days of the date required to be funded by it hereunder, unless such
Lender notifies the Administrative Agent in writing that such failure is the result of such
Lender’s good faith determination that a condition precedent to funding (specifically identified
and including the particular Default, if any) has not been satisfied, (b) has failed to fund any
portion of its participations in respect of Letters of Credit (including, without limitation, its
Revenue Bond Loans) or any other amounts required to be funded or paid by such Lender hereunder
(other than its Revolving Loans), within three (3) Business Days of the date required to be funded
by it hereunder, (c) has notified the Borrower, the Administrative Agent or any Issuing Bank that
it does not intend to comply with its funding obligations, or has made a public statement to that
effect, with respect to its funding obligations hereunder (unless such notice or public statement
indicates that such position is based on such Lender’s good faith determination that a condition
precedent (specifically identified and including the particular Default, if any) to funding a
Revolving Loan under this Agreement cannot be satisfied) or under other agreements in which it
commits to extend credit, (d) has failed, within three (3) Business
Days after request by the Administrative Agent, to confirm in a manner satisfactory to the


 


6









 








Administrative Agent that it will comply with its funding obligations, or (e) has, or has a direct
or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief
Law, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of
creditors or similar Person charged with reorganization or liquidation of its business or a
custodian appointed for it, or (iii) taken any action in furtherance of, or indicated its consent
to, approval of or acquiescence in any such proceeding or appointment, provided that a
Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any
equity interest in that Lender or any direct or indirect parent company thereof by a Governmental
Authority.



“Disclosure Documents” means (i) the Annual Report on Form 10-K of the Borrower for
the fiscal year ended December 31, 2009, as filed with the SEC, (ii) the Quarterly Reports on Form
10-Q of the Borrower for the fiscal quarters ended March 31, 2010, June 30, 2010 and September 30,
2010, as filed with the SEC, and (iii) the Current Reports on Form 8-K of the Borrower as filed
with the SEC on January 15, 2010, March 5, 2010, May 4, 2010 and October 8, 2010.



“Dodd-Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection Act
(Public Law 111-203), as amended.




“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).



“Eleventh Supplemental Indenture” means Supplemental Indenture No. 11 under the
Mortgage Indenture, substantially in the form of Exhibit D.



“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.



“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.


 


7









 





“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 Sections 302 and 303 of ERISA and Sections 412 and 430 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) a determination that any Plan is in “at risk” status (within the
meaning of Section 430 of the Code or Section 303 of ERISA); (c) the filing pursuant to Section
412(c) of the Code or Section 302(c) 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.




“Exchange Act” means the Securities Exchange Act of 1934, as amended.



“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any
Issuing Bank 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).



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


 


8









 





“Existing ABN AMRO Letter of Credit” means Irrevocable Letter of Credit No. S068322,
dated November 14, 2006, as amended, in the original stated amount of $103,835,616.44, issued by
ABN AMRO Bank N.V. pursuant to the Existing Credit Agreement.



“Existing Credit Agreement” has the meaning assigned to such term in the recitals to
this Agreement.



“Existing Lenders” has the meaning assigned to such term in the preamble to this
Agreement.



“Existing Revenue Bond Letters of Credit” means the Revenue Bond Letters of Credit set
forth on Schedule 2.04B.



“Existing Revolving Letters of Credit” means the Revolving Letters of Credit set forth
on Schedule 2.04A.



“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 the date that occurs four (4) years after the Effective
Date.



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



“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) such
Defaulting Lender’s Applicable Percentage of the aggregate Revolving LC Exposure, other than
Revolving LC Exposure as to which such Defaulting Lender’s participation obligation has been
reallocated to other Revolving Lenders or Cash Collateralized in accordance with the terms hereof,
and (b) such Defaulting Lender’s Applicable Percentage of the aggregate Revenue Bond LC Exposure,
other than Revenue Bond LC Exposure as to which such Defaulting Lender’s participation obligation
has been reallocated to other Revenue Bond Lenders or Cash Collateralized in accordance with the
terms hereof.




“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.


 


9









 





“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 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.




“Increasing Existing Lender” has the meaning assigned to such term in Section 2.19.



“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.


 


10









 






“Index Debt” means the Indebtedness of the Borrower under this Agreement.



“Information Memorandum” means the Confidential Information Memorandum dated October
2010 relating to the Borrower and the Transactions.



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



“Interest Payment Date” means (a) with respect to any ABR Loan, the last Business Day
of each March, June, September and December, commencing with December 31, 2010, 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 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.



“Issuing Bank” means each Lender (or other commercial bank or financial institution
satisfactory to the Administrative Agent) executing this Agreement as an Issuing Bank, in its
capacity as an issuer of Letters of Credit hereunder, and each of its successors in such capacity
as provided in Section 2.04(j).



“LC Disbursement” means either a Revolving LC Disbursement or a Revenue Bond LC
Disbursement. “LC Disbursements” means the Revolving LC Disbursements and the Revenue Bond
LC Disbursements.



“LC Outstandings” means, for any Letter of Credit on any date of determination, the
maximum amount available to be drawn under such Letter of Credit at any time on or after such date
(assuming the satisfaction of all conditions for drawing enumerated therein).



“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.


 


11









 





“Letter of Credit” means any letter of credit issued (or deemed issued) pursuant to
this Agreement (including any Revolving Letter of Credit and each Revenue Bond Letter of Credit).



“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time,
on the date that is two (2) Business Days prior to the commencement of such Interest Period by
reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars (as
set forth by the Bloomberg Information Service or any successor thereto or any other service
selected by the Administrative Agent which has been nominated by the British Bankers’ Association
as an authorized information vendor for the purpose of displaying such rates) for a period equal to
such Interest Period; provided that, to the extent that an interest rate is not
ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” with
respect to such Eurodollar Borrowing for such Interest Period shall be the rate per annum at which
dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period would be
offered to the Administrative Agent in the London interbank market at approximately 12:00 noon,
London time, on the date that is two (2) Business Days prior to the beginning 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.



“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 Revenue Bond Pledge Agreements and the other Security Documents.



“Loans” means the loans made (or deemed made) by the Lenders to the Borrower pursuant
to this Agreement, including any Revolving Loans and any Revenue Bond Loans.



“Material Adverse Effect” means a material adverse effect on (a) the financial
condition, assets, results of operations or business 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 Administrative Agent or
the Lenders under any Loan Document or the Mortgage Indenture.


 


12









 





“Material Indebtedness” means Indebtedness (other than the Loans, LC Disbursements and
Letters of Credit), 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
$30,000,000; provided however, that, solely for purposes of clause (g) of Article
VII hereof, the contingent Guarantee obligation of the Borrower or a Significant
Subsidiary in respect of Material Indebtedness of one of its subsidiaries that is not a
Significant Subsidiary shall not constitute Material Indebtedness of the Borrower or such
Significant Subsidiary unless and until such Guarantee obligation is no longer contingent. 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.




“Moody’s” means Moody’s Investors Service, Inc., or any successor thereto.



“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, as amended,
supplemented or otherwise modified from time to time.



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




“New Lenders” has the meaning assigned to such term in the preamble to this Agreement.



“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 and LC Disbursements, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (ii) each other payment required to be made by the Borrower
under this Agreement in respect of any Letter of Credit, when and as due, and (iii) 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.


 


13









 





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



“Percentage” means, for any Lender on any date of determination, the percentage
obtained by dividing such Lender’s Aggregate Commitment on such date by the total of the Aggregate
Commitments on such date, and multiplying the quotient so obtained by 100%. In the event that the
Aggregate Commitments have been terminated, each Lender’s Percentage shall be calculated on the
basis of the Aggregate Commitments in effect immediately prior to such termination, giving effect
to any assignments.



“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 Sections 412 and 430 of the Code or Sections 302
and 303 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.




“PPD Repayment Date” has the meaning assigned to such term in Section 2.04(f)(ii).



“Purchase Price Disbursement” has the meaning assigned to such term in Section
2.04(f)(ii).




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



“Reference Rate” means the variable rate of interest per annum established by Union
Bank from time to time as its “reference rate”. Such “reference rate” is set by Union Bank as a
general reference rate of interest, taking into account such factors as Union Bank may deem
appropriate, it being understood that many of Union Bank’s commercial or other loans are priced in
relation to such rate, that it is not necessarily the lowest or best rate actually charged to any
customer and that Union Bank may make various commercial or other loans at rates of interest having
no relationship to such rate. For purposes of this Agreement, each change in the Reference Rate
shall be effective as of the opening of business on the date announced as the effective date of any
change in such “reference rate”.




“Register” has the meaning assigned to such term 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.



“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such
Person and such Person’s Affiliates.


 


14









 





“Required Lenders” means, at any time, Lenders having Credit Exposures and unused
Aggregate Commitments representing a majority of the sum of the total Credit Exposures and the
total unused Aggregate Commitments at such time; provided, that the Credit Exposure and
unused Aggregate Commitment of any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.



“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.



“Revenue Bond Commitment” means, with respect to each Revenue Bond Lender, the
commitment of such Lender to participate in the Revenue Bond Letters of Credit and all Revenue Bond
LC Disbursements and to make Revenue Bond Loans hereunder, expressed as an amount representing the
maximum aggregate permitted amount of such Lender’s Revenue Bond Credit Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.
The initial amount of each Revenue Bond Lender’s Revenue Bond Commitment is set forth on Schedule
2.01, or in the Assignment and Assumption pursuant to which such Revenue Bond Lender shall have
assumed its Revenue Bond Commitment, as applicable. The initial aggregate amount of the Revenue
Bond Commitments is $340,587,047.19.



“Revenue Bond Credit Exposure” means, at any time, the sum of (a) the aggregate
outstanding principal amount of Revenue Bond Loans at such time plus (b) the Revenue Bond
LC Exposure at such time. The Revenue Bond Credit Exposure of any Revenue Bond Lender at any time
shall be its Applicable Percentage of the total Revenue Bond Credit Exposure at such time.



“Revenue Bond Indenture” means, with respect to any Revenue Bond Letter of Credit, (a)
the Revenue Bond Indenture, as amended and supplemented from time to time, in respect of the
Revenue Bonds referenced on Schedule 2.04 for such Revenue Bond Letter of Credit, as applicable, or
(b) in respect of any Revenue Bond Letter of Credit issued after the Effective Date, the indenture
described in such Revenue Bond Letter of Credit pursuant to which the Revenue Bonds supported by
such Revenue Bond Letter of Credit have been issued, as such indenture may be amended and
supplemented from time to time.



“Revenue Bond Issuing Bank” means, with respect to each outstanding Revenue Bond
Letter of Credit, the Issuing Bank that has issued such Revenue Bond Letter of Credit.


 


15









 





“Revenue Bond LC Availability Period” means the period from and including the
Effective Date to but excluding the earlier to occur of (a) the date that occurs ten (10) Business
Days prior to the Final Maturity Date and (b) the date of the termination of the Revenue Bond
Commitments.



“Revenue Bond LC Disbursement” means a payment made by a Revenue Bond Issuing Bank
pursuant to a Revenue Bond Letter of Credit.



“Revenue Bond LC Exposure” means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Revenue Bond Letters of Credit at such time plus (b) the aggregate amount
of all Revenue Bond LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The Revenue Bond LC Exposure of any Revenue Bond Lender at any time shall
be its Applicable Percentage of the total Revenue Bond LC Exposure at such time.




“Revenue Bond Lender” means a Lender having a Revenue Bond Commitment.



“Revenue Bond Letters of Credit” means the Letters of Credit issued (or deemed issued)
pursuant to Section 2.04(a)(ii).



“Revenue Bond Loan” has the meaning assigned to such term in Section 2.04(f)(iii).



“Revenue Bond Loan Agreement” means, with respect to any Revenue Bond Letter of
Credit, (a) the Revenue Bond Loan Agreement in respect of the Revenue Bonds referenced on Schedule
2.04 for such Revenue Bond Letter of Credit, as applicable, or (b) in respect of any Revenue Bond
Letter of Credit issued after the Effective Date, the loan agreement between the Borrower and the
issuer of the Revenue Bonds supported by such Revenue Bond Letter of Credit, as described in the
applicable Revenue Bond Indenture pursuant to which such Revenue Bonds have been issued.



“Revenue Bond Pledge Agreement” means, individually, any pledge agreement in
substantially the form of Exhibit C-1 or Exhibit C-2 (as applicable) and otherwise satisfactory to
the applicable Issuing Bank and the Administrative Agent. “Revenue Bond Pledge Agreements”
means, collectively, all Revenue Bond Pledge Agreements.



“Revenue Bonds” means, with respect to any Revenue Bond Letter of Credit, (a) the
Revenue Bonds referenced on Schedule 2.04 for such Revenue Bond Letter of Credit, or (b) in respect
of any Revenue Bond Letter of Credit issued after the Effective Date, the bonds supported by, and
described in, such Revenue Bond Letter of Credit.



“Revenue Bond Trustee” means, with respect to any Revenue Bond Letter of Credit, the
trustee and/or agent, as applicable, named in such Revenue Bond Letter of Credit’s Revenue Bond
Indenture, and any successor or assign thereof.



“Revolving Availability Period” means the period from and including the Effective Date
to but excluding the earlier to occur of (a) the Final Maturity Date and (b) the date of the
termination of the Revolving Commitments.


 


16









 





“Revolving Commitment” means, with respect to each Revolving Lender, the commitment of
such Lender to make Revolving Loans hereunder and to participate in Revolving Letters of Credit and
Revolving LC Disbursements, expressed as an amount representing the maximum aggregate permitted
amount of such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Revolving
Lender’s Revolving Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption
pursuant to which such Revolving Lender shall have assumed its Revolving Commitment, as applicable.
The initial aggregate amount of the Revolving Commitments is $200,000,000.



“Revolving Credit Exposure” means, at any time, the sum of (a) the aggregate
outstanding principal amount of Revolving Loans at such time plus (b) the Revolving LC
Exposure at such time. The Revolving Credit Exposure of any Revolving Lender at any time shall be
its Applicable Percentage of the total Revolving Credit Exposure at such time.



“Revolving LC Disbursement” means a payment made by an Issuing Bank pursuant to a
Revolving Letter of Credit.



“Revolving LC Exposure” means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Revolving Letters of Credit at such time plus (b) the aggregate
amount of all Revolving LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time. The Revolving LC Exposure of any Revolving Lender at any time shall be its
Applicable Percentage of the total Revolving LC Exposure at such time.




“Revolving Lender” means a Lender having a Revolving Commitment.



“Revolving Letters of Credit” means the Letters of Credit issued (or deemed issued)
pursuant to Section 2.04(a)(i).



“Revolving Loan” means a Loan made by a Revolving Lender pursuant to Sections 2.01 and
2.03.



“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 Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor thereto.




“SEC” means the Securities and Exchange Commission.


 


17









 





“Security Documents” means (a) prior to the release of the Collateral Mortgage Bonds
pursuant to Section 9.09, the Mortgage Indenture, the Eleventh Supplemental Indenture,
the Collateral Mortgage Bonds and the Bond Delivery Agreement, (b) the Revenue Bond Pledge
Agreements, and (c) 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.



“Senior Unsecured Debt” means the senior unsecured, long-term Indebtedness of the
Borrower that is not guaranteed by any other Person or subject to any other credit enhancement.



“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(a) or 5.01(b) 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.


 


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“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.



“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority (including any interest
or penalties or additions to tax imposed with respect thereto).



“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 (or deemed issuance) of Letters of Credit, and the issuance of Collateral Mortgage
Bonds to the Administrative Agent under the Eleventh 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.




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




“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.


 


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SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement,
Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by
Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”). Borrowings also may be classified and referred to by Class
(e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar
Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving 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”. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) 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, (d) 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 (e) 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 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 (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), 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.



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 an Authorized Officer as having been prepared
in good faith based upon assumptions believed to be reasonable.


 


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ARTICLE II

The Credits




SECTION 2.01. Revolving Commitments. Subject to the terms and conditions set forth
herein, each Revolving Lender agrees to make Revolving Loans to the Borrower from time to time
during the Revolving Availability Period in an aggregate principal amount that will not result in
(a) such Revolving Lender’s Revolving Credit Exposure exceeding its Revolving Commitment or (b) the
aggregate Revolving Credit Exposures exceeding the aggregate Revolving Commitments. Within the
foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow,
prepay and reborrow Revolving Loans.




SECTION 2.02. Loans and Borrowings.



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



(b) Subject to Section 2.12, each Revolving Borrowing shall be comprised entirely of ABR
Revolving Loans or Eurodollar Revolving 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
$1,000,000. At the time that each ABR Revolving 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;
provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Revolving Commitments or that is required to finance the
reimbursement of a Revolving LC Disbursement as contemplated by Section 2.04(f)(i)(A). 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 ten (10) Eurodollar Borrowings outstanding.



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


 


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SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing,
the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of
a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California time, three (3) Business
Days before the date of the proposed Borrowing or (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., Los Angeles, California time, one Business Day before
the date of the proposed Borrowing; provided that any such notice of an ABR Revolving
Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(f)(i)
may be given not later than 9:00 a.m., Los Angeles, California time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy 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;




(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 Revolving Borrowing is specified, then the requested Revolving
Borrowing shall be an ABR Revolving Borrowing. If no Interest Period is specified with respect to
any requested Eurodollar Revolving 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 Revolving Lender of the
details thereof and of the amount of such Revolving Lender’s Loan to be made as part of the
requested Borrowing.




SECTION 2.04. Letters of Credit.



(a) General. (i) Subject to the terms and conditions set forth herein, the Borrower
may request the issuance of Revolving Letters of Credit for its own account, in a form reasonably
acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time
to time during the period from the Effective Date through and including the date that occurs ten
(10) Business Days prior to the end of the Revolving Availability Period. In the event of any
inconsistency between the terms and conditions of this Agreement and the terms and conditions of
any form of letter of credit application or other agreement submitted by the Borrower to, or
entered into by the Borrower with, any Issuing Bank relating to any Revolving Letter of Credit or
the obligation of the Issuing Bank to issue Revolving Letters of Credit hereunder, the terms and
conditions of this Agreement shall control; provided, however, that any such
agreement between the Borrower and any Issuing Bank may set forth the maximum aggregate stated
amount of all Revolving Letters of Credit at any one time outstanding that such Issuing Bank will
issue hereunder, and the obligation of such Issuing Bank to issue Revolving Letters of Credit
hereunder shall be subject to such maximum amount. In addition, as of the
Effective Date, each of the Existing Revolving Letters of Credit shall be deemed to be issued
under this Agreement as a Revolving Letter of Credit.


 


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(ii) Subject to the terms and conditions set forth herein, the Borrower may request the
issuance, amendment or replacement of Revenue Bond Letters of Credit, for its own account,
during the Revenue Bond LC Availability Period, in a form reasonably acceptable to the
Administrative Agent and the applicable Issuing Bank. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions of any form
of letter of credit application or other agreement submitted by the Borrower to, or entered
into by the Borrower with, any Issuing Bank relating to any Revenue Bond Letter of Credit,
the terms and conditions of this Agreement shall control; provided, however,
that any such agreement between the Borrower and any Issuing Bank may set forth the maximum
aggregate stated amount of all Revenue Bond Letters of Credit at any one time outstanding
that such Issuing Bank will issue hereunder, and the obligation of such Issuing Bank to
issue Revenue Bond Letters of Credit hereunder shall be subject to such maximum amount. In
addition, as of the Effective Date, each of the Existing Revenue Bond Letters of Credit
shall be deemed to be issued under this Agreement as a Revenue Bond Letter of Credit. On
the Effective Date, upon the satisfaction (or waiver in accordance with Section 9.02) of the
conditions precedent specified in Section 4.01, each of the Existing Revenue Bond Letters of
Credit shall be amended by the applicable Issuing Bank to extend the stated expiration date
thereof to the date that is five (5) Business Days prior to the Final Maturity Date.



(b) Issuance and Amendment. (i) To request the issuance of any Letter of Credit (or
the amendment, renewal or extension of an outstanding Letter of Credit) (other than the Existing
Revolving Letters of Credit and Existing Revenue Bond Letters of Credit), the Borrower shall hand
deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have
been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative
Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension
(which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall
comply with paragraph (d) of this Section), the amount of such Letter of Credit, the name and
address of the beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit. The Administrative Agent shall, promptly after its
receipt thereof, distribute a copy of each such notice to the Lenders. If requested by the
applicable Issuing Bank, the Borrower also shall submit a letter of credit application on such
Issuing Bank’s standard form in connection with any request for a Letter of Credit. Upon the
issuance, amendment, renewal or extension of any Letter of Credit, the applicable Issuing Bank
shall provide notice and a copy thereof to the Administrative Agent, which shall promptly furnish
copies thereof to the Lenders.


 


23









 






(ii) Without limitation of paragraph (b)(i) above, any Revenue Bond Letter of Credit may
be amended by the applicable Issuing Bank, or replaced with a new Revenue Bond Letter of
Credit issued by another Issuing Bank, at the request of the Borrower and with the consent
of the Administrative Agent; provided, that no such amendment or replacement shall
increase the stated amount of a Revenue Bond Letter of
Credit or extend the expiration date thereof beyond the last permissible date referred
to in paragraph (d) below. To request an amendment to or replacement of an outstanding
Revenue Bond Letter of Credit, the Borrower shall hand deliver or telecopy to the applicable
Issuing Bank and the Administrative Agent (no less than three (3) Business Days (or such
shorter period of time as acceptable to the applicable Issuing Bank and the Administrative
Agent) in advance of the requested date of amendment or replacement, as the case may be) a
notice identifying the Revenue Bond Letter of Credit to be amended or replaced (as the case
may be) and specifying the date of amendment or replacement (which shall be a Business Day),
the amount of such Revenue Bond Letter of Credit, the name and address of the beneficiary
thereof and such other information as shall be necessary to amend or replace (as the case
may be) such Revenue Bond Letter of Credit. The Administrative Agent shall, promptly after
its receipt thereof, distribute a copy of each such notice to the Lenders. If requested by
the applicable Issuing Bank, the Borrower also shall submit a letter of credit application
on such Issuing Bank’s standard form in connection with any request for the replacement of a
Revenue Bond Letter of Credit. Upon the amendment or replacement of any Revenue Bond Letter
of Credit, the applicable Issuing Bank shall provide notice and a copy thereof to the
Administrative Agent, which shall promptly furnish copies thereof to the Lenders.




(iii) Notwithstanding any provision to the contrary contained in this Agreement, an
Issuing Bank shall have no obligation to issue, amend, renew, replace or extend any Letter
of Credit if at such time a Defaulting Lender exists, unless (i) such Issuing Bank has
entered into arrangements satisfactory to such Issuing Bank (in its sole discretion) with
the Borrower or such Defaulting Lender to eliminate such Issuing Bank’s risk with respect to
such Defaulting Lender’s Applicable Percentage of its participation interest in such Letter
of Credit or (ii) such Issuing Bank is satisfied that such risk has been reallocated in its
entirety to the applicable non-Defaulting Lenders pursuant to Section 2.20(a)(iv).



(c) Limitation of Amount. A Letter of Credit shall be issued, amended or extended
only if (and upon issuance, amendment or extension of each Letter of Credit the Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance, amendment or extension
(i) the Revolving Credit Exposure shall not exceed the aggregate amount of the Revolving
Commitments, (ii) the aggregate LC Outstandings of all Revolving Letters of Credit then outstanding
(after giving effect to all issuances, amendments and extensions of Revolving Letters of Credit on
such date) shall not exceed $50,000,000 and (iii) the Revenue Bond Credit Exposure shall not exceed
the aggregate amount of the Revenue Bond Commitments.



(d) Expiration Date. Each Revolving Letter of Credit shall expire at or prior to the
close of business on the earlier to occur of (i) the date one year after the date of the issuance
of such Revolving Letter of Credit (or, in the case of any renewal or extension thereof, one year
after such renewal or extension) and (ii) the date that is five (5) Business Days prior to the
Final Maturity Date; provided that any Revolving Letter of Credit with a one-year term may
provide for the renewal thereof for additional one-year periods (which shall in no event extend
beyond the date referred to in clause (ii) above). Each Revenue Bond Letter of Credit shall
expire not later than the close of business on the date that is five (5) Business Days prior
to the Final Maturity Date.


 


24









 





(e) (i) Participations of Revolving Lenders. On the Effective Date, without any
further action on the part of any Issuing Bank or the Revolving Lenders, each Issuing Bank issuing
one or more Revolving Letters of Credit (whether on the Effective Date or at any time thereafter)
pursuant to this Section hereby grants to each Revolving Lender, and each Revolving Lender hereby
acquires from such Issuing Bank, a participation in each such Revolving Letter of Credit equal to
such Revolving Lender’s Applicable Percentage of the aggregate amount available to be drawn under
such Revolving Letter of Credit. In consideration and in furtherance of the foregoing, each
Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the applicable Issuing Bank, such Revolving Lender’s Applicable Percentage of
each Revolving LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (f)(i)(A) of this Section, or of any reimbursement payment in
respect of a Revolving LC Disbursement required to be refunded to the Borrower for any reason.
Each Revolving Lender acknowledges and agrees that its obligation to acquire and fund
participations in respect of Revolving Letters of Credit pursuant to this subparagraph (i) is
absolute, unconditional and irrevocable and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Revolving Letter of Credit or the occurrence
and continuance of a Default or the reduction or termination of the Revolving Commitments, and that
each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.
For the avoidance of doubt, the parties hereto acknowledge and agree that the funding by a
Revolving Lender of its participation interest in any Revolving LC Disbursement shall not
constitute a reimbursement by the Borrower of such Revolving LC Disbursement.




(ii) Participations of Revenue Bond Lenders. On the Effective Date, without any
further action on the part of any Issuing Bank or the Revenue Bond Lenders, each Issuing
Bank issuing (or deemed to be issuing) one or more Revenue Bond Letters of Credit (whether
on the Effective Date or at any time thereafter) pursuant to this Section hereby grants to
each Revenue Bond Lender, and each Revenue Bond Lender hereby acquires from such Issuing
Bank, a participation in each such Revenue Bond Letter of Credit equal to such Revenue Bond
Lender’s Applicable Percentage of the aggregate amount available to be drawn under such
Revenue Bond Letter of Credit. In consideration and in furtherance of the foregoing, each
Revenue Bond Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the applicable Issuing Bank, such Revenue Bond
Lender’s Applicable Percentage of each Revenue Bond LC Disbursement made by such Issuing
Bank and not reimbursed by the Borrower on the date due as provided in paragraph (f)(i)(B)
of this Section (without giving effect to paragraph (f)(ii) of this Section), or of any
reimbursement payment in respect of a Revenue Bond LC Disbursement required to be refunded
to the Borrower for any reason. Each Revenue Bond Lender acknowledges and agrees that its
obligation to acquire and fund participations in respect of Revenue Bond Letters of Credit
pursuant to this subparagraph (ii) is absolute, unconditional and irrevocable and shall not
be affected by any circumstance whatsoever, including any amendment, renewal or extension of
any Revenue Bond Letter of Credit or the occurrence and continuance of a Default or the
reduction or termination of the Revenue Bond Commitments, and that each such payment
shall be made without any offset, abatement, withholding or reduction whatsoever. For
the avoidance of doubt, the parties hereto acknowledge and agree that the funding by a
Revenue Bond Lender of its participation interest in any Revenue Bond LC Disbursement shall
not constitute a reimbursement by the Borrower of such Revenue Bond LC Disbursement.


 


25









 





(f) Reimbursement. (i) (A) If any Issuing Bank shall make any Revolving LC
Disbursement, the Borrower shall reimburse such Revolving LC Disbursement by paying to the
Administrative Agent an amount equal to such Revolving LC Disbursement not later than 11:00 a.m.,
Los Angeles, California time, on the date that such Revolving LC Disbursement is made, if the
Borrower shall have received notice of such Revolving LC Disbursement prior to 9:00 a.m., Los
Angeles, California time, on such date, or, if such notice has not been received by the Borrower
prior to such time on such date, then not later than 11:00 a.m., Los Angeles, California time, on
the Business Day immediately following the day that the Borrower receives such notice;
provided that the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Sections 2.01 and 2.03 that such payment be financed with an ABR
Revolving Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s
obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving
Borrowing.



(B) If any Issuing Bank shall make any Revenue Bond LC Disbursement, the Borrower shall,
except as provided in paragraph (ii) below, reimburse such Revenue Bond LC Disbursement by paying
to the Administrative Agent an amount equal to such Revenue Bond LC Disbursement not later than
11:00 a.m., Los Angeles, California time, on the date that such Revenue Bond LC Disbursement is
made, if the Borrower shall have received notice of such Revenue Bond LC Disbursement prior to 9:00
a.m., Los Angeles, California time, on such date, or, if such notice has not been received by the
Borrower prior to such time on such date, then not later than 11:00 a.m., Los Angeles, California
time, on the Business Day immediately following the day that the Borrower receives such notice;
provided that the Borrower may, subject to the conditions to borrowing set forth herein,
request in accordance with Sections 2.01 and 2.03 that such payment be financed with an ABR
Revolving Borrowing in an equivalent amount and, to the extent so financed, the Borrower’s
obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving
Borrowing.




(ii) In the case of any Revenue Bond LC Disbursement to fund the payment of the
purchase price (to the extent such purchase price is attributable to the principal of a
Revenue Bond) of any Revenue Bond that the Borrower is unable to remarket prior to the day
on which payment of the purchase price of such Revenue Bond is due to the holder or owner
thereof (a “Purchase Price Disbursement”), the Borrower shall reimburse such
Purchase Price Disbursement (to the extent not reimbursed by a Revenue Bond Loan pursuant to
paragraph (iii) below) on or prior to the earliest to occur of (A) the Final Maturity Date,
(B) the date on which such Revenue Bond is redeemed or cancelled pursuant to the applicable
Revenue Bond Indenture, (C) the date on which such Revenue Bond is remarketed pursuant to
the applicable Revenue Bond Indenture, and (D) the date on which the applicable Revenue Bond
Letter of Credit is replaced by an alternate letter of credit or other security arrangement
in accordance with the terms of the applicable Revenue Bond Indenture (such earliest date
being referred to herein as the


 


26









 






“PPD Repayment Date”); provided that (x) such Revenue Bond shall be
promptly delivered to the applicable Issuing Bank (or to its bailee or custodian, if
applicable) and pledged to the applicable Issuing Bank under a Revenue Bond Pledge
Agreement, (y) any portion of such Purchase Price Disbursement may be reimbursed at any time
by or on behalf of the Borrower on one Business Day’s notice stating the amount to be
reimbursed (which shall be $100,000 or a whole multiple thereof) and directing such Issuing
Bank to deliver Revenue Bonds held by or for the account of such Issuing Bank to or upon the
order of the Borrower against repayment of the portion of such Purchase Price Disbursement
attributable to such Revenue Bonds with the proceeds of the remarketing of such Revenue
Bonds and specifying the principal amount of Revenue Bonds to be so delivered
(provided, however, that if all or any portion of such Purchase Price
Disbursement was reimbursed with the proceeds of a Revenue Bond Loan pursuant to paragraph
(iii) below, such Issuing Bank shall deliver such Revenue Bonds pursuant to this clause (y)
only if and to the extent that such Revenue Bond Loan has been repaid or prepaid by the
Borrower in accordance with the terms of this Agreement (including, without limitation,
Sections 2.09(d)) with the proceeds of such remarketing), and (z) upon payment to the
Administrative Agent for the account of such Issuing Bank of the amount of any such
repayment, together with accrued interest to the date of such repayment on the amount of the
Purchase Price Disbursement to be reimbursed, the outstanding obligations of the Borrower in
respect of such Purchase Price Disbursement shall be reduced by the amount of such
reimbursement, interest shall cease to accrue on the amount so reimbursed and such Issuing
Bank shall release to or upon the order of the Borrower from the pledge and security
interest created by the applicable Revenue Bond Pledge Agreement a principal amount of
Revenue Bonds held under such Revenue Bond Pledge Agreement equal to the amount of such
repayment; provided that, prior to the release of such Revenue Bonds, (1) the
Borrower shall have paid to the Administrative Agent the amount of any Revenue Bond LC
Disbursement made in connection with the purchase of such Revenue Bonds to pay the interest
portion of the purchase price thereof and (2) the Borrower shall have repaid or prepaid, in
accordance with the terms of this Agreement (including, without limitation, Sections
2.09(d)), all Revenue Bond Loans the proceeds of which were used to reimburse such Purchase
Price Disbursement, together with accrued interest thereon to the date of such repayment or
prepayment and any amounts required to be paid pursuant to Section 2.14 in connection with
such repayment or prepayment. The provisions of Section 2.04(f)(i)(B) shall apply with
respect to any portion of any such Revenue Bond LC Disbursement made on the Final Maturity
Date, as if it were a Revenue Bond LC Disbursement in respect of which the Borrower received
notice prior to 9:00 a.m., Los Angeles, California time, on the Final Maturity Date.
Whenever an Issuing Bank is holding Revenue Bonds pursuant to a Revenue Bond Pledge
Agreement in respect of a Revenue Bond Letter of Credit and accordingly receives a payment
of interest on such pledged Revenue Bonds, such Issuing Bank shall promptly deliver such
interest so received to the Administrative Agent for application to (I) the payment of
accrued and unpaid interest on all outstanding Purchase Price Disbursements of such Issuing
Bank in respect of such Revenue Bond Letter of Credit or (II) to the extent the Revenue Bond
Banks have reimbursed such Issuing Bank for such Purchase Price Disbursements pursuant to
paragraph (iii) below, the payment of accrued and unpaid interest on all outstanding Revenue
Bond Loans made by the Revenue Bond Banks in respect of such Purchase Price


 


27









 






 Disbursements.

If the amount of interest so
received exceeds the amount of accrued and unpaid interest on such Purchase Price
Disbursements or Revenue Bond Loans (as the case may be) on the date of receipt, such
Issuing Bank shall promptly deliver all such interest received to the Administrative Agent
and the Administrative Agent shall hold the unused balance of such interest and apply it on
a daily basis to interest accrued on such Purchase Price Disbursements or Revenue Bond Loans
(as the case may be).




(iii) If the Borrower fails to make any payment due under paragraph (i)(A) above with
respect to a Revolving LC Disbursement, the Administrative Agent shall notify each Revolving
Lender of the applicable Revolving LC Disbursement and such Revolving Lender’s Applicable
Percentage thereof. Upon receipt of such notice, each Revolving Lender shall make available
to the Administrative Agent such Revolving Lender’s Applicable Percentage of the payment
then due from the Borrower, in immediately available funds, by 10:00 a.m., Los Angeles,
California time, on the next succeeding Business Day after the date of such notice, in the
same manner as provided in Section 2.05 with respect to Revolving Loans made by the
Revolving Lenders, and the Administrative Agent shall promptly pay to the applicable Issuing
Bank the amounts so received by it from the Revolving Lenders. If the Borrower fails to
reimburse the applicable Issuing Bank for any Revenue Bond LC Disbursement (including any
Purchase Price Disbursement) at or prior to 11:00 a.m., Los Angeles, California time, on the
Business Day immediately following the date of such Revenue Bond LC Disbursement, the
Administrative Agent shall notify each Revenue Bond Lender of the applicable Revenue Bond LC
Disbursement and such Revenue Bond Lender’s Applicable Percentage thereof. Upon receipt of
such notice, each Revenue Bond Lender shall make available to the Administrative Agent such
Revenue Bond Lender’s Applicable Percentage of the payment then due from the Borrower, in
immediately available funds, by 10:00 a.m., Los Angeles, California time, on the next
succeeding Business Day after the date of such notice, in the same manner as provided in
Section 2.05 with respect to Revolving Loans made by Revolving Lenders, and the
Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so
received by it from the Revenue Bond Lenders. Promptly following receipt by the
Administrative Agent of any payment pursuant to paragraph (i) or (ii) above in respect of
any LC Disbursement, the Administrative Agent shall distribute such payment to the
applicable Issuing Bank or, (A) to the extent that Revolving Lenders have made payments
pursuant to this paragraph to reimburse such Issuing Bank in connection with an unreimbursed
Revolving LC Disbursement, then to such Revolving Lenders as their interests may appear, and
(B) to the extent that Revenue Bond Lenders have made payments pursuant to this paragraph to
reimburse such Issuing Bank in connection with an unreimbursed Revenue Bond LC Disbursement,
then to such Revenue Bond Lenders as their interests may appear. Any payment made by a
Lender pursuant to this paragraph to reimburse an Issuing Bank for any LC Disbursement shall
not constitute a Loan and shall not relieve the Borrower of its obligation, if any, to
reimburse such LC Disbursement; provided, however, that on the date that the
Revenue Bond Lenders reimburse the applicable Issuing Bank for a Purchase Price
Disbursement, that portion of such reimbursement payment equal to the principal amount of
the Revenue Bonds purchased with the proceeds of such Purchase Price Disbursement shall be
deemed to constitute a loan made by the Revenue Bond Lenders to the Borrower


 


28









 







 on such date in the amount of such principal amount (each such
loan being a “Revenue Bond Loan”), and the Borrower’s obligation to reimburse such
Purchase Price Disbursement shall be discharged and replaced by such Revenue Bond Loan (it
being understood and agreed that any Purchase Price Disbursement so discharged and replaced
shall no longer constitute an unreimbursed Revenue Bond LC Disbursement hereunder). Each
Revenue Bond Loan shall initially bear interest at the Applicable Rate for ABR Loans, and
thereafter may be converted or continued pursuant to Section 2.06.



(g) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as
provided in paragraph (f) above shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit,
this Agreement or any other Loan Document, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in
any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an
Issuing Bank under a Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of, or provide a right of setoff against,
the Borrower’s obligations hereunder. None of the Administrative Agent, the Revolving Lenders, the
Revenue Bond Lenders, the Issuing Banks or any of their Related Parties shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit
or any payment or failure to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond the control of the
applicable Issuing Bank; provided that the foregoing shall not be construed to excuse such
Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the Borrower to the extent
permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s
failure to exercise care when determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the
absence of gross negligence or willful misconduct on the part of an Issuing Bank (as finally
determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have
exercised care in each such determination. In furtherance of the foregoing and without limiting
the generality thereof, the parties agree that, with respect to documents presented which appear on
their face to be in substantial compliance with the terms of a Letter of Credit, the applicable
Issuing Bank may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or information to the
contrary, or refuse to accept and make payment upon such documents if such documents are not in
strict compliance with the terms of such Letter of Credit.


 


29









 





(h) Disbursement Procedures. Each Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment under a
Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the
Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing
Bank has made or will make an LC Disbursement thereunder; provided that any failure to give
or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such
Issuing Bank and the Revolving Lenders or Revenue Bond Lenders with respect to any such LC
Disbursement.



(i) Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, (i) in
the case of any Revolving LC Disbursements, unless the Borrower shall reimburse such Revolving LC
Disbursement in full on the date such Revolving LC Disbursement is made or (ii) in the case of any
Revenue Bond LC Disbursements, unless the Borrower shall reimburse such Revenue Bond LC
Disbursement in full on the date such Revenue Bond LC Disbursement is made, in each case the unpaid
amount thereof shall bear interest, for each day from and including the date such LC Disbursement
is made to but excluding the date that the Borrower reimburses such LC Disbursement (or such
reimbursement obligation of the Borrower has been discharged pursuant to the terms of Section
2.04(f)(i) or (iii)), at a fluctuating interest rate per annum equal to the Applicable Rate for ABR
Loans; provided, that, if the Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (f) of this Section, then Section 2.11(b) shall apply. Interest accrued
pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that
interest accrued on and after the date of payment by any Revolving Lender or any Revenue Bond
Lender, as the case may be, to reimburse an Issuing Bank shall be for the account of such Revolving
Lender or Revenue Bond Lender, as applicable, to the extent of such payment.



(j) Replacement of an Issuing Bank. Any Issuing Bank may be replaced at any time by
written agreement among the Borrower and the Administrative Agent; provided,
however, that (i) each Issuing Bank shall be (A) a Lender or (B) another commercial bank or
other financial institution satisfactory to the Administrative Agent, and (ii) the Administrative
Agent shall review any such proposed agreement for form only and not with respect to the identity
of any successor Issuing Bank or the identity of the Issuing Bank to be replaced. The
Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the
time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued
for the account of the replaced Issuing Bank pursuant to Section 2.10(b) and shall return to such
Issuing Bank each Letter of Credit issued by such Issuing Bank. From and after the effective date
of any such replacement, (1) the successor Issuing Bank shall have all the rights and obligations
of an Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it on
such effective date or thereafter and (2) references herein to the term “Issuing Bank” shall be
deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all
previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank
hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the
rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit
issued by it prior to such replacement, but shall not be required to issue additional Letters of
Credit. On the Effective Date, The Royal Bank of Scotland N.V. (formerly known as ABN AMRO Bank
N.V.), in its capacity as issuer of the Existing ABN AMRO Letter of Credit, shall be replaced as
issuer thereof by U.S. Bank National Association.


 


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(k) Acceleration of Revenue Bonds. If any Event of Default shall occur and be
continuing, the Administrative Agent may, and at the request of the Required Lenders shall, direct
the applicable Issuing Bank to take such steps as are required and available to it under any
Revenue Bond Indenture to cause the Revenue Bond Trustee thereunder to declare the principal amount
of all Revenue Bonds then outstanding thereunder to be immediately due and payable and, to the
extent necessary to make all payments then due and payable on the Revenue Bonds, require all
necessary drawings under the applicable Letter of Credit to be made in respect thereof, whereupon
such Issuing Bank shall pay from its general funds the amounts so drawn and such amounts, all
interest thereon and all other amounts payable by the Borrower hereunder in respect thereof shall
automatically be forthwith due and payable.




SECTION 2.05. Funding of Borrowings.



(a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof
by wire transfer of immediately available funds by 10:00 a.m., Los Angeles, California time, to the
account of the Administrative Agent most recently designated by it for such purpose by notice to
the Lenders. In the case of Revolving Loans, 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;
provided that Loans made to finance the reimbursement of an LC Disbursement as provided in
Section 2.04(f) shall be remitted by the Administrative Agent to the applicable Issuing Bank.



(b) Unless the Administrative Agent shall have received notice from a Revolving Lender prior
to the proposed date of any Revolving Borrowing that such Revolving Lender will not make available
to the Administrative Agent such Revolving Lender’s share of such Borrowing, the Administrative
Agent may in its sole discretion assume that such Revolving 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 Revolving
Lender has not in fact made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Revolving 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 Revolving 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 Revolving Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Revolving Lender’s Loan included
in such Borrowing.




SECTION 2.06. Interest Elections.



(a) Each Borrowing of (i) Revolving Loans initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall have an
initial Interest Period as specified in such Borrowing Request, and (ii) Revenue Bond Loans
initially shall be an ABR Borrowing. Thereafter, the Borrower may elect to convert such Borrowing to a


 


31









 






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 telecopy 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, if an Event of
Default has occurred and is continuing (i) 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.


 


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SECTION 2.07. Termination and Reduction of Commitments.



(a) Unless previously terminated, each of the Revolving Commitments and the Revenue Bond
Commitments shall terminate on the Final Maturity Date. If any Letter of Credit remains
outstanding on the Final Maturity Date, the Borrower will deposit with the Administrative Agent an
amount in Cash Collateral equal to 105% of the aggregate undrawn amount of such Letter of Credit to
secure the Borrower’s reimbursement obligations with respect to any drawings that may occur
thereunder.



(b) The Borrower may at any time terminate, or from time to time reduce, the Revolving
Commitments; provided that (i) each reduction of the Revolving Commitments shall be in an
amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the
Borrower shall not terminate or reduce any Revolving Commitments if, after giving effect to such
termination or reduction and any concurrent prepayment of the Revolving Loans in accordance with
Section 2.09, the aggregate Revolving Credit Exposures would exceed the aggregate Revolving
Commitments. The Borrower may at any time terminate, or from time to time reduce, the Revenue Bond
Commitments; provided that (i) each reduction of the Revenue Bond Commitments shall be in
an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the
Borrower shall not terminate or reduce any Revenue Bond Commitments if, after giving effect to such
termination or reduction and any concurrent prepayment of the Revenue Bond Loans in accordance with
Section 2.09, the aggregate Revenue Bond Credit Exposure would exceed the aggregate Revenue Bond
Commitments.



(c) The Borrower shall notify the Administrative Agent of any election or requirement to
terminate or reduce the Revolving Commitments or the Revenue Bond Commitments under paragraph (b)
of this Section at least three (3) Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly following receipt of
any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice
delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a
notice of termination of the Revolving Commitments or the Revenue Bond Commitments delivered by the
Borrower may state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Revolving Commitments or the Revenue Bond
Commitments shall be permanent. Each reduction of the Revolving Commitments or the Revenue Bond
Commitments shall be made ratably among the Revolving Lenders or Revenue Bond Lenders, as the case
may be, ratably in accordance with their Applicable Percentages.




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 Revolving Lender the then unpaid principal amount of each Revolving Loan on the
Final Maturity Date, (ii) for the account of each Revenue
Bond Lender the unpaid principal amount of each Revenue Bond Loan on the applicable PPD
Repayment Date and (iii) for the account of each Lender all accrued and unpaid interest on the
Loans and all other Obligations, on the Final Maturity Date.


 


33









 





(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. Each Issuing Bank shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Issuing Bank resulting from
each LC Disbursement made by such Issuing Bank, including the amounts of principal and interest
payable and paid to such Issuing Bank 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, any Issuing Bank 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 and LC Disbursements in accordance with
the terms of this Agreement.



(e) Any Lender may request that Loans of any Class 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
(d) of this Section.



(b) On the date of any termination of the Revolving Commitments, the Borrower shall repay or
prepay all outstanding Revolving Borrowings. If, as a result of any partial reduction of the
Revolving Commitments, the sum of the Revolving Credit Exposures would exceed the total Revolving
Commitments after giving effect thereto, then the Borrower
shall, on the date of such reduction, repay or prepay Revolving Borrowings in an amount equal
to such excess.


 


34









 





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



(d) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of
any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than
11:00 a.m., Los Angeles, California 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., Los Angeles,
California time, one 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; provided, that if a notice of prepayment is given in
connection with a conditional notice of termination of the Revolving Commitments or the Revenue
Bond Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if
such notice of termination is revoked in accordance with Section 2.07. 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. Fees.



(a) The Borrower agrees to pay to the Administrative Agent (i) for the account of each
Revolving Lender a commitment fee, which shall accrue at a rate per annum equal to the Commitment
Fee Rate in effect from time to time on the daily unused amount of the Revolving Commitment of such
Revolving Lender during the period from and including the Effective Date to but excluding the date
on which such Revolving Commitment terminates, and (ii) for the account of each Revenue Bond Lender
a commitment fee, which shall accrue at a rate per annum equal to the Commitment Fee Rate in effect
from time to time on the daily unused amount of the Revenue Bond Commitment of such Revenue Bond
Lender during the period from and including the Effective Date to but excluding the date on which
such Revenue Bond Commitment terminates. Accrued commitment fees shall be payable quarterly in
arrears on the last Business Day of March, June, September and December of each year, commencing
with December 31, 2010, and (A) with respect to commitment fees payable pursuant to clause (i)
above, on the date on which the Revolving Commitments terminate, and (B) with respect to commitment
fees payable pursuant to clause (ii) above, on the date on which the Revenue Bond Commitments
terminate. All commitment fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).


 


35









 





(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender
a participation fee with respect to its participations in Letters of Credit,
which participation fee shall accrue at a rate per annum equal to the Applicable Margin in
effect from time to time for Eurodollar Loans, on the daily aggregate amount of the sum of (A) such
Lender’s Revolving LC Exposure (excluding any portion thereof attributable to unreimbursed
Revolving LC Disbursements) and (B) such Lender’s Revenue Bond LC Exposure (excluding any portion
thereof attributable to unreimbursed Revenue Bond LC Disbursements), during the period from and
including the Effective Date to but excluding the Final Maturity Date, and (ii) to each Issuing
Bank, for its own account, a fronting fee payable in the amounts and at the times separately agreed
upon by the Borrower and such Issuing Bank, as well as such Issuing Bank’s standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Accrued participation fees in respect of Letters of Credit shall be payable
quarterly in arrears on the last Business Day of March, June, September and December of each year,
commencing with December 31, 2010; provided that (1) all such fees payable in respect of
the Revolving Letters of Credit shall also be payable on the date on which the Revolving
Commitments terminate, and any such fees accruing after the date on which the Revolving Commitments
terminate shall be payable on demand, and (2) all such fees payable in respect of the Revenue Bond
Letters of Credit shall also be payable on the date on which the Revenue Bond Commitments
terminate, and any such fees accruing after the date on which the Revenue Bond Commitments
terminate shall be payable on demand; provided, further, that upon the occurrence
and during the continuance of an Event of Default, the participation fees payable pursuant to
clause (i) above shall be increased by 200 basis points per annum. Any other fees payable to any
Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but excluding the last
day).



(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable
in the amounts and at the times separately agreed upon by the Borrower and the Administrative
Agent.



(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds,
to the Administrative Agent (or to the applicable Issuing Bank, in the case of fees payable to any
Issuing Bank) for distribution, in the case of commitment fees and participation fees, to the
Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.




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 LC Disbursement or any fee or other amount payable by
the


 


36









 






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 and (i) in the case of Revolving Loans, upon termination of the Revolving
Commitments, and (ii) in the case of Revenue Bond Loans, upon termination of the Revenue Bond
Commitments, and accrued interest on each LC Disbursement that bears interest at the Applicable
Rate for ABR Loans shall be payable in arrears on each Interest Payment Date applicable to ABR
Loans; 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 or LC
Disbursement, 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.



(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 telecopy 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.


 


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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 any Issuing Bank; or




(ii) impose on any Lender, any Issuing Bank, the Administrative Agent or the London
interbank market any other condition affecting this Agreement or Eurodollar Loans made by
such Lender or any Letter of Credit or participation therein;



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
increase the cost to such Lender, such Issuing Bank or the Administrative Agent of participating
in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or
receivable by such Lender, such Issuing Bank or the Administrative Agent hereunder (whether of
principal, interest or otherwise), then the Borrower will pay to such Lender, such Issuing Bank or
the Administrative Agent, as the case may be, such additional amount or amounts as will compensate
such Lender, such Issuing Bank or the Administrative Agent, as the case may be, for such additional
costs incurred or reduction suffered.



(b) If any Lender or any Issuing Bank 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 or such
Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company,
if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of
Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below
that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company
could have achieved but for such Change in Law (taking into consideration such Lender’s or such
Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company
with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or
such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such
Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such
reduction suffered.



(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary
to compensate such Lender or such Issuing Bank 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 or such Issuing Bank, as the
case may be, the amount shown as due on any such certificate within ten (10) days after receipt
thereof.


 


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(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s
right to demand such compensation; provided that the Borrower shall not be
required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased
costs or reductions incurred more than 270 days prior to the date that such Lender or such Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s or such Issuing Bank’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 or LC Disbursement on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.09(d)
and is revoked in accordance therewith), (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. 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, the applicable Lender or the
applicable Issuing Bank (as the case may be) 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.


 


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(b) The Borrower shall indemnify the Administrative Agent, each Lender and each Issuing Bank,
within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Administrative Agent, such Lender or such Issuing Bank, 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
an Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or an
Issuing Bank, 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, to the extent it is legally permitted to do so, 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 by 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 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, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise) prior to 10:00 a.m., Los
Angeles, California time, on the date when due, in immediately available funds, without set-off,
counterclaim, 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 offices located at 445 South Figueroa Street, Los
Angeles, California 90071 (or such other office as the Administrative Agent shall from time to time
designate to the Borrower), except payments to be made directly to an Issuing Bank as expressly
provided herein and 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 fees payable pursuant to Section 2.10 or any payment accruing
interest, such fees and such interest shall be payable for the period of such extension. All
payments under each Loan Document shall be made in dollars.


 


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(b) If at any time insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, 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 and unreimbursed
LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with
the amounts of principal and unreimbursed LC Disbursements 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 or participations in
LC Disbursements resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Loans and participations in LC Disbursements 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 and participations in LC
Disbursements 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 and participations in LC Disbursements; 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 or participations in LC Disbursements
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 or any
Issuing Bank 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 accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders or such Issuing Bank, as the case may be,
the amount due. In such event, if the Borrower has not in fact made such payment, then each of the
Lenders and each of the Issuing Banks, as the case may be, severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing
Bank 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.


 


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(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section
2.04(e) or (f), 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 any Lender requests compensation under Section 2.13, or if 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, 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 defaults in its obligation to fund Loans
hereunder or is otherwise 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 the 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 of 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 (A) the Borrower shall have received the prior written consent
of the Administrative Agent and each Issuing Bank, which consent shall not unreasonably be
withheld, (B) such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements, 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 (C) 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. Illegality. Notwithstanding any other provision of this Agreement, if
any Change in Law makes it unlawful, or any Governmental Authority asserts that it is unlawful, for
any Lender to perform its obligations hereunder to make, continue or convert into Eurodollar Loans,
then, on notice thereof and demand therefor by such Lender to the Borrower through the
Administrative Agent, (a) the obligation of such Lender to make, continue or convert into
Eurodollar Loans shall be suspended until the Administrative Agent notifies the Borrower that such
Lender has determined that the circumstances causing such suspension no longer exist, and (b) the
Borrower shall forthwith prepay in full all Eurodollar Loans of such Lender then outstanding,
together with accrued and unpaid interest thereon, unless the Borrower, within five (5) Business
Days of such notice and demand, converts all Eurodollar Loans of all Lenders then outstanding into
ABR Loans in accordance with the terms hereof.



SECTION 2.19. New Lenders. On the Effective Date, each New Lender and Increasing
Existing Lender (as hereinafter defined) shall purchase by assignment from the Existing Lenders
such portion of the Loans (as defined in the Existing Credit Agreement), if any, owing to them as
shall be designated by the Administrative Agent such that, after giving effect to all such
purchases and assignments, (a) the outstanding Revolving Loans owing to each Revolving Lender shall
equal such Revolving Lender’s Applicable Percentage of the aggregate amount of Revolving Loans
owing to all Revolving Lenders and (b) the outstanding Revenue Bond Loans owing to each Revenue
Bond Lender shall equal such Revenue Bond Lender’s Applicable Percentage of the aggregate amount of
Revenue Bond Loans owing to all Revenue Bond Lenders. In addition, on the Effective Date, each New
Lender and Increasing Existing Lender shall be deemed to have purchased by assignment from the
Existing Lenders (and the Existing Lenders shall be deemed to have assigned to the New Lenders and
the Increasing Existing Lenders) a portion of the participations (if any) then held by the Existing
Lenders in each outstanding Letter of Credit and LC Disbursement, such that, after giving effect to
all such deemed purchases and assignments, (i) each Revolving Lender’s participations in
outstanding Revolving Letters of Credit and Revolving LC Disbursements shall equal such Revolving
Lender’s Applicable Percentage of the aggregate amount of such participations held by all of the
Revolving Lenders and (ii) each Revenue Bond Lender’s participations in outstanding Revenue Bond
Letters of Credit and Revenue Bond LC Disbursements shall equal such Revenue Bond Lender’s
Applicable Percentage of the aggregate amount of such participations held by all of the Revenue
Bond Lenders. As used herein, the term “Increasing Existing Lender” means each Existing
Lender whose Aggregate Commitment (as set forth on Schedule 2.01) exceeds its Aggregate Commitment
(as defined in the Existing Credit Agreement) under the Existing Credit Agreement.




SECTION 2.20. Defaulting Lenders.



(a) Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any
Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting
Lender, to the extent permitted by applicable law:




(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove
any amendment, waiver or consent with respect to this Agreement shall be restricted as set
forth in Section 9.02.


 


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(ii) Reallocation of Payments. Any payment of principal, interest, fees or other
amounts received by the Administrative Agent for the account of such Defaulting Lender
(whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise, and
including any amounts made available to the Administrative Agent by such Defaulting Lender
pursuant to Section 9.08), shall be applied at such time or times as may be determined by
the Administrative Agent as follows: first, to the payment of any amounts owing by
such Defaulting Lender to the Administrative Agent hereunder; second, to the payment
on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Banks
hereunder; third, if so determined by the Administrative Agent or requested by any
Issuing Bank, to be held as Cash Collateral for future funding obligations of such
Defaulting Lender of any participations in any Letters of Credit; fourth, to the
payment of any amounts owing to the Lenders or the Issuing Banks as a result of any judgment
of a court of competent jurisdiction obtained by any Lender or any Issuing Bank against such
Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under
this Agreement; fifth, so long as no Default exists, to the payment of any amounts
owing to the Borrower as a result of any judgment of a court of competent jurisdiction
obtained by the Borrower against such Defaulting Lender as a result of such Defaulting
Lender’s breach of its obligations under this Agreement; and sixth, to such Defaulting
Lender or as otherwise directed by a court of competent jurisdiction, provided that if such
payment is a payment of the principal amount of any LC Disbursements in respect of which
such Defaulting Lender has not fully funded its appropriate share, such payment shall be
applied solely to pay LC Disbursements owed to the applicable Issuing Banks on a pro rata
basis (or, to the extent that the non-Defaulting Lenders have reimbursed such Issuing Banks
for such LC Disbursements, to the non-Defaulting Lenders on a pro rata basis) prior to being
applied to the payment of any LC Disbursements owed to such Defaulting Lender. Any
payments, prepayments or other amounts paid or payable to a Defaulting Lender that are
applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral
pursuant to this SECTION 2.20(a)(ii) shall be deemed paid to and redirected by such
Defaulting Lender, and each Lender irrevocably consents thereto.




(iii) Certain Fees. Such Defaulting Lender shall not be entitled to receive any
commitment fee pursuant to Section 2.10(a) or any participation fee pursuant to Section
2.10(b), in each case for any period during which it is a Defaulting Lender.




(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure. During any
period in which there is a Defaulting Lender under this Agreement, for purposes of computing
the amount of the obligation of each non-Defaulting Lender hereunder to acquire or fund
participations in Letters of Credit pursuant to Section 2.04(e) (including, without
limitation, for purposes of determining the amount of participation fees payable to such
non-Defaulting Lender pursuant to Section 2.10(b)), the “Applicable Percentage” of each
non-Defaulting Lender hereunder shall be computed without giving effect to the Revolving
Commitment and Revenue Bond Commitment of such Defaulting Lender; provided, that (A)
each such reallocation shall be given effect only if, at the date the applicable Lender
becomes a Defaulting Lender, no Default exists, (B) the obligation of each non-Defaulting
Lender to acquire or fund participations in Revolving Letters of Credit at any time shall
not exceed the unused


 


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positive difference, if any, of (1) the Revolving Commitment of such non-Defaulting
Lender minus (2) the total Revolving Credit Exposure of such non-Defaulting Lender at such
time, and (C) the obligation of each non-Defaulting Lender to acquire or fund participations
in Revenue Bond Letters of Credit at any time shall not exceed the unused positive
difference, if any, of (1) the Revenue Bond Commitment of such non-Defaulting Lender minus
(2) the total Revenue Bond Credit Exposure of such non-Defaulting Lender at such time.



(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent and the Issuing Banks
agree in writing in their sole discretion that a Lender should no longer be deemed to be a
Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the
effective date specified in such notice and subject to any conditions set forth therein (which may
include arrangements with respect to any Cash Collateral), such Lender will, to the extent
applicable, take such action as the Administrative Agent may determine to be necessary to cause the
funded and unfunded participations in Letters of Credit to be held on a pro rata basis by the
Lenders in accordance with their Applicable Percentages (without giving effect to Section
2.20(a)(iv)), whereupon that Lender will cease to be a Defaulting Lender, provided that no
adjustments will be made retroactively with respect to fees accrued or payments made by or on
behalf of the Borrower while such Lender was a Defaulting Lender, and provided,
further, that except to the extent otherwise expressly agreed by the affected parties, no
change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim
of any party hereunder arising from such Lender’s having been a Defaulting Lender.



(c) Cash Collateral. At any time that there shall exist a Defaulting Lender, immediately upon
the request of the Administrative Agent or any Issuing Bank, the Borrower shall deliver to the
Administrative Agent Cash Collateral in an amount sufficient to cover all Fronting Exposure (after
giving effect to Section 2.20(a)(iv) and any Cash Collateral provided by the Defaulting Lender).
All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be
maintained in blocked, non-interest bearing deposit accounts at the Administrative Agent. The
Borrower, and to the extent provided by any Lender, such Lender, hereby grants to (and subjects to
the control of) the Administrative Agent, for the benefit of the Administrative Agent, the Issuing
Banks and the Lenders, and agrees to maintain, a first priority security interest in all such cash,
deposit accounts and all balances therein, and all other property so provided as collateral
pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which
such Cash Collateral may be applied pursuant to this subsection (c). If at any time the
Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person
other than the Administrative Agent as herein provided, or that the total amount of such Cash
Collateral is less than the applicable Fronting Exposure and other obligations secured thereby, the
Borrower or the relevant Defaulting Lender will, promptly upon demand by the Administrative Agent,
pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to
eliminate such deficiency. Notwithstanding anything to the contrary contained in this Agreement,
Cash Collateral provided under this subsection (c), Section 2.20(a)(ii) or Article VII in respect
of Letters of Credit shall be held and applied to the satisfaction of the specific Revolving LC
Exposure and/or Revenue Bond LC Exposure, obligations to fund participations therein (including, as
to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and
other obligations for which the Cash Collateral was so provided, prior to any other application of
such


 


45









 






property as may be provided for herein. Cash Collateral (or the appropriate portion thereof) provided to reduce
Fronting Exposure or other obligations shall be released promptly following (i) the elimination of
the applicable Fronting Exposure or other obligations giving rise thereto (including by the
termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee
following compliance with Section 9.04(b)(iv)) or (ii) the Administrative Agent’s good faith
determination that there exists excess Cash Collateral, provided that (x) any Cash
Collateral furnished by or on behalf of the Borrower shall not be released during the continuance
of a Default (and following application as provided in this subsection (c) may, during the
continuance of an Event of Default, be otherwise applied in accordance with Article VII), and (y)
the Person providing Cash Collateral and the Issuing Banks may agree that Cash Collateral shall not
be released but instead held to support future anticipated Fronting Exposure or other obligations.



ARTICLE III

Representations and Warranties




The Borrower represents and warrants to the Administrative Agent, the Lenders and the Issuing
Banks 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, 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, 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) Except to the extent that any specific change is explicitly disclosed in the Disclosure
Documents, 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, after giving effect to the issuance of the Collateral Mortgage
Bonds, there will be $540,588,000 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) Except as explicitly disclosed in the Disclosure Documents, there has been no change in
the status of any matters 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.


 


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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, as amended.



(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) Prior to the release of the Collateral Mortgage Bonds pursuant to Section 9.09, the
Collateral Mortgage Bonds are and shall be 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 the Bond Delivery Agreement and at all times thereafter prior to the
release of the Collateral Mortgage Bonds pursuant to Section 9.09, 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.


 


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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. Neither the Information Memorandum nor any of the
other 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 untrue statement 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 (other than the Arrangers in connection with the syndication of
the credit facilities established by this Agreement) 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 Precedent




SECTION 4.01. Effective Date. This Agreement, and the obligations of the Lenders to
make Loans and acquire participations in Letters of Credit, and the obligations of the Issuing
Banks to issue Letters of Credit hereunder (and to amend the Existing Letters of Credit to extend
the stated expiration date thereof), shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02):




 


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(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) written evidence
satisfactory to the Administrative Agent (which may include telecopy or other electronic
transmission 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, the Issuing Banks and the Lenders and dated the Effective Date) of each of
(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 (b) and (c) of Section 4.02 shall be satisfied, and
the Administrative Agent shall have received a certificate, dated the Effective Date and signed by
an Authorized Officer, confirming compliance with such conditions as of the Effective Date.



(e) The Administrative Agent and the Arrangers shall have received all fees and other amounts
due and payable on or prior to the Effective Date, including all up-front fees and, 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 counterparts of the Bond Delivery Agreement
and each Revenue Bond Pledge Agreement, in each case signed on behalf of the Borrower and any other
parties thereto, together with (i) Collateral Mortgage Bonds in an aggregate principal amount not
less than $540,588,000, duly issued and authenticated under the Mortgage Indenture; (ii) a duly
executed copy of the Eleventh Supplemental Indenture and all other documents, instruments and
filings relating to the issuance and authentication of the Collateral Mortgage Bonds under the
Mortgage Indenture; (iii) copies of any amendments or supplements, entered into at any time after
August 11, 2006, to the Mortgage Indenture, the Revenue Bond Indentures, the Revenue Bond Loan
Agreements and all related agreements with respect to the Revenue Bonds, 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; (iv) all documents, instruments and filings creating or perfecting the Lien of
the Mortgage Indenture; and (v) all
other documents and instruments required by law or reasonably requested by the Administrative
Agent to be filed, registered or recorded to create or perfect the Liens intended to be created
under the Security Documents, all of which shall be in form and substance satisfactory to the
Administrative Agent.


 


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(g) The Administrative Agent shall have received copies of the ACC order authorizing the
Transactions 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.



(h) On the Effective Date, all accrued and unpaid interest and fees payable by the Borrower
under the Existing Credit Agreement shall have been paid in full.



(i) The Borrower and its Subsidiaries shall not have any indebtedness or preferred stock
outstanding 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) the Indebtedness described in the Borrower’s Current Report on Form 8-K filed with
the SEC on October 8, 2010.



(j) 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.



(k) The Administrative Agent, the Issuing Banks 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.



(l) 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.



(m) U.S. Bank National Association shall have issued a Revenue Bond Letter of Credit, in
replacement of (and in form and substance substantially identical to) the Existing ABN AMRO Letter
of Credit, to the applicable Revenue Bond Trustee, and all conditions to the issuance of such
replacement Revenue Bond Letter of Credit set forth in the applicable Revenue Bond Indenture and
Revenue Bond Loan Agreement shall have been satisfied (or waived in accordance with the terms
thereof).



(n) (i) The Existing ABN AMRO Letter of Credit shall have been surrendered for cancellation by
the applicable Revenue Bond Trustee and returned to The Royal Bank of Scotland N.V. (formerly known
as ABN AMRO Bank N.V.); and (ii) the Borrower shall have paid all unpaid fees accrued for the
account of The Royal Bank of Scotland N.V. (formerly known as ABN AMRO Bank N.V.) pursuant to
Section 2.10(b) of the Existing Credit Agreement.


 


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SECTION 4.02. Each Credit Event. The obligation of an Issuing Bank to issue a Letter
of Credit (or to issue any amendment of a Letter of Credit having the effect of extending the
stated expiration date thereof, increasing the amount available for drawing thereunder or otherwise
altering any of the material terms or conditions thereof), and the obligation of each Revolving
Lender to make a Revolving Loan on the occasion of any Borrowing that increases the amount of the
Revolving Loans of any Revolving Lender outstanding, shall be subject to the satisfaction of the
following conditions:



(a) The Administrative Agent shall have received a Borrowing Request with respect to any such
Borrowing.



(b) The representations and warranties of the Borrower set forth in this Agreement and the
other Loan Documents (other than, with respect to any such issuance or Borrowing made after the
Effective Date, the representations and warranties set forth in Sections 3.04(b), 3.06(a)(i) and
3.06(c)) shall be true and correct on and as of the date of such issuance or Borrowing, as the case
may be, both before and after giving effect thereto and (in the case of any Borrowing) to 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).



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



(d) Each Revolving Borrowing and issuance of a Letter of Credit (or any amendment of a Letter
of Credit having the effect of extending the stated expiration date thereof, increasing the amount
available for drawing thereunder or otherwise altering any of the material terms or conditions
thereof) shall be deemed to constitute a representation and warranty by the Borrower on the date
thereof as to the matters specified in paragraphs (b) and (c) of this Section.



(e) In connection with the issuance or replacement of a Revenue Bond Letter of Credit after
the Effective Date, (i) the Borrower, the applicable Issuing Bank and, if necessary (as determined
by the Administrative Agent based upon the terms of the applicable Revenue Bond Indenture), the
applicable Revenue Bond Trustee (or other agent or custodian) shall have executed and delivered to
the Administrative Agent a Revenue Bond Pledge Agreement, (ii) the Administrative Agent shall have
received all other documents and instruments required by law or reasonably requested by the
Administrative Agent to be filed, registered or recorded to create or perfect the Liens intended to
be created under such Revenue Bond Pledge Agreement, (iii) all other conditions to the issuance of
such Revenue Bond Letter of Credit set forth in the applicable Revenue Bond Indenture and Revenue
Bond Loan Agreement shall have been satisfied (or waived in accordance with the terms thereof), and
(iv) the Administrative Agent shall have received copies of the applicable Revenue Bond Indenture,
the applicable Revenue Bond Loan Agreement and all related agreements with respect to the
applicable Revenue Bonds, in each case together with all amendments and supplements thereto,
certified by an Authorized Officer as being true, correct and complete copies thereof and in full
force and effect on the date of issuance of such Revenue Bond Letter of Credit.


 


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ARTICLE V

Affirmative Covenants




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



SECTION 5.01. Financial Statements; Ratings Change 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 sixty (60) days after the end of each of the
first three fiscal quarterly periods of each fiscal year of the Borrower, or fifteen (15) days
after the date on which its quarterly report for such fiscal quarterly period is to be filed with
the SEC in order to have been considered filed on a timely basis, 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 an Authorized Officer, 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);



(b) as soon as available and in any event within one hundred and five (105) days after the end
of each fiscal year of the Borrower, or fifteen (15) days after the date on which its annual report
for such fiscal year is to be filed with the SEC in order to have been considered filed on a timely
basis, 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);


 


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(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a
certificate of an Authorized Officer (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 Section 6.05 (including, without limitation, a listing of any
Indebtedness for borrowed money of the Borrower or any of its Subsidiaries that has been
disregarded for purposes of the determination of Consolidated Total Indebtedness pursuant to the
proviso contained in the definition thereof set forth in Section 1.01) 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) 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 Exchange Act with the SEC (or any governmental
agency substituted therefor) or filed with any national securities exchange;



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



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



(g) 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 an Authorized Officer under the Mortgage
Indenture with respect to amounts charged to replacement reserve, detailing insurance on the
Borrower’s property or showing compliance by the Borrower with the covenants contained in the
Mortgage Indenture; any supplemental indentures to the Mortgage Indenture; any redemption notices
under the Mortgage Indenture; and any notices of defaults under the Mortgage 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;



(h) 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; and


 


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(i) 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 an Authorized Officer, 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 an Authorized
Officer, 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 (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 (b); and



(j) 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 files periodic reports under the Exchange Act and the financial statements
contained in any quarterly or annual reports filed with the SEC are prepared in accordance with the
Exchange 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.



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 $30,000,000; 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 an Authorized
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.


 


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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 6.02.



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 6.03;
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.



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 and independent accountants, 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 (a) all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property (including, without limitation,
ERISA and Environmental Laws) and (b) the Revenue Bond Loan Agreements, 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.


 


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SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans and
the Revolving Letters of Credit will be used only for general corporate purposes. No part of the
proceeds of any Loan or of any Letter of Credit 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. Each Revenue Bond Letter of Credit will be issued only to support the Revenue Bonds
corresponding to such Revenue Bond Letter of Credit.




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.



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.


 


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ARTICLE VI

Negative Covenants




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



SECTION 6.01. 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.




SECTION 6.02. 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


 


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 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 6.02, 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.




SECTION 6.03. 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, or enter into any Sale Leaseback
with respect to, 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 in connection with any securitization (e.g., stranded costs) or
sale of assets required by law;




(iv) the Borrower and its Consolidated Subsidiaries may sell, transfer or otherwise
dispose of other assets in transactions not permitted under any of clauses (i), (ii) and
(iii) above; provided that the aggregate book value of all assets sold, transferred
or otherwise disposed of by the Borrower and its Consolidated Subsidiaries pursuant to this
clause (iv) during the term of this Agreement shall at no time exceed in the aggregate 15%
of the consolidated assets of the Borrower as set forth in the most recent balance sheet of
the Borrower delivered to the Administrative Agent pursuant to Section 5.01(a) or 5.01(b)
hereof; and




(v) any sale of the Borrower’s assets as an entirety or substantially as an entirety in
accordance with Section 6.02, 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 6.03, including the percentage limitation set forth in clause
(iv) 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 6.03 to the
extent such investments or contributions are made in cash.


 


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(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,
or enter into any Sale Leaseback with respect to, all or substantially all of its generating assets
(including leasehold interests), whether now owned or hereafter acquired, except as required by
applicable law.




SECTION 6.04. 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.



(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 6.05 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 6.05. Leverage Ratio. The Borrower will not permit the ratio of (a)
Consolidated Total Indebtedness at the end of any fiscal quarter, commencing with the fiscal
quarter ended September 30, 2010, to (b) Consolidated Total Capitalization at the end of such
fiscal quarter, to be greater than 0.70 to 1.0.



SECTION 6.06. 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, (a) prior to the release of the Collateral Mortgage Bonds pursuant to
Section 9.09, the Mortgage Indenture or the Eleventh Supplemental Indenture, or (b) any Revenue
Bond Indenture, any Revenue Bond Loan Agreement or any Revenue Bonds, in each case without the
prior written consent of the Required Lenders and any Issuing Bank affected thereby,
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, (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


 


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the Collateral Mortgage Bonds and (c) such consent shall not be
required in connection with any amendment of any Revenue Bond Indenture, any Revenue Bond Loan
Agreement or any Revenue Bonds to provide for a mandatory tender of Revenue Bonds at any time when
such Revenue Bonds are currently subject to mandatory redemption at a purchase price which does not
exceed the applicable redemption price.



SECTION 6.07. Release of Collateral under the Mortgage Indenture. Prior to the
release of the Collateral Mortgage Bonds pursuant to Section 9.09, 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.



SECTION 6.08. 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, subject to Section 6.03 and the other terms and conditions contained in this Agreement and
the other Loan Documents, (a) at prices and on terms and conditions (i) not less favorable to the
Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third
parties or (ii) as approved by the ACC or the Federal Energy Regulatory Commission, (b)
transactions between or among the Borrower and the Consolidated Subsidiaries not involving any
other Affiliate, (c) any Restricted Payment permitted by Section 6.04(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.



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 or any reimbursement obligation
in respect of any LC Disbursement 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, subject in the case of any
such reimbursement obligation to a grace period of two (2) days;



(b) (i) 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; or (ii) the Borrower shall fail to deposit,
post, deliver or otherwise furnish Cash Collateral when required to
do so pursuant to the terms of this Agreement, 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 thirty (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 Sixty (60) days
or an order or decree approving or ordering any of the foregoing shall be entered;


 


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(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;



(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
$30,000,000 shall be rendered against the Borrower, any Significant Subsidiary or any combination
thereof and the same shall remain undischarged for a period of thirty (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 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, 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) prior to the release of the Collateral
Mortgage Bonds pursuant to Section 9.09, 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; or




(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, (A)
the Revenue Bond Issuing Banks (in the case of clauses (iii) and (vi) below) shall, at the request
of the Administrative Agent or the Required Lenders, and (B) the Administrative Agent may, and at
the request of the Required Lenders shall, in each case by notice to the Borrower,


 


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 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 and LC Disbursements 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 and LC Disbursements so declared to be
due and payable, together with accrued interest thereon and all fees and other obligations of the
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, (iii) take any
action under Section 2.04(k), (iv) prior to the release of the Collateral Mortgage Bonds pursuant
to Section 9.09, deliver a notice of redemption under the Eleventh Supplemental Indenture stating
that such notice is being delivered pursuant to this Article VII, (v) require the Borrower to (in
which case the Borrower shall) deposit immediately with the Administrative Agent Cash Collateral in
an amount equal to the aggregate undrawn amount of all outstanding Letters of Credit at such time,
to be held by the Administrative Agent (for the benefit of the Issuing Banks and the Lenders) as
security for the Borrower’s reimbursement obligations in respect of such Letters of Credit, and
(vi) direct the Revenue Bond Issuing Banks to (in which case the Revenue Bond Issuing Banks shall)
exercise the rights and remedies available under the Revenue Bond Pledge Agreements and, in
addition thereto, all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in the State of New York at that time in respect of the Collateral (as
defined in the Revenue Bond Pledge Agreements); and 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 and LC Disbursements 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. Notwithstanding anything to the contrary contained herein, no
notice given or declaration made by the Administrative Agent pursuant to this Article VII shall
affect (1) the obligation of any Issuing Bank to make any payment under any Letter of Credit issued
by such Issuing Bank in accordance with the terms of such Letter of Credit or (2) the participatory
interest of each Lender in each such payment.



ARTICLE VIII

The Administrative Agent




Each of the Lenders and the Issuing Banks 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
Required Lenders or the Borrower may at any time, with the consent of the Borrower
(provided that such consent shall not be required if an Event of Default under clause (a),
(b), (h), (i) or (j) of Article VII shall have occurred and is continuing) or the Required Lenders,
as the case may be, replace the Administrative Agent (it being understood that any such replacement
Administrative Agent shall be a Person that serves as administrative agent for other credit
facilities of a comparable size), provided that the Required Lenders or the Borrower may
not replace the Administrative Agent unless, after giving effect to such replacement and each
contemporaneous


 


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assignment, the Required Lenders or the Borrower shall have arranged in connection with such replacement, to the extent requested by the Administrative Agent, that
(a) neither the Administrative Agent nor any of its Affiliates shall have outstanding any Letter of
Credit, Loan, LC Disbursement, Revolving Commitment, Revenue Bond Commitment or other obligation of
any kind under this Agreement or any other Loan Document and (b) each of the Administrative Agent
and its Affiliates shall have received payment in full of all amounts owing to it under or in
respect of this Agreement and each other Loan Document.



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 as directed 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 with any Loan Document, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set 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. Notwithstanding anything herein to the contrary, no
Arranger and no Lender identified as a Co-Syndication Agent or a Co-Documentation Agent shall have
any separate rights, duties, responsibilities, obligations or authority as Arranger, Co-Syndication
Agent or Co-Documentation Agent.


 


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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, the
Issuing Banks 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 thirty (30)
days after the retiring Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders and the Issuing Banks, 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.



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 any related agreement or any document furnished
hereunder or thereunder.


 


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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 telecopy, as follows:




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




(ii) if to the Administrative Agent, to Union Bank, N.A., 445 South Figueroa Street,
15th Floor, Los Angeles, California 90071, Attention of Kevin Zitar (Telecopy No.
(213) 236-4096); and




(iii) if to any other Agent, any Issuing Bank or any Lender, to it at its address (or
telecopy number) set forth in its Administrative Questionnaire.



(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 telecopy 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, any Issuing Bank 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, the Issuing Banks and the Lenders hereunder and under the
other Loan Documents 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 or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether the
Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such
Default at the time.


 


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(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 Eleventh 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 any Revolving
Commitment or Revenue Bond Commitment of any Lender without the written consent of such Lender,
(ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest
thereon, or reduce any fees payable hereunder, or change the definition of “Applicable Margin” or
“Commitment Fee Rate”, 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 LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of expiration of any Revolving
Commitment or Revenue Bond 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
(including, without limitation, the release of the Collateral Mortgage Bonds pursuant to Section
9.09) or under any Security Document; provided further that no such agreement shall
amend, modify or otherwise affect the rights or duties of any Agent or any Issuing Bank hereunder
without the prior written consent of such Agent or Issuing Bank, as the case may be.
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, the Issuing Banks and the Administrative Agent if (1) by the terms
of such agreement the Aggregate 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.
Notwithstanding any provision to the contrary contained herein, no Defaulting Lender shall have any
right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment,
waiver or consent which by its terms requires the consent of all Lenders or each affected Lender
may be effected with the consent of the


 


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applicable Lenders other than Defaulting Lenders),
provided, however, that (x)
 neither the Revolving Commitment nor the Revenue Bond Commitment of any Defaulting Lender may
be increased or extended without the consent of such Defaulting Lender, (y) any waiver, amendment
or modification requiring the consent of all Lenders or each affected Lender that by its terms (A)
affects any Defaulting Lender more adversely than other affected Lenders or (B) extends the date
fixed for payment of principal or interest owing to such Defaulting Lender hereunder, reduces the
principal amount of any obligation owing to such Defaulting Lender hereunder, or reduces the amount
of or the rate of interest on any amount owing to such Defaulting Lender or of any fee payable to
such Defaulting Lender hereunder, shall require the consent of such Defaulting Lender, and (z) any
waiver, amendment or modification that alters the terms of this proviso shall require the consent
of such Defaulting Lender.




SECTION 9.03. Expenses; Indemnity; Damage Waiver.



(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent, the Arrangers and their respective Affiliates (including due diligence
expenses and the reasonable fees, charges and disbursements of counsel for the Administrative Agent
and the Arrangers) 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 Arrangers in connection with any evaluations of Collateral conducted by it;
(iii) all reasonable out-of-pocket expenses incurred by any Issuing Bank in connection with the
issuance, amendment or extension of any Letter of Credit or any demand for payment thereunder; and
(iv) all out-of-pocket expenses incurred by the Administrative Agent, any Issuing Bank or any
Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent,
any Issuing Bank 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 or Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of
Credit.



(b) The Borrower shall indemnify the Administrative Agent, each Arranger, each Issuing Bank
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 Letter of Credit or the use of the
proceeds therefrom (including any refusal of any Issuing Bank to honor a demand for payment under a
Letter of Credit if the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (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


 


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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, any Arranger or any Issuing Bank under paragraph (a) or (b) of this Section,
each Lender severally agrees to pay to the Administrative Agent, such Arranger or such Issuing
Bank, as the case may be, such Lender’s 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, such Arranger or such
Issuing Bank 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 Letter of Credit 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 (including any
Affiliate of any Issuing Bank that issues any Letter of Credit), 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 (including any Affiliate of any Issuing Bank that issues any Letter of
Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the
Agents, the Arrangers, the Issuing Banks 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 (other than (w) a Defaulting Lender, (x)
any Subsidiary of a Defaulting Lender, (y) the Borrower and (z) any Affiliate or Subsidiary of the
Borrower) all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Revolving Commitment and the Revolving Loans owing to it or all or a portion of its
Revenue Bond Commitment and the Revenue Bond 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


 


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such assignment (which
consent shall not be unreasonably withheld), (ii) each of the
 Issuing Banks must give its prior written consent to such assignment (which consent 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, the Borrower must give its prior written consent to such
assignment (which consent shall not be unreasonably withheld), (iv) 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 Aggregate Commitment, the
amount of the Revolving Loan Commitment and/or Revenue Bond 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, (v) in connection with any assignment of rights and obligations of any
Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to
the other conditions thereto set forth herein, the parties to the assignment shall make such
additional payments to the Administrative Agent in an aggregate amount sufficient, upon
distribution thereof as appropriate (which may be outright payment, purchases by the assignee of
participations or subparticipations, or other compensating actions, to each of which the applicable
assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment
liabilities then owed by such Defaulting Lender to the Administrative Agent, any Issuing Bank or
any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its
full pro rata share of all participations in Letters of Credit in accordance with its Applicable
Percentage, (vi) 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
(vii) 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 (A) if an Event of Default shall have
occurred and be continuing or (B) in connection with the initial syndication of the Aggregate
Commitments and Loans. 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. Notwithstanding the foregoing, in
the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall
become effective under applicable law without compliance with the provisions of this paragraph,
then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of
this Agreement until such compliance occurs.


 


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(c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall
maintain at one of its offices in California 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 Aggregate
Commitments of, and principal amount of the Loans and LC
Disbursements 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, the Issuing Banks 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. In addition the Administrative Agent shall
maintain in the Register information regarding the designation and revocation of designation of any
Lender as a Defaulting Lender. The Register shall be available for inspection by the Borrower, any
Issuing Bank 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.



(e) Any Lender may, without the consent of the Borrower, the Administrative Agent or any
Issuing Bank, sell participations to one or more banks or other entities (other than (w) a
Defaulting Lender, (x) any Subsidiary of a Defaulting Lender, (y) the Borrower and (z) any
Affiliate or Subsidiary of the Borrower) (a “Participant”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a portion of its Revolving
Commitment and the Revolving Loans owing to it or all or a portion of its Revenue Bond Commitment
and the Revenue Bond 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, the Issuing Banks 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.


 


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(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, the Issuing Banks 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 or the option to pay to
the Administrative Agent for the account of the applicable Issuing Bank all or any part of such
Granting Lender’s Applicable Percentage of any LC Disbursement made by such Issuing Bank and not
reimbursed by the Borrower that such Granting Lender would otherwise be obligated to pay to the
Administrative Agent for the account of the applicable Issuing Bank pursuant to this Agreement, as
the case may be; provided that (i) nothing herein shall constitute a commitment by any SPC
to make any Loan or to pay such Granting Lender’s Applicable Percentage of any LC Disbursement
reimbursement obligation and (ii) if an SPC elects not to exercise such option or otherwise fails
to provide all or any part of such Loan or to pay all or any part of such Granting Lender’s
Applicable Percentage of any LC Disbursement reimbursement obligation, the Granting Lender shall be
obligated to make such Loan or to pay its Applicable Percentage of any LC Disbursement
reimbursement obligation, as the case may be, pursuant to the terms hereof. The making of a Loan
by an SPC or the payment by such SPC of such Granting Lender’s Applicable Percentage of any LC
Disbursement reimbursement obligation hereunder shall utilize the Revolving Commitment or Revenue
Bond Commitment, as applicable, of the Granting Lender to the same extent, and as if, such Loan
were made by such Granting Lender or such LC Disbursement reimbursement obligation were paid 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



 


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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, the Issuing Banks and the
Administrative Agent and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans or LC Disbursement reimbursement obligations 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 or payment of LC Disbursement reimbursement obligations and (B) disclose on a
confidential basis consistent with the provisions of Section 9.12 any non-public information
relating to its Loans or LC Disbursement reimbursement obligations 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 and issuance of any Letters of Credit, regardless of
any investigation made by any such other party or on its behalf and notwithstanding that any Agent,
any Issuing Bank 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 or any Letter of Credit is
outstanding and so long as any Revolving Commitment or Revenue Bond 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, the expiration or termination of the Letters of Credit 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, the other Loan Documents and any separate letter agreements with respect
to fees payable to the Agents, the Arrangers and the Issuing Banks 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 telecopy or other electronic transmission shall be effective as delivery of a manually executed
counterpart of this Agreement.


 


76









 








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, each Issuing Bank and each of their respective 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, such Issuing Bank or such
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 or
such Issuing Bank (as the case may be), irrespective of whether or not such Lender or such Issuing
Bank (as the case may be) shall have made any demand under this Agreement and although such
obligations may be unmatured; provided, that in the event that any Defaulting Lender shall
exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the
Administrative Agent for further application in accordance with the provisions of Section 2.20 and,
pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed
held in trust for the benefit of the Administrative Agent, the Issuing Banks and the Lenders, and
(y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing
in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such
right of setoff. The rights of each Lender, each Issuing Bank and their respective Affiliates
under this Section are in addition to other rights and remedies (including other rights of setoff)
which such Lender, such Issuing Bank and their respective Affiliates may have.



SECTION 9.09. Release of Collateral Mortgage Bonds. In the event that (a) the Senior
Unsecured Debt is rated BBB or higher by S&P and Baa2 or higher by Moody’s, or (b) the
Administrative Agent has received written confirmation from S&P and Moody’s that upon the release
and surrender of the Collateral Mortgage Bonds by the Administrative Agent, the Senior Unsecured
Debt will be rated BBB or higher by S&P and Baa2 or higher by Moody’s, then the Administrative
Agent shall, upon its receipt of written notice from the Borrower, so long as no Default has
occurred and is continuing, promptly release and surrender to or upon the order of the Borrower all
Collateral Mortgage Bonds then held by the Administrative Agent.




SECTION 9.10. 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 court or, to the extent permitted by
law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such


 


77









 






 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, any
Issuing Bank 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.



(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 9.11. 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 OR THE TRANSACTIONS
CONTEMPLATED HEREBY (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 9.12. 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 9.13. Confidentiality. Each of the Administrative Agent, the Issuing Banks
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, (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 hereunder or any suit, action or proceeding relating
to this Agreement or any other Loan Document or the enforcement


 


78









 






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 any Agent, any Issuing Bank 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 any Agent, any Issuing Bank 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 date hereof, 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.



SECTION 9.14. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan or LC Disbursement, together with
all fees, charges and other amounts which are treated as interest on such Loan or such LC
Disbursement 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 or such LC Disbursement in accordance with applicable law,
the rate of interest payable in respect of such Loan or such LC Disbursement 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 or
such LC Disbursement 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 LC
Disbursements 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 9.15. Patriot Act Notice. Each Lender and each 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 such Agent, as applicable, to identify the Borrower in accordance with the
Patriot Act.



[Remainder of Page Intentionally Left Blank]





 


79












 




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 and Treasurer 	 
	 
	 	UNION BANK, N.A., as Administrative Agent, as an

Issuing Bank and as an Existing Lender

 	 
	 	By:  	/s/ Jeffrey P. Fesenmaier
 	 
	 	 	Name:  	Jeffrey P. Fesenmaier 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-1









 







	 	 	 	 	 
	 	THE BANK OF NEW YORK MELLON, as an Issuing Bank and
as an Existing Lender

 	 
	 	By:  	/s/ Mark W. Rogers
 	 
	 	 	Name:  	Mark W. Rogers 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-2









 







	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., as a Co-Syndication Agent,
as an Issuing Bank and as an Existing Lender

 	 
	 	By:  	/s/ Nancy R. Barwig
 	 
	 	 	Name:  	Nancy R. Barwig 	 
	 	 	Title:  	Credit Executive 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-3









 







	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, as a
Co-Syndication Agent, as an Issuing Bank and as an
Existing Lender

 	 
	 	By:  	/s/ Yann Blindert
 	 
	 	 	Name:  	Yann Blindert 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-4









 







	 	 	 	 	 
	 	BANK HAPOALIM B.M., as an Existing Lender

 	 
	 	By:  	/s/ Helen H. Gateson
 	 
	 	 	Name:  	Helen H. Gateson 	 
	 	 	Title:  	Vice President 	 
	 
	 	 	 
	 	By:  	                     /s/ Frederic S. Becker
 	 
	 	 	Name:  	Frederic S. Becker 	 
	 	 	Title:  	Senior Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-5









 







	 	 	 	 	 
	 	BAYERISCHE LANDESBANK, NEW YORK BRANCH, as an
Existing Lender

 	 
	 	By:  	/s/ Rolf Siebert
 	 
	 	 	Name:  	Rolf Siebert 	 
	 	 	Title:  	First Vice President 	 
	 
	 	 	 
	 	By:  	                      /s/ Gina Hoey
 	 
	 	 	Name:  	Gina Hoey 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-6









 







	 	 	 	 	 
	 	COBANK, ACB, as an Existing Lender

 	 
	 	By:  	/s/ John H. Kemper
 	 
	 	 	Name:  	John H. Kemper 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-7









 







	 	 	 	 	 
	 	COMERICA BANK, as an Existing Lender

 	 
	 	By:  	/s/ Fatima Arshad
 	 
	 	 	Name:  	Fatima Arshad 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-8









 







	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as a Co-Documentation
Agent, as an Issuing Bank and as an Existing Lender

 	 
	 	By:  	/s/ Holland H. Williams
 	 
	 	 	Name:  	Holland H. Williams 	 
	 	 	Title:  	AVP & Portfolio Mgr. 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-9









 







	 	 	 	 	 
	 	SUNTRUST BANK, as a Co-Syndication Agent and as a New
Lender

 	 
	 	By:  	/s/ C. David Yates
 	 
	 	 	Name:  	C. David Yates 	 
	 	 	Title:  	Managing Director 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-10









 







	 	 	 	 	 
	 	BANK OF AMERICA, N.A., as a Co-Documentation Agent
and as a New Lender

 	 
	 	By:  	/s/ Justin Martin
 	 
	 	 	Name:  	Justin Martin 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-11









 







	 	 	 	 	 
	 	COMPASS BANK, an Alabama Banking Corporation, as a
New Lender

 	 
	 	By:  	/s/ Izaro Urreiztieta
 	 
	 	 	Name:  	Izaro Urreiztieta 	 
	 	 	Title:  	SVP 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-12









 







	 	 	 	 	 
	 	SCOTIABANC INC., as a New Lender

 	 
	 	By:  	/s/ J.F. Todd
 	 
	 	 	Name:  	J.F. Todd 	 
	 	 	Title:  	Managing Director 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-13









 







	 	 	 	 	 
	 	THE BANK OF NOVA SCOTIA, as a New Lender

 	 
	 	By:  	/s/ Thane Rattew
 	 
	 	 	Name:  	Thane Rattew 	 
	 	 	Title:  	Managing Director 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement



 


S-14









 







	 	 	 	 	 
	 	NATIONAL BANK OF ARIZONA, as a New Lender

 	 
	 	By:  	/s/ Reid Clark
 	 
	 	 	Name:  	Reid Clark 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page to Second Amended and Restated Tucson Electric Power Company Credit Agreement




 


S-15









 







SCHEDULE 1.01




PRICING SCHEDULE





The “Applicable Margin” and the “Commitment Fee Rate” 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:



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Level 4	 	 	Level 5	 	 	Level 6	 
	 	 	3A-/A3	 	 	BBB+/Baa1	 	 	BBB/Baa2	 	 	BBB-/Baa3	 	 	BB+/Ba1	 	 	£BB/Ba2	 
	Applicable Margin
— Eurodollar Loans
	 	 	1.625	%	 	 	1.875	%	 	 	2.125	%	 	 	2.50	%	 	 	3.00	%	 	 	3.50	%
	Applicable Margin
— ABR Loans
	 	 	0.625	%	 	 	0.875	%	 	 	1.125	%	 	 	1.50	%	 	 	2.00	%	 	 	2.50	%
	Commitment Fee Rate
	 	 	0.175	%	 	 	0.225	%	 	 	0.350	%	 	 	0.450	%	 	 	0.600	%	 	 	0.750	%







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 (i) 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 (i) the Index Debt is rated either BBB-
or higher by S&P or Baa3 or higher by Moody’s and (ii) none of Level 1 Status, Level 2 Status or
Level 3 Status exists.



“Level 5 Status” exists at any date if, at such date (i) the Index Debt is rated either BB+ or
higher by S&P or Ba1 or higher by Moody’s and (ii) none of Level 1 Status, Level 2 Status, Level 3
Status or Level 4 Status exists.


 


 









 






“Level 6 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, Level 4 Status, Level 5 Status or Level 6 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 both Moody’s and S&P, Level 6 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 this Pricing 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; and provided,
further, that if the Index Debt is rated by only one of Moody’s or S&P, the Status shall be
determined by reference to the rating of such Rating Agency.



The Applicable Margin and Commitment Fee Rate shall be increased or decreased in accordance
with the foregoing Pricing 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 











 




SCHEDULE 2.01




Commitments




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lender	 	Revolving Commitment	 	 	Revenue Bond Commitment	 	 	Aggregate Commitment	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Union Bank, N.A.
	 	$	20,565,438.07	 	 	$	35,021,609.12	 	 	$	55,587,047.19	 
	JPMorgan Chase Bank, N.A.
	 	$	18,498,408.45	 	 	$	31,501,591.55	 	 	$	50,000,000.00	 
	SunTrust Bank
	 	$	18,498,408.45	 	 	$	31,501,591.55	 	 	$	50,000,000.00	 
	Wells Fargo Bank, National Association
	 	$	18,498,408.45	 	 	$	31,501,591.55	 	 	$	50,000,000.00	 
	Bank of America, N.A.
	 	$	16,648,567.60	 	 	$	28,351,432.40	 	 	$	45,000,000.00	 
	U.S. Bank National Association
	 	$	16,648,567.60	 	 	$	28,351,432.40	 	 	$	45,000,000.00	 
	CoBank, ACB
	 	$	14,798,726.76	 	 	$	25,201,273.24	 	 	$	40,000,000.00	 
	Compass Bank, an Alabama Banking
Corporation
	 	$	14,798,726.76	 	 	$	25,201,273.24	 	 	$	40,000,000.00	 
	Scotiabanc Inc.
	 	$	7,399,363.38	 	 	$	12,600,636.62	 	 	$	20,000,000.00	 
	The Bank of Nova Scotia
	 	$	7,399,363.38	 	 	$	12,600,636.62	 	 	$	20,000,000.00	 
	Bank Hapoalim B.M.
	 	$	9,249,204.22	 	 	$	15,750,795.78	 	 	$	25,000,000.00	 
	Bayerische Landesbank, New York Branch
	 	$	9,249,204.22	 	 	$	15,750,795.78	 	 	$	25,000,000.00	 
	Comerica Bank
	 	$	9,249,204.22	 	 	$	15,750,795.78	 	 	$	25,000,000.00	 
	National Bank of Arizona
	 	$	9,249,204.22	 	 	$	15,750,795.78	 	 	$	25,000,000.00	 
	The Bank of New York Mellon
	 	$	9,249,204.22	 	 	$	15,750,795.78	 	 	$	25,000,000.00	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total Commitments
	 	$	200,000,000.00	 	 	$	340,587,047.19	 	 	$	540,587,047.19	 





 


 









 





SCHEDULE 2.04A




Existing Revolving Letters of Credit




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Letter of Credit	 	 	 	 	 	 	 	 	 	 
	Issuing Bank	 	Number	 	 	Stated Amount	 	 	Issuance Date	 	 	Expiration Date	 
	Union Bank, N.A.
	 	 	S307009M	 	 	$	500,000.00	 	 	 	10/01/2008	 	 	 	03/31/2011	 





 


 









 





SCHEDULE 2.04B




Existing Revenue Bond Letters of Credit




	 	 	 	 	 
	Revenue Bond Letter of Credit	 	Revenue Bonds
	 
	 	 	 	 
	1.

	 	Irrevocable Letter of Credit No.
593269, dated March 30, 2007, as
amended by the First Amendment
thereto, dated as of November 8,
2010, in the stated amount of
$40,078,356.16, issued by Wells
Fargo Bank, National Association in
favor of U.S. Bank Trust National
Association, as Trustee and Agent.

	 	Industrial Development
Revenue Bonds, 1982 Series
A (Tucson Electric Power
Company Irvington Project),
in the original aggregate
principal amount of
$100,000,000 and the
current outstanding amount
of $38,700,000, issued by
The Industrial Development
Authority of the County of
Pima.

	 
	 	 	 	 
	2.

	 	Irrevocable Letter of Credit No.
SLCPPDX05202, dated November 9,
2010, in the stated amount of
$103,835,616.44, issued by U.S. Bank
National Association in favor of
U.S. Bank Trust National
Association, as Trustee and Agent.

	 	Industrial Development
Revenue Bonds, 1983 Series
A (Tucson Electric Power
Company Springerville
Project), in the original
aggregate principal amount
of $100,000,000, issued by
The Industrial Development
Authority of the County of
Apache.

	 
	 	 	 	 
	3.

	 	Irrevocable Letter of Credit No.
593270, dated March 30, 2007, as
amended by the First Amendment
thereto, dated as of November 8,
2010, in the stated amount of
$20,657,534.25, issued by Wells
Fargo Bank, National Association in
favor of U.S. Bank Trust National
Association, as Trustee.

	 	Industrial Development
Revenue Bonds, 1985 Series
A (Tucson Electric Power
Company Springerville
Project), in the original
aggregate principal amount
of $20,000,000, issued by
The Industrial Development
Authority of the County of
Apache.

	 
	 	 	 	 
	4.

	 	Irrevocable Letter of Credit No.
S00049578, dated March 25, 2004, as
amended by the First Amendment
thereto, dated as of May 4, 2005,
the Second Amendment thereto, dated
as of January 18, 2007, and the
Third Amendment thereto, dated as of
November 9, 2010, in the stated
amount of $41,321,095.89, issued by
The Bank of New York Mellon
(formerly known as The Bank of New
York) in favor of U.S. Bank Trust
National Association, as Trustee and
Agent.

	 	Industrial Development
Revenue Bonds, 1982 Series
A (Tucson Electric Power
Company Projects), in the
original aggregate
principal amount of
$100,000,000 and the
current outstanding amount
of $39,900,000, issued by
The Industrial Development
Authority of the County of
Pima.

	 
	 	 	 	 
	5.

	 	Irrevocable Letter of Credit No.
S00047053, dated November 25, 2002,
as amended by the First Amendment
thereto, dated as of March 25, 2004,
the Second Amendment thereto, dated
as of May 4, 2005, the Third
Amendment thereto, dated as of
January 18, 2007, and the Fourth
Amendment thereto, dated as of
November 9, 2010, in the stated
amount of $51,805,555.56, issued by
The Bank of New York Mellon
(formerly known as The Bank of New
York) in favor of U.S. Bank Trust
National Association, as Trustee and
Agent.

	 	Industrial Development
Revenue Bonds, 1983 Series
C (Tucson Electric Power
Company Springerville
Project), in the original
aggregate principal amount
of $50,000,000, issued by
The Industrial Development
Authority of the County of
Apache.






 


 









 





	 	 	 	 	 
	Revenue Bond Letter of Credit	 	Revenue Bonds
	 
	 	 	 	 
	6.

	 	Irrevocable Letter of Credit No.
S00047054, dated November 25, 2002,
as amended by the First Amendment
thereto, dated as of March 25, 2004,
the Second Amendment thereto, dated
as of May 4, 2005, the Third
Amendment thereto, dated as of
January 18, 2007, and the Fourth
Amendment thereto, dated as of
November 9, 2010, in the stated
amount of $82,888,888.89, issued by
The Bank of New York Mellon
(formerly known as The Bank of New
York) in favor of U.S. Bank Trust
National Association, as Trustee and
Agent.

	 	Industrial Development
Revenue Bonds, 1983 Series
B (Tucson Electric Power
Company Springerville
Project), in the original
aggregate principal amount
of $80,000,000, issued by
The Industrial Development
Authority of the County of
Apache.







 


2 









 







EXHIBIT A




[**FORM OF**]




TUCSON ELECTRIC POWER COMPANY




ASSIGNMENT AND ASSUMPTION




Reference is made to the Amended and Restated Credit Agreement, dated as of August 11, 2006
(as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Tucson Electric Power Company, an Arizona corporation (the “Company”), the Lenders
party thereto, the Issuing Banks party thereto, The Bank of New York and JPMorgan Chase Bank, N.A.,
as Co-Syndication Agents, Wells Fargo Bank, National Association and ABN AMRO Bank N.V., as
Co-Documentation Agents, and Union Bank of California, N.A., as Administrative Agent. Terms used
herein and not otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed
to and incorporated herein by reference and made a part of this Assignment and Assumption as if set
forth herein in full.



SECTION 1. The Assignor hereby sells and assigns, without recourse, to the Assignee, and the
Assignee hereby purchases and assumes, without recourse, from the Assignor, subject to and in
accordance with the Terms and Conditions set forth in Annex 1 attached hereto, effective as of the
Effective Date set forth below (but not prior to the registration of the information contained
herein in the Register pursuant to Section 9.04(d) of the Credit Agreement), the interests set
forth below (the “Assigned Interest”) in the Assignor’s rights and obligations under the
Credit Agreement and the other Loan Documents, including, without limitation, the amounts and
percentages set forth below of (i) the Aggregate Commitment of the Assignor on the Effective Date,
(ii) the Loans owing to the Assignor which are outstanding on the Effective Date and (iii)
participations of the Assignor in Letters of Credit which are outstanding on the Effective Date.
From and after the Effective Date (i) the Assignee shall be a party to and be bound by the
provisions of the Credit Agreement and, to the extent of the interests assigned by this Assignment
and Assumption, have the rights and obligations of a Lender thereunder and under the other Loan
Documents and (ii) the Assignor shall, to the extent of the Assigned Interest, relinquish its
rights and be released from its obligations under the Credit Agreement and the other Loan
Documents.



SECTION 2. This Assignment and Assumption is being delivered to the Administrative Agent
together with (i) if the Assignee is organized under the laws of a jurisdiction outside the United
States, any documentation referred to in Section 2.15(d) of the Credit Agreement, duly completed
and executed by such Assignee and (ii) if the Assignee is not already a Lender under the Credit
Agreement, a completed Administrative Questionnaire.


 


A-1









 







SECTION 3. THIS ASSIGNMENT AND ASSUMPTION SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK.



	 	 	 	 	 
	Date of Assignment:

	 	 
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Legal Name of Assignor:

	 	 
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Legal Name of Assignee:

	 	 
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Assignee’s Address for Notices:

	 	 
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Effective Date of Assignment:

	 	 
	 	 
	 

	 	 	 	 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Percentage Assigned of	 
	 	 	 	 	 	 	Aggregate Commitment and of	 
	 	 	Principal Amount	 	 	Revolving Commitment and/or	 
	 	 	Assigned	 	 	Revenue Bond Commitment**	 
	 
	 	 	 	 	 	 	 	 
	Aggregate Commitment
	 	$	 	 	 	 	____________	%
	 
	 	 	 	 	 	 	 	 
	Revolving
Commitment
	 	$	 	*	 	 	____________	%
	 
	 	 	 	 	 	 	 	 
	Revenue Bond
Commitment
	 	$	 	*	 	 	____________	%








 




	 	 	 
	**	 	Set forth, to at least 8 decimals, as a percentage of
the Aggregate Commitments, Revolving Commitments and Revenue Bond
Commitments, respectively, of all Lenders, Revolving Lenders and Revenue
Bond Lenders, respectively.

	 
	*	 	The sum of the Revolving Commitment and Revenue Bond
Commitment assigned shall be equal to the amount of the Aggregate Commitment
assigned.




 


A-2









 









	 	 	 	 	 
	The terms set forth on the foregoing

pages are hereby agreed to:	 	 
	 
	 	 	 	 
	[___________________________],

as Assignor	 	 
	 
	 	 	 	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	[___________________________],

as Assignee	 	 
	 
	 	 	 	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 






(signatures continue on next page)




[Assignment and Assumption Agreement]



 


A-3









 










	 	 	 	 	 
	Accepted:*	 	 
	 
	 	 	 	 
	UNION BANK OF CALIFORNIA, N.A.,

as Administrative Agent,	 	 
	 
	 	 	 	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	[ISSUING BANKS]	 	 
	 
	 	 	 	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 
	 
	 	 	 	 
	Accepted:*	 	 
	 
	 	 	 	 
	TUCSON ELECTRIC POWER COMPANY	 	 
	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 








 




	 	 	 
	*	 	To be completed to the extent consent is required under
Section 9.04(b) of the Credit Agreement.






[Assignment and Assumption Agreement]





 


A-4











 




ANNEX 1




TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION





1. Representations and Warranties.



1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any
lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the Credit Agreement or any
other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its
Subsidiaries or Affiliates or any other Person of any of their respective obligations under any
Loan Document.



1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power
and authority, and has taken all action necessary, to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby and to become a Lender under the
Credit Agreement, (ii) it meets all requirements of an assignee under Section 9.04 of the Credit
Agreement (subject to receipt of such consents as may be required under the Credit Agreement),
(iii) from and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together
with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as
applicable, and such other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Assumption and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision independently and
without reliance on the Administrative Agent or any other Lender, and (v) if it is a Foreign
Lender, attached to this Assignment and Assumption is any documentation required to be delivered by
it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; (b)
appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental thereto; and (c) agrees that
(i) it will, independently and without reliance on the Administrative Agent, the Assignor or any
other Lender, and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under the Loan Documents,
and (ii) it will perform in accordance with their terms all of the obligations which by the terms
of the Loan Documents are required to be performed by it as a Lender.


 


A-5









 





2. Payments. From and after the Effective Date, the Administrative Agent shall make
all payments in respect of the Assigned Interest (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to but excluding the
Effective Date and to the Assignee for amounts which have accrued from and after the Effective
Date.



3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and assigns. This
Assignment and Assumption may be executed in any number of counterparts, which together shall
constitute one instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a manually executed
counterpart of this Assignment and Assumption.



 


A-6









 







EXHIBIT B




 



 

 








Bond Delivery Agreement




 






TUCSON ELECTRIC POWER COMPANY




to




UNION BANK, N.A.,

as Administrative Agent




 






Dated as of November 9, 2010




 






Relating to

First Mortgage Bonds, Collateral Series I




 






 



 

 









 


 









 











THIS BOND DELIVERY AGREEMENT, dated as of November 9, 2010, is between Tucson Electric
Power Company, an Arizona corporation (the “Company”), and Union Bank, N.A. (formerly
known as Union Bank of California, N.A.), as administrative agent (in such capacity,
together with its successors and assigns in such capacity, the “Administrative Agent”) under the
Second Amended and Restated Credit Agreement, dated as of November 9, 2010, among the Company, the
Lenders party thereto, the Issuing Banks party thereto, JPMorgan Chase Bank, N.A., SunTrust Bank
and Wells Fargo Bank, National Association, as Co-Syndication Agents, Bank of America, N.A. and
U.S. Bank National Association, as Co-Documentation Agents, and Union Bank, N.A. (formerly known as
Union Bank of California, N.A.), as Administrative Agent, as amended, amended and restated,
supplemented or otherwise modified from time to time (the “Credit Agreement”).



Whereas, the Company has entered into the Credit Agreement and has requested the
issuance of the Revenue Bond Letters of Credit and may from time to time borrow Loans and request
the issuance of additional Letters of Credit (such terms and all other capitalized terms used
herein without definition having the meanings assigned to them in the Credit Agreement) in
accordance with the provisions of the Credit Agreement; and



Whereas, the Company has established its First Mortgage Bonds, Collateral Series I,
in the aggregate principal amount of up to $540,588,000.00 (the “Series 10 Bonds”), to be issued
under and in accordance with, and secured by, the Indenture of Mortgage and Deed of Trust, dated as
of December 1, 1992, between the Company and The Bank of New York Mellon, formerly known as The
Bank of New York (successor in trust to Bank of Montreal Trust Company), as trustee (the
“Trustee”), as amended and supplemented and as further supplemented by Supplemental Indenture No.
11, dated as of November 1, 2010 (such Indenture, as so amended and supplemented, and such
Supplemental Indenture being hereinafter sometimes called the “General First Mortgage” and
“Supplemental Indenture No. 11”, respectively); and



Whereas, the Company proposes to issue and deliver to the Administrative Agent, for
its benefit and the benefit of the Lenders and the Issuing Banks, the Series 10 Bonds in order to
provide collateral security for the obligation of the Company under the Credit Agreement to pay the
Obligations;



Now, Therefore, in consideration of the premises, of the agreements of the
Lenders and Issuing Banks in the Credit Agreement, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company and the Administrative
Agent hereby agree as follows:



ARTICLE I




Series 10 Bonds




SECTION 1.1. Delivery of Series 10 Bonds.




In order to provide collateral security for the obligation of the Company to pay the
Obligations, as aforesaid, the Company hereby delivers to the Administrative Agent Series 10 Bonds
in the aggregate principal amount of $540,588,000.00, maturing on May 1, 2015 and
bearing interest as provided in Supplemental Indenture No. 11. The obligation of the Company
to pay the principal of and interest on the Series 10 Bonds shall be deemed to have been satisfied
and discharged in full or in part, as the case may be, to the extent of the payment by the Company
of the Obligations, all as set forth in subdivision (u) of Article II of Supplemental Indenture No.
11 and in the Series 10 Bonds.


 


1









 





The Series 10 Bonds are registered in the name of the Administrative Agent and shall be owned
and held by the Administrative Agent, subject to the provisions of this Agreement, for its benefit
and the benefit of the Lenders and the Issuing Banks, and the Company shall have no interest
therein. The Administrative Agent shall be entitled to exercise all rights of bondholders under the
General First Mortgage with respect to the Series 10 Bonds.




The Administrative Agent hereby acknowledges receipt of the Series 10 Bonds.



SECTION 1.2. Payments on Series 10 Bonds.




Any payments received by the Administrative Agent on account of the principal of or interest
on the Series 10 Bonds shall be distributed by the Administrative Agent in accordance with the
applicable provisions of the Credit Agreement, and the Company hereby consents to such
distribution.



ARTICLE II




No Transfer of Bonds; Surrender of Bonds




SECTION 2.1 No Transfer of Bonds.




The Administrative Agent shall not sell, assign or otherwise transfer any Series 10 Bonds
delivered to it under this Agreement except to a successor administrative agent under the Credit
Agreement. The Company may take such actions as it shall deem necessary, desirable or appropriate
to effect compliance with such restrictions on transfer, including the issuance of stop-transfer
instructions to the trustee under the General First Mortgage or any other transfer agent
thereunder.



SECTION 2.2 Surrender of Bonds.




(a) The Administrative Agent shall forthwith surrender to or upon the order of the Company all
Series 10 Bonds held by it at the first time at which the Aggregate Commitments shall have been
terminated, no Letter of Credit shall be outstanding and all Obligations shall have been paid in
full.



(b) Upon any permanent reduction in the Revolving Commitments or the Revenue Bond Commitments
pursuant to Section 2.07(b) of the Credit Agreement, the Administrative Agent shall forthwith
surrender to or upon the order of the Company Series 10 Bonds in an aggregate principal amount
equal to the excess of the aggregate principal amount of the Series 10 Bonds held by the
Administrative Agent over the sum of (i) the greater at such time of the total Revolving
Commitments and the total Revolving Credit Exposure plus (ii) the greater at such time of
the total Revenue Bond Commitments and the total Revenue Bond Credit Exposure,
provided that the Administrative Agent shall have received, in accordance with Section 6 of
Article II of the General First Mortgage, replacement Series 10 Bonds in an aggregate principal
amount equal to the sum of clauses (i) and (ii) above.



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



[Remainder of page intentionally left blank]



 


2









 





IN WITNESS WHEREOF, the Company and the Administrative Agent have caused this Agreement to be
executed and delivered as of the date first above written.



	 	 	 	 	 
	 	Tucson Electric Power Company

 	 
	 	By  	
 	 
	 	 	Name:  	Kentton C. Grant 	 
	 	 	Title:  	Vice President 	 
	 
	 	Union Bank, N.A.,

as Administrative Agent

 	 
	 	By  	
 	 
	 	 	Vice President 	 
	 	 	 	 
	 



Signature Page to Bond Delivery Agreement




 


 









 







EXHIBIT C-1




[**FORM OF**]




[SECOND AMENDED AND RESTATED] REVENUE BOND PLEDGE AGREEMENT





[SECOND AMENDED AND RESTATED] REVENUE BOND PLEDGE AGREEMENT, dated as of                         , 20   
(this “Revenue Bond Pledge Agreement”), made by TUCSON ELECTRIC POWER COMPANY, an Arizona
corporation (the “Pledgor”), to                                          (the “Bank”) pursuant to the
Second Amended and Restated Credit Agreement, dated as of November 9, 2010, among the Pledgor, the
Lenders party thereto, the Issuing Banks party thereto, JPMorgan Chase Bank, N.A., SunTrust Bank
and Wells Fargo Bank, National Association, as Co-Syndication Agents, Bank of America, N.A. and
U.S. Bank National Association, as Co-Documentation Agents, and Union Bank, N.A. (formerly known as
Union Bank of California, N.A.), as Administrative Agent (hereinafter, as the same may from time to
time be amended, restated, supplemented or otherwise modified, called the “Credit
Agreement”):



WITNESSETH:




[WHEREAS, the Pledgor and the Bank previously entered into that certain Amended and Restated
Revenue Bond Pledge Agreement, dated as of August 11, 2006 (as amended, supplemented or otherwise
modified from time to time prior to the date hereof, the “Existing Pledge Agreement”);]



WHEREAS, The Industrial Development Authority of the County of                      (the
“Issuer”) has issued its Industrial Development Revenue Bonds,            Series       (Tucson
Electric Power Company                     ) (the “Bonds”), under the Indenture of Trust, dated
as of               ,       (as the same may from time to time be amended, supplemented or otherwise
modified, the “Indenture”), between the Issuer and U.S. Bank Trust National Association
(successor in interest to Morgan Guaranty Trust Company of New York), as Trustee (the
“Trustee”);



WHEREAS, the Indenture requires the Agent (as defined in the Indenture) (the “Agent”)
to purchase Bonds under certain circumstances as set forth in Section 2.07(g)(iii) of the Indenture
from the holders thereof;



WHEREAS, the Pledgor has agreed to enter into the Credit Agreement in order to cause the Bank
to issue a letter of credit (the “Letter of Credit”) thereunder which may be used,
inter alia, to pay the purchase price of the Bonds;



WHEREAS, pursuant to Section 2.04(f)(ii) of the Credit Agreement and Section 10.28(c) of the
Indenture, to the extent that Bonds are purchased from the proceeds of a drawing on the Letter of
Credit pursuant to Sections 2.01(g)(iii) and 10.27(a)(v) of the Indenture for which the Bank has
not been reimbursed with proceeds from remarketing the Bonds, the Bonds
purchased with the proceeds of such drawing shall be “Company Bonds” (as defined in the
Indenture) (the “Company Bonds”) that will be delivered to the Bank and registered in the
name of or at the direction of the Bank and subject to the pledge and security interest in favor of
the Bank created by this Revenue Bond Pledge Agreement; and


 


C-1-1









 





WHEREAS, it is a condition precedent to the obligations of the Bank to enter into the Credit
Agreement that the Pledgor shall have executed and delivered this Revenue Bond Pledge Agreement to
the Bank;



NOW, THEREFORE, in consideration of the premises and in order to induce the Bank to enter into
the Credit Agreement and issue the Letter of Credit thereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby
agrees with the Bank [that the Existing Pledge Agreement is hereby amended and restated, without
novation,] as follows:



1. Defined Terms. Unless otherwise defined herein, terms defined in the Credit
Agreement shall have such defined meanings when used herein.



2. Pledge. (a) The Pledgor hereby pledges, assigns, hypothecates, transfers, and
delivers to the Bank (on behalf of and for the ratable benefit of the Revenue Bond Lenders, in
accordance with their respective Applicable Percentages), and hereby grants to the Bank (on behalf
of and for the ratable benefit of the Revenue Bond Lenders, in accordance with their respective
Applicable Percentages) a first-priority Lien on and security interest in, all of the Pledgor’s
right, title and interest in and to the Company Bonds, the interest thereon, all proceeds thereof
and all security entitlements relating thereto, in each case whether now owned or existing or
hereafter created, acquired or existing, as collateral security for the prompt and complete payment
when due of all amounts due in respect of (i) the reimbursement obligation of the Pledgor set forth
in Section 2.04(f)(ii) of the Credit Agreement and interest on such amounts as set forth in Section
2.04(i) of the Credit Agreement, and (ii) any and all Revenue Bond Loans and interest thereon
payable by the Pledgor pursuant to the Credit Agreement (all the foregoing being hereinafter
called the “Obligations”). Subject to subsection (b) below, upon delivery of the Company
Bonds to the Bank, the Pledgor shall cause the Registrar (as defined in the Indenture) to register
such Company Bonds in the name of the Bank in accordance with Sections 2.07 and 10.28(c) of the
Indenture.



(b) For so long as the Company Bonds are registered in the name of The Depository Trust
Company (“DTC”), the Pledgor shall cause DTC to make appropriate entries on its books
increasing the appropriate securities account of the Trustee or the Agent (as applicable), as a
direct participant of DTC, to include the Company Bonds, and shall cause the Trustee or the Agent
(as applicable) to identify, by book-entry or otherwise, the Company Bonds as belonging to, or
subject to a security interest in favor of, the Bank, and shall send the Bank a confirmation of the
transfer of the Company Bonds to the Bank. The Pledgor shall cause the Trustee or the Agent (as
applicable) to continuously identify the Company Bonds on its books as being held for the account
of the Bank and shall take all such action reasonably requested in writing by the Bank to ensure
that the Bank shall be the “entitlement holder” with respect to the Company Bonds having “control”
of all “security entitlements” related to the Company Bonds within the
meaning of Article 8 of the Uniform Commercial Code as in effect from time to time in the
State of New York.


 


C-1-2









 





3. Payments on the Bonds. If, while this Revenue Bond Pledge Agreement is in effect,
the Pledgor shall become entitled to receive or shall receive any payment in respect of the Company
Bonds, the Pledgor agrees to accept the same as the Bank’s agent and to hold the same in trust on
behalf of the Bank and to deliver the same forthwith to the Bank. All sums of money so paid in
respect of any interest on, or portion of purchase price equal to the amount of accrued interest
on, the Company Bonds which are received by the Pledgor and paid to the Bank shall be delivered to
the Administrative Agent and applied in accordance with Section 2.04(f)(ii) of the Credit
Agreement. All sums of money so paid in respect of any payment of principal of, or portion of
purchase price equal to the principal amount of, the Company Bonds which are received by the
Pledgor and paid to the Bank shall be delivered to the Administrative Agent and credited against
the obligations of the Pledgor set forth in Section 2.04(f)(ii) or 2.08(a)(ii) (as applicable) of
the Credit Agreement.



4. Collateral. All property at any time pledged with the Bank hereunder (whether
described herein or not) and all income therefrom and proceeds thereof, are herein collectively
sometimes called the “Collateral”.



5. Release of Company Bonds. The Bank will release Company Bonds from the Lien of
this Revenue Bond Pledge Agreement in accordance with Section 2.04(f)(ii) of the Credit Agreement,
and upon such release will deliver such Company Bonds to the Pledgor or, if requested in writing by
the Pledgor, to the Remarketing Agent (as defined in the Indenture) in accordance with Section
10.23 of the Indenture. For the avoidance of doubt, it is understood and agreed that the Bank will
not release any Company Bond from the Lien of this Revenue Bond Pledge Agreement (including,
without limitation, any such release in connection with the exercise of remedies by the Bank
hereunder or under the Credit Agreement) unless the stated amount of the Letter of Credit shall
have been reinstated by an amount not less than the principal amount of such Company Bond. For so
long as the Company Bonds are registered in the name of DTC, the Bank instructs and authorizes each
of the Trustee and the Agent, upon receipt of written notice from the Bank of any such release, (a)
to cause DTC to make appropriate entries on its books decreasing the appropriate securities account
of the Trustee or the Agent (as applicable) to exclude such Company Bonds and (b) to reclassify, by
book-entry or otherwise, such Company Bonds as not subject to a security interest in favor of the
Bank.



6. Rights of the Bank. The Bank shall not be liable for failure to collect or realize
upon the Obligations or any collateral security or guarantee therefor, or any part thereof, or for
any delay in so doing, nor shall the Bank be under any obligation to take any action whatsoever
with regard thereto. If an Event of Default has occurred and is continuing, the Bank may
thereafter, without notice, exercise all rights, privileges or options pertaining to any Company
Bonds as if it were the absolute owner thereof, upon such terms and conditions as it may determine,
all without liability except to account for property actually received by it, but the Bank shall
have no duty to exercise any of the aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing.


 


C-1-3









 





7. Remedies. In the event that any portion of the Obligations has been declared due
and payable, the Bank, without demand of performance or other demand, advertisement or notice of
any kind (except the notice specified below of the time and place of public or private sale) to or
upon the Pledgor or any other Person (all and each of which demands, advertisements and/or notices
are hereby expressly waived), may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral, or any part
thereof, in one or more parcels at public or private sale or sales, at any exchange, broker’s board
or at any of the Bank’s offices or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk, with the right to the Bank upon any such sale or sales,
public or private, to purchase the whole or any part of said Collateral so sold, free of any right
or equity of redemption in the Pledgor, which right or equity is hereby expressly waived or
released. The Bank shall pay over the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind
incurred in taking any of the foregoing actions or incidental to the care or safekeeping of, or
otherwise with respect to, any and all of the Collateral or in any way relating to the rights of
the Bank hereunder (including, without limitation, reasonable attorneys’ fees and legal expenses),
to the Administrative Agent to apply such net proceeds to the payment in whole or in part of the
Obligations in such order as the Administrative Agent may elect, the Pledgor remaining liable for
any deficiency remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Bank of any other amount required by any provision of law,
including, without limitation, Section 9-615 of the Uniform Commercial Code as in effect in the
State of New York at such time, need the Bank account for the surplus, if any, to the Pledgor. The
Pledgor agrees that the Bank need not give more than ten (10) days’ notice of the time and place of
any public sale or of the time after which a private sale or other intended disposition is to take
place and that such notice is reasonable notification of such matters. No notification need be
given to the Pledgor if it has signed after default a statement renouncing or modifying any right
to notification of sale or other intended disposition. In addition to the rights and remedies
granted to it in this Revenue Bond Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to any of the Obligations, the Bank shall have all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of New York from time to
time in effect. The Pledgor shall be liable for the deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all Obligations due and payable by the
Pledgor and any other amounts to which the Bank is entitled, and the fees of any attorneys employed
by the Bank to collect such deficiency.



8. Representations, Warranties and Covenants of the Pledgor. The Pledgor represents
and warrants that: (a) on the date of delivery to the Bank of any Company Bonds described herein,
neither the Issuer, the Agent, the Remarketing Agent (as defined in the Indenture) nor the Trustee
will have any right, title or interest in or to the Company Bonds; (b) it has, and on the date of
delivery to or for the benefit of the Bank of any Company Bonds will have, full power, authority
and legal right to pledge all of its right, title and interest in and to the Company Bonds pursuant
to this Revenue Bond Pledge Agreement; (c) this Revenue Bond Pledge Agreement has been duly
authorized, executed and delivered by the Pledgor and constitutes the legal, valid and binding
obligation of the Pledgor enforceable in accordance with its terms; (d) no consent of any other
party (including, without limitation, any shareholders or


 


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creditors of the Pledgor) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with, any Governmental
Authority, domestic or foreign, is required to be obtained by the Pledgor in connection with the
execution, delivery or performance of this Revenue Bond Pledge Agreement; (e) the execution,
delivery and performance of this Revenue Bond Pledge Agreement will not violate any provision of
any applicable law, rule or regulation or of any order, judgment, writ, award or decree of any
court, arbitrator or other Governmental Authority, domestic or foreign, or of the certificate of
incorporation or by-laws of the Pledgor or of any securities issued by the Pledgor or any of its
Subsidiaries, or of any mortgage, indenture, lease, contract, or other agreement, instrument or
undertaking to which the Pledgor or any of its Subsidiaries is a party or which purports to be
binding upon the Pledgor or any of its Subsidiaries or upon any of their respective assets, and
will not result in the creation or imposition of any Lien on any of the assets of the Pledgor or
any of its Subsidiaries except as contemplated by this Revenue Bond Pledge Agreement; and (f) the
pledge, assignment and delivery of such Company Bonds pursuant to this Revenue Bond Pledge
Agreement will create a valid first Lien on, and a first perfected security interest in, all right,
title and interest of the Pledgor in or to such Company Bonds and the proceeds thereof, subject to
no prior Lien or to any agreement purporting to grant to any third party a Lien in the property or
assets of the Pledgor which could include the Company Bonds. The Pledgor covenants and agrees that
it will defend the Bank’s right, title and Lien in and to the Company Bonds and the proceeds
thereof against the claims and demands of all Persons whomsoever; and covenants and agrees that it
will have like title to and right to pledge any other property at any time hereafter pledged to the
Bank as Collateral hereunder and will likewise defend the Bank’s right thereto and Lien therein.



9. No Disposition, etc. Without the prior written consent of the Bank, the Pledgor
agrees that it will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Collateral, nor will it create, incur or permit to exist any Lien with
respect to any of the Collateral, or any interest therein, or any proceeds thereof, except for the
Lien provided for by this Revenue Bond Pledge Agreement and sales contemplated or permitted hereby.




10. Sale of Collateral.



(a) The Pledgor recognizes that the Bank may not deem it desirable to effect a public sale of
any or all the Company Bonds by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the “Securities Act”), and applicable state securities laws or otherwise,
but may deem it desirable to resort to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Bank shall be under no obligation to delay a sale of any of
the Company Bonds for the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act, or under applicable state
securities laws, even if the issuer would agree to do so.


 


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(b) The Pledgor further agrees to do or cause to be done all such other acts and things as may
be necessary to make such sale or sales of any portion or all of the Company Bonds valid and
binding and in compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or other Governmental
Authorities, domestic or foreign, having jurisdiction over any such sale or sales, all at the
Pledgor’s expense. The Pledgor further agrees that a breach of any of the covenants contained in
this paragraph 10 will cause irreparable injury to the Bank and that the Bank has no adequate
remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant
contained in this paragraph shall be specifically enforceable against the Pledgor and the Pledgor
hereby waives and agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred under the Credit
Agreement. The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Bank by reason of a breach of any of such covenants and,
consequently, agrees that, if the Bank shall sue for damages for breach, it shall pay, as
liquidated damages and not as a penalty, an amount equal to the value of the Company Bonds on the
date the Bank shall demand compliance with this paragraph.



11. Further Assurances. The Pledgor agrees that at any time and from time to time
upon the written request of the Bank, the Pledgor will execute and deliver such further documents
and do such further acts and things as the Bank may reasonably request in order to effect the
purposes of this Revenue Bond Pledge Agreement.



12. Severability. Any provision of this Revenue Bond Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.



13. No Waiver; Cumulative Remedies. The Bank shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder and no waiver shall be
valid unless in writing, signed by the Bank, and then only to the extent therein set forth. A
waiver by the Bank of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Bank would otherwise have on any future occasion. No failure
to exercise nor any delay in exercising on the part of the Bank any right, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.



14. Waivers; Amendments; Applicable Law. None of the terms or provisions of this
Revenue Bond Pledge Agreement may be waived, altered, modified or amended except by an instrument
in writing, duly executed by the Bank. This Revenue Bond Pledge Agreement and all obligations of
the Pledgor hereunder shall be binding upon the successors and assigns of the Pledgor, and shall,
together with the rights and remedies of the Bank hereunder, inure to the benefit of the Bank and
the Revenue Bond Lenders and their respective successors and assigns.
This Revenue Bond Pledge Agreement shall be governed by, and be construed and interpreted in
accordance with, the laws of the State of New York.



15. Counterparts. This Revenue Bond Pledge Agreement may be signed in any number of
counterpart copies, and all such copies shall constitute one and the same instrument.



[Signature Pages to Follow]



 


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IN WITNESS WHEREOF, the Pledgor has caused this Revenue Bond Pledge Agreement to be duly
executed and delivered by its duly authorized officers, and its corporate seal to be affixed, on
the day and year first above written.



	 	 	 	 	 
	 	TUCSON ELECTRIC POWER COMPANY

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 	 	 
	[SEAL]	 	 
	 
	 	 	 	 
	Attest:	 	 
	 
	 	 	 	 
	 	 	 
	Secretary	 	 
	 
	 	 	 	 
	AGREED AND ACCEPTED:	 	 
	 
	 	 	 	 
	[NAME OF BANK]	 	 
	 
	 	 	 	 
	By:

	 	 
	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 





 


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EXHIBIT C-2




[**FORM OF**]




[SECOND AMENDED AND RESTATED] REVENUE BOND PLEDGE AGREEMENT




[SECOND AMENDED AND RESTATED] REVENUE BOND PLEDGE AGREEMENT, dated as of                         , 20   
(this “Revenue Bond Pledge Agreement”), by and among (i) TUCSON ELECTRIC POWER COMPANY, an
Arizona corporation (the “Pledgor”), (ii)                                          (the “Bank”), as an
Issuing Bank under the Second Amended and Restated Credit Agreement, dated as of November 9, 2010,
among the Pledgor, the Lenders party thereto, the Issuing Banks party thereto, JPMorgan Chase Bank,
N.A., SunTrust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents, Bank of
America, N.A. and U.S. Bank National Association, as Co-Documentation Agents, and Union Bank, N.A.
(formerly known as Union Bank of California, N.A.), as Administrative Agent (hereinafter, as the
same may from time to time be amended, restated, supplemented or otherwise modified, called the
“Credit Agreement”), and (iii) U.S. BANK TRUST NATIONAL ASSOCIATION, as Tender Agent under
the Indenture referred to below, as custodian (in such capacity, together with its successors and
assigns in such capacity, the “Custodian”).



WITNESSETH:




[WHEREAS, the Pledgor, the Bank and the Custodian previously entered into that certain Amended
and Restated Revenue Bond Pledge Agreement, dated as of August 11, 2006 (as amended, supplemented
or otherwise modified from time to time prior to the date hereof, the “Existing Pledge
Agreement”);]



WHEREAS, The Industrial Development Authority of the County of Apache (the “Issuer”)
has issued its Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric Power Company
Springerville Project) (the “Bonds”), under the Indenture of Trust, dated as of December 1,
1985 (as the same may from time to time be amended, supplemented or otherwise modified, the
“Indenture”), between the Issuer and U.S. Bank Trust National Association (successor in
interest to Morgan Guaranty Trust Company of New York), as Trustee (the “Trustee”);



WHEREAS, the Indenture requires the Tender Agent (as defined in the Indenture) (the
“Tender Agent”) to purchase Bonds under certain circumstances as set forth in Section
2.02(a) of the Indenture from the holders thereof;



WHEREAS, the Pledgor has agreed to enter into the Credit Agreement in order to cause the Bank
to issue a letter of credit (the “Letter of Credit”) thereunder which may be used,
inter alia, to pay the purchase price of the Bonds;


 


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WHEREAS, pursuant to Section 2.04(f)(ii) of the Credit Agreement and Section 14.07(c)(ii) of
the Indenture, to the extent that Bonds are purchased from the proceeds of a
drawing on the Letter of Credit pursuant to Sections 2.02(a) and 14.03(a)(v) of the Indenture
for which the Bank has not been reimbursed with proceeds from remarketing the Bonds, the Bonds
purchased with the proceeds of such drawing (such Bonds being referred to herein as “Company
Bonds”) are required to be held by the Tender Agent for the account of the Company and subject
to the pledge and security interest in favor of the Bank created by this Revenue Bond Pledge
Agreement; and



WHEREAS, it is a condition precedent to the obligations of the Bank to enter into the Credit
Agreement that the Pledgor and the Custodian shall have executed and delivered this Revenue Bond
Pledge Agreement to the Bank;



NOW, THEREFORE, in consideration of the premises and in order to induce the Bank to enter into
the Credit Agreement and issue the Letter of Credit thereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor and the
Custodian hereby agree with the Bank [that the Existing Pledge Agreement is hereby amended and
restated, without novation,] as follows:



1. Defined Terms. Unless otherwise defined herein, terms defined in the Credit
Agreement shall have such defined meanings when used herein.



2. Pledge. (a) The Pledgor hereby pledges, assigns, hypothecates, transfers, and
delivers to the Bank (on behalf of and for the ratable benefit of the Revenue Bond Lenders, in
accordance with their respective Applicable Percentages), and hereby grants to the Bank (on behalf
of and for the ratable benefit of the Revenue Bond Lenders, in accordance with their respective
Applicable Percentages) a first-priority Lien on and security interest in, all of the Pledgor’s
right, title and interest in and to the Company Bonds, the interest thereon, all proceeds thereof
and all security entitlements relating thereto, in each case whether now owned or existing or
hereafter created, acquired or existing, as collateral security for the prompt and complete payment
when due of all amounts due in respect of (i) the reimbursement obligation of the Pledgor set forth
in Section 2.04(f)(ii) of the Credit Agreement and interest on such amounts as set forth in Section
2.04(i) of the Credit Agreement, and (ii) any and all Revenue Bond Loans and interest thereon
payable by the Pledgor pursuant to the Credit Agreement (all the foregoing being hereinafter
called the “Obligations”). The Pledgor hereby agrees that the Custodian shall act as the
agent and bailee of the Bank for the purpose of perfecting the Lien of this Revenue Bond Pledge
Agreement and of holding the Collateral (as hereinafter defined) for the benefit of the Bank
pursuant to the Indenture and this Revenue Bond Pledge Agreement. Subject to subsection (b) below,
upon delivery of the Company Bonds to the Tender Agent pursuant to Sections 2.02(a) and
14.07(c)(ii) of the Indenture, the Pledgor shall cause the Registrar (as defined in the Indenture)
to register such Company Bonds in the name of the Bank in accordance with Section 2.09 of the
Indenture.



(b) For so long as the Company Bonds are registered in the name of The Depository Trust
Company (“DTC”), the Custodian shall cause DTC to make appropriate entries on its books
increasing the appropriate securities account of the Custodian, as a direct participant of DTC, to
include the Company Bonds, and shall identify, by book-entry or otherwise, the Company Bonds as
belonging to, or subject to a security interest in favor of, the Bank, and shall send the Bank a
confirmation thereof. The Custodian shall


 


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continuously identify the Company Bonds on its books as being held for the account of the Bank and shall take all such action
reasonably requested in writing by the Bank to ensure that the Bank shall be the “entitlement
holder” with respect to the Company Bonds having “control” of all “security entitlements” related
to the Company Bonds within the meaning of Article 8 of the Uniform Commercial Code as in effect
from time to time in the State of New York (“UCC Article 8”).



3. Payments on the Bonds. If, while this Revenue Bond Pledge Agreement is in effect,
the Pledgor shall become entitled to receive or shall receive any payment in respect of the Company
Bonds, the Pledgor agrees to accept the same as the Bank’s agent and to hold the same in trust on
behalf of the Bank and to deliver the same forthwith to the Bank. The Pledgor instructs and
authorizes the Custodian to hold and receive on the Bank’s behalf and to deliver forthwith to the
Bank any payment received by it in respect of the Collateral (including, without limitation, the
proceeds of any remarketing of the Company Bonds). All sums of money so paid in respect of any
interest on, or portion of purchase price equal to the amount of accrued interest on, the Company
Bonds which are received by the Pledgor or the Custodian (as the case may be) and paid to the Bank
shall be delivered to the Administrative Agent and applied in accordance with Section 2.04(f)(ii)
of the Credit Agreement. All sums of money so paid in respect of any payment of principal of, or
portion of purchase price equal to the principal amount of, the Company Bonds which are received by
the Pledgor or the Custodian (as the case may be) and paid to the Bank shall be delivered to the
Administrative Agent and credited against the obligations of the Pledgor set forth in Section
2.04(f)(ii) or 2.08(a)(ii) (as applicable) of the Credit Agreement.



4. Collateral. All property at any time pledged with the Bank hereunder (whether
described herein or not) and all income therefrom and proceeds thereof, are herein collectively
sometimes called the “Collateral”.



5. Release of Company Bonds. The Bank will release Company Bonds from the Lien of
this Revenue Bond Pledge Agreement in accordance with Section 2.04(f)(ii) of the Credit Agreement,
and upon such release will deliver such Company Bonds (or cause such Company Bonds to be delivered)
to the Pledgor or, if requested in writing by the Pledgor, to the Remarketer (as defined in the
Indenture) in accordance with Section 14.04 of the Indenture. For the avoidance of doubt, it is
understood and agreed that the Bank will not release any Company Bond from the Lien of this Revenue
Bond Pledge Agreement (including, without limitation, any such release in connection with the
exercise of remedies by the Bank hereunder or under the Credit Agreement) unless the stated amount
of the Letter of Credit shall have been reinstated by an amount not less than the principal amount
of such Company Bond. For so long as the Company Bonds are registered in the name of DTC, the Bank
instructs and authorizes the Custodian, upon receipt of written notice from the Bank of any such
release, (a) to cause DTC to make appropriate entries on its books decreasing the appropriate
securities account of the Custodian to exclude such Company Bonds and (b) to reclassify, by
book-entry or otherwise, such Company Bonds as not subject to a security interest in favor of the
Bank.


 


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6. Rights of the Bank. The Bank shall not be liable for failure to collect or realize
upon the Obligations or any collateral security or guarantee therefor, or any part thereof, or for
any delay in so doing, nor shall the Bank be under any obligation to take any action whatsoever
with regard thereto. If an Event of Default has occurred and is continuing, the Bank may
thereafter, without notice, exercise all rights, privileges or options pertaining to any
Company Bonds as if it were the absolute owner thereof, upon such terms and conditions as it may
determine, all without liability except to account for property actually received by it, but the
Bank shall have no duty to exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing.



7. Remedies. In the event that any portion of the Obligations has been declared due
and payable, the Bank, without demand of performance or other demand, advertisement or notice of
any kind (except the notice specified below of the time and place of public or private sale) to or
upon the Pledgor or any other Person (all and each of which demands, advertisements and/or notices
are hereby expressly waived), may forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral, or any part
thereof, in one or more parcels at public or private sale or sales, at any exchange, broker’s board
or at any of the Bank’s offices or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk, with the right to the Bank upon any such sale or sales,
public or private, to purchase the whole or any part of said Collateral so sold, free of any right
or equity of redemption in the Pledgor, which right or equity is hereby expressly waived or
released. The Bank shall pay over the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind
incurred in taking any of the foregoing actions or incidental to the care or safekeeping of, or
otherwise with respect to, any and all of the Collateral or in any way relating to the rights of
the Bank hereunder (including, without limitation, reasonable attorneys’ fees and legal expenses),
to the Administrative Agent to apply such net proceeds to the payment in whole or in part of the
Obligations in such order as the Administrative Agent may elect, the Pledgor remaining liable for
any deficiency remaining unpaid after such application, and only after so paying over such net
proceeds and after the payment by the Bank of any other amount required by any provision of law,
including, without limitation, Section 9-615 of the Uniform Commercial Code as in effect in the
State of New York at such time, need the Bank account for the surplus, if any, to the Pledgor. The
Pledgor agrees that the Bank need not give more than ten (10) days’ notice of the time and place of
any public sale or of the time after which a private sale or other intended disposition is to take
place and that such notice is reasonable notification of such matters. No notification need be
given to the Pledgor if it has signed after default a statement renouncing or modifying any right
to notification of sale or other intended disposition. In addition to the rights and. remedies
granted to it in this Revenue Bond Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to any of the Obligations, the Bank shall have all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of New York from time to
time in effect. The Pledgor shall be liable for the deficiency if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all Obligations due and payable by the
Pledgor and any other amounts to which the Bank is entitled, and the fees of any attorneys employed
by the Bank to collect such deficiency.


 


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8. Representations, Warranties and Covenants of the Pledgor. The Pledgor represents
and warrants that: (a) on the date of delivery to the Bank (or to the Custodian for the benefit of
the Bank, as the case may be) of any Company Bonds described herein, neither the Issuer, the Tender
Agent, the Remarketing Agent (as defined in the Indenture) nor the Trustee
will have any right, title or interest in and to the Company Bonds; (b) it has, and on the
date of delivery to or for the benefit of the Bank of any Company Bonds will have, full power,
authority and legal right to pledge all of its right, title and interest in and to the Company
Bonds pursuant to this Revenue Bond Pledge Agreement; (c) this Revenue Bond Pledge Agreement has
been duly authorized, executed and delivered by the Pledgor and constitutes the legal, valid and
binding obligation of the Pledgor enforceable in accordance with its terms; (d) no consent of any
other party (including, without limitation, any shareholders or creditors of the Pledgor) and no
consent, license, permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any Governmental Authority, domestic or foreign, is
required to be obtained by the Pledgor in connection with the execution, delivery or performance of
this Revenue Bond Pledge Agreement; (e) the execution, delivery and performance of this Revenue
Bond Pledge Agreement will not violate any provision of any applicable law, rule or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator or other Governmental
Authority, domestic or foreign, or of the certificate of incorporation or by-laws of the Pledgor or
of any securities issued by the Pledgor or any of its Subsidiaries, or of any mortgage, indenture,
lease, contract, or other agreement, instrument or undertaking to which the Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon the Pledgor or any of its Subsidiaries
or upon any of their respective assets, and will not result in the creation or imposition of any
Lien on any of the assets of the Pledgor or any of its Subsidiaries except as contemplated by this
Revenue Bond Pledge Agreement; and (f) the pledge, assignment and delivery of such Company Bonds
pursuant to this Revenue Bond Pledge Agreement will create a valid first Lien on, and a first
perfected security interest in, all right, title and interest of the Pledgor in or to such Company
Bonds and the proceeds thereof, subject to no prior Lien or to any agreement purporting to grant to
any third party a Lien in the property or assets of the Pledgor which could include the Company
Bonds. The Pledgor covenants and agrees that it will defend the Bank’s right, title and Lien in
and to the Company Bonds and the proceeds thereof against the claims and demands of all Persons
whomsoever; and covenants and agrees that it will have like title to and right to pledge any other
property at any time hereafter pledged to the Bank as Collateral hereunder and will likewise defend
the Bank’s right thereto and Lien therein.



9. No Disposition, etc. Without the prior written consent of the Bank, the Pledgor
agrees that it will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Collateral, nor will it create, incur or permit to exist any Lien with
respect to any of the Collateral, or any interest therein, or any proceeds thereof, except for the
Lien provided for by this Revenue Bond Pledge Agreement and sales contemplated or permitted hereby.




10. Sale of Collateral.



(a) The Pledgor recognizes that the Bank may not deem it desirable to effect a public sale of
any or all the Company Bonds by reason of certain prohibitions contained in the Securities Act of
1933, as amended (the “Securities Act”), and applicable state securities laws or otherwise,
but may deem it desirable to resort to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such securities for their
own account for investment and not with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale may result in prices and other



 


C-2-5









 






terms less
favorable to the seller than if such sale were a public sale and, notwithstanding such
 circumstances, agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Bank shall be under no obligation to delay a sale of any of
the Company Bonds for the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act, or under applicable state
securities laws, even if the issuer would agree to do so.



(b) The Pledgor further agrees to do or cause to be done all such other acts and things as may
be necessary to make such sale or sales of any portion or all of the Company Bonds valid and
binding and in compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or other Governmental
Authorities, domestic or foreign, having jurisdiction over any such sale or sales, all at the
Pledgor’s expense. The Pledgor further agrees that a breach of any of the covenants contained in
this paragraph 10 will cause irreparable injury to the Bank and that the Bank has no adequate
remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant
contained in this paragraph shall be specifically enforceable against the Pledgor and the Pledgor
hereby waives and agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred under the Credit
Agreement. The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages which would be suffered by the Bank by reason of a breach of any of such covenants and,
consequently, agrees that, if the Bank shall sue for damages for breach, it shall pay, as
liquidated damages and not as a penalty, an amount equal to the value of the Company Bonds on the
date the Bank shall demand compliance with this paragraph.



11. Further Assurances. The Pledgor agrees that at any time and from time to time
upon the written request of the Bank, the Pledgor will execute and deliver such further documents
and do such further acts and things as the Bank may reasonably request in order to effect the
purposes of this Revenue Bond Pledge Agreement.



12. The Custodian. (a) The Bank hereby appoints the Custodian as agent and bailee for
the Bank on the terms and conditions of this Revenue Bond Pledge Agreement, and the Custodian
hereby accepts such appointment and agrees with the Bank to act as agent without compensation
separate from that provided to the Custodian, in its capacity as Tender Agent, pursuant to the
Indenture.



(b) The duties of the Custodian as agent under this Revenue Bond Pledge Agreement shall be
limited to those duties expressly set forth herein and the following:




(i) the Custodian shall hold (either directly or as a direct participant of
DTC) in trust for the Bank all Company Bonds purchased by the Custodian, in its
capacity as Tender Agent, with drawings under the Letter of Credit pursuant to
Section 2.02(a) of the Indenture, all proceeds thereof and all other amounts held by
the Custodian and payable to the Bank by the Tender Agent pursuant to the Indenture;




(ii) upon the remarketing of Company Bonds, the Custodian shall deliver or
cause to be delivered to the Bank the proceeds of such remarketing and
all other amounts received by the Custodian and payable to the Bank by the
Tender Agent pursuant to the Indenture; and


 


C-2-6









 






(iii) the Custodian shall comply with any notice, request or instruction of the
Bank with respect to the Company Bonds, subject to paragraph 5 hereof, without the
further consent of the Pledgor such that the Bank shall be deemed to have “control”
of the Company Bonds as “security entitlements” within the meaning of UCC Article 8.



(c) The Custodian shall not pledge, hypothecate, transfer or release all or any part of the
Collateral to any other Person or in any manner not in accordance with this Revenue Bond Pledge
Agreement without the prior written consent of the Bank.



(d) The Custodian shall transfer the benefits or obligations of this Revenue Bond Pledge
Agreement or the Indenture only with the prior written consent of the Bank and only if any such
transferee shall have agreed in writing to be bound by the terms and conditions of this Revenue
Bond Pledge Agreement and the Indenture. Notwithstanding the preceding sentence, any corporation,
association or other entity into which the Custodian may be converted or merged, or with which it
may be consolidated, or to which it may sell or otherwise transfer all or substantially all of its
corporate trust assets and business or any corporation, association or other entity resulting from
any such conversion, sale, merger, consolidation or other transfer to which it is a party, ipso
facto, shall be and become successor Custodian hereunder, vested with all other matters as was its
predecessor, without the execution or filing of any instrument or consent or any further act on the
part of the parties hereto.



(e) The Custodian may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, attorneys, custodians or nominees.



(f) The Custodian may resign and be discharged from its duties hereunder at any time by giving
thirty (30) calendar days’ prior written notice of such resignation to the Pledgor and the Bank.
The Pledgor and the Bank, acting jointly, may remove the Custodian at any time by giving thirty
(30) calendar days’ prior written notice to the Custodian. Upon such notice, a successor Custodian
shall be jointly appointed by the Pledgor and the Bank who shall provide written notice of such to
the resigning Custodian. Such successor Custodian shall become the Custodian hereunder upon the
resignation or removal date specified in such notice. If the Pledgor and the Bank are unable to
agree upon a successor Custodian within thirty (30) days after such notice, the Custodian may, in
its sole discretion, deliver any Collateral then held by the Custodian to the Bank at the address
provided herein or may apply to a court of competent jurisdiction for the appointment of a
successor Custodian or for other appropriate relief. Upon receipt of the identity of the successor
Custodian, the Custodian shall deliver the Collateral then held hereunder to the successor
Custodian. Upon its resignation and delivery of the Collateral as set forth in this subsection
(f), the Custodian shall be discharged of and from any and all further obligations arising in
connection with the Collateral or this Revenue Bond Pledge Agreement. Notwithstanding the
foregoing provisions of this subsection (f), the Custodian may resign or be removed only in
conjunction with the resignation or removal of the Tender Agent pursuant to the
Indenture, and any successor Tender Agent appointed pursuant to the Indenture shall be
appointed as Custodian hereunder.


 


C-2-7









 





13. Severability. Any provision of this Revenue Bond Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.



14. No Waiver; Cumulative Remedies. The Bank shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder and no waiver shall be
valid unless in writing, signed by the Bank, and then only to the extent therein set forth. A
waiver by the Bank of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Bank would otherwise have on any future occasion. No failure
to exercise nor any delay in exercising on the part of the Bank any right, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.



15. Notices. All notices, requests and other communications to any party hereunder
shall be in writing (including telecopier, overnight courier or similar writing) and shall be given
to such party, addressed to it, at its address or telecopier number set forth below or such other
address or telecopier number as such party may specify by notice to the other parties. Each such
notice, request or communication shall be effective (a) if given by telecopy, when sent by
telecopier to the telecopier number specified below and receipt thereof has been confirmed by
telephone, (b) if given by mail, five days after such communication is deposited in the mails with
first-class postage prepaid, addressed as aforesaid, (c) if given by a reputable overnight courier,
upon confirmation of delivery by such courier, (d) when delivered personally or (e) if given by any
other means, when delivered at the address specified below.



	 	 	 
	Party	 	Address
	 
	 	 
	Pledgor:
	 	Tucson Electric Power Company
	 
	 	One South Church Avenue, Suite 100
	 
	 	Tucson, Arizona 85701
	 
	 	Attention of Chief Financial Officer
	 
	 	Telecopier:  (520) 884-3612
	 
	 	 
	Bank:
	 	[Name of Bank]
	 
	 	____________________
	 
	 	____________________
	 
	 	Attention:  _____________
	 
	 	Telecopier:  ____________





 


C-2-8









 





	 	 	 
	Party	 	Address
	 
	 	 
	Custodian:
	 	U.S. Bank Trust National Association
	 
	 	Corporate Trust Services
	 
	 	100 Wall Street, Suite 1600
	 
	 	New York, New York  10005
	 
	 	Attention:  Patrick J. Crowley
	 
	 	Telecopier:  (212) 809-4993






16. Waivers; Amendments. None of the terms or provisions of this Revenue Bond Pledge
Agreement may be waived, altered, modified or amended except by an instrument in writing, duly
executed by the parties hereto. This Revenue Bond Pledge Agreement and all obligations of the
Pledgor and the Custodian hereunder shall be binding upon the successors and assigns of the Pledgor
and the Custodian, respectively, and shall, together with the rights and remedies of the Bank
hereunder, inure to the benefit of the Bank and the Revenue Bond Lenders and their respective
successors and assigns.




17. Governing Law; Submission to Jurisdiction; WAIVER OF JURY TRIAL.



(a) This Revenue Bond Pledge Agreement shall be governed by, and be construed and interpreted
in accordance with, the laws of the State of New York.



(b) Each of the parties hereto 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 this Revenue Bond Pledge Agreement, 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.



(c) Each of the parties hereto 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 Revenue
Bond Pledge Agreement in any court referred to in subsection (b) of this paragraph 17. 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.



(d) Each party to this Revenue Bond Pledge Agreement irrevocably consents to service of
process in the manner provided for notices in paragraph 15. Nothing in this Revenue Bond Pledge
Agreement will affect the right of any party to this Revenue Bond Pledge Agreement to serve process
in any other manner permitted by law.


 


C-2-9









 





(e) 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 REVENUE BOND PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (i) 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
(ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS REVENUE
BOND PLEDGE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SUBSECTION.



18. Counterparts. This Revenue Bond Pledge Agreement may be signed in any number of
counterpart copies, and all such copies shall constitute one and the same instrument.



[Signature Pages to Follow]



 


C-2-10









 





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



	 	 	 	 	 
	 	TUCSON ELECTRIC POWER COMPANY

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



	 	 	 
	[SEAL]
	 	 
	 
	 	 
	Attest:
	 	 
	 
	 	 
	 
 


	 	  
	Secretary
	 	 






	 	 	 	 	 
	 	[NAME OF BANK]

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	U.S. BANK TRUST NATIONAL
ASSOCIATION, as
Custodian

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




 


C-2-11











 








EXHIBIT D




 

 








Supplemental Indenture No. 11

 






TUCSON ELECTRIC POWER COMPANY




to




THE BANK OF NEW YORK MELLON,




Trustee




 






Dated as of November 1, 2010




Supplemental to Indenture of Mortgage and Deed of Trust,

dated as of December 1, 1992




 






Creating A Series of Bonds Designated

First Mortgage Bonds, Collateral Series I




 






 

 








This instrument constitutes a mortgage, a deed of trust and a security agreement.




 


 









 







SUPPLEMENTAL INDENTURE NO. 11, dated as of November 1, 2010, between Tucson Electric Power
Company (hereinafter sometimes called the “Company”), a corporation organized and existing
under the laws of the State of Arizona, having its principal office at One South Church Avenue, in
the City of Tucson, Arizona, as trustor, and The Bank of New York Mellon, formerly known
as The Bank of New York (successor in trust to Bank of Montreal Trust Company), a banking
corporation organized and existing under the laws of the State of New York and having its principal
office at 101 Barclay Street, in the Borough of Manhattan, The City of New York, New York, as
trustee (hereinafter sometimes called the “Trustee”), under the Indenture of Mortgage and Deed of
Trust, dated as of December 1, 1992, between the Company and the Trustee (hereinafter called the
“Original Indenture”), as heretofore amended and supplemented, this Supplemental Indenture No. 11
being supplemental thereto (the Original Indenture as heretofore amended and supplemented, and as
supplemented hereby, and as it may from time to time be further supplemented, modified, altered or
amended by any supplemental indenture entered into in accordance with and pursuant to the
provisions thereof, is hereinafter called the “Indenture”).



Recitals of the Company




WHEREAS, the Original Indenture was authorized, executed and delivered by the Company
to provide for the issuance from time to time of its Bonds (such term and all other capitalized
terms used herein without definition having the meanings assigned to them in the Original
Indenture), to be issued in one or more series as therein contemplated, and to provide security for
the payment of the principal of and premium, if any, and interest, if any, on the Bonds; and



WHEREAS, the Company proposes to establish a series of Bonds designated “First
Mortgage Bonds, Collateral Series I” and to be limited in aggregate principal amount (except as
contemplated in clause (b) of Section 2 of Article II of the Original Indenture) to $540,588,000,
such series of Bonds and such Bonds to be hereinafter sometimes called, respectively, “Series 10”
and “Series 10 Bonds”; and



WHEREAS, all acts and proceedings required by law and by the articles of
incorporation and by-laws of the Company, including all action requisite on the part of its
shareholders, directors and officers, necessary to make the Series 10 Bonds, when executed by the
Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal
obligations of the Company, and to constitute this Supplemental Indenture a valid, binding and
legal instrument, in accordance with its and their terms, have been done and taken; and the
execution and delivery of this Supplemental Indenture No. 11 have been in all respects duly
authorized;



WHEREAS, effective June 3, 1999, The Bank of New York succeeded to all of the corporate trust
business of Bank of Montreal Trust Company, and, as a consequence, The Bank of New York, being
otherwise qualified and eligible under Article XII of the Original Indenture, became the successor
trustee under the Indenture without further act on the part of the parties thereto, as contemplated
by Section 11 of Article XII of the Original Indenture; and


 


1









 





WHEREAS, effective July 1, 2008, The Bank of New York changed its name to The Bank of New York
Mellon.



Granting Clauses




NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 11 WITNESSETH, that, in order to
secure the payment of the principal of and premium, if any, and interest, if any, on all Bonds at
any time Outstanding under the Indenture according to their tenor, purport and effect, and to
secure the performance and observance of all the covenants and conditions therein and herein
contained (except any covenant of the Company with respect to the refund or reimbursement of taxes,
assessments or other governmental charges on account of the ownership of the Bonds of any series or
the income derived therefrom, for which the Holders of the Bonds shall look only to the Company and
not to the property hereby mortgaged or pledged), and to declare the terms and conditions upon and
subject to which the Series 10 Bonds are to be issued, and for and in consideration of the premises
and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the
Holders thereof, and of the sum of $1 duly paid to the Company by the Trustee at or before the
ensealing and delivery hereof, and for other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged, the Company has executed and delivered this
Supplemental Indenture No. 11, and by these presents does grant, bargain, sell, release, convey,
assign, transfer, mortgage, pledge, set over and confirm unto the Trustee, and grant to the Trustee
a security interest in:



All and singular the premises, property, assets, rights and franchises of the Company (except
Excepted Property), whether now or hereafter owned, constructed or acquired, of whatever character
and wherever situated including, among other things (but reference to or enumeration of any
particular kinds, classes or items of property shall not be deemed to exclude from the operation
and effect of this Supplemental Indenture No. 11 any kind, class or item not so referred to or
enumerated), all right, title and interest of the Company in and to the property described as
granted in “Schedule A” attached to this Supplemental Indenture No. 11 and made part of these
Granting Clauses to the same extent as if fully set forth in the same, and all plants for the
generation of electricity by water, steam and/or other power; all power houses, substations,
transmission lines, and distributing systems; all offices, buildings and structures, and the
equipment thereof; all machinery, engines, boilers, dynamos, machines, regulators, meters,
transformers, generators and motors; all appliances whether electrical, gas or mechanical,
conduits, cables and lines; all pipes, service pipes, fittings, valves and connections, poles,
wires, tools, implements, apparatus, furniture, and chattels; all municipal franchises and other
franchises; all lines for the transmission and/or distribution of electric current, including
towers, poles, wires, cables, pipes, conduits, street lighting systems and all apparatus for use in
connection therewith; all real estate, lands, and leaseholds; all easements, servitudes, licenses,
permits, rights, powers, franchises, privileges, rights-of-way and other rights in or relating to
real estate or the occupancy of the same and all the right, title and interest of the Company in
and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or
enjoyed in connection with any property hereinbefore described; it being the intention of the
parties that all property of every kind, real, personal or mixed (including, but not limited to,
all property of the types hereinbefore described), other than Excepted Property, which may be
acquired by the Company after the date hereof, shall, immediately upon the acquisition thereof by



 


2









 






the Company, to the extent of such acquisition, and without any further conveyance or assignment, become and be subject to the direct lien of the Indenture as fully and completely
as though now owned by the Company and described in said “Schedule A”; it further being the
intention of the parties, however, that the lien of and security interest granted by this
Supplemental Indenture No. 11 shall not result in the Trustee having greater rights with respect to
any property of the Company, real, personal or mixed (including, but not limited to, leasehold
interests in property), than the rights of the Company with respect to such property.



Together With all and singular the tenements, hereditaments and appurtenances
belonging or in any wise appertaining to the aforesaid premises, property, assets, rights and
franchises or any part thereof, with the reversion and reversions, remainder and remainders, and
all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which
the Company now has or may hereafter acquire in and to the aforesaid premises, property, assets,
rights and franchises and every part and parcel thereof.



Subject, however, to the reservations, exceptions, limitations and restrictions contained in
the several deeds, leases, servitudes, contracts, decrees, judgments, or other instruments through
which the Company acquired or claims title to or enjoys the use of the aforesaid properties; and
subject also to such easements, leases, reservations, servitudes, reversions and other rights and
privileges of others and such mortgages, liens and other encumbrances in, on, over, across or
through said properties as existed at the time of the acquisition of such properties by the Company
or as have been granted by the Company to other persons at or prior to the time of the issuance and
delivery of the Bonds of the Initial Series; and subject also to Permitted Encumbrances and, as to
any property acquired by the Company after the time of the issuance and delivery of the Bonds of
the Initial Series, to any easements, leases, reservations, servitudes, reversions and other rights
and privileges of others and mortgages, liens or other encumbrances thereon existing, and to any
mortgages, liens and other encumbrances for unpaid portions of the purchase money placed thereon,
at the time of such acquisition; and subject also to the provisions of Article XI of the Original
Indenture;



To Have and To Hold the Trust Estate and all and singular the lands, properties,
estates, rights, franchises, privileges and appurtenances hereby granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed, together
with all the appurtenances thereunto appertaining, unto the Trustee and its successors and assigns,
forever;



But in Trust, Nevertheless, for the equal and proportionate use, benefit, security
and protection of those who from time to time shall hold the Bonds authenticated and delivered
hereunder and under the Indenture and duly issued by the Company, without any discrimination,
preference or priority of any one Bond over any other by reason of priority in the time of issue,
sale or negotiation thereof or otherwise, except as provided in Section 2 of Article IV of the
Original Indenture, so that, subject to said provisions, each and all of said Bonds shall have the
same right, lien and privilege under the Indenture and shall be equally secured thereby (except as
any sinking, amortization, improvement, renewal or other fund, established in accordance with the
provisions of the Indenture, may afford additional security for the Bonds of any particular
series), and shall have the same proportionate interest and share in the Trust Estate, with the
same effect as if all of the Bonds had been issued, sold and negotiated simultaneously on the date
of the delivery hereof; and in trust for enforcing payment of the principal of the Bonds, and
premium, if any, and interest, if any, thereon, according to the tenor, purport and effect of
the Bonds and of the Indenture, and for enforcing the terms, provisions, covenants and agreements
herein, in the Indenture and in the Bonds set forth;


 


3









 





Upon Condition that, until the happening of a Default, the Company shall be suffered
and permitted to possess, use and enjoy the Trust Estate (except money, securities and other
personal property pledged or deposited with or required to be pledged or deposited with the Trustee
hereunder or under the Indenture) and to receive and use the rents, issues, income, revenues,
earnings and profits therefrom, all as more specifically provided in Section 1 of Article VII of
the Original Indenture;



And Upon the Trusts, Uses and Purposes and subject to the covenants, agreements and
conditions hereinafter set forth and declared.



ARTICLE I




Additional Definitions




Section 1. Applicability of Article.



For all purposes of this Supplemental Indenture No. 11, except as otherwise expressly provided
or unless the context otherwise requires, the terms defined in this Article shall have the meanings
herein specified and include the plural as well as the singular.



Section 2. Additional Definitions.



“Administrative Agent” means Union Bank, N.A. (formerly known as Union Bank of California,
N.A.), in its capacity as Administrative Agent under the Credit Agreement.



“Credit Agreement” means the Second Amended and Restated Credit Agreement, dated as of
November 9, 2010, among the Company, the Lenders party thereto, the Issuing Banks party thereto,
the Co-Syndication Agents party thereto, the Co-Documentation Agents party thereto and Union Bank,
N.A. (formerly known as Union Bank of California, N.A.), as Administrative Agent, as amended,
amended and restated, supplemented or otherwise modified from time to time.



“Interest Payment Date” means the last Business Day of each March, June, September and
December; provided, however, that the first Interest Payment Date shall be December 31, 2010.



“Maturity” means the date on which the principal of the Series 10 Bonds becomes due and
payable, whether at stated maturity, upon redemption or acceleration, or otherwise.



The following terms shall have the meanings specified in the Credit Agreement: “Aggregate
Commitment”, “Alternate Base Rate”, “Business Day”, “Issuing Bank”, “Letter of Credit”, “Loans” and
“Obligations”.


 


4









 






A copy of the Credit Agreement is filed at the office of the Administrative Agent at 445 South
Figueroa Street, 15th Floor, Los Angeles, California 90071 and at the office of the Company at One
South Church Avenue, Tucson, Arizona 85701.



ARTICLE II




Series 10 Bonds




There is hereby established a series of Bonds having the following terms and characteristics
(the lettered subdivisions set forth below corresponding to the lettered subdivisions of Section 2
of Article II of the Indenture):




(a) the title of the Bonds of such series shall be “First Mortgage Bonds, Collateral
Series I” (such Bonds being hereinafter sometimes called the “Series 10 Bonds”);




(b) the aggregate principal amount of Series 10 Bonds which may be authenticated and
delivered under the Indenture shall be limited to $540,588,000, except as contemplated in
subdivision (b) of Section 2 of Article II of the Original Indenture;




(c) not applicable;




(d) the Series 10 Bonds shall mature on May 1, 2015;




(e) during the period from and including the date of the first authentication and
delivery of the Series 10 Bonds to and including the day next preceding the first Interest
Payment Date, the Series 10 Bonds shall bear interest at the rate of eight per centum (8%)
per annum; thereafter, the Series 10 Bonds shall bear interest at a rate equal to the
Alternate Base Rate from time to time in effect plus 500 basis points; interest on the
Series 10 Bonds shall accrue from and including the date of the first authentication and
delivery of the Series 10 Bonds, except as otherwise provided in the form of bond attached
hereto as Exhibit A; interest on the Series 10 Bonds shall be payable on each Interest
Payment Date and at Maturity, and the Regular Record Date for the interest payable on each
Interest Payment Date shall be the day next preceding such Interest Payment Date; interest
payable at Maturity shall be paid to the Person to whom principal shall be paid; and
interest on the Series 10 Bonds during any period for which payment is made shall be
computed in accordance with the Credit Agreement;




(f) the office of the Trustee in New York, New York, shall be the office or agency of
the Company in The City of New York where (i) the principal of the Series 10 Bonds and
interest payable thereon at Maturity shall be payable upon presentation thereof, (ii)
registration of transfer of the Series 10 Bonds may be effected, (iii) exchanges of the
Series 10 Bonds may be effected and (iv) notices and demands to or upon the Company in
respect of the Series 10 Bonds or the Indenture may be served; provided, however, that the
Company reserves the right to change, by written notice to the Trustee, such office or
agency in The City of New York; and provided, further, that the principal office of the
Company in Tucson, Arizona shall be an additional financial office or agency where the
principal of the Series 10 Bonds and interest payable thereon
at Maturity shall be payable upon presentation thereof; interest payable on the Series
10 Bonds prior to Maturity shall be paid by the Company directly to the Holders thereof;





 


5









 








(g) the Series 10 Bonds shall not be redeemable, in whole or in part, at the option of
the Company;




(h) upon (i) the occurrence of an Event of Default under the Credit Agreement, and
further upon the condition that, in accordance with the terms of the Credit Agreement, the
Aggregate Commitments shall have been or shall have terminated and the Loans shall have been
declared to be or shall have otherwise become due and payable immediately and the
Administrative Agent shall have delivered to the Company a notice demanding redemption of
the Series 10 Bonds which notice states that it is being delivered pursuant to Article VII
of the Credit Agreement or (ii) the occurrence of an Event of Default under clause (h) or
(i) of Article VII of the Credit Agreement, then all Series 10 Bonds shall be redeemed
immediately at the principal amount thereof plus accrued interest to the date of redemption;




(i) the Series 10 Bonds shall be issued in denominations of $1,000 and any amount in
excess thereof;




(j) not applicable;




(k) not applicable;




(l) not applicable;




(m) not applicable;




(n) not applicable;




(o) not applicable;




(p) not applicable;




(q) the Series 10 Bonds are to be issued and delivered to the Administrative Agent in
order to provide collateral security for the obligation of the Company under the Credit
Agreement to pay the Obligations, as described in subdivision (u) below. The Series 10
Bonds are non-transferable, except to a successor Administrative Agent under the Credit
Agreement;




(r) not applicable;




(s) no service charge shall be made for the registration of transfer or exchange of
Series 10 Bonds;




(t) not applicable;


 


6









 






(u) (i) the Series 10 Bonds are to be issued and delivered to the Administrative Agent
in order to provide collateral security for the obligation of the Company under the Credit
Agreement to pay the Obligations, to the extent and subject to the limitations set forth in
clauses (ii) and (iii) of this subdivision;




(ii) the obligation of the Company to pay interest on the Series 10 Bonds on any
Interest Payment Date prior to Maturity (x) shall be deemed to have been satisfied and
discharged in full in the event that all amounts then due in respect of the Obligations
shall have been paid or (y) shall be deemed to remain unsatisfied in an amount equal to the
aggregate amount then due in respect of the Obligations and remaining unpaid (not in excess,
however, of the amount otherwise then due in respect of interest on the Series 10 Bonds);




(iii) the obligation of the Company to pay the principal of and accrued interest on the
Series 10 Bonds at or after Maturity (x) shall be deemed to have been satisfied and
discharged in full in the event that all amounts then due in respect of the Obligations
shall have been paid and no Letter of Credit shall remain outstanding or (y) shall be deemed
to remain unsatisfied in an amount equal to the aggregate amount then due in respect of the
Obligations and remaining unpaid plus the aggregate stated amount of the outstanding Letters
of Credit (not in excess, however, of the amount otherwise then due in respect of principal
of and accrued interest on the Series 10 Bonds);




(iv) the Trustee shall be entitled to presume that the obligation of the Company to pay
the principal of and interest on the Series 10 Bonds as the same shall become due and
payable shall have been fully satisfied and discharged unless and until it shall have
received a written notice from the Administrative Agent, signed by an authorized officer
thereof, stating that the principal of and/or interest on the Series 10 Bonds has become due
and payable and has not been fully paid, and specifying the amount of funds required to make
such payment;




(v) in the event of an application by the Administrative Agent for payment or for a
substituted Series 10 Bond pursuant to Section 11 of Article II of the Original Indenture,
the Administrative Agent shall not be required to provide any indemnity or pay any expenses
or charges as contemplated in said Section 11; and




(vi) the Series 10 Bonds shall have such other terms as are set forth in the form of
bond attached hereto as Exhibit A, which form is hereby designated as the form of the Series
10 Bonds.



ARTICLE III




Amendments to the indenture





Section 1. Amendment to Definition of “Excepted Property.”



The Company hereby amends subdivisions A, B and C of the definition of “Excepted Property”
contained in the Granting Clauses of the Indenture to read as follows:


 


7









 





“A. All bills, notes and accounts receivable, cash on hand or in banks, choses in action,
contracts and agreements, existing leases in which the Company is lessor and leases hereafter made
of portions of the Mortgaged Property in which the Company is lessor.



B. All shares of stock and other certificates or evidences of interest therein, and all bonds,
notes and other evidences of indebtedness or certificates of interest therein and other securities,
security entitlements, securities accounts, deposit accounts, or investment property now owned or
hereafter acquired or possessed by the Company (except securities or obligations specifically
subjected to the lien hereof or required to be pledged by the terms of this Indenture).



C. (i) All goods, wares, materials, merchandise and supplies purchased or acquired for the
purpose of sale in the ordinary course of business; and fuel, materials, stores and supplies and
other personal property which are consumable in their use in the operation of, or are not in use in
connection with or connected as fixtures to, the plants or systems of the Company; (ii) all
automobiles, buses, trucks, tractors, trailers and similar vehicles and all rolling stock and other
railroad equipment and all personal property (other than fixtures) of such character that the
perfection of a security interest therein or other Lien thereon is not governed by the Uniform
Commercial Code as in effect in the jurisdiction in which the Company is organized; and (iii) to
the extent not properly chargeable to the utility plant accounts of the Company, all hand tools,
all furniture, and all computers, machinery and equipment used exclusively for corporate
administrative or clerical purposes.”



Section 2. Amendment to the Engineers’ Certificate.



(a) The Company hereby amends the first paragraph of clause (B) of subdivision (3) of Section
6 of Article III of the Indenture to read as follows:



“(B) specifying any Property Additions designated by the Company that were purchased,
constructed or otherwise acquired by the Company since the Initial Funding Date, not included in
clause (B) of any Engineer’s Certificate under this subdivision (3) theretofore delivered to the
Trustee and not theretofore made the basis for the release of Funded Property under any of the
provisions of this Indenture; and as to such Property Additions:”



(b) The Company hereby amends clause (C) of subdivision (3) of Section 6 of Article III of the
Indenture to read as follows:



“(C) stating the aggregate amount of all Property Retirements made on or before a date
specified in such certificate (which date shall be the most recent date prior to the date of such
certificate for which the Company can reasonably calculate such amount of Property Retirements) and
not theretofore deducted in a prior Engineer’s Certificate under this subdivision (3);”



Section 3. Effective Date of Amendments.



The amendments specified in Sections 1 and 2 of this Article III will become effective at the
time that the Bonds of the series designated as “First Mortgage Bonds, Collateral Series F” are no
longer Outstanding.


 


8









 





As provided in Section 2 of Article XIII of the Indenture, the Holders of Series 10 Bonds
shall be deemed to have consented to this Supplemental Indenture No. 11 containing the amendments
specified herein and no action on the part of such Holders is required to evidence such consent.



ARTICLE IV




Miscellaneous Provisions




This Supplemental Indenture No. 11 is a supplement to the Original Indenture. As heretofore
supplemented and further supplemented by this Supplemental Indenture No. 11, the Original Indenture
is in all respects ratified, approved and confirmed, and the Original Indenture as heretofore
supplemented and this Supplemental Indenture No. 11 shall together constitute one and the same
instrument.



The Trustee makes no representation as to the validity or sufficiency of this Supplemental
Indenture No. 11. The statements and recitals herein are deemed to be those of the Company and not
of the Trustee.


 


9









 





IN WITNESS WHEREOF, Tucson Electric Power Company has caused its corporate name to be
hereunto affixed, and this instrument to be signed by one of its Vice Presidents, and its corporate
seal to be hereunto affixed and attested by its Secretary or one of its Assistant Secretaries for
and on its behalf; and The Bank of New York Mellon, as trustee, in evidence of its acceptance of
the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument
to be signed by one of its authorized signatories and its corporate seal to be hereunto affixed and
attested by one of its authorized signatories, for and on its behalf, all as of the day and year
first above written.



	 	 	 	 	 
	 	Tucson Electric Power Company

 	 
	 	By  	 	 
	 	 	Vice President 	 
	 	 	 	 
	 




Attest:



 




Secretary



 


10









 











	 	 	 	 	 
	 	The Bank of New York Mellon,

Trustee

 	 
	 	By  	 	 
	 	 	Authorized Signatory 	 
	 	 	 	 
	 



Attest:




 





Authorized Signatory



 


11









 









	 	 	 	 	 	 	 
	State of Arizona
	 	 	)	 	 	 
	 
	 	 	)	 	 	ss.:
	County of Pima
	 	 	)	 	 	 






This instrument was acknowledged before me this __ day of November 2010 by Kentton C. Grant,
as Vice President and Treasurer, and Linda Kennedy, as Secretary, of Tucson Electric Power
Company, an Arizona corporation, known to me to be the individuals who executed this
instrument, and known to me to be a Vice President and Treasurer and the Secretary, respectively,
of said corporation, and who personally acknowledged before me and stated that they executed said
instrument on behalf of said corporation for the purposes and consideration therein expressed.




 

Notary Public



 


12









 







	 	 	 	 	 	 	 
	State of New York
	 	 	)	 	 	 
	 
	 	 	)	 	 	ss.:
	County of New York
	 	 	)	 	 	 






This instrument was acknowledged before me this __ day of November 2010 by _________,
as Authorized Signatory, and ______________, as Authorized Signatory, of The Bank of
New York Mellon, a New York banking corporation, known to me to be the individuals who
executed this instrument, and known to me to be Authorized Signatories of said corporation, and who
personally acknowledged before me and stated that they executed said instrument on behalf of said
corporation for the purposes and consideration therein expressed.




 

Notary Public



 


13









 





Exhibit A




[Form of Bond]

This bond is non-transferable,

except to a successor Administrative Agent under the

Credit Agreement referred to herein.




			
	No. ___________
	 	$






TUCSON ELECTRIC POWER COMPANY




FIRST MORTGAGE BOND, COLLATERAL SERIES I




DUE MAY 1, 2015




TUCSON ELECTRIC POWER COMPANY, a corporation of the State of Arizona (hereinafter sometimes
called the “Company”), for value received, promises to pay to



as Administrative Agent under the Credit Agreement hereinafter referred to or registered assigns,
the principal sum of



DOLLARS



on May 1, 2015 in coin or currency of the United States of America which at the time of payment
shall be legal tender for the payment of public and private debts, at the office or agency of the
Company in The City of New York, or in the City of Tucson, Arizona, upon presentation hereof, and
quarterly, on the last Business Day (as defined in Supplemental Indenture No. 11 hereinafter
referred to) of March, June, September and December in each year, commencing December 31, 2010
(each an “Interest Payment Date”), and at Maturity (as defined in Supplemental Indenture No. 11
hereinafter referred to), to pay interest thereon in like coin or currency at the rate specified
below, from the Interest Payment Date next preceding the date of this bond (unless this bond be
dated on an Interest Payment Date, in which case from the date hereof; or unless this bond be dated
prior to the first Interest Payment Date, in which case from and including the date of the first
authentication and delivery of the bonds of this series), until the Company’s obligation with
respect to such principal sum shall be discharged.




During the period from and including the date of the first authentication and delivery of the
bonds of this series to and including the day next preceding the first Interest Payment Date, the
bonds of this series shall bear interest at the rate of eight per centum (8%) per annum;
thereafter, the bonds of this series shall bear interest at a rate equal to the Alternate Base Rate
(as defined in Supplemental Indenture No. 11 hereinafter referred to) from time to time in effect
plus 500 basis points. Interest on the bonds of this series during any period for which payment is
made shall be computed in accordance with the Credit Agreement.




 


A-1









 






This bond is one of an issue of bonds of the Company, issued and to be issued in one or more
series under and equally and ratably secured (except as any sinking, amortization,
improvement, renewal or other fund, established in accordance with the provisions of the
indenture hereinafter mentioned, may afford additional security for the bonds of any particular
series) by the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992 (the “Original
Indenture”), from the Company to The Bank of New York Mellon, formerly known as The Bank of New
York (successor in trust to Bank of Montreal Trust Company), as trustee (the “Trustee”), as
supplemented by eleven supplemental indentures including Supplemental Indenture No. 11, dated as of
November 1, 2010 (the Original Indenture, as so supplemented, and such Supplemental Indenture being
hereinafter called the “Indenture” and “Supplemental Indenture No. 11”, respectively), to which
Indenture reference is hereby made for a description of the property mortgaged and pledged, the
nature and extent of the security provided by the Indenture, the rights and limitations of rights
of the Company, the Trustee and the holders of said bonds with respect to the security provided by
the Indenture, the powers, duties and immunities of the Trustee, the terms and conditions upon
which such bonds are and are to be secured, and the circumstances under which additional bonds may
be issued. The acceptance of this bond shall be deemed to constitute the consent and agreement by
the holder hereof to all of the terms and provisions of the Indenture. This bond is one of a
series of bonds designated as the First Mortgage Bonds, Collateral Series I, of the Company.



The Indenture permits, with certain exceptions as therein provided, the Trustee to enter into
one or more supplemental indentures for the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, the Indenture with the consent of the holders of
not less than sixty per centum (60%) in aggregate principal amount of the bonds of all series then
outstanding under the Indenture, considered as one class; provided, however, that if there shall be
bonds of more than one series outstanding under the Indenture and if a proposed supplemental
indenture shall directly affect the rights of the holders of bonds of one or more, but less than
all, of such series, then the consent only of the holders of bonds in aggregate principal amount of
the outstanding bonds of all series so directly affected, considered as one class, shall be
required; and provided, further, that if the bonds of any series shall have been issued in more
than one tranche and if the proposed supplemental indenture shall directly affect the rights of the
holder of bonds of one or more, but less than all, of such tranches, then the consent only of the
holders of bonds in aggregate principal amount of the outstanding bonds of all tranches so directly
affected, considered as one class, shall be required; and provided, further, that the Indenture
permits the Trustee to enter into one or more supplemental indentures for limited purposes without
the consent of any holders of bonds. Any such consent by the holder of this bond shall be
conclusive and binding upon such holder and upon all future holders of this bond and of any bond
issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether
or not notation of such consent is made upon this bond.



The Company has issued and delivered the bonds of this series to Union Bank, N.A., as
Administrative Agent (the “Administrative Agent”) under the Second Amended and Restated Credit
Agreement, dated as of November 9, 2010, among the Company, the Lenders party thereto, the Issuing
Banks party thereto, the Co-Syndication Agents party thereto, the Co-Documentation Agents party
thereto and Union Bank, N.A. (formerly known as Union Bank of California, N.A.), as Administrative
Agent, as amended, amended and restated, supplemented or otherwise modified from time to time (the
“Credit Agreement”), in order to provide collateral security for the obligation of the Company
thereunder to pay the Obligations (as defined in Supplemental Indenture No. 11).


 


A-2









 





Upon the occurrence of an Event of Default under the Credit Agreement, and further upon such
additional conditions as are set forth in subdivision (h) of Article II of Supplemental Indenture
No. 11, then all bonds of this series shall be redeemed immediately at the principal amount thereof
plus accrued interest to the date of redemption.



The obligation of the Company to pay interest on the bonds of this series on any Interest
Payment Date prior to Maturity (a) shall be deemed to have been satisfied and discharged in full in
the event that all amounts then due in respect of the Obligations shall have been paid or (b) shall
be deemed to remain unsatisfied in an amount equal to the aggregate amount then due in respect of
the Obligations and remaining unpaid (not in excess, however, of the amount otherwise then due in
respect of interest on the bonds of this series).



The obligation of the Company to pay the principal of and accrued interest on the bonds of
this series at or after Maturity (x) shall be deemed to have been satisfied and discharged in full
in the event that all amounts then due in respect of the Obligations shall have been paid and no
Letter of Credit (as defined in Supplemental Indenture No. 11) shall remain outstanding or (y)
shall be deemed to remain unsatisfied in an amount equal to the aggregate amount then due in
respect of the Obligations and remaining unpaid plus the aggregate stated amount of the outstanding
Letters of Credit (not in excess, however, of the amount otherwise then due in respect of principal
of and accrued interest on the bonds of this series).



The principal of this bond and the interest accrued hereon may become or be declared due and
payable before the stated maturity hereof, on the conditions, in the manner and at the times set
forth in the Indenture, upon the happening of a default as therein provided.



This bond is non-transferable except as required to effect transfer to any successor
administrative agent under the Credit Agreement, any such transfer to be made at the office or
agency of the Company in The City of New York, upon surrender and cancellation of this bond, and
upon any such transfer a new bond of this series, for the same aggregate principal amount and
having the same stated maturity date, will be issued to the transferee in exchange herefor. Prior
to due presentment for registration of transfer, the Company and the Trustee may deem and treat the
person in whose name this bond is registered as the absolute owner hereof for the purpose of
receiving payment and for all other purposes. This bond, alone or with other bonds of this series,
may in like manner be exchanged at such office or agency for one or more bonds of this series of
the same aggregate principal amount and having the same stated maturity date and interest rate, all
as provided in the Indenture.



No recourse shall be had for the payment of the principal of or interest on this bond, or for
any claim based hereon or otherwise in respect hereof or of the Indenture, against any
incorporator, shareholder, director or officer, as such, past, present or future, of the Company or
of any predecessor or successor corporation, either directly or through the Company or any
predecessor or successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or by any legal or equitable proceeding or
otherwise howsoever (including, without limiting the generality of the foregoing, any proceeding to
enforce any claimed liability of shareholders of the Company, based upon any theory of disregarding
the corporate entity of the Company or upon any theory that the Company was acting as the agent or
instrumentality of the shareholders); all such liability being, by the
acceptance hereof and as a part of the consideration for the issuance hereof, expressly waived
and released by every holder hereof, and being likewise waived and released by the terms of the
Indenture under which this bond is issued, as more fully provided in said Indenture.



This bond shall not be valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been signed by The Bank of New York Mellon, or its successor, as
Trustee under the Indenture.


 


A-3









 







In Witness Whereof, the Company has caused this bond to be signed in its name by the
manual or facsimile signature of its President or one of its Vice Presidents, and its corporate
seal, or a facsimile thereof, to be impressed or imprinted hereon and attested by the manual or
facsimile signature of its Secretary or one of its Assistant Secretaries.




Dated: ___ __, 20__



	 	 	 	 	 
	 	TUCSON ELECTRIC POWER COMPANY

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 




Attest:




 






 


A-4









 





[FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION]




This is one of the bonds, of the series designated therein, described in the within-mentioned
Indenture.



Dated: ___ __, 20__




	 	 	 	 	 
	 	The Bank of New York Mellon,

Trustee

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 




 


A-5











 




SCHEDULE A




DESCRIPTION OF MORTGAGED PROPERTY




Generic Description




All electric generating plants, gas generating plant, gas holders, steam plant, gas regulating
stations, substations and other properties of the Company, including all power houses, transmission
lines, buildings, pipes, structures and works, and the lands of the Company on which the same are
situated, and all the Company’s lands, easements, rights, rights-of-way, water rights, rights to
the use of water, including all of the Company’s right, title and interest in and to any and all
decrees therefor, permits, franchises, consents, privileges, licenses, poles, towers, wires, switch
racks, insulators, pipes, machinery, engines, boilers, motors, regulators, meters, tools,
appliances, equipment, appurtenances and supplies, forming a part of or appertaining to said
plants, holders, sites, stations or other properties, or any of them, or used or enjoyed or capable
of being used or enjoyed in conjunction or connection therewith; and



All electric substations and substation sites of the Company including all buildings,
structures, towers, poles, lines, and all equipment, appliances, and devices for transforming,
converting and distributing electric energy, and all the right, title and interest of the Company
in and to the land on which the same are situated, and all of the Company’s lands, easements,
rights-of-way, rights, franchises, privileges, machinery, equipment, fixtures, appliances, devices,
appurtenances and supplies forming a part of said substation or any of them, or used or enjoyed, or
capable of being used or enjoyed, in conjunction or connection therewith; and



All warehouses, buildings, structures, works and sites and the Company’s lands on which the
same are situated, and all easements, rights-of-way, permits, franchises, consents, privileges,
licenses, machinery, equipment, furniture and fixtures, appurtenances and supplies forming a part
of said warehouses, buildings, structures, works and sites, or any of them, or used or enjoyed or
capable of being used or enjoyed in connection or conjunction therewith; and



All electric distribution systems of the Company, including towers, poles, wires, insulators,
appliances, devices, appurtenances and equipment, and all the Company’s other property, real,
personal or mixed, forming a part of, or used, occupied or enjoyed in connection with or in any way
appertaining to said distribution systems, or any of them, together with all of the Company’s
rights-of-way, easements, permits, privileges, municipal or other franchises, licenses, consents
and rights for or relating to the construction, maintenance or operation thereof through, over,
under or upon any public streets or highways, or public or private lands; and also all branches,
extensions, improvements and developments of or appertaining to or connected with said electric
distribution systems, or any of them, and all other electric distribution systems of the Company
and parts thereof wherever situated, and whether now owned or hereafter acquired, as well as all
rights-of-way, easements, privileges, permits, municipal or other franchises, consents and rights
for or relating to the construction, maintenance or operation thereof, or any part thereof,
through, over, under or upon public or private lands, whether now owned or hereafter acquired; and


 


A-6









 





All electric transmission and/or distribution lines of the Company, including the towers,
poles, pole lines, wires, switch racks, insulators, supports, guys, telephone and telegraph lines
and other appliances and equipment, and all other property of the Company, real, personal or mixed,
forming a part thereof or appertaining thereto, together with all of the Company’s rights-of-way,
easements, permits, privileges, municipal or other franchises, consents, licenses and rights, for
or relating to the construction, maintenance or operation thereof, through, over, under or upon any
public streets or highways or other lands, public or private; also all extension, branches, taps,
developments and improvements of or to any and all of the above-described transmission and/or
distribution lines, telephone and telegraph lines or any of them, as well as all rights-of-way,
easements, permits, privileges, rights and municipal or other franchises, licenses and consents,
for or relating to the construction, maintenance or operation of said lines or any of them, or any
part thereof, through, over, under or upon any public streets or highways or any public or private
lands, whether now owned or hereafter acquired;



Excepting, however, any property of the character of “Excepted Property” within the meaning of
the Supplemental Indenture to which this Schedule A is attached.



Specific Description of Any Additional Real Property




Specific descriptions of additional portions of the Mortgaged Property which constitute real
property, if any, are contained in Annex 1 to this Schedule A.


 


A-7









 





Annex 1

to

Schedule A



An undivided 33% interest in the following real property situated in Apache County, Arizona:



Parcel No. 1:



Section 1, Township 12 North, Range 27 East of the Gila and Salt River Base and Meridian, Apache
County, Arizona.



EXCEPT one-half interest in all oil, gas, coal and other minerals upon, lying in or under the said
land as reserved in Deed recorded in Book 25 of Deeds, page 348.



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 2:



Section 9, Township 12 North, Range 27 East of the Gila and Salt River Base and Meridian, Apache
County, Arizona;



EXCEPT the Northeast quarter of the Northwest quarter thereof;



EXCEPT an undivided three-quarters of all oil and mineral rights on said land as reserved in
instrument recorded in Book 27 of Deeds, page 522;



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 3:



Section 11, Township 12 North, Range 27 East of the Gila and Salt River Base and Meridian, Apache
County, Arizona;



EXCEPT an undivided three-quarters of all oil and mineral rights on said land as reserved in
instrument recorded in Book 27 of Deeds, page 522;



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



 


A-8









 









Parcel No. 4:



All of Section 3, Township 12 North, Range 28 East, of the Gila and Salt River Base and Meridian,
Apache County, Arizona;




EXCEPT the following described parcel reserved unto the Grantor: BEGINNING at the Southwest corner
of the above described Section 3, said point also being the Southeast corner of Section 4, Township
12 North, Range 28 East, and the Southeast corner of Mountain View Unit Two, a subdivision plat
recorded in Book 6, page 32, records of Apache County, Arizona, and being situated in a portion of
Section 4, Township 12 North, Range 28 East;


Thence North 02°59’52” West, along the west line of said Section 3, also being the east line of
said Subdivision, a distance of 2,795.03 feet;

Thence North 89°43’22” East, a distance of 350.00 feet;

Thence South 02°59’52” West parallel with the east line of said Subdivision, a distance of
2,795.03, more or less, to a point on the South line of said Section 3;

Thence westerly, along the south line of said Section 3, a distance of 350 feet, more or less, to
the POINT OF BEGINNING; AND



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 5:




The North half of the North half;

the North half of the Southwest quarter of the Northeast quarter;

and the North half of the South half of the Southwest quarter of the Northeast quarter of Section
7, Township 12 North, Range 28 East, of the Gila and Salt River Base and Meridian, Apache County,

Arizona;



EXCEPT one-half interest in all oil, gas, coal and other minerals upon, lying in or under the said
land as reserved in Deed recorded in Book 25 of Deeds, page 349 (N1/2 of NE1/4; SW1/4 NE1/4, Except
S1/2 S1/2 SW1/4NE1/4);



EXCEPT all oil, gas, coal and other minerals upon, lying in or under said land as reserved in Deed
recorded in Book 25 of Deeds, page 384 (N1/2 of NW1/4);



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 6:




The East half;

the West half of the Southwest quarter;

and the Southwest quarter of the Northwest quarter of Section 8, Township 12 North, Range 28 East,
of the Gila and Salt River Base and Meridian, Apache County, Arizona;



EXCEPT an undivided one-half of all oil and mineral rights held as reserved in Deed recorded in
Book 25 of Deeds, page 566 (East half of Section 8);



 


A-9









 








EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 7:




The South half;

and the South half of the North half of Section 9, Township 12 North, Range 28 East, of the Gila
and Salt River Base and Meridian, Apache County, Arizona;



EXCEPT an undivided one-half of all oil and mineral rights held as reserved in Deed recorded in
Book 25 of Deeds, page 566;



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 8:




The East half;

the Northwest quarter;

the East half of the Southwest quarter;

and the East half of the West half of the Southwest quarter of Section 17, Township 12 North, Range
28 East, of the Gila and Salt River Base and Meridian, Apache County, Arizona;



EXCEPT an undivided one-half of all oil and mineral rights held as reserved in Deed recorded in
Book 25 of Deeds, page 566; and



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 9:




The North half of the Southeast quarter of the Northeast quarter;

and the South half of the Northeast quarter of the Northeast quarter of Section 18, Township 12
North, Range 28 East, of the Gila and Salt River Base and Meridian, Apache County, Arizona;



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 10:




The South half of the Southwest quarter of the Northwest quarter;

the East half of the Northwest quarter;

the Southwest quarter;

the Southeast quarter;

the West half of the Northeast quarter;



 


A-10









 




and the Southeast quarter of the Northeast quarter of Section 20, Township 12 North, Range 28 East,
of the Gila and Salt River Base and Meridian, Apache County, Arizona;



EXCEPT an undivided interest in all the oil, gas, coal and other minerals, as reserved in favor of
Waldo I. Rogers and Joann R. Judd in Deed recorded in Docket 62, page 277.



Parcel No. 11:



The Northeast quarter of the Northeast quarter of Section 20, Township 12 North, Range 28 East, of
the Gila and Salt River Base and Meridian, Apache County, Arizona;



EXCEPT all the oil and gas in the land as reserved in the Patent from the United States of America
(Docket 74, page 84).



 


A-11









 







EXHIBIT E-1




[FORM OF OPINION OF RAYMOND S. HEYMAN]




November 9, 2010




Union Bank, N.A.,

   as Administrative Agent, an Issuing Bank and a Lender

445 South Figueroa Street, 15th Floor

Los Angeles, California 90071




The Lenders and Issuing Banks listed on Schedule I hereto




Ladies and Gentlemen:




I am Senior Vice President and General Counsel of Tucson Electric Power Company, an Arizona
corporation (the “Company”), and have acted as such in connection with:




(i) The Second Amended and Restated Credit Agreement, dated as of November 9, 2010,
among the Company, the Lenders and Issuing Banks party thereto, JPMorgan Chase Bank, N.A.,
SunTrust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents, Bank of
America, N.A. and U.S. Bank National Association, as Co-Documentation Agents, and Union
Bank, N.A. (formerly known as Union Bank of California, N.A.) (“Union Bank”), as
Administrative Agent (hereinafter, the “Second Amended and Restated Credit Agreement”); and




(ii) the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992 (the
“Mortgage Indenture”), from the Company to 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
(the “Mortgage Trustee”), as amended and supplemented by various supplemental indentures
including Supplemental Indenture No. 11, dated as of November 1, 2010 (the “Mortgage
Supplement”), from the Company to the Mortgage Trustee creating a series of First Mortgage
Bonds, Collateral Series I (the “Mortgage Bonds”). The Mortgage Indenture, as so amended
and supplemented, is hereinafter referred to as the “Mortgage.” Unless otherwise specified
herein, capitalized terms used herein have the respective meanings set forth in the Second
Amended and Restated Credit Agreement.


 


 









 





November 9, 2010

Page 2




In so acting I have reviewed all corporate proceedings of the Company in connection with (i)
the authorization, execution and delivery of the Mortgage, the Second
Amended and Restated Credit Agreement, the Revenue Bond Pledge Agreements, the Bond Delivery
Agreement, the promissory notes executed and delivered by the Company on the date hereof pursuant
to Section 2.08(e) of the Second Amended and Restated Credit Agreement (the “Notes”), and the fee
letter agreement, dated November 9, 2010, between the Company and Union Bank, as Administrative
Agent and an Issuing Bank (the “Fee Letter”), and (ii) the authorization, execution and issuance of
the Mortgage Bonds. I have also examined such other documents and satisfied myself as to such
other matters as I have deemed necessary as a basis for the opinions set forth below. I have
relied as to various questions of fact upon the representations and warranties of the Company
contained in the Second Amended and Restated Credit Agreement and in the certificates of public
officials and officers of the Company delivered thereunder, and have further relied upon
certificates of the Mortgage Trustee as to the authentication of the Mortgage Bonds.



As to all matters relating to the status of title to property and encumbrances thereon, I have
relied upon public records, certificates and reports of title companies and other records and
documents including without limitation instruments of conveyance and, with respect to the lien of
the Mortgage on personal property, upon recent Uniform Commercial Code search reports and upon,
among other things, recent reports with respect to tax liens and judgments as to courts of
competent jurisdiction in the State of Arizona. In my opinion, the searches described in such
reports were conducted in the appropriate offices and locations in order to discover effective
filings or recordings with respect to the property subject to the Mortgage.



Based upon and subject to the foregoing, and subject also to the qualifications hereinafter
set forth, I am of the opinion that:




1. The Company (a) is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (b) has the corporate power and authority to
own and operate its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, and (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of its property or the conduct of its business requires such
qualification except to the extent that the failure to so qualify would not have a Material
Adverse Effect.




2. The Company had the corporate power and authority to execute and deliver the
Mortgage Indenture as heretofore supplemented. The Company has the corporate power and
authority to perform the Mortgage, to execute, deliver and perform the Second Amended and
Restated Credit Agreement and to borrow and request the
issuance of Letters of Credit thereunder, to execute, deliver and perform the Mortgage
Supplement, the Revenue Bond Pledge Agreements, the Notes, the Fee Letter and the Bond
Delivery Agreement and to issue and deliver the Mortgage Bonds pursuant to the Bond Delivery
Agreement, and has taken all necessary corporate action to authorize the execution, delivery
and performance of the Second Amended and Restated Credit Agreement, the Mortgage
Supplement, the Revenue Bond Pledge Agreements, the Notes, the Fee Letter and the Bond
Delivery Agreement and to borrow and request the issuance of Letters of Credit under the
Second Amended and Restated Credit Agreement and to issue and deliver the Mortgage Bonds
pursuant to the Bond Delivery Agreement.


 


 









 





November 9, 2010

Page 3





3. The Second Amended and Restated Credit Agreement, the Mortgage, the Revenue Bond
Pledge Agreements, the Notes, the Fee Letter and the Bond Delivery Agreement have been duly
and validly executed and delivered on behalf of the Company and constitute legal, valid and
binding obligations of the Company, enforceable against it in accordance with their
respective terms except that certain of the remedial provisions of the Mortgage may be
limited by the law of the state wherein the mortgaged property is located (however, such law
does not, in my opinion, make the remedies afforded by the Mortgage inadequate for the
practical realization of the benefits thereof) and except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of mortgagees’ and other creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in equity or at
law) and subject to any principles of public policy limiting the right to enforce
indemnification or contribution provisions contained in the Second Amended and Restated
Credit Agreement with respect to liabilities under federal or state securities law.




4. The Mortgage Bonds have been duly and validly issued and executed and delivered by
the Company and authenticated by the Mortgage Trustee and are legal, valid and binding
obligations of the Company enforceable in accordance with their terms (subject to the
exceptions referred to in paragraph 3 above), and are entitled to the benefits of and
secured by the Lien of the Mortgage, equally and ratably with all other bonds outstanding
thereunder.




5. No consent or authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the execution,
delivery or performance by the Company of the Second Amended and Restated Credit Agreement,
the Mortgage Supplement, the Revenue Bond Pledge
Agreements, the Notes, the Fee Letter and the Bond Delivery Agreement, for borrowings
and requests for issuance of Letters of Credit by the Company under the Second Amended and
Restated Credit Agreement or for the issuance by the Company of the Mortgage Bonds pursuant
to the Bond Delivery Agreement, except the Order (Decision No. 71788) of the ACC relating
thereto (which has been obtained and is, to the best of my knowledge, in full force and
effect); provided, however, that I express no opinion as to compliance with the securities
or “blue sky” laws of any jurisdiction.




6. The execution, delivery and performance by the Company of the Second Amended and
Restated Credit Agreement, the Mortgage Supplement, the Revenue Bond Pledge Agreements, the
Notes, the Fee Letter and the Bond Delivery Agreement, the borrowings and requests for
issuance of Letters of Credit under the Second Amended and Restated Credit Agreement and the
issuance of the Mortgage Bonds and delivery thereof pursuant to the Bond Delivery Agreement
will not (a) violate any law, rule


 


 









 





November 9, 2010

Page 4





or regulation of any Governmental Authority, which, in my
experience, is normally applicable to transactions of the type contemplated thereby or to
entities similar to the Company, (b) violate any order of any Governmental Authority of
which I have knowledge, (c) violate the Restated Articles of Incorporation, as amended, or
Bylaws, as amended, of the Company, (d) violate or result in a default under any indenture,
agreement or other instrument, of which I have knowledge, binding upon the Company or its
assets or (e) result in, or require, the creation or imposition of any Lien on any of its
properties or revenues other than as contemplated by the Mortgage and the Second Amended and
Restated Credit Agreement.




7. Except as disclosed in the Disclosure Documents, there are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending against or, to my
knowledge, threatened against or affecting the Company or any of its Consolidated
Subsidiaries (a) as to which there is, in my judgment, a reasonable possibility of an
adverse determination and that, if adversely determined, would individually or in the
aggregate, in my judgment, result in a Material Adverse Effect or (b) that involves the
Second Amended and Restated Credit Agreement or any other Loan Document, or any transactions
contemplated therein.




8. No taxes (as distinguished from filing and recordation fees) are payable to the
State of Arizona or any subdivision or agency thereof in connection with the execution,
delivery and filing or recordation of the Mortgage Supplement or any related
filings or recordings, or the execution, authentication, issuance or delivery of the
Mortgage Bonds.




9. The Company has good and marketable fee title to all of the real properties in the
State of Arizona purported to be owned by the Company in fee on which the Company’s
generating stations (or the Company’s undivided ownership or leasehold interest therein, as
the case may be) are located, except for such properties as have been disposed of or
released from the lien of the Mortgage in accordance with the provisions thereof, subject to
(A) the lien of the Mortgage, (B) “Permitted Encumbrances” as such term is defined in the
Mortgage, (C) the possible defects, liens, encumbrances, reservations or restrictions
described in the sixth, seventh, eighth and ninth paragraphs in Item 2 — PROPERTIES in the
Company’s Annual Report on Form 10-K for 2009, which possible defects, liens, encumbrances,
reservations or restrictions do not materially affect the Company’s title to such
properties, and (D) other liens, encumbrances, defects, exceptions and qualifications, none
of which, individually or in the aggregate, materially affect the business or operations of
the Company, or the Company’s title to its properties.



 


 









 





November 9, 2010

Page 5








10. The Mortgage has been duly recorded and filed as a mortgage and security agreement
with respect to real and personal property, and appropriate financing statements and
continuation statements have been filed for record and recorded and posted, to such extent,
in such manner and in such places in the State of Arizona as are required by law to make
effective the lien which the Mortgage purports to create and all



recordings and filing fees
in connection therewith have been paid; the Mortgage constitutes a valid first mortgage lien
on and valid security interest in the properties and franchises in the State of Arizona
specifically or generally described or referred to therein as being subject to the lien
thereof, subject to “Permitted Encumbrances” (as defined therein) and subject to certain
possible prior interests described in the sixth, seventh, eighth and ninth paragraphs of
Item 2 — PROPERTIES in the Company’s Annual Report on Form 10-K for 2009, which possible
prior interests are permitted under the Mortgage; all properties and franchises in the State
of Arizona (except those of the character expressly excepted or released from the lien of
the Mortgage) hereafter acquired by the Company will, upon such acquisition, become subject
to the lien of the Mortgage, subject to no liens prior to or pari passu with the
lien of the Mortgage except “Permitted Encumbrances” and liens or other encumbrances, if
any, existing or placed thereon at the time of the acquisition thereof by the Company or,
with respect to real estate, placed thereon following the acquisition thereof by the Company
and prior to the filing and recording of an indenture supplemental to the Mortgage or an
instrument of further
assurance specifically describing such real estate, and to certain possible claims of a
trustee in bankruptcy and possible claims and taxes of the United States of America; and no
rerecording or refiling of the Mortgage is, or will under existing law be, necessary to
maintain, preserve, and protect the lien of the Mortgage as a mortgage on the real property,
and a security interest in the personal property, in each case in the State of Arizona
specifically or generally described or referred to therein as being subject to the lien
thereof.



I express no opinion as to the granting of security interests in motor vehicles, aircraft,
ships, insurance policies, instruments, contracts with governmental authorities and rights in
connection therewith, deposit accounts, copyrights, trademarks, patents, brokerage accounts,
security accounts, security entitlements, investment property, property located other than in
Arizona, goods to be kept outside of Arizona, other goods subject to certificate of title statutes,
other personal property excluded pursuant to A.R.S. Section 47-9109, security interests arising
pursuant to Uniform Commercial Code articles on sales and leases, consignment transactions, and,
with respect to the perfection of security interests in personal property, transactions for which
filing is not necessary or effective pursuant to A.R.S. Section 47-9310.



This opinion is limited to the laws of the States of Arizona, New York and New Mexico, and the
federal laws of the United States of America. As to all matters of New York law, the Federal Power
Act, as amended, or the Investment Company Act of 1940, as amended, and as to matters involving
technical compliance with the conditions set forth in the Mortgage precedent to the issuance of the
Mortgage Bonds (insofar as such matters are governed by the Trust Indenture Act of 1939, as
amended), I have relied, with your consent, upon the opinion of even date herewith rendered to you
by Morgan, Lewis & Bockius LLP of New York, New York, and as to all matters of New Mexico law, I
have relied, with your consent, upon the opinion of even date herewith rendered to you by Rodey,
Dickason, Sloan, Akin & Robb, P.A. of Albuquerque, New Mexico, and the opinions expressed herein
upon such reliance are subject to the same assumptions, qualifications and limitations set forth
therein.


 


 









 





November 9, 2010

Page 6




Morgan, Lewis & Bockius LLP and Rodey, Dickason, Sloan, Akin & Robb, P.A. are authorized to
rely upon this letter as to matters of Arizona law. This letter is not being delivered for the
benefit of, nor may it be relied upon by, any person or entity to which it is not specifically
addressed or by which reliance is not expressly authorized hereby. Notwithstanding the foregoing,
persons who subsequently become Lenders (or participants in accordance with the terms of the Second
Amended and Restated Credit Agreement) or Issuing Banks may rely on this letter as of the time of
its delivery on the date hereof as if this letter were addressed to them.




Very truly yours,




Raymond S. Heyman


 


 









 





SCHEDULE I




LENDERS




BANK OF AMERICA, N.A.




JPMORGAN CHASE BANK, N.A.




SUNTRUST BANK




THE BANK OF NEW YORK MELLON




UNION BANK, N.A.




U.S. BANK NATIONAL ASSOCIATION




WELLS FARGO BANK, NATIONAL ASSOCIATION




COMPASS BANK




COBANK, ACB




THE BANK OF NOVA SCOTIA




BANK HAPOALIM B.M.




BAYERISCHE LANDESBANK, NEW YORK BRANCH




COMERICA BANK




NATIONAL BANK OF ARIZONA




ISSUING BANKS




JPMORGAN CHASE BANK, N.A.




THE BANK OF NEW YORK MELLON




UNION BANK, N.A.




U.S. BANK NATIONAL ASSOCIATION




WELLS FARGO BANK, NATIONAL ASSOCIATION



 


 









 





EXHIBIT E-2




[FORM OF OPINION OF MORGAN, LEWIS & BOCKIUS LLP]




November 9, 2010




Union Bank, N.A.,

   as Administrative Agent, an Issuing Bank and a Lender

445 South Figueroa Street, 15th Floor

Los Angeles, California 90071




The Lenders and Issuing Banks listed on Schedule I hereto




Ladies and Gentlemen:




We are counsel to Tucson Electric Power Company, an Arizona corporation (the “Company”), and
have acted as such in connection with:




The Second Amended and Restated Credit Agreement, dated as of November 9, 2010, among
the Company, the Lenders and Issuing Banks party thereto, JPMorgan Chase Bank, N.A.,
SunTrust Bank and Wells Fargo Bank, National Association, as Co-Syndication Agents, Bank of
America, N.A. and U.S. Bank National Association, as Co-Documentation Agents, and Union
Bank, N.A. (formerly known as Union Bank of California, N.A.) (“Union Bank”), as
Administrative Agent (hereinafter, the “Second Amended and Restated Credit Agreement”); and




the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992 (the
“Mortgage Indenture”), from the Company to 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
(the “Mortgage Trustee”), as amended and supplemented by various supplemental indentures
including Supplemental Indenture No. 11, dated as of November 1, 2010 (the “Mortgage
Supplement”), from the Company to the Mortgage Trustee creating a series of First Mortgage
Bonds, Collateral Series I (the “Mortgage Bonds”). The Mortgage Indenture, as so amended
and supplemented, is hereinafter referred to as the “Mortgage.”


 


 









 






November 9, 2010

Page 2




In so acting we have reviewed all corporate proceedings of the Company in connection with (i)
the authorization, execution and delivery of the Mortgage, the Second Amended and Restated Credit
Agreement, the Revenue Bond Pledge Agreements, the Bond
Delivery Agreement, the promissory notes executed and delivered by the Company on the date
hereof pursuant to Section 2.08(e) of the Second Amended and Restated Credit Agreement (the
“Notes”), and the fee letter agreement, dated November 9, 2010, between the Company and Union Bank,
as Administrative Agent and an Issuing Bank (the “Fee Letter”), and (ii) the authorization,
execution and issuance of the Mortgage Bonds. We have also examined such other documents and
satisfied ourselves as to such other matters as we have deemed necessary as a basis for the
opinions set forth below. We have relied as to various questions of fact upon the representations
and warranties of the Company contained in the Second Amended and Restated Credit Agreement and in
the certificates of public officials and officers of the Company delivered thereunder, and have
further relied upon certificates of the Mortgage Trustee as to the authentication of the Mortgage
Bonds. Unless otherwise specified herein, capitalized terms used herein have the respective
meanings set forth in the Second Amended and Restated Credit Agreement.



Based upon and subject to the foregoing, and subject also to the qualifications hereinafter
set forth, we are of the opinion that:



1. The Company (a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has the corporate power and authority to own and operate
its property, to lease the property it operates as lessee and to conduct the business in which it
is currently engaged, and (c) is duly qualified as a foreign corporation and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of its property or the
conduct of its business requires such qualification except to the extent that the failure to so
qualify would not have a Material Adverse Effect.



2. The Company had the corporate power and authority to execute and deliver the Mortgage
Indenture as heretofore supplemented; the Company has the corporate power and authority to perform
the Mortgage, to execute, deliver and perform the Second Amended and Restated Credit Agreement and
to borrow and request the issuance of Letters of Credit thereunder, to execute, deliver and perform
the Mortgage Supplement, the Revenue Bond Pledge Agreements, the Notes, the Fee Letter and the Bond
Delivery Agreement and to issue and deliver the Mortgage Bonds pursuant to the Bond Delivery
Agreement; and the Company has taken all necessary corporate action to authorize the execution,
delivery and performance of the Second Amended and Restated Credit Agreement, the Mortgage
Supplement, the Revenue Bond Pledge Agreements, the Notes, the Fee Letter and the Bond Delivery
Agreement, the borrowings and requests for issuance of Letters of Credit under the Second Amended
and Restated Credit
Agreement and the issuance of the Mortgage Bonds and the delivery thereof pursuant to the Bond
Delivery Agreement.



3. The Second Amended and Restated Credit Agreement, the Mortgage, the Revenue Bond Pledge
Agreements, the Notes, the Fee Letter and the Bond Delivery Agreement have been duly and validly
executed and delivered on behalf of the Company and constitute legal, valid and binding obligations
of the Company, enforceable against it in accordance with their respective terms, except that
certain of the remedial provisions of the Mortgage may be limited by the laws of the state wherein
the mortgaged property is located and except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium or


 


 









 





November 9, 2010

Page 3



 other similar laws affecting
the enforcement of mortgagees’ and other creditors’ rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law) and subject to any
principles of public policy limiting the right to enforce indemnification or contribution
provisions contained in the Second Amended and Restated Credit Agreement with respect to
liabilities under federal or state securities laws.




4. The Mortgage Bonds have been duly and validly issued and executed and delivered by the
Company and authenticated by the Mortgage Trustee and are legal, valid and binding obligations of
the Company enforceable in accordance with their terms (subject to the exceptions referred to in
paragraph 3 above), and are entitled to the benefits of and secured by the Lien of the Mortgage,
equally and ratably with all other bonds outstanding thereunder.



5. No consent or authorization of, filing with or other act by or in respect of, any
Governmental Authority of the State of New York, the Federal Energy Regulatory Commission (“FERC”)
or the Arizona Corporation Commission (“ACC”) is required in connection with the execution,
delivery or performance by the Company of the Second Amended and Restated Credit Agreement, the
Mortgage Supplement, the Revenue Bond Pledge Agreements, the Notes, the Fee Letter and the Bond
Delivery Agreement, for borrowings and requests for issuances of Letters of Credit by the Company
under the Second Amended and Restated Credit Agreement or for the issuance and delivery by the
Company of the Mortgage Bonds pursuant to the Bond Delivery Agreement, except the Order (Decision
No. 71788) of the ACC relating thereto (which has been obtained and is, to the best of our
knowledge, in full force and effect); provided, however, that we express no opinion in this
paragraph as to compliance with the securities or “blue sky” laws of any jurisdiction.



6. The execution, delivery and performance by the Company of the Second Amended and Restated
Credit Agreement, the Mortgage Supplement, the Revenue Bond Pledge Agreements, the Notes, the Fee
Letter and the Bond Delivery Agreement, the borrowings and
requests for issuances of Letters of Credit under the Second Amended and Restated Credit
Agreement and the issuance of the Mortgage Bonds and the delivery thereof pursuant to the Bond
Delivery Agreement will not violate (a) any applicable law of the State of New York or any law
administered by or any rule or regulation of the FERC or the ACC, (b) the Company’s Restated
Articles of Incorporation, as amended, or Bylaws, as amended, (c) the Mortgage or (d) any agreement
or other instrument, of which we have knowledge, (1) to which the Company is a party relating to
pollution control revenue bonds or industrial development revenue bonds issued to finance projects
of the Company or (2) to which the Company is a party relating to any Sale Leaseback consummated
prior to the date hereof, and will not result in, or require, the creation or imposition of any
Lien on any of its properties or revenues other than as contemplated by the Mortgage and the Second
Amended and Restated Credit Agreement.



7. No taxes (as distinguished from filing and recordation fees) are payable to the State of
New York or any subdivision or agency thereof in connection with the execution, delivery and filing
or recordation of the Mortgage Supplement or any related filings or recordings, or the execution,
authentication, issuance or delivery of the Mortgage Bonds.


 


 









 





November 9, 2010

Page 4




8. The Company is not an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.



9. The provisions of each Revenue Bond Pledge Agreement are sufficient to create a valid and
enforceable security interest in favor of the Revenue Bond Issuing Bank party thereto (for the
benefit of the Revenue Bond Lenders) under the Uniform Commercial Code as in effect on the date
hereof in the State of New York (the “New York UCC”), as security for the Obligations (as defined
in such Revenue Bond Pledge Agreement), in the right, title and interest of the Company in the
Company Bonds (as defined in such Revenue Bond Pledge Agreement), all proceeds thereof and all
security entitlements relating thereto (collectively the “Pledged Collateral”).



With respect to each Revenue Bond Pledge Agreement other than the Revenue Bond Pledge
Agreement relating to the Industrial Development Revenue Bonds, 1985 Series A (Tucson Electric
Power Company Springerville Project) issued by The Industrial Development Authority of the County
of Apache (the “1985 Pledge Agreement”), if the Company Bonds are registered in the name of the
Revenue Bond Issuing Bank party thereto and held by such Revenue Bond Issuing Bank, then the
security interest created in favor of such Revenue Bond Issuing Bank in the Company’s right, title
and interest in the Company Bonds and any identifiable proceeds thereof held by such Revenue Bond
Issuing Bank will be perfected.



With respect to the 1985 Pledge Agreement, if the Company Bonds are registered in the name of
the Tender Agent (as defined in the 1985 Pledge Agreement) and held by the Tender Agent as
Custodian under, and as defined in, the 1985 Pledge Agreement for the benefit of the Revenue Bond
Issuing Bank party thereto, then the security interest created in favor of such Revenue Bond
Issuing Bank in the Company’s right, title and interest in the Company Bonds and any identifiable
proceeds thereof held by the Custodian will be perfected.



If the Company Bonds are registered in the name of Cede & Co., and The Depository Trust
Company (“DTC”) makes appropriate entries on its books crediting the Company Bonds and any
identifiable proceeds thereof to the appropriate securities account of the Trustee, the Agent or
the Custodian (as defined in, and as applicable under, each Revenue Bond Pledge Agreement), as a
direct participant of DTC, and the Trustee, the Agent or the Custodian (as applicable), as a
“securities intermediary” within the meaning of the New York UCC (a “Securities Intermediary”), has
on its books and records identified the applicable Revenue Bond Issuing Bank as the “entitlement
holder” of security entitlements to the Company Bonds and such proceeds, then the security interest
created in favor of such Revenue Bond Issuing Bank in the Company’s right, title and interest in
such Company Bonds, such security entitlements to the Company Bonds and such proceeds will be
perfected.



Our opinions as to the Revenue Bond Pledge Agreements and the perfection of any security
interest are subject to the following additional assumptions and qualifications:


 


 









 





November 9, 2010

Page 5




(A) except with respect to the Company Bonds, the interest thereon, the security entitlements
thereto and any other Collateral (as defined in each Revenue Bond Pledge Agreement) identified by a
type of collateral defined in the New York UCC, we have assumed, with your permission and without
independent investigation, that the description of the Pledged Collateral in each Revenue Bond
Pledge Agreement is adequate for purposes of Section 9-108 of the New York UCC;



(B) we have assumed, with your permission and without independent investigation, that each
Revenue Bond Issuing Bank is taking the pledge of the Collateral (as defined in each Revenue Bond
Pledge Agreement) pursuant to the applicable Revenue Bond Pledge Agreement in good faith and
without notice of any adverse claim in, to or against such Collateral;



(C) we express no opinion regarding the creation of a security interest in the right, title
and interest of the Company in any proceeds of the Company Bonds (other than cash proceeds) to the
extent that (i) such proceeds consist of property in which a security interest cannot be created
under the New York UCC or (ii) such proceeds consist of commercial tort claims or cooperative
interests;



(D) we express no opinion regarding the perfection of a security interest in the right, title
and interest of the Company in any proceeds of the Company Bonds (other than cash proceeds) in
which a security interest cannot be perfected by possession under the New York UCC;



(E) we have assumed, with your permission and without independent investigation, that each
Securities Intermediary’s jurisdiction (as contemplated by Section 8-110(e) of the New York UCC) is
the State of New York;



(F) we wish to call your attention to the provisions of (i) Sections 9-314 to 9-317 and 9-320
to 9-338 of the New York UCC, as to limitations on the effect of perfection, and (ii) Sections
9-301 to 9-308, 9-315 and 9-316 of the New York UCC, as to actions that may be necessary in the
future to continue perfection as a result of the lapse of time or a change in circumstances;



(G) limitations imposed by (i) bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting the enforcement of creditors’ rights generally, including, without
limitation, laws relating to fraudulent transfers or conveyances, preferences and equitable
subordination, and by (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law), including without limitation (A) the possible
unavailability of specific performance, injunctive relief or any other equitable remedy, and (B)
concepts of materiality, reasonableness, good faith and fair dealing;



 


 









 





November 9, 2010

Page 6






(H) we express no opinion regarding the enforceability of any provisions intended to establish
any standard other than the standard set forth in the relevant Uniform
Commercial Code as the measure of the performance of any party thereto of such party’s obligations thereunder, and assume
for purposes of this Opinion that the Trustee, the Agent and the Custodian, in each case as
Securities Intermediary, will perform all of the duties and exercise the standard of care required
by the New York UCC;




(I) we express no opinion as to the effect, if any, of a bankruptcy, insolvency, receivership,
conservatorship or similar event with respect to any Securities Intermediary;



(J) (i) we express no opinion as to the effect of any rule adopted by a clearing corporation
within the meaning of Section 8-102(a)(5) of the New York UCC (a “Clearing Corporation”) governing
rights and obligations among the Clearing Corporation and its participants in the Clearing
Corporation, and (ii) we express no opinion as to the creation or perfection of any security
interest in any proceeds of the Company Bonds that consist of obligations of the government of the
United States or any agency or instrumentality thereof except for such obligations which are
subject to 31 C.F.R. Part 357 (book-entry Treasury bills, notes and bonds) and the book-entry rules
promulgated by any Federal administrative agency which adopts the provisions of 31 C.F.R. Part 357
in connection with such agency’s instruments and obligations, and in which a security interest
therein may be perfected under the New York UCC in the manner described in opinion paragraph 9;
and



(K) we wish to point out that the rights of each Revenue Bond Issuing Bank in respect of any
security interest in a security entitlement are subject to the rights of the holder of such
security entitlement specified in Part 5 of Article 8 of the New York UCC against the relevant
Securities Intermediary.



This opinion is limited to the laws of the States of New York, Arizona and New Mexico, and the
federal laws of the United States of America. As to all matters of law of the States of Arizona
and New Mexico, we have relied, with your consent, upon the respective opinions of even date
herewith rendered to you by Raymond S. Heyman, Esq., Senior Vice President and General Counsel of
the Company, and Rodey, Dickason, Sloan, Akin & Robb, P.A., of Albuquerque, New Mexico, counsel to
the Company, and the opinions expressed herein upon such reliance are subject to the same
assumptions, qualifications and limitations set forth therein.


 


 









 





November 9, 2010

Page 7




Raymond S. Heyman, Esq. and Rodey, Dickason, Sloan, Akin & Robb, P.A., are authorized to rely
upon this letter as to matters of New York and, to the extent stated in their opinions, federal
law. This letter is not being delivered for the benefit of, nor may it be relied upon by, any
person or entity to which it is not specifically addressed or by which reliance is not expressly
authorized hereby. Notwithstanding the foregoing, persons who subsequently become Lenders (or
participants in accordance with the terms of the Second Amended and Restated Credit Agreement) or
Issuing Banks may rely on this letter as of the time of its delivery on the date hereof as if this
letter were addressed to them.




Very truly yours,




MORGAN, LEWIS & BOCKIUS LLP


 


 









 





SCHEDULE I




LENDERS




BANK OF AMERICA, N.A.




JPMORGAN CHASE BANK, N.A.




SUNTRUST BANK




THE BANK OF NEW YORK MELLON




UNION BANK, N.A.




U.S. BANK NATIONAL ASSOCIATION




WELLS FARGO BANK, NATIONAL ASSOCIATION




COMPASS BANK




COBANK, ACB




THE BANK OF NOVA SCOTIA




BANK HAPOALIM B.M.




BAYERISCHE LANDESBANK, NEW YORK BRANCH




COMERICA BANK




NATIONAL BANK OF ARIZONA




ISSUING BANKS




JPMORGAN CHASE BANK, N.A.




THE BANK OF NEW YORK MELLON




UNION BANK, N.A.




U.S. BANK NATIONAL ASSOCIATION




WELLS FARGO BANK, NATIONAL ASSOCIATION



 


 









 





EXHIBIT E-3




[OPINION OF RODEY, DICKASON, SLOAN, AKIN & ROBB, PA]




November 9, 2010




Union Bank, N.A.,

   as Administrative Agent, an Issuing Bank and a Lender

445 South Figueroa Street, 15th Floor

Los Angeles, California 90071




The Lenders and Issuing Banks listed on Schedule I hereto




Ladies and Gentlemen:




We are special New Mexico counsel to Tucson Electric Power Company, an Arizona corporation
(the “Company”), and have acted as such in connection with the Indenture of Mortgage and Deed of
Trust, dated as of December 1, 1992 (the “Mortgage Indenture”), from the Company to 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 (the “Mortgage Trustee”), as amended and supplemented by various
supplemental indentures, including Supplemental Indenture No. 11, dated as of November 1, 2010 (the
“Mortgage Supplement”), from the Company to the Mortgage Trustee creating a series of First
Mortgage Bonds, Collateral Series I (the “Mortgage Bonds”). The Mortgage Indenture, as so amended
and supplemented, is hereinafter referred to as the “Mortgage”. Unless otherwise specified herein,
capitalized terms used herein have the respective meanings set forth in the Second Amended and
Restated Credit Agreement, dated as of November 9, 2010, among the Company, the Lenders and Issuing
Banks party thereto, JPMorgan Chase Bank, N.A., SunTrust Bank and Wells Fargo Bank, National
Association, as Co-Syndication Agents, Bank of America, N.A. and U.S. Bank National Association, as
Co-Documentation Agents, and Union Bank, N.A. (formerly known as Union Bank of California, N.A.),
as Administrative Agent (hereinafter, the “Second Amended and Restated Credit Agreement”).



In so acting we have examined such documents and satisfied ourselves as to such matters as we
have deemed necessary as a basis for the opinions set forth below. As to all matters relating to
the status of title to property and encumbrances thereon, we have relied solely upon public
records, certificates and reports of title companies and other records and documents including
without limitation instruments of conveyance.



Based upon and subject to the foregoing, and subject also to the qualifications hereinafter
set forth, we are of the opinion that:



1. The Company is duly qualified as a foreign corporation and in good standing in the State of
New Mexico.


 


 









 





November 9, 2010

Page 2




2. The Mortgage, the Mortgage Bonds and the Second Amended and Restated Credit Agreement
constitute the legal, valid and binding obligations of the Company, enforceable against it in the
State of New Mexico in accordance with their respective provisions, except that certain of the
remedial provisions of the Mortgage may be limited by the law of the State of New Mexico (however,
such law does not, in our opinion, make the remedies afforded by the Mortgage inadequate for the
practical realization of the benefits thereof) and except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, moratorium or other similar laws
affecting the enforcement of mortgagees’ and other creditors’ rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or at law) and subject
to any laws and principles of public policy of the United States of America, the State of New
Mexico or the Navajo Nation limiting the right to enforce indemnification or contribution
provisions contained in the Second Amended and Restated Credit Agreement with respect to any actual
or alleged presence or release of Hazardous Materials on or from any property in the State of New
Mexico owned or operated by the Company or any of its Subsidiaries or any Environmental Liability.



3. No consent or authorization of, filing with or other act by or in respect of, any
Governmental Authority of the State of New Mexico is required in connection with the execution,
delivery or performance by the Company of the Second Amended and Restated Credit Agreement,
borrowings and requests for issuance of Letters of Credit by the Company under the Second Amended
and Restated Credit Agreement or for the issuance and delivery by the Company of the Mortgage
Bonds; provided, however, that we express no opinion as to compliance with the securities or “blue
sky” laws of the United States of America or any other jurisdiction.



4. The execution, delivery and performance by the Company of the Second Amended and Restated
Credit Agreement, the borrowings and requests for issuance of Letters of Credit thereunder and the
issuance of the Mortgage Bonds and delivery thereof pursuant to the Bond Delivery Agreement will
not (a) violate any law, rule or regulation of any Governmental Authority of the State of New
Mexico, which, in our experience, is normally applicable to transactions of the type contemplated
thereby or to entities similar to the Company, (b) violate any applicable order of any Governmental
Authority of the State of New Mexico of which we have knowledge or (c) result in, or require, the
creation or imposition of any Lien on any of the properties of the Company in the State of New
Mexico other than as contemplated by the Mortgage or the Second Amended and Restated Credit
Agreement.



5. The Company has good and marketable fee title to all the real properties in the State of
New Mexico purported to be owned by the Company in fee and good and marketable title to all the
other properties in the State of New Mexico described or referred to in the Mortgage as being
subject to the lien thereof, except for such properties as have been disposed of or released from
the lien of the Mortgage in accordance with the provisions thereof, subject to
(A) the lien of the Mortgage, (B) “Permitted Encumbrances,” as such term is defined in the
Mortgage, (C) the possible defects, liens, encumbrances, reservations or restrictions described in
the sixth, eighth and ninth paragraphs in Item 2 — PROPERTIES in the Company’s Annual Report on
Form 10-K for 2009, which possible defects, liens, encumbrances, reservations or restrictions do
not materially affect the Company’s title to such properties, and (D) such other defects and
qualifications, none of which, individually or in the aggregate, materially affect the Company’s
business or operations.


 


 









 





November 9, 2010

Page 3




6. The Mortgage has been duly recorded and filed as a mortgage and security agreement with
respect to real and personal property, and appropriate financing statements have been filed and
posted, to such extent, in such manner and in such places in the State of New Mexico as are
required by law to make effective the lien on properties in the State of New Mexico which the
Mortgage purports to create, and all recording and filing fees in connection therewith have been
paid; the Mortgage constitutes a valid first mortgage lien on and a valid security interest in the
properties in the State of New Mexico specifically or generally described or referred to therein as
being subject to the lien thereof, subject to “Permitted Encumbrances” (as defined therein) and
subject to certain possible prior interests described in the sixth, eighth and ninth paragraphs in
Item 2 — PROPERTIES in the Company’s Annual Report on Form 10-K for 2009, which possible prior
interests are permitted under the Mortgage; all properties in the State of New Mexico (except those
of the character expressly excepted from the lien of the Mortgage) hereafter acquired by the
Company will, upon such acquisition, become subject to the lien of the Mortgage, subject to no
liens prior to or pari passu with the lien of the Mortgage except “Permitted
Encumbrances” and liens or other encumbrances, if any, existing or placed thereon at the time of
the acquisition thereof by the Company or, with respect to real estate, placed thereon following
the acquisition thereof by the Company and prior to the filing and recording of an indenture
supplemental to the Mortgage or an instrument of further assurance specifically describing such
real estate, and to certain possible claims of a trustee in bankruptcy and possible claims and
taxes of the United States of America; and no re-recording or refiling of the Mortgage is, or will
under existing law be, necessary to maintain, preserve and protect the lien of the Mortgage as a
mortgage on the real property and a security interest in the personal property, in each case in the
State of New Mexico, specifically or generally described or referred to therein as being subject to
the lien thereof.



7. No taxes (as distinguished from filing and recordation fees) are payable to the State of
New Mexico or any subdivision or agency thereof in connection with the execution, delivery and
filing or recordation of the Mortgage Supplement or any related filings or recordings, or the
execution, authentication, issuance or delivery of the Mortgage Bonds.



We express no opinion with respect to security interests in motor vehicles, aircraft, ships,
other goods subject to certificate of title statutes, insurance policies, instruments, contracts
with governmental authorities and rights in connection therewith, deposit accounts, copyrights,
trademarks, patents, brokerage accounts, security accounts, security entitlements, investment
property, property located outside the State of New Mexico, goods to be kept outside
the State of New Mexico, other personal property excluded from the operation of Article 9 of the
Uniform Commercial Code of New Mexico (the “UCC”), security interests arising pursuant to the UCC
provisions dealing with sales, with bank accounts and collections, with letters of credit, with
leases, and with consignment transactions, and, with respect to the perfection of security
interests in personal property, transactions for which filing is not necessary or effective to
perfect a security interest under Section 9-310, Section 9-311 or Section 9-312 of the UCC.


 


 









 





November 9, 2010

Page 4




We are members of the State Bar of New Mexico and do not hold ourselves out as experts on the
law of other states. Accordingly, the opinions enumerated above are based solely upon the law of
the State of New Mexico and, with reference to the interests of the Company and the rights of the
Mortgage Trustee in the San Juan Generating Station, the Four Corners Generating Station and the
easement and lease relating thereto, upon the laws of the United States and the Navajo Nation. To
the extent that such opinions are dependent upon matters governed by the law of the State of
Arizona, the law of the State of New York, the Federal Power Act, as amended, the Trust Indenture
Act of 1939, as amended, or the Investment Company Act of 1940, as amended, we have relied, with
your consent, upon the respective opinions of even date herewith rendered to you by Raymond S.
Heyman, Esq., Senior Vice President and General Counsel of the Company, and Morgan, Lewis & Bockius
LLP, New York counsel to the Company, and the opinions expressed herein upon such reliance are
subject to the same assumptions, qualifications and limitations set forth therein.



Raymond S. Heyman, Esq. and Morgan, Lewis & Bockius LLP are authorized to rely upon this
letter except to the extent that the opinions expressed herein are based upon the assumption that
the opinions expressed by Raymond S. Heyman, Esq., and Morgan, Lewis & Bockius LLP are correct.
This letter is not being delivered for the benefit of, nor may it be relied upon by, any person or
entity to which it is not specifically addressed or by which reliance is not expressly authorized
hereby. Notwithstanding the foregoing, persons who subsequently become Lenders (or participants in
accordance with the terms of the Second Amended and Restated Credit Agreement) or Issuing Banks may
rely on this letter as of the time of its delivery on the date hereof as if this letter were
addressed to them.




Very truly yours,




RODEY, DICKASON, SLOAN, AKIN & ROBB, P.A.


 


 









 





SCHEDULE I




LENDERS




BANK OF AMERICA, N.A.




JPMORGAN CHASE BANK, N.A.




SUNTRUST BANK




THE BANK OF NEW YORK MELLON




UNION BANK, N.A.




U.S. BANK NATIONAL ASSOCIATION




WELLS FARGO BANK, NATIONAL ASSOCIATION




COMPASS BANK




COBANK, ACB




THE BANK OF NOVA SCOTIA




BANK HAPOALIM B.M.




BAYERISCHE LANDESBANK, NEW YORK BRANCH




COMERICA BANK




NATIONAL BANK OF ARIZONA




ISSUING BANKS




JPMORGAN CHASE BANK, N.A.




THE BANK OF NEW YORK MELLON




UNION BANK, N.A.




U.S. BANK NATIONAL ASSOCIATION




WELLS FARGO BANK, NATIONAL ASSOCIATION