Document:

Amendment No. 4 to Lease Agreement (Emerson)

    Exhibit
      10.3

    
 

    AMENDMENT
      NO. 4

    to

    LEASE
      AGREEMENT

    

    

    This
      AMENDMENT
      NO. 4,
      dated
      as of June 1, 2006, to Lease Agreement, dated as of December 1, 1985, between
      TUCSON
      ELECTRIC POWER COMPANY,
      an
      Arizona corporation (“TEP”), and SAN
      CARLOS RESOURCES INC.,
      an
      Arizona corporation (“San Carlos”), jointly and severally as Lessee (such term
      and all other capitalized terms used herein without definition having the
      meanings provided in Section 1 hereof), and WILMINGTON
      TRUST COMPANY,
      a
      Delaware corporation, and WILLIAM
      J. WADE
      (not in
      their respective individual capacities but solely as Owner Trustee and
      Cotrustee, respectively, under the Trust Agreement between such parties and
      Emerson Finance LLC (formerly known as Emerson Finance Co.), as Owner
      Participant), as Lessor (this “Lease Amendment”),

     

    W
      I T N E S S E T H

     

    WHEREAS,
      the
      Lessee and the Lessor have heretofore entered into a Lease Agreement, dated
      as
      of December 1, 1985, as duly recorded in the office of the County Recorder
      of
      Apache County, Arizona on January 8, 1986, in Docket 499 at Pages 319-452,
      as
      supplemented by a Lease Supplement dated December 31, 1985, as duly recorded
      in
      the aforesaid office in Docket 499 at Pages 489-506, as amended by Amendment
      No.
      1 to Lease Agreement, dated as of December 15, 1992, duly recorded in the
      aforesaid office in Docket 700 at Pages 372-398, as amended by Amendment No.
      2
      to Lease Agreement, dated as of December 1, 1999, duly recorded in the aforesaid
      office in Docket 968 at Pages 594-601, and as amended by Amendment No. 3 to
      Lease Agreement, dated as of June 1, 2003, duly recorded in the aforesaid office
      on June 25, 2003 as Instrument No. 2003-05403, providing for the lease by the
      Lessor to the Lessee of the Leased Assets (such Lease Agreement, as so
      supplemented and amended and as further amended, modified or supplemented from
      time to time in accordance with the provisions thereof, being hereinafter
      referred to as the “Lease”),

     

    WHEREAS,
      the
      Lessee and the Lessor have agreed pursuant to a Refinancing Agreement, dated
      as
      of June 1, 2006 (as amended, modified or supplemented from time to time in
      accordance with the provisions thereof, the “Refinancing Agreement”), with the
      Owner Participant, the Loan Participants named therein, the Indenture Trustee
      and certain other parties to amend certain Operative Documents on the Amendment
      Date (as defined in the Refinancing Agreement),

     

    WHEREAS,
      the
      Lessee and Lessor have agreed to amend the Lease as contemplated
      herein,

     

    WHEREAS,
      Section
      31(b) of the Lease provides, among other things, that until the Lessee has
      received notice from the Indenture Trustee that the Lien of the Indenture on
      the
      Trust Indenture Estate has been released, no term of the Lease shall be amended
      without the consent of the Indenture Trustee, and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    WHEREAS,
      pursuant to Section 15.1 of the Indenture, the Indenture Trustee has, at the
      direction and with the consent of each holder of a Secured Note, consented,
      by
      executing and delivering the Refinancing Agreement, to the amendments to the
      Lease set forth in this Lease Amendment,

     

    NOW
      THEREFORE,
      in
      consideration of the premises and of such other good and valuable consideration,
      the receipt and sufficiency of which are hereby acknowledged, the parties hereto
      agree as follows:

     

    Section
      1.  Definitions.

     

    (a)  General
      Definitions.
      Except
      as otherwise expressly provided herein or unless the context otherwise requires,
      capitalized terms used herein shall have the meanings set forth in Section
      1 of
      the Lease.

     

    (b)  Special
      Event of Loss.
      Clause
      (iii) of the definition of “Special
      Event of Loss”
      in
      Section 1 of the Lease is hereby amended in its entirety to read as
      follows:

     

    (iii)  
      [Deleted]

    

    Section
      2.  Prepayment
      Upon a Special Event of Loss.
      The
      first proviso to Section 11(a) of the Lease is hereby amended by deleting the
      phrase “a Special Event of Loss described in (iii) of the definition thereof or”
in its entirety.

     

    Section
      3.  Counterpart
      Execution. This
      Lease Amendment may be executed by the parties hereto in separate counterparts,
      each of which when so executed and delivered shall be deemed an original, but
      all such counterparts shall together constitute but one and the same instrument.
      The single executed original of this Lease Amendment which provides that it
      is
      the “original counterpart” and which contains the receipt therefor executed by
      the Indenture Trustee on or immediately following the signature page thereof
      shall evidence the monetary obligations of the Lessee hereunder and thereunder.
      To the extent, if any, that this Lease Amendment constitutes chattel paper
      (as
      such term is defined in the Uniform Commercial Code as in effect in any
      applicable jurisdiction), no security interest in this Lease Amendment may
      be
      created by the transfer or possession of any counterpart thereof other than
      the
      original counterpart and containing the receipt therefor executed by the
      Indenture Trustee on or immediately following the signature page
      thereof.

     

    Section
      4.  Ratification
      of the Lease.
      This
      Lease Amendment is an amendment to the Lease. As amended by this Lease
      Amendment, the Lease is in all respects ratified, approved and confirmed, and
      the Lease and this Lease Amendment shall together constitute one and the same
      instrument.

     

    Section
      5.  Governing
      Law.
      This
      Lease Amendment has been delivered in, and shall in all respects be governed
      by
      and construed in accordance with, the laws of the State of Arizona applicable
      to
      agreements made and to be performed entirely within such state, including
      matters of construction, validity and performance.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Section
      6.  Liabilities
      of Owner Participant.
      Sections
      23 and 31 of the Lease are hereby incorporated by reference mutatis
      mutandis
      in this
      Lease Amendment.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      undersigned Lessee and Lessor have each caused this Lease Amendment to be duly
      executed and delivered and their corporate seals to be hereunto affixed and
      attested or witnessed by their respective officers thereunto duly authorized
      as
      of the day and year first above written.

     

    
      	 	
              TUCSON
                ELECTRIC POWER COMPANY,

                  as
                Lessee

               

               

            
	 	
              By:

            	_____________________________ 
	 	 	
                Name:

                Title:

               

            
	
              [seal]

               

              Attest:

               

            	 	 
	_______________________ 	 	 
	
              Assistant
                Secretary

            	 	 
	 	
              SAN
                CARLOS RESOURCES INC.

                  as
                Lessee

               

               

            
	 	
              By:

            	_____________________________ 
	 	 	
                Name:

                Title:

               

            
	
              [seal]

               

              Attest:

               

            	 	 
	_______________________ 	 	 
	
              Assistant
                Secretary

            	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    
      	 	
              WILMINGTON
                TRUST COMPANY,

                  not
                in its
                individual capacity but solely as

                  Owner
                Trustee under the
                Trust Agreement,

                  as
                Lessor

               

               

            
	 	
              By:

            	_____________________________  
	 	 	
                Name:

                Title:

            
	
              [seal]

               

              Attest:

               

            	 	 
	_______________________  	 	 
	
              Title:

            	 	 
	 	_____________________________   
	 	
              WILLIAM
                J. WADE,

                  not
                in his
                individual capacity but solely as

                  Cotrustee
                under the Trust
                Agreement, as

                  Lessor

            
	
              Witness:

               

            	 	 
	_______________________ 	 	 

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Receipt
      of this original counterpart of the foregoing Amendment No. 4 to Lease Agreement
      is hereby acknowledged on
      this          day of June,
      2006.

    

    
      	 	
              THE
                BANK OF NEW YORK,

              as
                Indenture Trustee

               

               

            
	 	
              By:

            	_______________________ 
	 	 	
                Name:

                Title:

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ACKNOWLEDGEMENTS
      TO LEASE AMENDMENT

    

    

    STATE
      OF
      ARIZONA     )

                     )
      ss.:

    COUNTY
      OF
      PIMA      )

    

    The
      foregoing instrument was acknowledged before me this ____ day of June, 2006,
      by
      _________________, _________________ of TUCSON
      ELECTRIC POWER COMPANY,
      an
      Arizona corporation, on behalf of said corporation.

    
 

    ________________________

    Notary
      Public

    

    

    My
      Commission Expires:

    

    

    _____________________

    

    

    

    
      STATE
        OF
        ARIZONA     )

                       )
        ss.:

      COUNTY
        OF
        PIMA      )

    The
      foregoing instrument was acknowledged before me this _____ day of June, 2006,
      by
      _________________, _____________________ of SAN
      CARLOS RESOURCES INC.,
      an
      Arizona corporation, on behalf of said corporation.

    
 

    
      ________________________

      Notary
        Public

    

    

    

    My
      Commission Expires:

    

    

    _____________________

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    STATE
      OF
      DELAWARE    )

                )
      ss.:

    COUNTY
      OF
      NEW CASTLE  )

    

    The
      foregoing instrument was acknowledged before me this _____ day of June, 2006,
      by
      __________________, __________________ of WILMINGTON
      TRUST COMPANY,
      a
      Delaware banking corporation, on behalf of said corporation.

    
 

    
      
        ________________________

        Notary
          Public

      

    

    

    

    My
      Commission Expires:

    

    

    _____________________

    

 

    
      STATE
        OF
        DELAWARE    )

                  )
        ss.:

      COUNTY
        OF
        NEW CASTLE  )

    The
      foregoing instrument was acknowledged before me this _____ day of June, 2006,
      by
WILLIAM
      J. WADE,
      an
      individual.

     

     

    
      
        ________________________

        Notary
          Public

      

    My
      Commission Expires:

    

    

    _____________________Amendment No. 4 to Tax Indemnity Agreement (Philip Morris)

    Exhibit
      10.4

    
 

    
      
        

      

    

    

     

    AMENDMENT
      NO. 4

     

    dated
      as
      of June 1, 2006

     

    to

     

    TAX
      INDEMNITY AGREEMENT

    dated
      as
      of December 1, 1985

     

    between

     

    PHILIP
      MORRIS CAPITAL CORPORATION

    beneficiary
      under a Trust Agreement

    dated
      as
      of December 1, 1985

    with
      Wilmington Trust Company

    and

    William
      J. Wade,

    as
      Owner
      Trustee and Cotrustee, respectively,

    Lessor

     

    and

     

    TUCSON
      ELECTRIC POWER COMPANY,

    and

    SAN
      CARLOS RESOURCES INC.,

    Lessee

     

    _______________________________________

    Common
      Plant

    Springerville
      Generating Station

     

    

    
      
        

      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    AMENDMENT
      NO. 4

    to

    TAX
      INDEMNITY AGREEMENT

     

    This
      AMENDMENT
      NO. 4
      (this
“Amendment”),
      dated
      as of June 1, 2006 to TAX
      INDEMNITY AGREEMENT,
      dated as
      of December 1, 1985, between TUCSON
      ELECTRIC POWER COMPANY,
      an
      Arizona corporation, and SAN
      CARLOS RESOURCES INC.,
      an
      Arizona corporation, as Lessee (the “Lessee”),
      and
PHILIP
      MORRIS CAPITAL CORPORATION,
      a
      Delaware corporation (the “Owner
      Participant”),
      beneficiary under a Trust Agreement, dated as of December 1, 1985, with
Wilmington
      Trust Company and
      William
      J. Wade,
      as
      Owner Trustee and Cotrustee, respectively (the “Lessor”).

     

    W
      I T N E S S E T H

     

    WHEREAS,
      the
      Owner Participant (or its predecessor in interest) and the Lessee entered into
      a
      Tax Indemnity Agreement, dated as of December 1, 1985, as amended by Amendment
      No. 1, dated as of December 15, 1992, to Tax Indemnity Agreement dated as of
      December 1, 1985, by Amendment No. 2, dated as of December 1, 1999, to Tax
      Indemnity Agreement dated as of December 1, 1985 and by Amendment No. 3, dated
      as of June 1, 2003 (such Tax Indemnity Agreement, as so amended and as further
      amended, modified or supplemented from time to time, being referred to herein
      as
      the “Tax
      Indemnity Agreement”);

     

    WHEREAS,
      the
      Lessee, the Lessor, the Owner Participant and certain other parties have agreed
      pursuant to an Refinancing Agreement, dated as June 1, 2006 (as amended,
      modified or supplemented from time to time, the “Refinancing Agreement”) to
      amend the Lease and the Indenture to permit a refinancing of the outstanding
      Secured Notes on the Amendment Date (as defined in the Refinancing
      Agreement);

     

    WHEREAS,
      the
      Owner Participant and the Lessee wish to amend the Tax Indemnity Agreement
      as
      contemplated herein in order to reflect agreements and amendments contemplated
      by the Refinancing Agreement;

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and other good and valuable consideration, the
      receipt and sufficiency of which is hereby acknowledged, the parties hereto
      agree as follows:

     

    Section
      1. Definitions.
      General.
      Capitalized terms used herein and not otherwise defined herein shall have the
      respective meanings specified in the Tax Indemnity Agreement and the Indenture,
      as amended and supplemented from time to time, including, without limitation,
      by
      Supplemental Indenture No. 3, dated as of June 1, 2003, and the Supplemental
      Indenture No. 4, dated as of the date hereof.

     

    Section
      2. Additional
      Definition. As
      used
      herein, Refinancing Agreement shall mean the Refinancing Agreement dated as
      of
      June 1, 2006, among Lessee, Owner Participant, Lessor and certain parties (as
      such Refinancing Agreement may be amended, modified or supplemented from time
      to
      time). 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      3. Indemnified
      Losses.
      (a)
      Section 3.1(c) is hereby amended to read in its entirety as set forth
      below:

     

    “(c)
      if,
      as a result of the Lessee paying any Transaction Expenses (as defined in the
      Refinancing Agreement), Transaction Expenses (as defined in the Refunding
      Agreement) or Transaction Expenses (as defined in the 1999 Refunding Agreement)
      the Owner Participant shall be required to include any amount in its gross
      income; or”.

     

    (c)
      Section 3.1 is hereby amended by adding at the end of subsection (e) (i.e.
      prior
      to the phrase “(any of the events”) the following:

     

    “;
      or (f)
      if, as a result of the Lessee paying any Supplemental Rent under Section 3(c)
      of
      the Lease with respect to payments contemplated by Section 2 of the Supplemental
      Indenture No. 4, dated as of June 1, 2006, to the Indenture the Owner
      Participant shall be required to include any amount in its gross
      income”.

     

    (d)
      Section 3.1 is hereby amended by replacing the phrase “(any of the events
      described in these subsections (a)(2), (b), (c), (d) or (e) being referred
      to
      hereinafter as a “Loss”)” with the following:

     

    “(any
      of
      the events described in these subsections (a)(2), (b), (c), (d), (e) or (f)
      being referred to hereinafter as a “Loss”)”.

     

    Section
      4. Counterpart
      Execution.
      This
      Amendment may be executed by the parties hereto in separate counterparts, each
      of which when so executed and delivered shall be deemed an original, but all
      such counterparts shall together constitute but one and the same
      instrument.

     

    Section
      5. Ratification
      of the Tax Indemnity Agreement.
      As
      amended by this Amendment, the Tax Indemnity Agreement is in all respects
      ratified, approved and confirmed, and the Tax Indemnity Agreement and this
      Amendment shall together constitute one and the same instrument.

     

    Section
      6. Governing
      Law.
      This
      Amendment has been delivered in, and shall in all respects be governed by,
      construed in accordance with, the laws of the State of New York applicable
      to
      agreements made and to be performed entirely within such State, including such
      laws applicable to matters of construction, validity and
      performance.

     

    Section
      7. Representation
      of Lessee. Lessee
      represents that the rate of interest payable in respect of the Series 4 Notes
      as
      determined pursuant to Supplemental Indenture No. 4, dated as of June 1, 2006,
      to the Indenture, including the use of Applicable Base Rate Margin and
      Applicable Libor Margin that increase over time (i) represents an arm’s length
      rate, (ii) is consistent with market practice for long-term floating rate
      financings, and (iii) was determined without reference to federal income tax
      considerations to any person.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF,
      the
      Owner Participant and the Lessee have caused this Amendment to be duly executed
      by their respective officers hereunto duly authorized as of the date set forth
      above.

     

     

    
      	 	 	 
	 	TUCSON
              ELECTRIC POWER COMPANY
	 
 	 
 	 
 
	 	By  	 
	 	
              
Name
	 	Title:

    

    

     

    
      	 	 	 
	 	SAN
              CARLOS RESOURCES INC.
	 
 	 
 	 
 
	 	By  	 
	 	
              
Name
	 	Title:

    
      	 	 	 
	 	PHILIP
              MORRIS CAPITAL CORPORATION
	 
 	 
 	 
 
	 	By  	 
	 	
              
Name:
	 	Title:

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