Document:

Exhibit 10.3

Exhibit 10.3

[EXECUTION COPY]

U.S. $175,000,000

CREDIT AGREEMENT

Dated as of February 23, 2011

among

PINNACLE WEST CAPITAL CORPORATION,

as Borrower,

THE LENDERS PARTY HERETO,

UNION BANK, N.A.,

as Agent,

THE ROYAL BANK OF SCOTLAND FINANCE (IRELAND),

as Syndication Agent,

SUNTRUST BANK,

as Documentation Agent,

and

UNION BANK, N.A., SUNTRUST ROBINSON HUMPHREY, INC. and

THE ROYAL BANK OF SCOTLAND FINANCE (IRELAND),

as Joint Lead Arrangers,

UNION BANK, N.A. and THE ROYAL BANK OF SCOTLAND FINANCE (IRELAND),

as Joint Bookrunners

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
	 	 	1	 
	 
	 	 	 	 
	Section 1.01 Certain Defined Terms
	 	 	1	 
	Section 1.02 Other Interpretive Provisions
	 	 	14	 
	Section 1.03 Accounting Terms
	 	 	15	 
	Section 1.04 Rounding
	 	 	15	 
	Section 1.05 Times of Day
	 	 	15	 
	 
	 	 	 	 
	ARTICLE II AMOUNTS AND TERMS OF THE LOANS
	 	 	15	 
	 
	 	 	 	 
	Section 2.01 The Loans
	 	 	15	 
	Section 2.02 Making the Loans
	 	 	16	 
	Section 2.03 Agent’s Fees
	 	 	17	 
	Section 2.04 Repayment of Loans
	 	 	17	 
	Section 2.05 Interest on Loans
	 	 	17	 
	Section 2.06 Interest Rate Determination
	 	 	18	 
	Section 2.07 Optional Conversion of Loans
	 	 	19	 
	Section 2.08 Prepayments of Loans
	 	 	19	 
	Section 2.09 Increased Costs
	 	 	20	 
	Section 2.10 Illegality
	 	 	21	 
	Section 2.11 Payments and Computations
	 	 	22	 
	Section 2.12 Taxes
	 	 	23	 
	Section 2.13 Sharing of Payments, Etc
	 	 	26	 
	Section 2.14 Evidence of Debt
	 	 	27	 
	Section 2.15 Use of Proceeds
	 	 	28	 
	Section 2.16 Affected Lenders
	 	 	28	 
	Section 2.17 Replacement of Lenders
	 	 	28	 
	 
	 	 	 	 
	ARTICLE III CONDITIONS PRECEDENT
	 	 	29	 
	 
	 	 	 	 
	Section 3.01 Conditions Precedent to Effectiveness
	 	 	29	 
	Section 3.02 Determinations Under Section 3.01
	 	 	30	 
	 
	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES
	 	 	31	 
	 
	 	 	 	 
	Section 4.01 Representations and Warranties of the Borrower
	 	 	31	 
	 
	 	 	 	 
	ARTICLE V COVENANTS OF THE BORROWER
	 	 	33	 
	 
	 	 	 	 
	Section 5.01 Affirmative Covenants
	 	 	33	 
	Section 5.02 Negative Covenants
	 	 	37	 
	Section 5.03 Financial Covenant
	 	 	38	 

 

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	ARTICLE VI EVENTS OF DEFAULT
	 	 	38	 
	 
	 	 	 	 
	Section 6.01 Events of Default
	 	 	38	 
	 
	 	 	 	 
	ARTICLE VII THE AGENT
	 	 	40	 
	 
	 	 	 	 
	Section 7.01 Appointment and Authority
	 	 	40	 
	Section 7.02 Rights as a Lender
	 	 	40	 
	Section 7.03 Exculpatory Provisions
	 	 	41	 
	Section 7.04 Reliance by Agent
	 	 	41	 
	Section 7.05 Delegation of Duties
	 	 	42	 
	Section 7.06 Resignation of Agent
	 	 	42	 
	Section 7.07 Non-Reliance on Agent and Other Lenders
	 	 	42	 
	Section 7.08 No Other Duties, Etc
	 	 	43	 
	 
	 	 	 	 
	ARTICLE VIII MISCELLANEOUS
	 	 	43	 
	 
	 	 	 	 
	Section 8.01 Amendments, Etc
	 	 	43	 
	Section 8.02 Notices, Etc
	 	 	44	 
	Section 8.03 No Waiver; Cumulative Remedies; Enforcement
	 	 	45	 
	Section 8.04 Costs and Expenses; Indemnity; Damage Waiver
	 	 	46	 
	Section 8.05 Right of Set-off
	 	 	48	 
	Section 8.06 Effectiveness; Binding Effect
	 	 	48	 
	Section 8.07 Successors and Assigns
	 	 	48	 
	Section 8.08 Confidentiality
	 	 	52	 
	Section 8.09 Governing Law
	 	 	52	 
	Section 8.10 Counterparts; Integration
	 	 	52	 
	Section 8.11 Jurisdiction, Etc
	 	 	53	 
	Section 8.12 Payments Set Aside
	 	 	53	 
	Section 8.13 Patriot Act
	 	 	53	 
	Section 8.14 Waiver of Jury Trial
	 	 	53	 
	Section 8.15 No Advisory or Fiduciary Responsibility
	 	 	54	 
	Section 8.16 Survival of Representations and Warranties
	 	 	54	 
	Section 8.17 Severability
	 	 	55	 

	 	 	 	 	 
	Schedules
	 	 	 	 
	 
	 	 	 	 
	Schedule 1.01 Commitments and Ratable Shares
	 	 	 	 
	Schedule 4.01(j) Subsidiaries
	 	 	 	 
	Schedule 4.01(k) Existing Indebtedness
	 	 	 	 
	Schedule 8.02 Certain Addresses for Notices
	 	 	 	 
	 
	 	 	 	 
	Exhibits
	 	 	 	 
	 
	 	 	 	 
	Exhibit A Form of Note
	 	 	 	 
	Exhibit B Form of Notice of Initial Borrowing
	 	 	 	 
	Exhibit C Form of Assignment and Assumption
	 	 	 	 
	Exhibit D Form of Interest Election Request
	 	 	 	 

 

ii

 

CREDIT AGREEMENT

Dated as of February 23, 2011

PINNACLE WEST CAPITAL CORPORATION, an Arizona corporation (the “Borrower”), the banks,
financial institutions and other institutional lenders (the “Initial Lenders”) listed on
the signature pages hereof, Union Bank, N.A., SunTrust Robinson Humphrey, Inc. and The Royal Bank
of Scotland Finance (Ireland), as Joint Lead Arrangers (the “Arrangers”), The Royal Bank of
Scotland Finance (Ireland), as Syndication Agent, SunTrust Bank, as Documentation Agent, and UNION
BANK, N.A., as Agent for the Lenders (as hereinafter defined), agree as follows:

The Borrower has requested that the Lenders provide a $175,000,000 term loan facility for the
purposes set forth herein, and the Lenders are willing to do so on the terms and conditions set
forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto
covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:

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

“Affected Lender” means any Lender, as reasonably determined by the Agent or, if the
Agent is the Affected Lender, by the Required Lenders, that (a) has defaulted in its obligation to
fund a Loan or any of its other funding obligations under this Agreement, (b) has notified the
Borrower, the Agent or any Lender in writing of its intention not to fund a Loan or any of its
other funding obligations under this Agreement, (c) has otherwise failed to pay over to the Agent
or any other Lender any other amount required to be paid by it hereunder within three Business Days
of the date when due, unless the subject of a good faith dispute, (d) has failed, within three
Business Days after written request by the Agent, or, if the Agent is the Affected Lender, by the
Required Lenders, to confirm that it will comply with the terms of this Agreement relating to its
obligations to fund a Loan or (e) shall (or whose parent company shall) generally not pay its debts
as such debts become due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors; or shall have had any proceeding
instituted by or against such Lender (or its parent company) seeking to adjudicate it as bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, administrator, assignee for the benefit of creditors or
similar Person charged with reorganization or liquidation of its business or custodian for it or
for any
substantial part of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or unstayed for a
period of 30 days, or any of the actions sought in such proceeding (including, without limitation,
the entry of an order for relief against, or the appointment of a receiver, trustee, administrator,
assignee for the benefit of creditors or similar Person charged with reorganization or liquidation
of its business or custodian for, it or for any substantial part of its property) shall occur, or
shall take (or whose parent company shall take) any corporate action to authorize any of the
actions set forth above in this subsection (e), provided that a Lender shall not be deemed to be an
Affected Lender solely by virtue of the ownership or acquisition of any equity interest in such
Lender or any Person that directly or indirectly controls such Lender by a Governmental Authority
or an instrumentality thereof.

 

1

 

“Affiliate” means, as to any Person, any other Person that, directly or indirectly,
controls, is controlled by or is under common control with such Person or is a director or officer
of such Person. For purposes of this definition, the term “control” (including the terms
“controlling”, “controlled by” and “under common control with”) of a Person means the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of Voting Stock, by contract or otherwise.

“Agent” means Union Bank in its capacity as administrative agent under any of the Loan
Documents, or any successor administrative agent.

“Agent’s Account” means the account of the Agent designated on Schedule 8.02 under the
heading “Agent’s Account” or such other account as the Agent may designate to the Lenders and the
Borrower from time to time.

“Agent’s Office” means the Agent’s address specified in Section 8.02(a) and, as
appropriate, the Agent’s Account, or such other address or account as the Agent may from time to
time notify to the Borrower and the Lenders.

“Agreement” means this Credit Agreement, dated as of February 23, 2011, among the
Borrower, the Lenders named herein and from time to time party hereto, the Arrangers, the
Syndication Agent, the Documentation Agent and the Agent, together with all schedules and exhibits
hereto.

“Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic
Lending Office in the case of a Base Rate Loan and such Lender’s Eurodollar Lending Office in the
case of a Eurodollar Rate Loan.

 

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“Applicable Rate” means, from time to time, the following percentages per annum
determined by reference to the Public Debt Rating as set forth below:

	 	 	 	 	 	 	 	 	 
	Public Debt Rating	 	 	 	 	 	 
	S&P/Moody’s	 	Base Rate Loan	 	 	Eurodollar Rate Loan	 
	Level 1

≥ BBB+/Baa1	 	 	0.25	%	 	 	1.25	%
	 
	 	 	 	 	 	 	 	 
	Level 2

< Level 1 but ≥ BBB/Baa2	 	 	0.50	%	 	 	1.50	%
	 
	 	 	 	 	 	 	 	 
	Level 3

< Level 2 but ≥ BBB-/Baa3	 	 	0.75	%	 	 	1.75	%
	 
	 	 	 	 	 	 	 	 
	Level 4

< Level 3	 	 	1.00	%	 	 	2.00	%

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of any entity that administers or manages a
Lender.

“APS” means Arizona Public Service Company, an Arizona corporation.

“Arrangers” has the meaning given to such term in the introductory paragraph hereof.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of
Exhibit C hereto.

“Authorized Officer” means the chairman of the board, chief executive officer, chief
operating officer, chief financial officer, chief accounting officer, president, any vice
president, treasurer, controller or any assistant treasurer of the Borrower.

“Base Rate” means for any day a fluctuating rate per annum equal to the highest of:

(a) the Reference Rate in effect for such day as publicly announced from time to time by Union
Bank;

(b) the Federal Funds Rate plus 0.50%; and

(c) an amount equal to (i) the Eurodollar Rate for a one month Interest Period on such day (or
if such day is not a Business Day, the immediately preceding Business Day) plus (ii) 1%.

Any change in the Base Rate due to a change in the Reference Rate, the Federal Funds Rate or
the Eurodollar Rate shall be effective from and including the effective date of such change in the
Reference Rate, the Federal Funds Rate or the Eurodollar Rate, respectively.

“Base Rate Loan” means a Loan that bears interest as provided in Section 2.05(a)(i).

“Borrower” has the meaning given to such term in the introductory paragraph hereof.

“Borrower Information” has the meaning specified in Section 8.08.

 

3

 

“Borrowing” means Loans of the same Type that are made, Converted or continued on the
same date and, in the case of Eurodollar Rate Loans, as to which a single Interest Period is in
effect.

“Business Day” means a day of the year on which banks are not required or authorized
by Law to close in New York City, Phoenix, Arizona or Los Angeles, California and, if the
applicable Business Day relates to any Loan in which interest is calculated by reference to the
Eurodollar Rate, on which dealings are carried on in the London interbank market.

“Capital Lease” means, at any time, a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the incurrence of a liability in
accordance with GAAP.

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

“Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption of any Law, (b) any change in any Law or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the making or issuance
of any request, guideline or directive (whether or not having the force of law) by any Governmental
Authority. Notwithstanding anything to the contrary herein, it is understood and agreed that the
Dodd—Frank Act, all requests, rules, regulations, guidelines and directives relating thereto, all
interpretations and applications thereof and any compliance by a Lender with any request, guideline
or directive relating thereto, shall, for the purposes of this Agreement, be deemed to be adopted
and issued subsequent to the date hereof.

“Commitment” means, as to any Lender, its obligation to make a Loan to the Borrower
pursuant to Section 2.01, in an aggregate principal amount not to exceed the amount set forth
opposite such Lender’s name on Schedule 1.01 under the column “Commitment”.
“Commitments” means the total of the Lenders’ Commitments hereunder. The Commitments shall
in no event exceed $175,000,000.

“Consolidated” refers to the consolidation of accounts in accordance with GAAP.

“Consolidated Indebtedness” means, at any date, the Indebtedness of the Borrower and
its Consolidated Subsidiaries determined on a Consolidated basis as of such date; provided,
however, that so long as the creditors of the VIE Lessor Trusts have no recourse to the
assets of APS or the Borrower, Consolidated Indebtedness shall not include any Indebtedness or
other obligations of the VIE Lessor Trusts.

“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 the
Consolidated
surplus, whether capital or earned, of the Borrower, determined in accordance with GAAP as of
the end of the most recent calendar month (excluding the effect on the Borrower’s accumulated other
comprehensive income/loss of the ongoing application of Accounting Standards Codification Topic
815).

 

4

 

“Consolidated Subsidiary” means, at any date, any Subsidiary or other entity the
accounts of which would be Consolidated with those of the Borrower on its Consolidated financial
statements if such financial statements were prepared as of such date.

“Convert”, “Conversion” and “Converted” each refers to a conversion of
Loans of one Type into Loans of the other Type pursuant to Section 2.06, Section 2.07 or Section
2.10.

“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, 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 of America or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.

“Default” means any Event of Default or any event that would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.

“Documentation Agent” means SunTrust Bank in its capacity as documentation agent for
the Lenders.

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

“Dollars” or “$” means dollars of the United States of America.

“Domestic Lending Office” means, with respect to any Lender, the office of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other office or offices as
a Lender may from time to time notify the Borrower and the Agent.

“Effective Date” has the meaning specified in Section 3.01.

“Eligible Assignee” means any Person that meets the requirements to be an assignee
under Section 8.07(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required
under Section 8.07(b)(iii)).

“Environmental Action” means any action, suit, demand, demand letter, claim, notice of
non-compliance or violation, notice of liability or potential liability, investigation, proceeding,
consent order or consent agreement relating in any way to any Environmental Law, Environmental
Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety
or the environment and relating to any Environmental Law, including, without limitation, (a) by any
Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any Governmental Authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.

 

5

 

“Environmental Law” means any federal, state, local or foreign statute, law,
ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation,
policy or guidance relating to pollution or protection of the environment, natural resources or, to
the extent relating to exposure to Hazardous Materials, human health or safety, including, without
limitation, those relating to the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.

“Environmental Permit” means any permit, approval, identification number, license or
other authorization required under any Environmental Law.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal
Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions
relating to Section 412 or 430 of the Internal Revenue Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2)
of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e)
of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of a Plan amendment as a termination under
Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA,
other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower
or any ERISA Affiliate.

“Eurodollar Lending Office” means, with respect to any Lender, the office of such
Lender described as such in such Lender’s Administrative Questionnaire, or such other office or
offices as a Lender may from time to time notify the Borrower and the Agent.

“Eurodollar Rate” means:

(a) for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal
to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or
other commercially available source providing quotations of BBA LIBOR as designated by the Agent
from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period. If such rate is not available at
such time for any reason, then the “Eurodollar Rate” for such Interest Period shall be the rate per
annum determined by the Agent to be the average (rounded upward, if necessary, to the nearest
1/100th of 1%) of the rates per annum at which deposits in Dollars for delivery on the first day of
such Interest Period in same day funds in the approximate amount of the Eurodollar
Rate Loan being made, continued or Converted by the Agent and with a term equivalent to such
Interest Period would be offered to the Agent by major banks in the London interbank eurodollar
market at the Agent’s request at approximately 11:00 a.m. (London time) two Business Days prior to
the commencement of such Interest Period; and

 

6

 

(b) for any interest rate calculation with respect to a Base Rate Loan, the rate per annum
equal to (i) BBA LIBOR, as published by Reuters (or other commercially available source providing
quotations of BBA LIBOR as designated by the Agent from time to time) at approximately 11:00 a.m.,
London time, two Business Days prior to the date of determination (provided that if such
day is not a Business Day in London, the next preceding Business Day in London), for Dollar
deposits being delivered in the London interbank market for a term of one month commencing that day
or (ii) if such published rate is not available at such time for any reason, the rate determined by
the Agent to be the average (rounded upward, if necessary, to the nearest 1/100th of 1%) of the
rates per annum at which deposits in Dollars for delivery on the date of determination in same day
funds in the approximate amount of the Base Rate Loan being made, continued or Converted by the
Agent and with a term equal to one month would be offered to the Agent by major banks in the London
interbank eurodollar market at the Agent’s request at approximately 11:00 a.m. (London time) two
Business Days prior to the date of determination.

“Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the
Eurodollar Rate (other than a Base Rate Loan bearing interest at a rate based on the Eurodollar
Rate).

“Events of Default” has the meaning specified in Section 6.01.

“Excluded Taxes” means, with respect to the Agent, any Lender or any other recipient
of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes
imposed on or measured by its overall net income (however denominated), and franchise taxes imposed
on it (in lieu of net income taxes), by the United States of America or the jurisdiction (or any
political subdivision thereof) under the Laws of which such recipient is organized or does business
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 the Borrower is located, (c) any backup
withholding tax that is required by the Internal Revenue Code to be withheld from amounts payable
to a Lender that has failed to comply with clause (A) of Section 2.12(e)(ii), and (d) in the case
of a Foreign Lender (other than as agreed to between any assignee and the Borrower pursuant to a
request by the Borrower under Section 2.17), any United States of America withholding tax that (i)
is required to be imposed on amounts payable to such Foreign Lender pursuant to the Laws in force
at the time such Foreign Lender becomes a party hereto (or designates a new Applicable Lending
Office) or (ii) is attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with clause (B) of Section 2.12(e)(ii), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a
new Applicable Lending Office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.12(a)(i) or (ii).

 

7

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted
average of the rates on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day; provided that (a) if such day is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to the Agent on such day on such transactions as determined by the Agent.

“Fee Letters” means each of the following letters to the Borrower dated February 23,
2011: (a) the fee letter from SunTrust Robinson Humphrey, Inc., (b) the fee letter from The Royal
Bank of Scotland Finance (Ireland) and (c) the fee letter from Union Bank, each relating to certain
fees payable by the Borrower to such parties in respect of the transactions contemplated by this
Agreement, each as amended, modified, restated or supplemented from time to time.

“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction
other than that in which the Borrower is resident for tax purposes. For purposes of this
definition, the United States of America, each State thereof and the District of Columbia shall be
deemed to constitute a single jurisdiction.

“Four Corners Acquisition” means the acquisition by APS from Southern California
Edison Company (“SCE”) of SCE’s interests in Units 4 and 5 of the Four Corners Power Plant
near Farmington, New Mexico, pursuant to the Purchase and Sale Agreement, dated as of November 8,
2010, by and between SCE and APS.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business.

“GAAP” has the meaning specified in Section 1.03.

“Governmental Authority” means the government of the United States of America or any
other nation, or of 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 (including any supra-national bodies such as the European Union or the
European Central Bank).

“Guarantee” means as to any Person, any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner
providing for the payment of any Indebtedness of any other Person or otherwise protecting the
holder of such Indebtedness against loss (whether by virtue of partnership arrangements, agreements
to keep well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise),
provided that the term “Guarantee” shall not include endorsements for collection or
deposit in the ordinary course of business. The term “Guarantee” used as a verb has a
corresponding meaning.

 

8

 

“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or
breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls
and radon gas and (b) any other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“Hedge Agreement” means any interest rate swap, cap or collar agreement, interest rate
future or option contract, currency swap agreement, currency future or option contract, commodity
future or option contract, commodity forward contract or other similar agreement.

“Indebtedness” means as to any Person at any date (without duplication): (a)
indebtedness created, issued, incurred or assumed by such Person for borrowed money or evidenced by
bonds, debentures, notes or similar instruments; (b) all obligations of such Person to pay the
deferred purchase price of property or services, excluding, however, trade accounts payable (other
than for borrowed money) arising in, and accrued expenses incurred in, the ordinary course of
business of such Person so long as such trade accounts payable are paid within 180 days of the date
incurred (unless subject to a good faith dispute); (c) all Indebtedness secured by a Lien on any
asset of such Person, to the extent such Indebtedness has been assumed by, or is a recourse
obligation of, such Person; (d) all Guarantees by such Person; (e) all Capital Lease Obligations of
such Person; and (f) the amount of all reimbursement obligations of such Person (whether contingent
or otherwise) in respect of letters of credit, bankers’ acceptances, surety or other bonds and
similar instruments in support of Indebtedness.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Initial Borrowing” means the Loans made by the Initial Lenders on the Effective Date
pursuant to Section 2.01 hereof.

“Initial Lenders” has the meaning given to such term in the introductory paragraph
hereof.

“Interest Election Request” means a written request by the Borrower to Convert or
continue a Borrowing in accordance with the definition of “Interest Period” contained in this
Section 1.01 and/or Section 2.07, as applicable, in each case in substantially the form of
Exhibit D hereto.

“Interest Period” means, for each Eurodollar Rate Loan comprising part of the same
Borrowing, the period commencing on (i) the date such Eurodollar Rate Loan is disbursed, (ii) the
date of the Conversion of any Base Rate Loan into such Eurodollar Rate Loan or (iii) the effective
date of the most recent continuation of such Eurodollar Rate Loan, as the case may be, and ending
on the last day of the period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the Borrower pursuant to the provisions
below. The duration of each such Interest Period shall be one, two, three or six months (or, if
available to all Lenders, twelve months), as the Borrower may, upon
notice (in the form of an Interest Election Request duly completed and executed by the
Borrower) received by the Agent not later than 12:00 noon on the third Business Day prior to the
first day of such Interest Period, select; provided, however, that:

(a) the Borrower may not select any Interest Period that ends after the Termination
Date;

 

9

 

(b) Interest Periods commencing on the same date for Eurodollar Rate Loans comprising
part of the same Borrowing shall be of the same duration;

(c) whenever the last day of any Interest Period would otherwise occur on a day other
than a Business Day, the last day of such Interest Period shall be extended to occur on the
next succeeding Business Day, provided, however, that, if such extension
would cause the last day of such Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on the next preceding Business Day;
and

(d) whenever the first day of any Interest Period occurs on a day of an initial
calendar month for which there is no numerically corresponding day in the calendar month
that succeeds such initial calendar month by the number of months equal to the number of
months in such Interest Period, such Interest Period shall end on the last Business Day of
such succeeding calendar month.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.

“Joint Bookrunners” means Union Bank and The Royal Bank of Scotland Finance (Ireland)
in their capacity as joint bookrunners for the credit facility established by this Agreement.

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, licenses, authorizations and permits of, and
agreements with, any Governmental Authority.

“Lenders” means the Initial Lenders and each Person that shall become a party hereto
pursuant to Section 8.07.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise), charge or other security interest or preferential
arrangement that has the practical effect of creating a security interest, including, without
limitation, the lien or retained security title of a conditional vendor and any easement, right of
way or other encumbrance on title to real property, and any Capital Lease having substantially the
same economic effect as any of the foregoing.

“Loans” has the meaning specified in Section 2.01.

 

10

 

“Loan Documents” mean this Agreement, each Note and the Fee Letters.

“Material Adverse Effect” means a material adverse effect on (a) the financial
condition, operations, business or properties of the Borrower and its Subsidiaries (excluding
SunCor Development Company and its Subsidiaries) taken as a whole, (b) the rights and remedies of
the Agent or any Lender under this Agreement or any Note or (c) the ability of the Borrower to
perform its obligations under this Agreement or any Note.

“Material Subsidiary” means APS and, at any time, each other Subsidiary of the
Borrower (excluding SunCor Development Company and its Subsidiaries) which as of such time meets
the definition of a “significant subsidiary” in Regulation S-X of the Securities and Exchange
Commission or whose assets at such time exceed 10% of the assets of the Borrower and the
Subsidiaries (on a Consolidated basis).

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been obligated to make
contributions.

“Note” means a promissory note of the Borrower payable to the order of any Lender,
delivered pursuant to a request made under Section 2.14, in substantially the form of Exhibit
A hereto.

“Notice of Initial Borrowing” has the meaning specified in Section 2.02(a).

“Obligations” means all loans to, and debts, liabilities, obligations, covenants and
duties of, the Borrower arising under any Loan Document or otherwise with respect to any Loan,
whether direct or indirect (including those acquired by assumption), absolute or contingent, due or
to become due, now existing or hereafter arising and including interest and fees that accrue under
any Loan Document after the commencement by or against the Borrower of any proceeding under any
Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such
interest and fees are allowed claims in such proceeding.

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

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and
is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any
ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time
during the immediately preceding five plan years.

 

11

 

“Percentage” means, with respect to any Lender at any time, a fraction the numerator
of which is the outstanding principal amount of such Lender’s Loans at such time and the
denominator of which is the aggregate outstanding principal amount of all Loans at such time;
provided, that (i) the initial Percentage of each Lender shall be the percentage set forth
opposite such Lender’s name on Schedule 1.01 under the column “Ratable Share” and (ii) if the
outstanding principal amount of all Loans has been repaid in full, the Percentage of each Lender
shall be such Lender’s Percentage as in effect immediately prior to such repayment.

“Person” means an individual, partnership, corporation (including a business trust),
joint stock company, trust, unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency thereof.

“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412
or 430 of the Internal Revenue Code or Title IV of ERISA, any ERISA Affiliate.

“Public Debt Rating” means, as of any date, (i) the rating that has been most recently
announced by either S&P or Moody’s, as the case may be, for any class of non-credit enhanced
long-term senior unsecured debt issued by the Borrower (or, if any such rating agency shall have
issued more than one such rating, the lowest such rating issued by such rating agency) or (ii) if
neither S&P nor Moody’s has in effect any rating for any class of non-credit enhanced long-term
senior unsecured debt issued by the Borrower, the Borrower’s long-term issuer rating that has been
most recently announced by either S&P or Moody’s, as the case may be. For purposes of the
foregoing, (a) if only one of S&P and Moody’s shall have in effect a Public Debt Rating, the
Applicable Rate shall be determined by reference to the available rating; (b) if neither S&P nor
Moody’s shall have in effect a Public Debt Rating, the Applicable Rate will be set in accordance
with Level 4 under the definition of “Applicable Rate”; (c) if the ratings established by
S&P and Moody’s shall fall within different levels, the Applicable Rate shall be based upon the
higher rating unless such ratings differ by two or more levels, in which case the applicable level
will be deemed to be one level below the higher of such levels; (d) if any rating established by
S&P or Moody’s shall be changed (other than as a result of a change in the basis on which ratings
are established), such change shall be effective as of the date on which such change is first
announced publicly by the rating agency making such change; and (e) if S&P or Moody’s shall change
the basis on which ratings are established, each reference to the Public Debt Rating announced by
S&P or Moody’s, as the case may be, shall refer to the then equivalent rating by S&P or Moody’s, as
the case may be.

“Ratable Share” of any amount means, with respect to any Lender at any time, the
product of such amount times such Lender’s Percentage.

“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”.

 

12

 

“Register” has the meaning specified in Section 8.07(c).

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

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA,
other than events for which the 30 day notice period has been waived under the final regulations
issued under Section 4043, as in effect as of the date of this Agreement (the “Section 4043
Regulations”). Any changes made to the Section 4043 Regulations that become effective after the
Effective Date shall have no impact on the definition of Reportable Event as used herein unless
otherwise amended by the Borrower and the Required Lenders.

“Required Lenders” means, as of any date of determination, but subject to Section
2.16, Lenders holding in the aggregate more than 50% of the aggregate outstanding principal amount
of all Loans (or, if all Loans have been repaid in full, more than 50% of the aggregate amount of
all outstanding Obligations).

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc.

“SEC Reports” means the Borrower’s Form 10-K Report for the fiscal year ended December
31, 2010 as filed with the Securities and Exchange Commission on February 18, 2011.

“Senior Notes” means the 5.91% Senior Notes, Series A, due February 28, 2011, issued
by the Borrower pursuant to the Senior Notes Indenture.

“Senior Notes Indenture” means the Uncommitted Master Shelf Agreement, dated as of
February 28, 2006, among the Borrower, Prudential Investment Management, Inc. and certain
affiliates of Prudential Investment Management, Inc.

“Subsidiary” of any Person means any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of (a) the issued and
outstanding Voting Stock, (b) the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in such trust or estate, is at
the time directly or indirectly owned or controlled by such Person, by such Person and one or more
of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Syndication Agent” means The Royal Bank of Scotland Finance (Ireland) in its capacity
as syndication agent for the Lenders.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

13

 

“Termination Date” means February 20, 2015.

“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
Eurodollar Rate or the Base Rate.

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

“VIE Lessor Trusts” means the three (3) separate variable-interest entity lessor
trusts that purchased from, and leased back to, APS certain interests in the Palo Verde Nuclear
Generating Station Unit 2 and related common facilities, as described in Note 20 of the Notes to
Consolidated Financial Statements set forth in the Borrower’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2010.

“Voting Stock” means capital stock issued by a corporation, or equivalent interests in
any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar functions) of such Person, even
if the right so to vote has been suspended by the happening of such a contingency.

Section 1.02 Other Interpretive Provisions. With reference to this Agreement and each
other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a) 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, (i)
any definition of or reference to any agreement, instrument or other document shall be construed as
referring to such agreement, instrument or other document as from time to time amended, restated,
supplemented or otherwise modified (subject to any restrictions on such amendments, restatements,
supplements or modifications set forth herein or in any other Loan Document), (ii) any reference
herein to any Person shall be construed to include such Person’s permitted successors and permitted
assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used
in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to
any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall
include all statutory and regulatory provisions consolidating, amending, replacing or interpreting
such law and any reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time, and (vi) 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.

 

14

 

(b) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;”
and the word “through” means “to and including.”

(c) Section headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any other Loan
Document.

Section 1.03 Accounting Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied on a basis
consistent (except for changes concurred in by the Borrower’s independent public accountants) with
the most recent audited Consolidated financial statements of the Borrower delivered to the Agent
(“GAAP”). If at any time any change in GAAP or in the interpretation thereof would affect
the computation of any financial ratio or requirement set forth in any Loan Document, and either
the Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower
shall negotiate in good faith to amend such ratio or requirement to preserve the original intent
thereof in light of such change in GAAP or in the interpretation thereof (subject to the approval
of the Required Lenders); provided that, unless and until so amended, such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such change therein.

Section 1.04 Rounding. Any financial ratios required to be maintained by the Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by which such ratio is
expressed herein and rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

Section 1.05 Times of Day. Unless otherwise specified, all references herein to times
of day shall be references to Eastern time (daylight or standard, as applicable).

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS

Section 2.01 The Loans.

Subject to the terms and conditions hereof (including, without limitation, Section 3.01), each
Lender, by its acceptance hereof, severally agrees to make a one-time loan (individually, a
“Loan” and, collectively, the “Loans”) to the Borrower on the Effective Date in
Dollars in an aggregate principal amount equal to such Lender’s Commitment. As provided in Section
2.05, the Borrower may elect that each Borrowing of Loans be either Base Rate Loans or Eurodollar
Rate Loans. Amounts borrowed by the Borrower hereunder and prepaid or otherwise repaid may not be
reborrowed. Unless an earlier maturity is provided for hereunder, all Loans shall mature and be
due and payable on the Termination Date. Upon the making of the Loans pursuant to this Section
2.01, the Commitments shall immediately and automatically terminate.

 

15

 

Section 2.02 Making the Loans.

(a) The Initial Borrowing shall be made on notice, given not later than (x) 12:00 noon on the
third Business Day prior to the Effective Date in the case of an Initial Borrowing consisting of
Eurodollar Rate Loans or (y) 12:00 noon on the Business Day prior to the Effective Date in the case
of an Initial Borrowing consisting of Base Rate Loans, by the Borrower to the Agent, which shall
give to each Lender prompt notice thereof by facsimile. Such notice of the Initial Borrowing (the
“Notice of Initial Borrowing”) shall be in writing or by facsimile in substantially the
form of Exhibit B hereto, specifying therein the requested (i) date of the Initial
Borrowing (which shall be the Effective Date and a Business Day), (ii) Type of Loans comprising the
Initial Borrowing, (iii) aggregate amount of the Initial Borrowing, and (iv) in the case of an
Initial Borrowing consisting of Eurodollar Rate Loans, initial Interest Period for each such Loan.
Each Lender shall, before 2:00 p.m. on the date of the Initial Borrowing, make available for the
account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds,
such Lender’s Ratable Share of the Initial Borrowing. After the Agent’s receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such
funds available to the Borrower at the Agent’s address referred to in Section 8.02 or as requested
by the Borrower in the Notice of Initial Borrowing.

(b) Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not
select Eurodollar Rate Loans for any Borrowing if the aggregate amount of such Borrowing is less
than $5,000,000 (or an integral multiple of $1,000,000 in excess thereof) or if the obligation of
the Lenders to make Eurodollar Rate Loans shall then be suspended pursuant to Section 2.06 or 2.10,
and (ii) at no time shall there be more than fifteen (15) different Interest Periods outstanding
for Eurodollar Rate Loans.

(c) The Notice of Initial Borrowing shall be irrevocable and binding on the Borrower. If the
Notice of Initial Borrowing specifies that the Initial Borrowing is to be comprised of Eurodollar
Rate Loans, the Borrower shall indemnify each Lender against any loss, cost or expense reasonably
incurred by such Lender as a result of any failure (i) to fulfill on or before the date specified
in the Notice of Initial Borrowing the applicable conditions set forth in Article III or (ii) to
otherwise borrow the Eurodollar Rate Loans requested by the Borrower in the Notice of Initial
Borrowing on such date (and shall set forth such indemnification obligation in the Notice of
Initial Borrowing), including, without limitation, any loss (excluding loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund the Loan to be made by such Lender as part of the
Initial Borrowing when such Loan, as a result of any such failure, is not made on such date.

(d) Unless the Agent shall have received notice from a Lender prior to the time of the Initial
Borrowing that such Lender will not make available to the Agent such Lender’s Ratable Share of the
Initial Borrowing, the Agent may assume that such Lender has made such portion available to the
Agent on the date of the Initial Borrowing in accordance with subsection (a) of this Section 2.02
and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so made such Ratable
Share available to the Agent, such Lender and the Borrower severally agree to repay to the Agent
within one Business Day after demand for such Lender and within
three Business Days after demand for the Borrower such corresponding amount together with
interest thereon, for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate
applicable at the time to Loans comprising the Initial Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If the Borrower and such Lender shall pay such interest to the
Agent for the same or an overlapping period, the Agent shall promptly remit to the Borrower the
amount of such interest paid by the Borrower for such period. If such Lender shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Loan as part
of the Initial Borrowing for purposes of this Agreement.

 

16

 

(e) The failure of any Lender to make the Loan to be made by it as part of the Initial
Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan
on the date of the Initial Borrowing, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on the date of the Initial Borrowing.

Section 2.03 Agent’s Fees. The Borrower shall pay to the Agent for its own account
such fees as are agreed between the Borrower and the Agent pursuant to the Fee Letter between the
Borrower and the Agent.

Section 2.04 Repayment of Loans. The Borrower hereby unconditionally agrees to pay to
the Agent on the Termination Date, for the account of the Lenders and the Agent, the then unpaid
principal amount of the Loans, together with all accrued and unpaid interest thereon, and all other
outstanding Obligations.

Section 2.05 Interest on Loans.

(a) Scheduled Interest. 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 following rates per annum:

(i) Base Rate Loans. During such periods as such Loan is a Base Rate Loan, a
rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to
time plus (y) the Applicable Rate for Base Rate Loans in effect from time to time,
payable in arrears quarterly on the last day of each March, June, September and December
during such periods and on the date such Base Rate Loan shall be Converted or paid in full.

(ii) Eurodollar Rate Loans. During such periods as such Loan is a Eurodollar
Rate Loan, a rate per annum equal at all times during each Interest Period for such Loan to
the sum of (x) the Eurodollar Rate for such Interest Period for such Loan plus (y)
the Applicable Rate for Eurodollar Rate Loans in effect from time to time, payable in
arrears on the last day of such Interest Period and, if such Interest Period has a duration
of more than three months, on each day that occurs during such Interest Period every three
months from the first day of such Interest Period and on the date such Eurodollar Rate Loan
shall be Converted or paid in full.

 

17

 

(b) Default Interest. Upon the occurrence and during the continuance of an Event of
Default under Section 6.01(a), the Agent may, and upon the request of the Required Lenders shall,
require the Borrower to pay interest (“Default Interest”) on (i) the unpaid principal
amount of each Loan owing to each Lender, payable in arrears on the dates referred to in clause
(a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per annum above the rate per
annum required to be paid on such Loan pursuant to clause (a)(i) or (a)(ii) above and (ii) to the
fullest extent permitted by Law, the amount of any interest, fee or other amount payable hereunder
that is not paid when due, from the date such amount shall be due until such amount shall be paid
in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate
per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base
Rate Loans pursuant to clause (a)(i) above, provided, however, that following
acceleration of the Loans pursuant to Section 6.01, Default Interest shall accrue and be payable
hereunder whether or not previously required by the Agent.

(c) Interest Rate Limitation. Nothing contained in this Agreement or in any other
Loan Document shall be deemed to establish or require the payment of interest to any Lender at a
rate in excess of the maximum rate permitted by applicable Law. If the amount of interest payable
for the account of any Lender on any interest payment date would exceed the maximum amount
permitted by applicable Law to be charged by such Lender, the amount of interest payable for its
account on such interest payment date shall be automatically reduced to such maximum permissible
amount. In the event of any such reduction affecting any Lender, if from time to time thereafter
the amount of interest payable for the account of such Lender on any interest payment date would be
less than the maximum amount permitted by applicable Law to be charged by such Lender, then the
amount of interest payable for its account on such subsequent interest payment date shall be
automatically increased to such maximum permissible amount, provided that at no time shall the
aggregate amount by which interest paid for the account of any Lender has been increased pursuant
to this sentence exceed the aggregate amount by which interest paid for its account has theretofore
been reduced pursuant to the previous sentence.

Section 2.06 Interest Rate Determination.

(a) The Agent shall give prompt notice to the Borrower and the Lenders of the applicable
interest rate determined by the Agent for purposes of Section 2.05(a).

(b) If the Required Lenders determine that for any reason in connection with any request for a
Eurodollar Rate Loan or a Conversion to or continuation thereof that (a) Dollar deposits are not
being offered to banks in the London interbank eurodollar market for the applicable amount and
Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for
determining the Eurodollar Rate for any requested Interest Period with respect to a proposed
Eurodollar Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to
a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of
funding such Loan, the Agent will promptly so notify the Borrower and each Lender, whereupon each
Eurodollar Rate Loan will automatically on the last day of the then existing Interest Period
therefor Convert into a Base Rate Loan. Thereafter, the obligation of the Lenders to make or
maintain Eurodollar Rate Loans shall be suspended until the Agent (upon the instruction of the
Required Lenders) revokes such notice. Upon receipt of such notice, the
Borrower may revoke any pending request for a Borrowing of, Conversion to or continuation of
Eurodollar Rate Loans or, failing that, will be deemed to have Converted such request into a
request for a Base Rate Loan in the amount specified therein.

 

18

 

(c) If the Borrower shall fail to select the duration of any Interest Period for any
Eurodollar Rate Loans in accordance with the provisions contained in the definition of “Interest
Period” in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such
Loans will automatically, on the last day of the then existing Interest Period therefor, Convert
into Base Rate Loans.

(d) On the date on which the aggregate unpaid principal amount of Eurodollar Rate Loans
comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than
$5,000,000, such Loans shall automatically Convert into Base Rate Loans.

(e) Upon the occurrence and during the continuance of any Event of Default,

(i) with respect to Eurodollar Rate Loans, each such Loan will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate Loan (or if
such Loan is then a Base Rate Loan, will continue as a Base Rate Loan); and

(ii) the obligation of the Lenders to Convert Loans into Eurodollar Rate Loans shall be
suspended until the Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.

Section 2.07 Optional Conversion of Loans. The Borrower may on any Business Day, upon
notice given to the Agent (in the form of an Interest Election Request duly completed and executed
by the Borrower) not later than 12:00 noon on the third Business Day prior to the date of the
proposed Conversion and subject to the provisions of Sections 2.06 and 2.10, Convert all or any
portion of the Loans of one Type comprising the same Borrowing into Loans of the other Type;
provided, however, that (a) any Conversion of Eurodollar Rate Loans into Base Rate
Loans shall be made only on the last day of an Interest Period for such Eurodollar Rate Loans, (b)
any Conversion of Base Rate Loans into Eurodollar Rate Loans shall be in an amount not less than
the minimum amount specified in Section 2.02(b) and (c) no Conversion of any Loans shall result in
more separate Borrowings than permitted under Section 2.02(b). Each such notice of a Conversion
shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the
Loans to be Converted and (iii) if such Conversion is into Eurodollar Rate Loans, the duration of
the initial Interest Period for each such Loan. Each Interest Election Request shall be
irrevocable and binding on the Borrower.

Section 2.08 Prepayments of Loans.

(a) Optional. At any time and from time to time, the Borrower shall have the right to
prepay the Loans, in whole or in part, without premium or penalty (except as provided in clause (z)
below), upon notice at least two Business Days’ prior to the date of such prepayment, in the case
of Eurodollar Rate Loans, and not later than 11:00 a.m. on the date of such prepayment, in the case
of Base Rate Loans, to the Agent specifying the proposed date of such prepayment and the aggregate
principal amount and Type of the Loans to be prepaid (and, in the case of Eurodollar Rate Loans,
the Interest Period of the Borrowing pursuant to which made); provided,

 

19

 

however, that (x) each partial prepayment shall be in an aggregate principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (y) accrued interest to the
date of prepayment on the principal amount prepaid shall be payable by the Borrower on the date of
such prepayment, and (z) in the event of any such prepayment of a Eurodollar Rate Loan, the
Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section
8.04(e). Each prepayment of Loans shall be applied ratably to the outstanding principal amount of
each Lender’s Loan in accordance with such Lender’s Ratable Share.

(b) Mandatory. The Borrower shall prepay the aggregate principal amount of the Loans,
together with accrued interest to the date of prepayment on the principal amount prepaid, without
requirement of demand therefor, or shall pay or prepay any other Indebtedness then outstanding at
any time, when and to the extent required to comply with applicable Laws of any Governmental
Authority or applicable resolutions of the Board of Directors of the Borrower.

Section 2.09 Increased Costs.

(a) Increased Costs Generally. If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for the account
of, or credit extended or participated in by, any Lender (except any reserve requirement
contemplated by Section 2.09(e)); or

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

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

(b) Capital Requirements. If any Lender determines that any Change in Law affecting
such Lender or any Applicable Lending Office of such Lender or such Lender’s holding company, if
any, regarding capital requirements has or would have the effect of reducing the rate of return on
such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence
of this Agreement, the Commitments of such Lender or the Loans made by such Lender, to a level
below that which such Lender or such Lender’s holding company could have achieved but for such
Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s
holding company with respect to capital adequacy), then from time to time the Borrower will pay to
such Lender such additional amount or amounts as will compensate such Lender or such Lender’s
holding company for any such reduction suffered. For the avoidance of doubt, this Section 2.09(b)
shall apply to all requests, rules, regulations, guidelines or directives concerning capital
adequacy issued in connection with the Dodd-Frank Act, regardless of the date adopted, issued,
promulgated or implemented.

 

20

 

(c) Certificates for Reimbursement. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as the case may be,
as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be
conclusive and binding upon all parties absent manifest error. The Borrower shall pay such Lender
the amount shown as due on any such certificate within 30 days after receipt thereof.

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

(e) Reserves on Eurodollar Rate Loans. The Borrower shall pay to each Lender, as long
as such Lender shall be required to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency
liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan
equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by
such Lender in good faith, which determination shall be conclusive absent manifest error), which
shall be due and payable on each date on which interest is payable on such Loan, provided
the Borrower shall have received at least 30 days’ prior notice (with a copy to the Agent) of such
additional interest from such Lender. If a Lender fails to give notice 30 days prior to the
relevant interest payment date, such additional interest shall be due and payable 30 days from
receipt of such notice.

Section 2.10 Illegality. If any Lender shall have determined in good faith that the
introduction of or any change in any applicable Law or in the interpretation or administration
thereof by any Governmental Authority charged with the interpretation or administration thereof, or
compliance with any guideline or request from any such Governmental Authority (whether or not
having the force of law), makes it unlawful for any Lender or its Applicable Lending Office to
make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates based upon
the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the
authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, any
obligation of such Lender to make or continue Eurodollar Rate Loans or to Convert Base Rate Loans
to Eurodollar Rate Loans shall be suspended until such Lender notifies the Agent and the Borrower
that the circumstances giving rise to such determination no longer exist. Upon receipt of such
notice, the Borrower shall, upon demand from such Lender (with a copy to the Agent), prepay or, if
applicable, Convert all Eurodollar Rate Loans of such Lender to Base Rate Loans, either on the last
day of the Interest Period therefor, if such Lender may lawfully continue to maintain such
Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to
maintain such Eurodollar Rate Loans. Upon any such prepayment or Conversion, the Borrower shall
also pay accrued interest on the amount so prepaid or Converted.

 

21

 

Section 2.11 Payments and Computations.

(a) All payments to be made by the Borrower shall be made without condition or deduction for
any counterclaim, defense, recoupment or setoff. The Borrower shall make each payment hereunder
not later than 1:00 p.m. on the day when due in Dollars to the Agent at the Agent’s Account in same
day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the
payment of principal, interest or fees ratably (other than amounts payable pursuant to Section
2.09, 2.10, 2.12, 2.17 or 8.04(e)) to the Lenders for the account of their respective Applicable
Lending Offices, and like funds relating to the payment of any other amount payable to any Lender
to such Lender for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Assumption
and recording of the information contained therein in the Register pursuant to Section 8.07(c),
from and after the effective date specified in such Assignment and Assumption, the Agent shall make
all payments hereunder and under the Notes in respect of the interest assigned thereby to the
Lender assignee thereunder, and the parties to such Assignment and Assumption shall make all
appropriate adjustments in such payments for periods prior to such effective date directly between
themselves.

(b) All computations of interest based on the Base Rate (when the Base Rate is based on the
Reference Rate) shall be made by the Agent on the basis of a year of 365 or 366 days, as the case
may be, and all other computations of interest and fees hereunder (including computations of
interest based on the Eurodollar Rate and the Federal Funds Rate) shall be made by the Agent on the
basis of a year of 360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest or fees are payable.
Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for
all purposes, absent manifest error.

(c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment of interest or fees,
as the case may be; provided, however, that, if such extension would cause payment
of interest on or principal of Eurodollar Rate Loans to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.

(d) Unless the Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Lenders hereunder that the Borrower will not make such payment in full,
the Agent may assume that the Borrower has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due
date an amount equal to the amount then due to such Lender. If and to the extent the Borrower
shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together with interest thereon, for each
day from the date such amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.

 

22

 

Section 2.12 Taxes.

(a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.

(i) Any and all payments by or on account of any obligation of the Borrower hereunder
or under any other Loan Document shall to the extent permitted by applicable Laws be made
free and clear of and without reduction or withholding for any Taxes. If, however,
applicable Laws require the Borrower or the Agent to withhold or deduct any Tax, such Tax
shall be withheld or deducted in accordance with such Laws as determined by the Borrower or
the Agent, as the case may be, upon the basis of the information and documentation to be
delivered pursuant to subsection (e) below.

(ii) If the Borrower or the Agent shall be required by the Internal Revenue Code to
withhold or deduct any Taxes, including both United States of America Federal backup
withholding and withholding taxes, from any payment, then (A) the Agent shall withhold or
make such deductions as are determined by the Agent to be required based upon the
information and documentation it has received pursuant to subsection (e) below, (B) the
Agent shall timely pay the full amount withheld or deducted to the relevant Governmental
Authority in accordance with the Internal Revenue Code, and (C) to the extent that the
withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum
payable by the Borrower shall be increased as necessary so that after any required
withholding or the making of all required deductions (including deductions applicable to
additional sums payable under this Section) the Agent or each Lender, as the case may be,
receives an amount equal to the sum it would have received had no such withholding or
deduction been made.

(b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable Laws.

(c) Tax Indemnifications.

(i) Without limiting the provisions of subsection (a) or (b) above, the Borrower shall,
and does hereby, indemnify the Agent and each Lender, and shall make payment in respect
thereof within 30 days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) withheld or deducted by the Borrower or
the Agent or paid by the Agent or such Lender, as the case may be, 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. The Borrower shall also, and does hereby, indemnify the
Agent, and shall make payment in respect thereof within 10 days after demand therefor, for
any amount which a Lender for any reason fails to pay indefeasibly to the Agent as required
by clause (ii) of this subsection. A certificate as to the amount of any such payment or
liability delivered to the Borrower by a Lender (with a copy to the Agent), or by the Agent
on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

23

 

(ii) Without limiting the provisions of subsection (a) or (b) above, each Lender shall,
and does hereby, indemnify the Borrower and the Agent, and shall make payment in respect
thereof within 30 days after demand therefor, against any and all Taxes and any and all
related losses, claims, liabilities, penalties, interest and expenses (including the fees,
charges and disbursements of any counsel for the Borrower or the Agent) incurred by or
asserted against the Borrower or the Agent by any Governmental Authority as a result of the
failure by such Lender to deliver, or as a result of the inaccuracy, inadequacy or
deficiency of, any documentation required to be delivered by such Lender to the Borrower or
the Agent pursuant to subsection (e). Each Lender hereby authorizes the Agent to set off
and apply any and all amounts at any time owing to such Lender under this Agreement or any
other Loan Document against any amount due to the Agent under this clause (ii). The
agreements in this clause (ii) shall survive the resignation and/or replacement of the
Agent, any assignment of rights by, or the replacement of, a Lender and the repayment,
satisfaction or discharge of all or any portion of the Obligations.

(d) Evidence of Payments. Upon request by the Borrower or the Agent, as the case may
be, after any payment of Taxes by the Borrower or by the Agent to a Governmental Authority as
provided in this Section 2.12, the Borrower shall deliver to the Agent or the Agent shall deliver
to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of any return required by Laws to report
such payment or other evidence of such payment reasonably satisfactory to the Borrower or the
Agent, as the case may be.

(e) Status of Lenders; Tax Documentation.

(i) Each Lender shall deliver to the Borrower and to the Agent, at the time or times
prescribed by applicable Laws or when reasonably requested by the Borrower or the Agent,
such properly completed and executed documentation prescribed by applicable Laws or by the
taxing authorities of any jurisdiction and such other reasonably requested information as
will permit the Borrower or the Agent, as the case may be, to determine (A) whether or not
payments made hereunder or under any other Loan Document are subject to Taxes, (B) if
applicable, the required rate of withholding or deduction, and (C) such Lender’s entitlement
to any available exemption from, or reduction of, applicable Taxes in respect of all
payments to be made to such Lender by the Borrower pursuant to this Agreement or otherwise
to establish such Lender’s status for withholding tax purposes in the applicable
jurisdiction.

(ii) Without limiting the generality of the foregoing, if the Borrower is resident for
tax purposes in the United States of America,

(A) any Lender that is a “United States person” within the meaning of Section
7701(a)(30) of the Internal Revenue Code shall deliver to the Borrower and the Agent
executed originals of Internal Revenue Service Form W-9 or such other documentation
or information prescribed by applicable Laws or reasonably requested by the Borrower
or the Agent as will enable the Borrower or the Agent,
as the case may be, to determine whether or not such Lender is subject to
backup withholding or information reporting requirements; and

 

24

 

(B) each Foreign Lender that is entitled under the Internal Revenue Code or any
applicable treaty to an exemption from or reduction of withholding tax with respect
to payments hereunder or under any other Loan Document shall deliver to the Borrower
and the Agent (in such number of copies as shall be requested by the recipient) on
or prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the request of the Borrower or the
Agent, but only if such Foreign Lender is legally entitled to do so), whichever of
the following is applicable:

(1) executed originals of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States
of America is a party,

(2) executed originals of Internal Revenue Service Form W-8ECI,

(3) executed originals of Internal Revenue Service Form W-8IMY and all
required supporting documentation,

(4) in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Internal
Revenue Code, (x) a certificate to the effect that such Foreign Lender is
not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Internal
Revenue Code, (B) a “10 percent shareholder” of the Borrower within the
meaning of section 881(c)(3)(B) of the Internal Revenue Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the
Internal Revenue Code and (y) executed originals of Internal Revenue Service
Form W-8BEN, or

(5) executed originals of any other form prescribed by applicable Laws
as a basis for claiming exemption from or a reduction in United States of
America Federal withholding tax together with such supplementary
documentation as may be prescribed by applicable Laws to permit the Borrower
or the Agent to determine the withholding or deduction required to be made.

(iii) Each Lender shall promptly (A) notify the Borrower and the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or reduction, and
(B) take such steps as shall not be materially disadvantageous to it, in the reasonable
judgment of such Lender, and as may be reasonably necessary (including the re-designation of
its Applicable Lending Office) to avoid any requirement of applicable Laws of any
jurisdiction that the Borrower or the Agent make any withholding or deduction for taxes from
amounts payable to such Lender.

 

25

 

(f) Treatment of Certain Refunds. Unless required by applicable Laws, at no time
shall the Agent have any obligation to file for or otherwise pursue on behalf of a Lender, or have
any obligation to pay to any Lender, any refund of Taxes withheld or deducted from funds paid for
the account of such Lender. If the Agent or any Lender determines, in its sole discretion, that it
has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts pursuant to this
Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of
indemnity payments made, or additional amounts paid, by the Borrower under this Section with
respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable
out-of-pocket expenses incurred by the Agent or such Lender, as the case may be, and without
interest (other than any interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrower, upon the request of the Agent or such Lender, agrees
to repay the amount paid over to the Borrower (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Agent or such Lender in the event the Agent
or such Lender is required to repay such refund to such Governmental Authority. This subsection
shall not be construed to require the Agent or any Lender to make available its tax returns (or any
other information relating to its taxes that it deems confidential) to the Borrower or any other
Person.

(g) Payments. Failure or delay on the part of the Agent or any Lender to demand
compensation pursuant to the foregoing provisions of this Section 2.12 shall not constitute a
waiver of the Agent’s or such Lender’s right to demand such compensation, provided that the
Borrower shall not be required to compensate the Agent or a Lender pursuant to the foregoing
provisions of this Section 2.12 for any Indemnified Taxes or Other Taxes imposed or asserted by the
relevant Governmental Authority more than three months prior to the date that the Agent or such
Lender, as the case may be, claims compensation with respect thereto (except that, if a Change in
Law giving rise to such Indemnified Taxes or Other Taxes is retroactive, then the three-month
period referred to above shall be extended to include the period of retroactive effect thereof).

(h) The Agent and each Lender agrees to cooperate with any reasonable request made by the
Borrower in respect of a claim of a refund in respect of Indemnified Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 2.12 if (i) the Borrower has agreed in writing to pay all of the Agent’s
or such Lender’s reasonable out-of-pocket costs and expenses relating to such claim, (ii) the Agent
or such Lender determines, in its good faith judgment, that it would not be disadvantaged, unduly
burdened or prejudiced as a result of such claim and (iii) the Borrower furnishes, upon request of
the Agent or such Lender, an opinion of tax counsel (such opinion, which can be reasoned, and such
counsel to be reasonably acceptable to such Lender or the Agent) that the Borrower is likely to
receive a refund or credit.

Section 2.13 Sharing of Payments, Etc. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on
account of the Loans owing to it (other than pursuant to Section 2.09, 2.10, 2.12, 2.17 or 8.04(e)
or any payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans to any assignee or participant, other than to the Borrower or any
Subsidiary thereof if permitted hereby (as to which the provisions of this Section 2.13 shall
apply) in excess of its Ratable Share of payments on account of the Loans obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders (for cash at face value) such
participations in the Loans owing to them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, that if all
or any portion of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender
the purchase price to the extent of such recovery together with an amount equal to such Lender’s
ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to
(ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid
or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender pursuant to this Section
2.13 may, to the fullest extent permitted by Law, exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.

 

26

 

Section 2.14 Evidence of Debt.

(a) 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 owing to such
Lender from time to time, including the amounts of principal and interest payable and paid to such
Lender from time to time hereunder in respect of Loans. The Borrower agrees that upon notice by
any Lender to the Borrower (with a copy of such notice to the Agent) to the effect that a Note is
required or appropriate in order for such Lender to evidence (whether for purposes of pledge,
enforcement or otherwise) the Loans owing to, or to be made by, such Lender, the Borrower shall
promptly execute and deliver to such Lender a Note payable to the order of such Lender in a
principal amount equal to the Loans owing to, or to be made by, such Lender.

(b) The Register maintained by the Agent pursuant to Section 8.07(c) shall include a control
account, and a subsidiary account for each Lender, in which accounts (taken together) shall be
recorded (i) the date and amount of each Borrowing made hereunder, the Type of Loans comprising
such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each
Assignment and Assumption delivered to and accepted by it, (iii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each Lender hereunder
and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender’s
share thereof.

(c) Entries made in good faith by the Agent in the Register pursuant to subsection (b) above,
and by each Lender in its account or accounts pursuant to subsection (a) above, shall be
prima facie evidence of the amount of principal and interest due and payable or to
become due and payable from the Borrower to, in the case of the Register, each Lender and, in the
case of such account or accounts, such Lender, under this Agreement, absent manifest error;
provided, however, that the failure of the Agent or such Lender to make an entry,
or any finding that an entry is incorrect, in the Register or such account or accounts shall not
limit or otherwise affect the obligations of the Borrower under this Agreement.

 

27

 

Section 2.15 Use of Proceeds. The proceeds of the Loans shall be available (and the
Borrower agrees that it shall use such proceeds) solely to repay and refinance the Senior Notes.

Section 2.16 Affected Lenders. Notwithstanding any provision of this Agreement to the
contrary, if any Lender becomes an Affected Lender, then the following provisions shall apply for
so long as such Lender is an Affected Lender:

(a) the outstanding principal amount of the Loans of such Affected Lender shall not be
included in determining whether the Required Lenders have taken or may take any action hereunder
(including any consent to any amendment or waiver pursuant to Section 8.01), other than any waiver,
amendment or modification requiring the consent of all Lenders or of each Lender affected;

(b) to the extent the Agent receives any payments or other amounts for the account of an
Affected Lender under this Agreement, such Affected Lender shall be deemed to have requested that
the Agent use such payment or other amount to fulfill such Affected Lender’s previously unsatisfied
obligations to fund a Loan under Section 2.01 or any other unfunded payment obligation of such
Affected Lender under this Agreement; and

(c) for the avoidance of doubt, the Borrower, the Agent and each other Lender shall retain and
reserve its other rights and remedies respecting each Affected Lender.

In the event that the Agent and the Borrower each agrees that an Affected Lender has
adequately remedied all matters that caused such Lender to be an Affected Lender, then this Section
2.16 will no longer apply to such Lender.

Section 2.17 Replacement of Lenders. If any Lender requests compensation under
Section 2.09, 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 2.12, or if any Lender is
an Affected Lender, then the Borrower may, at its sole expense and effort, upon notice to such
Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance
with and subject to the restrictions contained in, and consents required by, Section 8.07), all of
its interests, rights and obligations under this Agreement and the related Loan Documents to one or
more assignees that shall assume such obligations (which any such assignee may be another Lender
(other than an Affected Lender), if such Lender accepts such assignment), provided that:

(a) the Borrower shall have paid to the Agent the assignment fee specified in Section 8.07(b);

(b) such Lender shall have received payment of an amount equal to the outstanding principal
amount of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder and under the other Loan Documents (including any amounts under Section 8.04(e)) 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);

 

28

 

(c) in the case of any such assignment resulting from a claim for compensation under Section
2.09 or payments required to be made pursuant to Section 2.12, such assignment will result in a
reduction in such compensation or payments thereafter; and

(d) such assignment does not conflict with applicable Laws.

A Lender shall not be required to make any such assignment or 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.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.01 Conditions Precedent to Effectiveness. This Agreement shall become
effective on and as of the first date (the “Effective Date”) on which the following
conditions precedent have been satisfied:

(a) The Lenders shall have been given such access to the management, records, books of
account, contracts and properties of the Borrower and its Subsidiaries as they shall have
requested.

(b) The Borrower shall have paid all accrued fees and agreed expenses of the Agent, the
Arrangers and the Lenders and the reasonable accrued fees and expenses of counsel to the Agent that
have been invoiced at least one Business Day prior to the Effective Date.

(c) On the Effective Date, the following statements shall be true and the Agent shall have
received a certificate signed by a duly authorized officer of the Borrower, dated the Effective
Date, stating that:

(i) The representations and warranties contained in Section 4.01 are true and correct
on and as of the Effective Date, both before and after giving effect to the Initial
Borrowing and the application of the proceeds thereof, as though made on and as of such
date; and

(ii) No event has occurred and is continuing, or would result from the Initial
Borrowing or the application of the proceeds thereof, that constitutes a Default.

(d) The Agent shall have received the Notice of Initial Borrowing pursuant to Section 2.02.

(e) The Agent shall have received on or before the Effective Date the following, each dated
such day, in form and substance satisfactory to the Agent and the Lenders:

(i) Receipt by the Agent of executed counterparts of this Agreement properly executed
by a duly authorized officer of the Borrower and by each Lender.

 

29

 

(ii) The Notes, payable to the order of the Lenders to the extent requested by any
Lender pursuant to Section 2.14(a).

(iii) The articles of incorporation of the Borrower certified to be true and complete
as of a recent date by the appropriate governmental authority of the state or other
jurisdiction of its incorporation and certified by a secretary, assistant secretary or
associate secretary of the Borrower to be true and correct as of the Effective Date.

(iv) The bylaws of the Borrower certified by a secretary, assistant secretary or
associate secretary of the Borrower to be true and correct as of the Effective Date.

(v) Certified copies of the resolutions of the Board of Directors of the Borrower
approving this Agreement and the Notes, and of all documents evidencing other necessary
corporate action, third party consents and governmental approvals, if any, with respect to
this Agreement and the Notes.

(vi) A certificate of the secretary, assistant secretary or associate secretary of the
Borrower certifying the names and true signatures of the officers of the Borrower authorized
to sign this Agreement and the Notes and the other documents to be delivered hereunder.

(vii) A certificate as of a recent date from the Borrower’s state of incorporation
evidencing that the Borrower is in good standing in such state.

(viii) A favorable opinion of counsel for the Borrower, in form and substance
reasonably acceptable to the Lenders.

(ix) A written opinion of Hughes Hubbard & Reed LLP, special New York counsel for the
Agent, addressed to the Agent and the Lenders, with respect to the enforceability of this
Agreement and the Notes issued on the Effective Date, in form and substance reasonably
acceptable to the Agent.

Section 3.02 Determinations Under Section 3.01. For purposes of determining
compliance with the conditions specified in Section 3.01 and the satisfaction of each Lender with
respect to letters delivered to it from the Borrower as set forth in Sections 4.01(a), 4.01(e) and
4.01(f), each Lender that has signed this Agreement shall be deemed to have consented to, approved
or accepted or to be satisfied with each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the
Agent responsible for the transactions contemplated by this Agreement shall have received notice
from such Lender prior to the date that the Borrower designates as the proposed Effective Date,
specifying its objection thereto. The Agent shall promptly notify the Lenders and the Borrower of
the occurrence of the Effective Date.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

Section 4.01 Representations and Warranties of the Borrower. The Borrower represents
and warrants as follows:

(a) Each of the Borrower and each Material Subsidiary: (i) is a corporation or other entity
duly organized and validly existing under the Laws of the jurisdiction of its incorporation or
organization; (ii) has all requisite corporate or if the Material Subsidiary is not a corporation,
other comparable power necessary to own its assets and carry on its business as presently
conducted; (iii) has all governmental licenses, authorizations, consents and approvals necessary to
own its assets and carry on its business as presently conducted, if the failure to have any such
license, authorization, consent or approval is reasonably likely to have a Material Adverse Effect
and except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower
to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the
Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case,
shall be satisfactory to each Lender in its sole discretion) and except that (A) APS from time to
time may make minor extensions of its lines, plants, services or systems prior to the time a
related franchise, certificate of convenience and necessity, license or permit is procured, (B)
from time to time communities served by APS may become incorporated and considerable time may
elapse before such a franchise is procured, (C) certain such franchises may have expired prior to
the renegotiation thereof, (D) certain minor defects and exceptions may exist which, individually
and in the aggregate, are not material and (E) certain franchises, certificates, licenses and
permits may not be specific as to their geographical scope); and (iv) is qualified to do business
in all jurisdictions in which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify is reasonably likely to have a Material Adverse Effect.

(b) The execution, delivery and performance by the Borrower of this Agreement and the other
Loan Documents, and the consummation of the transactions contemplated hereby, are within the
Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do
not (i) contravene the Borrower’s articles of incorporation or by-laws, (ii) contravene any Law,
decree, writ, injunction or determination of any Governmental Authority, in each case applicable to
or binding upon the Borrower or any of its properties, (iii) contravene any contractual restriction
binding on or affecting the Borrower or (iv) cause the creation or imposition of any Lien upon the
assets of the Borrower or any Material Subsidiary, except for Liens created under this Agreement
and except where such contravention or creation or imposition of such Lien is not reasonably likely
to have a Material Adverse Effect.

(c) No authorization or approval or other action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery and performance by the Borrower
of this Agreement or the Notes to be delivered by it.

(d) This Agreement has been, and each of the other Loan Documents upon execution and delivery
will have been, duly executed and delivered by the Borrower. This Agreement is, and each of the
other Loan Documents upon execution and delivery will be, the legal, valid and
binding obligation of the Borrower enforceable against the Borrower in accordance with their
respective terms, subject, however, to the application by a court of general principles of equity
and to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar
Laws affecting creditors’ rights generally.

 

31

 

(e) The Consolidated balance sheet of the Borrower as of December 31, 2010, and the related
Consolidated statements of income and cash flows of the Borrower for the fiscal year then ended,
accompanied by an opinion thereon of Deloitte & Touche LLP, independent registered public
accountants, copies of which have been furnished to the Agent, fairly present in all material
respects the Consolidated financial condition of the Borrower as at such date and the Consolidated
results of the operations of the Borrower for the fiscal year ended on such date, all in accordance
with GAAP (except as disclosed therein). Except as disclosed to the Agent in the SEC Reports or by
means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the
Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this
Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion), since
December 31, 2010, there has been no Material Adverse Effect.

(f) There is no pending or, to the knowledge of an Authorized Officer of the Borrower,
threatened action, suit, investigation, litigation or proceeding, including, without limitation,
any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator that (i) purports to affect the legality, validity or
enforceability of this Agreement or any other Loan Document or the consummation of the transactions
contemplated hereby or (ii) would be reasonably likely to have a Material Adverse Effect (except as
disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders
(such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders)
delivered prior to the execution and delivery of this Agreement (which, in each case, shall be
satisfactory to each Lender in its sole discretion)), and there has been no adverse change in the
status, or financial effect on the Borrower or any of its Subsidiaries, of such disclosed
litigation that would be reasonably likely to have a Material Adverse Effect.

(g) No proceeds of any Loan will be used to acquire any equity security not issued by the
Borrower of a class that is registered pursuant to Section 12 of the Securities Exchange Act of
1934.

(h) The Borrower is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any Loan will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any
margin stock, in any case in violation of Regulation U.

(i) The Borrower and its Material Subsidiaries have filed all United States of America Federal
income tax returns and all other material tax returns which are required to be filed by them and
have paid all taxes due pursuant to such returns or pursuant to any assessment received by the
Borrower or any of its Material Subsidiaries, except to the extent that (i) such taxes are being
contested in good faith and by appropriate proceedings and that appropriate reserves for the
payment thereof have been maintained by the Borrower and its Material Subsidiaries in accordance
with GAAP or (ii) the failure to make such filings or such payments
is not reasonably likely to have a Material Adverse Effect. The charges, accruals and
reserves on the books of the Borrower and its Material Subsidiaries as set forth in the most recent
financial statements of the Borrower delivered to the Agent pursuant to Section 4.01(e) or Section
5.01(h)(i) or (ii) hereof in respect of taxes and other governmental charges are, in the opinion of
the Borrower, adequate.

 

32

 

(j) Set forth on Schedule 4.01(j) hereto (as such schedule may be modified from time
to time by the Borrower by written notice to the Agent) is a complete and accurate list of all the
Material Subsidiaries of the Borrower.

(k) Set forth on Schedule 4.01(k) hereto is a complete and accurate list identifying
any Indebtedness of the Borrower outstanding in a principal amount equal to or exceeding $5,000,000
and which is not described in the financial statements referred to in Section 4.01(e).

(l) The Borrower 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.

(m) No report, certificate or other written information furnished by the Borrower or any of
its Subsidiaries to the Agent, any Arranger or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan
Document (as modified or supplemented by other information so furnished) at the time so furnished,
when taken together as a whole with all such written information so furnished, contains an untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading,
except as would not reasonably be expected to result in a Material Adverse Effect; provided
that with respect to any projected financial information, forecasts, estimates or forward-looking
information, the Borrower represents only that such information and materials have been prepared in
good faith on the basis of assumptions believed to be reasonable at the time of preparation of such
forecasts, and no representation or warranty is made as to the actual attainability of any such
projections, forecasts, estimates or forward-looking information.

ARTICLE V

COVENANTS OF THE BORROWER

Section 5.01 Affirmative Covenants. So long as any Loan or any other Obligations
shall remain unpaid, the Borrower shall:

(a) Compliance with Laws, Etc. (i) Comply, and cause each of its Material
Subsidiaries to comply, in all material respects, with all applicable Laws of Governmental
Authorities, such compliance to include, without limitation, compliance with ERISA and
Environmental Laws, unless the failure to so comply is not reasonably likely to have a Material
Adverse Effect and (ii) comply at all times with all Laws, orders, decrees, writs, injunctions or
determinations of any Governmental Authority relating to the incurrence or maintenance of
Indebtedness by the Borrower, unless the failure to so comply is not reasonably likely to have
a Material Adverse Effect.

 

33

 

(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Material
Subsidiaries to pay and discharge, before the same shall become delinquent, all taxes, assessments
and governmental charges or levies imposed upon it or upon its property; provided,
however, that neither the Borrower nor any of its Material Subsidiaries shall be required
to pay or discharge any such tax, assessment, charge or levy (i) that is being contested in good
faith and by proper proceedings and as to which appropriate reserves are being maintained in
accordance with GAAP or (ii) if the failure to pay such tax, assessment, charge or levy is not
reasonably likely to have a Material Adverse Effect.

(c) Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries
to maintain, insurance with responsible and reputable insurance companies or associations in such
amounts and covering such risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the Borrower or such Material
Subsidiary operates; provided, however, that the Borrower and its Subsidiaries may
self-insure to the same extent as other companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower or such Subsidiary operates and to the
extent consistent with prudent business practice.

(d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each
of its Material Subsidiaries to preserve and maintain, its corporate existence, rights (charter and
statutory) and franchises (other than “franchises” as described in Arizona Revised Statutes,
Section 40-283 or any successor provision) reasonably necessary in the normal conduct of its
business, if the failure to maintain such rights or privileges is reasonably likely to have a
Material Adverse Effect, and, in the case of APS, will cause APS to use its commercially reasonable
efforts to preserve and maintain such franchises reasonably necessary in the normal conduct of its
business, except that (i) APS from time to time may make minor extensions of its lines, plants,
services or systems prior to the time a related franchise, certificate of convenience and
necessity, license or permit is procured, (ii) from time to time communities served by APS may
become incorporated and considerable time may elapse before such a franchise is procured, (iii)
certain such franchises may have expired prior to the renegotiation thereof, (iv) certain minor
defects and exceptions may exist which, individually and in the aggregate, are not material and (v)
certain franchises, certificates, licenses and permits may not be specific as to their geographical
scope; provided, however, that the Borrower and its Subsidiaries may consummate any
merger or consolidation permitted under Section 5.02(b).

(e) Visitation Rights. At any reasonable time and from time to time, permit and cause
each of its Subsidiaries to permit the Agent or any of the Lenders or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or
directors; provided, however, that the Borrower and its Subsidiaries reserve the
right to restrict access to any of its properties in accordance with reasonably adopted procedures
relating to safety and security; and provided further that the costs and expenses
incurred by such Lender or its agents or representatives in connection with any such examinations,
copies,
abstracts, visits or discussions shall be, upon the occurrence and during the continuation of
a Default, for the account of the Borrower and, in all other circumstances, for the account of such
Lender.

 

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(f) Keeping of Books. Keep, and cause each of its Material Subsidiaries to keep,
proper books of record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Borrower and each such Subsidiary in a
manner that permits the preparation of financial statements in accordance with GAAP.

(g) Maintenance of Properties, Etc. Keep, and cause each Material Subsidiary to keep,
all property useful and necessary in its business in good working order and condition (ordinary
wear and tear excepted), if the failure to do so is reasonably likely to have a Material Adverse
Effect, it being understood that this covenant relates only to the working order and condition of
such properties and shall not be construed as a covenant not to dispose of properties.

(h) Reporting Requirements. Furnish to the Agent:

(i) as soon as available and in any event within 50 days after the end of each of the
first three fiscal quarters of each fiscal year of the Borrower, (A) for each such fiscal
quarter of the Borrower, statements of income and cash flows of the Borrower and its
Consolidated Subsidiaries for such fiscal quarter setting forth in each case in comparative
form the corresponding figures for the corresponding fiscal quarter in the preceding fiscal
year and (B) for the period commencing at the end of the previous fiscal year and ending
with the end of each fiscal quarter, statements of income and cash flows of the Borrower and
its Consolidated Subsidiaries for such period setting forth in each case in comparative form
the corresponding figures for the corresponding period in the preceding fiscal year;
provided that so long as the Borrower remains subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, the Borrower may provide, in
satisfaction of the requirements of this first sentence of this Section 5.01(h)(i), its
report on Form 10-Q for such fiscal quarter. Each set of financial statements provided
under this Section 5.01(h)(i) shall be accompanied by a certificate of an Authorized
Officer, which certificate shall state that said financial statements fairly present in all
material respects the financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries in accordance with GAAP (except as disclosed therein) as at the
end of, and for, such period (subject to normal year-end audit adjustments) and shall set
forth reasonably detailed calculations demonstrating compliance with Section 5.03;

(ii) as soon as available and in any event within 90 days after the end of each fiscal
year of the Borrower, statements of income and cash flows of the Borrower and its
Consolidated Subsidiaries for such year and the related balance sheet of the Borrower and
its Consolidated Subsidiaries as at the end of such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year; provided
that, so long as the Borrower remains subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, the Borrower may provide, in satisfaction of
the requirements of this first sentence of this Section 5.01(h)(ii), its report on Form 10-K
for such fiscal year. Each set of financial statements provided pursuant to this Section
5.01(h)(ii) shall be accompanied by (A) an opinion thereon of independent certified
public accountants of recognized national standing, which opinion shall state that said
financial statements fairly present in all material respects the financial condition and
results of operations of the Borrower and its Consolidated Subsidiaries as at the end of,
and for, such fiscal year, in accordance with GAAP (except as disclosed therein) and (B) a
certificate of an Authorized Officer, which certificate shall set forth reasonably detailed
calculations demonstrating compliance with Section 5.03;

 

35

 

(iii) as soon as possible and in any event within five days after any Authorized
Officer of the Borrower knows of the occurrence of each Default continuing on the date of
such statement, a statement of an Authorized Officer of the Borrower setting forth details
of such Default and the action that the Borrower has taken and proposes to take with respect
thereto;

(iv) promptly after the sending or filing thereof, copies of all reports and
registration statements (other than exhibits thereto and registration statements on Form S-8
or its equivalent) that the Borrower or any Subsidiary files with the Securities and
Exchange Commission;

(v) promptly after an Authorized Officer becomes aware of the commencement thereof,
notice of all actions and proceedings before any court, governmental agency or arbitrator
affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f),
except, with respect to any matter referred to in Section 4.01(f)(ii), to the extent
disclosed in a report on Form 8-K, Form 10-Q or Form 10-K of the Borrower;

(vi) promptly after an Authorized Officer becomes aware of the occurrence thereof,
notice of any change by Moody’s or S&P of its respective Public Debt Rating or of the
cessation (or subsequent commencement) by Moody’s or S&P of publication of its respective
Public Debt Rating;

(vii) promptly after the occurrence thereof, notice of the occurrence of any ERISA
Event, together with (x) a written statement of an Authorized Officer of the Borrower
specifying the details of such ERISA Event and the action that the Borrower has taken and
proposes to take with respect thereto, (y) a copy of any notice with respect to such ERISA
Event that may be required to be filed with the PBGC and (z) a copy of any notice delivered
by the PBGC to the Borrower or an ERISA Affiliate with respect to such ERISA Event; and

(viii) such other information respecting the Borrower or any of its Subsidiaries as any
Lender through the Agent may from time to time reasonably request.

Information required to be delivered pursuant to Sections 5.01(h)(i), (ii) and (iv) above
shall be deemed to have been delivered on the date on which the Borrower provides notice to the
Agent that such information has been posted on the Borrower’s website on the Internet at
www.pinnaclewest.com, at sec.gov/edaux/searches.htm or at another website identified in such notice
and accessible by the Lenders without charge; provided that (i) such notice may be
included in a certificate delivered pursuant to Section 5.01(h)(i) or (ii) and (ii) the
Borrower shall deliver paper copies of the information referred to in Section 5.01(h)(i), (ii), and
(iv) to any Lender which requests such delivery.

 

36

 

(i) Change in Nature of Business. Conduct directly or through its Subsidiaries the
same general type of business conducted by the Borrower and its Material Subsidiaries on the date
hereof.

(j) Ownership of APS. Except to the extent permitted under Section 5.02(b), at all
times continue to own directly or indirectly at least 80% of the outstanding capital stock of APS.

Section 5.02 Negative Covenants. So long as Loan or any other Obligations shall
remain unpaid, the Borrower shall not:

(a) Liens, Etc. Directly or indirectly create, incur, assume or permit to exist any
Lien securing Indebtedness for borrowed money on or with respect to any property or asset
(including, without limitation, the capital stock of APS) of the Borrower, whether now owned or
held or hereafter acquired (unless it makes, or causes to be made, effective provision whereby the
Obligations will be equally and ratably secured with any and all other obligations thereby secured
so long as such other Indebtedness shall be so secured, such security to be pursuant to an
agreement reasonably satisfactory to the Required Lenders); provided, however, that
this Section 5.02(a) shall not apply to Liens securing Indebtedness for borrowed money (other than
Indebtedness for borrowed money secured by the capital stock of APS) which do not in the aggregate
exceed at any time outstanding the principal amount of $50,000,000.

(b) Mergers, Etc. Merge or consolidate with or into any Person, or permit any of its
Material Subsidiaries to do so, except that (i) any Material Subsidiary of the Borrower may merge
or consolidate with or into any other Material Subsidiary of the Borrower, (ii) any Subsidiary of
the Borrower may merge into the Borrower or any Material Subsidiary of the Borrower and (iii) the
Borrower or any Material Subsidiary may merge with any other Person so long as the Borrower or such
Material Subsidiary is the surviving corporation, provided, in each case, that no Default
shall have occurred and be continuing at the time of such proposed transaction or would result
therefrom.

(c) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit
any of its Material Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or
grant any option or other right to purchase, lease or otherwise acquire any assets to any Person
other than the Borrower or any Subsidiary of the Borrower, except (i) dispositions in the ordinary
course of business, including, without limitation, sales or other dispositions of electricity and
related and ancillary services, other commodities, emissions credits and similar mechanisms for
reducing pollution, and damaged, obsolete, worn out or surplus property no longer required or
useful in the business or operations of the Borrower or any of its Subsidiaries, (ii) sale or other
disposition of patents, copyrights, trademarks or other intellectual property that are, in the
Borrower’s reasonable judgment, no longer economically practicable to maintain or necessary in the
conduct of the business of the Borrower or its Subsidiaries and any license or sublicense of
intellectual property that does not interfere with the business of the Borrower or any Material
Subsidiary, (iii) in a transaction authorized by subsection (b) of this Section, (iv) individual
dispositions
occurring in the ordinary course of business which involve assets with a book value not
exceeding $5,000,000, (v) sales, leases, transfers or other dispositions of assets during the term
of this Agreement having an aggregate book value not to exceed 30% of the total of all assets
properly appearing on the most recent balance sheet of the Borrower provided pursuant to Section
4.01(e) or 5.01(h)(ii) hereof, (vi) at any time following the consummation of the Four Corners
Acquisition and the closure by APS of Units 1, 2 and 3 of the Four Corners Power Plant near
Farmington, New Mexico, as described in the SEC Reports, disposition of all or any portion of APS’
interests in such Units 1, 2 and 3, and (vii) any Lien permitted under Section 5.02(a).

 

37

 

Section 5.03 Financial Covenant. So long as any Loan or any other Obligations shall
remain unpaid, the Borrower will maintain a ratio of (a) Consolidated Indebtedness to (b) the sum
of Consolidated Indebtedness plus Consolidated Net Worth of not greater than 0.65 to 1.

ARTICLE VI

EVENTS OF DEFAULT

Section 6.01 Events of Default. If any of the following events (“Events of
Default”) shall occur and be continuing:

(a) The Borrower shall fail to pay when due (i) any principal of any Loan or (ii) any interest
on any Loan or any fees or other amounts payable under this Agreement or any other Loan Documents,
and (in the case of this clause (ii) only) such failure shall continue for a period of three
Business Days; or

(b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of
its officers) in any certificate or other document delivered in connection with this Agreement or
any other Loan Document shall prove to have been incorrect in any material respect when made or
deemed made or furnished; or

(c) (i) The Borrower shall fail to perform or observe any term, covenant or agreement
contained in Section 5.01(d) (as to the corporate existence of the Borrower), Section 5.01(h)(iii),
Section 5.01(h)(vi), Section 5.01(j), Section 5.02 or Section 5.03; or (ii) the Borrower shall fail
to perform or observe any term, covenant or agreement contained in Section 5.01(e) if such failure
shall remain unremedied for 15 days after written notice thereof shall have been given to the
Borrower by the Agent or any Lender; or (iii) the Borrower shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement or any other Loan Document on its
part to be performed or observed if such failure shall remain unremedied for 30 days after written
notice thereof shall have been given to the Borrower by the Agent or any Lender; or

(d) (i) The Borrower or any of its Material Subsidiaries shall fail to pay (A) any principal
of or premium or interest on any Indebtedness that is outstanding in a principal amount of at least
$35,000,000 in the aggregate (but excluding Indebtedness outstanding hereunder), or (B) an amount,
or post collateral as contractually required in an amount, of at least $35,000,000 in respect of
any Hedge Agreement, of the Borrower or such Material Subsidiary (as the case may be), in each
case, when the same becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after
the applicable grace period, if any, specified in the agreement or instrument relating to such
Indebtedness or Hedge Agreement; or (ii) any event of default shall exist under any agreement or
instrument relating to any such Indebtedness and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such event is to accelerate, or
to permit the acceleration of, the maturity of such Indebtedness; or

 

38

 

(e) The Borrower or any of its Material Subsidiaries shall fail to pay any principal of or
premium or interest in respect of any operating lease in respect of which the payment obligations
of the Borrower have a present value of at least $35,000,000, when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in such operating
lease, if the effect of such failure is to terminate, or to permit the termination of, such
operating lease; or

(f) The Borrower or any of its Material Subsidiaries shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts generally, or shall make
a general assignment for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower or any of its Material Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the case of any such proceeding instituted
against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 60 days, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its property) shall
occur; or the Borrower or any of its Material Subsidiaries shall take any corporate action to
authorize any of the actions set forth above in this subsection (f); or

(g) Judgments or orders for the payment of money that exceed any applicable insurance coverage
(the insurer of which shall be rated at least “A” by A.M. Best Company) by more than $35,000,000 in
the aggregate shall be rendered against the Borrower or any Material Subsidiary and such judgments
or orders shall continue unsatisfied or unstayed for a period of 45 days; or

(h) (i) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary
or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of 30% or more of the
equity securities of the Borrower entitled to vote for members of the board of directors of the
Borrower; or (ii) during any period of 24 consecutive months, a majority of the members of the
board of directors of the Borrower cease (other than due to death or disability) to be composed of
individuals (A) who were members of that board on the first day of such period, (B) whose election
or nomination to that board was approved by individuals referred to in clause (A) above
constituting at the time of such election or nomination at least a majority of that board or (C)
whose election or nomination to that board was approved by individuals referred to in
clauses (A) and (B) above constituting at the time of such election or nomination at least a
majority of that board; or

 

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(i) (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has
resulted or could reasonably be expected to result in liability of the Borrower under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$35,000,000; or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the
expiration of any applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess
of $35,000,000;

then, and in any such event, the Agent shall at the request, or may with the consent, of the
Required Lenders, by notice to the Borrower, (i) declare the Loans, all interest thereon and all
other amounts payable under this Agreement to be forthwith due and payable, whereupon the Loans,
all such interest and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or deemed
entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United
States of America, the Loans, all such interest and all such amounts shall automatically become and
be due and payable, without presentment, demand, protest or any notice of any kind, all of which
are hereby expressly waived by the Borrower, and (ii) exercise all rights and remedies available to
it under this Agreement, the other Loan Documents and applicable Law.

ARTICLE VII

THE AGENT

Section 7.01 Appointment and Authority. Each of the Lenders hereby irrevocably
appoints Union Bank to act on its behalf as the Agent hereunder and under the other Loan Documents
and authorizes the Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto. Except as set forth in Section 7.06, the provisions of this Article
are solely for the benefit of the Agent and the Lenders, and neither the Borrower nor any of its
Affiliates shall have rights as a third party beneficiary of any of such provisions.

Section 7.02 Rights as a Lender. The Person serving as the 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 Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the Person serving as the
Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits
from, lend money to, act as the financial advisor or in any other advisory capacity for and
generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if such Person were not the Agent hereunder and without any duty to account therefor to
the Lenders.

 

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Section 7.03 Exculpatory Provisions. The Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, the Agent:

(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;

(b) shall not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan
Documents that the Agent is required to exercise as directed in writing by the Required Lenders (or
such other number or percentage of the Lenders as shall be expressly provided for herein),
provided that the Agent shall not be required to take any action that, in its opinion or
the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan
Document or applicable Law; and

(c) shall not, except as expressly set forth herein and in the other Loan Documents, 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 Affiliates that is communicated to or obtained by the Person serving as
the Agent or any of its Affiliates in any capacity.

The Agent shall not be liable for any action taken or not taken by it (i) with the consent or
at the request of the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary, or as the Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Section 6.01 and Section 8.01) or (ii) in the absence of its own gross
negligence or willful misconduct. The Agent shall be deemed not to have knowledge of any Default
unless and until notice describing such Default is given to the Agent by the Borrower or a Lender.

The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any
statement, warranty or representation made in or in connection with this Agreement or any other
Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder
or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of
the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Agent.

Section 7.04 Reliance by Agent. The 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 (including any electronic message, internet or intranet
website posting or other distribution) believed by it to be genuine and to have been signed, sent
or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made
to it orally or by telephone and believed by it to have been made by the proper Person, and shall
not incur any liability for relying thereon. In determining compliance with any condition
hereunder to the making of any Loan that by its terms must be fulfilled to the satisfaction of a
Lender, the Agent may presume that such condition is satisfactory to such Lender unless the
Agent shall have received notice to the contrary from such Lender prior to the making of such
Loan. The 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 good faith in accordance with the advice of any such counsel, accountants or
experts.

 

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Section 7.05 Delegation of Duties. The Agent may perform any and all of its duties
and exercise its rights and powers hereunder or under any other Loan Document by or through any one
or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and
all of its duties and exercise its rights and powers by or through their respective Related
Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the
Related Parties of the 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 Agent.

Section 7.06 Resignation of Agent. The Agent may at any time give notice of its
resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the
Required Lenders shall have the right, with the consent of the Borrower so long as no Event of
Default has occurred and is continuing, to appoint a successor, which shall be a bank with an
office in the United States of America, or an Affiliate of any such bank with an office in the
United States of America. If no such successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 45 days after the retiring Agent gives
notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent meeting the qualifications set forth above; provided that if the Agent
shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment,
then such resignation shall nonetheless become effective in accordance with such notice and (1) the
retiring Agent shall be discharged from its duties and obligations hereunder and under the other
Loan Documents (except that in the case of any collateral security held by the Agent on behalf of
the Lenders under any of the Loan Documents, the retiring Agent shall continue to hold such
collateral security until such time as a successor Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the Agent shall instead be
made by or to each Lender directly, until such time as the Required Lenders appoint a successor
Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as
Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be
discharged from all of its duties and obligations hereunder or under the other Loan Documents (if
not already discharged therefrom as provided above in this Section). The fees payable by the
Borrower to a successor Agent shall be as agreed between the Borrower and such successor. After
the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of
this Article and Section 8.04 shall continue in effect for the benefit of such retiring 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 the retiring Agent was acting as Agent.

Section 7.07 Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other Lender or any of their
Related Parties 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 Agent or any other
Lender or any of their Related Parties 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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Section 7.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding,
none of the Arrangers, the Syndication Agent, the Documentation Agent, the Joint Bookrunners or any
other agents listed on the cover page hereof shall have any powers, duties or responsibilities
under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as
the Agent or a Lender hereunder.

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or any other Loan Document, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the Required Lenders,
and then such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver or
consent shall

(a) unless agreed to by each Lender directly affected thereby, (i) reduce or forgive the
principal amount of any Loan, reduce the rate of or forgive any interest thereon (provided
that only the consent of the Required Lenders shall be required to waive the applicability of any
post-default increase in interest rates), or reduce or forgive any fees hereunder (other than fees
payable to the Agent or the Arrangers for their own respective accounts), (ii) extend the final
scheduled maturity date or any other scheduled date for the payment of any principal of or interest
on any Loan, or extend the time of payment of any fees hereunder (other than fees payable to the
Agent or the Arrangers for their own respective accounts), or (iii) increase any Commitment of any
such Lender over the amount thereof in effect or extend the maturity thereof (it being understood
that a waiver of any Default, if agreed to by the Required Lenders or all Lenders (as may be
required hereunder with respect to such waiver), shall not constitute such an increase);

(b) unless agreed to by all of the Lenders, (i) reduce the percentage of the aggregate
Commitments or of the aggregate unpaid principal amount of the Loans, or the number or percentage
of Lenders, that shall be required for the Lenders or any of them to take or approve, or direct the
Agent to take, any action hereunder or under any other Loan Document (including as set forth in the
definition of “Required Lenders”), (ii) change any other provision of this Agreement or any of the
other Loan Documents requiring, by its terms, the consent or approval of all the Lenders for any
amendment, modification, waiver, discharge or termination thereof or any consent to any departure
by the Borrower therefrom, or (iii) change or waive any provision of Section 2.13, any other
provision of this Agreement or any other Loan Document requiring pro rata treatment of any Lenders,
or this Section 8.01 or Section 2.17(b); and

 

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(c) unless agreed to by the Agent in addition to the Lenders required as provided hereinabove
to take such action, affect the respective rights or obligations of the Agent hereunder or under
any of the other Loan Documents.

Section 8.02 Notices, Etc.

(a) All notices and other communications provided for hereunder shall be either (x) in writing
(including facsimile communication) and mailed, faxed or delivered or (y) delivered, furnished,
distributed or made available as and to the extent set forth in Sections 8.02(b) and (c), if to the
Borrower, at the address specified on Schedule 8.02; if to any Lender, at its Domestic
Lending Office; and if to the Agent, at the address specified on Schedule 8.02; or, as to
the Borrower or the Agent, at such other address as shall be designated by such party in a written
notice to the other parties and, as to each other party, at such other address as shall be
designated by such party in a written notice to the Borrower and the Agent. All such notices and
communications shall, when mailed or faxed, be effective when deposited in the mails or faxed,
respectively, except that notices and communications to the Agent pursuant to Article II, III or
VII shall not be effective until received by the Agent. Delivery by facsimile of an executed
counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any
Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually
executed counterpart thereof. Notices delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such subsection (b). Upon
request of the Borrower, the Agent will provide to the Borrower (i) copies of each Administrative
Questionnaire or (ii) the address of each Lender.

(b) Notices and other communications to the Lenders and the Agent hereunder may be delivered
or furnished by electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by the Agent and agreed to by the Borrower, provided that
the foregoing shall not apply to notices to any Lender pursuant to Article II if such
Lender has notified the Agent and the Borrower that it is incapable of receiving notices under such
Article by electronic communication. The 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. Unless the Agent and the Borrower otherwise agree, (i)
notices and other communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written acknowledgement),
provided that if such notice or other communication is not sent during the normal business
hours of the recipient, such notice or communication shall be deemed to have been sent at the
opening of business on the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause (i) of notification
that such notice or communication is available and identifying the website address therefor.

 

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(c) The Borrower agrees that the Agent may make materials delivered to the Agent pursuant to
Sections 5.01(h)(i), (ii) and (iv), as well as any other written information, documents,
instruments and other material relating to the Borrower or any of its Subsidiaries and relating to
this Agreement, the Notes or the transactions contemplated hereby, or any other materials or
matters relating to this Agreement, the Notes or any of the transactions contemplated hereby
(collectively, the “Communications”) available to the Lenders by posting such notices on
Intralinks or a substantially similar electronic system (the “Platform”). The Borrower
acknowledges that (i) the distribution of material through an electronic medium is not necessarily
secure and that there are confidentiality and other risks associated with such distribution, (ii)
the Platform is provided “as is” and “as available” and (iii) neither the Agent nor any of its
Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform
and each expressly disclaims liability for errors or omissions in the Communications or the
Platform. No warranty of any kind, express, implied or statutory, including, without limitation,
any warranty of merchantability, fitness for a particular purpose, non-infringement of third party
rights or freedom from viruses or other code defects, is made by the Agent or any of its Affiliates
in connection with the Platform.

(d) Each Lender agrees that notice to it (as provided in the next sentence) (a
“Notice”) specifying that any Communications have been posted to the Platform shall
constitute effective delivery of such information, documents or other materials to such Lender for
purposes of this Agreement; provided that if requested by any Lender the Agent shall
deliver a copy of the Communications to such Lender by e-mail, facsimile or mail. Each Lender
agrees (i) to notify the Agent in writing of such Lender’s e-mail address to which a Notice may be
sent by electronic transmission (including by electronic communication) on or before the date such
Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Agent
has on record an effective e-mail address for such Lender) and (ii) that any Notice may be sent to
such e-mail address.

(e) The Borrower hereby acknowledges that certain of the Lenders may be “public-side” Lenders
(i.e., Lenders that do not wish to receive material non-public information with respect to the
Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that (w)
all Communications that are to be made available to Public Lenders shall be clearly and
conspicuously marked “PUBLIC” which shall mean that the word “PUBLIC” shall appear prominently on
the first page thereof; (x) by marking Communications “PUBLIC,” the Borrower shall be deemed to
have authorized the Agent, the Arrangers and the Lenders to treat such Communications as not
containing any material non-public information with respect to the Borrower or its securities for
purposes of United States of America federal and state securities laws; (y) all Communications
marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as
“Public Investor;” and (z) the Agent and the Arrangers shall be entitled to treat any
Communications that are not marked “PUBLIC” as being suitable only for posting on a portion of the
Platform not marked as “Public Investor.” Notwithstanding the foregoing, the Borrower shall be
under no obligation to mark any Communications “PUBLIC.” Notwithstanding anything to the contrary
herein, the Borrower need not provide to any Public Lender any information, notice, or other
document hereunder that is not public information, including without limitation, the Notice of
Initial Borrowing and any notice of Default.

Section 8.03 No Waiver; Cumulative Remedies; Enforcement. No failure by any Lender or
the Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by Law.

 

45

 

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the
authority to enforce rights and remedies hereunder and under the other Loan Documents against the
Borrower shall be vested exclusively in, and all actions and proceedings at Law in connection with
such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with
Article VI for the benefit of all the Lenders; provided, however, that the
foregoing shall not prohibit (a) the Agent from exercising on its own behalf the rights and
remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other
Loan Documents, (b) any Lender from exercising setoff rights in accordance with Section 8.05
(subject to the terms of Section 2.13), or (c) any Lender from filing proofs of claim or appearing
and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower
under any Debtor Relief Law; and provided, further, that if at any time there is no
Person acting as Agent hereunder and under the other Loan Documents, then (i) the Required Lenders
shall have the rights otherwise ascribed to the Agent pursuant to Article VI and (ii) in addition
to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section
2.13, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies
available to it and as authorized by the Required Lenders.

Section 8.04 Costs and Expenses; Indemnity; Damage Waiver.

(a) The Borrower agrees to pay on demand all costs and expenses of the Agent in connection
with the administration, modification and amendment of this Agreement, the Notes and the other Loan
Documents to be delivered hereunder, including, without limitation, the reasonable fees and
expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to
its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand
all costs and expenses of the Agent and the Lenders, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other Loan
Documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of
counsel for the Agent and each Lender in connection with the enforcement of rights under this
Section 8.04(a).

(b) The Borrower agrees to indemnify and hold harmless the Agent (and any sub-agent thereof),
each Lender, each Arranger, the Syndication Agent, the Documentation Agent, each Joint Bookrunner
and each Related Party of any of the foregoing (each, an “Indemnified Party”) from and
against any and all claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by reason of (including,
without limitation, in connection with any investigation, litigation or proceeding or preparation
of a defense in connection therewith, whether based on contract, tort or any other theory) (i) the
Notes, this Agreement, any other Loan Document, any of the transactions contemplated herein or the
actual or proposed use of the proceeds of any Loan, or (ii) the actual or alleged presence of
Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any

 

46

 

Environmental
Action relating in any way to the Borrower or any of its Subsidiaries, provided that such indemnity shall not, as to any Indemnified Party, be
available to the extent (a) such fees and expenses are expressly stated in this Agreement to be
payable by the Indemnified Party, included expenses payable under Section 2.12, Section 5.01(e) and
Section 8.07(b) or (b) such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified
Party’s gross negligence, willful misconduct or material breach of its obligations under this
Agreement, in which case any fees and expenses previously paid or advanced by the Borrower to such
Indemnified Party in respect of such indemnified obligation will be returned by such Indemnified
Party. In the case of an investigation, litigation or other proceeding to which the indemnity in
this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by the Borrower, its directors, equityholders or creditors or
an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party
thereto, and whether or not the transactions contemplated hereby are consummated, provided
that if the Borrower and such Indemnified Party are adverse parties in any such litigation or
proceeding, and the Borrower prevails in a final, non-appealable judgment by a court of competent
jurisdiction, any fees or expenses previously paid or advanced by the Borrower to such Indemnified
Party pursuant to this Section 8.04(b) will be returned by such Indemnified Party.

(c) To the extent that the Borrower for any reason fails to indefeasibly pay any amount
required under subsection (a) or (b) of this Section to be paid by it to the Agent (or any
sub-agent thereof) or any Related Party of any of the foregoing (and without limiting its
obligation to do so), each Lender severally agrees to pay to the Agent (or any such sub-agent) or
such Related Party, as the case may be, such Lender’s Ratable Share (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 Agent (or any such
sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for
the Agent (or any such sub-agent) in connection with such capacity.

(d) Each party hereto also agrees not to assert any claim for special, indirect, consequential
or punitive damages against the other parties hereto, or any Related Party of any party hereto, on
any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any
other Loan Document, any of the transactions contemplated herein or the actual or proposed use of
the proceeds of the Loans. No Indemnified Party shall be liable for any damages arising from the
use by unintended recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems (including Intralinks,
SyndTrak or similar systems) in connection with this Agreement or the other Loan Documents,
provided that such indemnity shall not, as to any Indemnified Party, be available to the extent
such damages are found in a final, non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party’s gross negligence or willful misconduct.

(e) If any payment of principal of, or Conversion of, any Eurodollar Rate Loan is made by the
Borrower to or for the account of a Lender other than on the last day of the Interest Period for
such Loan, as a result of a payment or Conversion pursuant to Section 2.06(d) or (e), 2.08 or 2.10,
acceleration of the maturity of the Loans pursuant to Section 6.01 or for any other
reason, or by an Eligible Assignee to a Lender other than on the last day of the Interest
Period for such Loan upon an assignment of rights and obligations under this Agreement pursuant to
Section 8.07 as a result of a demand by the Borrower pursuant to Section 2.17, the Borrower shall,
upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any additional losses,
costs or expenses that it may reasonably incur as a result of such payment or Conversion,
including, without limitation, any loss (excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Loan.

 

47

 

(f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in Sections 2.09, 2.12 and 8.04 shall survive
the payment in full of principal, interest and all other amounts payable hereunder and under the
Notes.

Section 8.05 Right of Set-off. Upon (i) the occurrence and during the continuance of
any Event of Default and (ii) the making of the request or the granting of the consent specified by
Section 6.01 to authorize the Agent to declare the Loans due and payable pursuant to the provisions
of Section 6.01, each Lender and each of its Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and other indebtedness
at any time owing by such Lender or any such Affiliate to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter existing under
this Agreement or any other Loan Document to such Lender, whether or not such Lender shall have
made any demand under this Agreement or such Note and although such obligations may be contingent
or unmatured or are owed to a branch or office of such Lender different from the branch or office
holding such deposit or obligated on such indebtedness. Each Lender agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights of each Lender
under this Section are in addition to other rights and remedies (including, without limitation,
other rights of set-off) that such Lender may have.

Section 8.06 Effectiveness; Binding Effect. Except as provided in Section 3.01, this
Agreement shall become effective when it shall have been executed by the Borrower and the Agent and
when the Agent shall have received counterparts hereof that, 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 Borrower, the Agent and each Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Lenders (and any purported assignment without such
consent shall be null and void).

Section 8.07 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns permitted hereby, except that the
Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of the Agent and each Lender (and any purported assignment or transfer
without such consent shall be null and void) and no Lender may assign or otherwise transfer
any of its rights or obligations hereunder except (i) to an assignee in accordance with the
provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the
provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of subsection (f) of this Section. 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, Participants to the extent provided in
subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related
Parties of each of the Agent and the Lenders) any legal or equitable right, remedy or claim under
or by reason of this Agreement.

 

48

 

(b) Any Lender may at any time assign to one or more assignees (other than to an Affected
Lender) all or a portion of its rights and obligations under this Agreement (including all or a
portion of the Loans owing to it at such time); provided that any such assignment shall be
subject to the following conditions:

(i) Minimum Amounts.

(A) in the case of an assignment of the entire principal amount of the
assigning Lender’s Loans at the time owing to it or in the case of an assignment to
a Lender, no minimum amount need be assigned; and

(B) in any case not described in subsection (b)(i)(A) of this Section, the
aggregate outstanding principal amount of the Loans of the assigning Lender subject
to each such assignment, determined as of the date the Assignment and Assumption
with respect to which such assignment is delivered to the Agent or, if “Trade Date”
is specified in the Assignment and Assumption, as of the Trade Date, shall not be
less than $5,000,000 unless each of the Agent and, so long as no Event of Default
has occurred and is continuing, the Borrower otherwise consents (each such consent
not to be unreasonably withheld or delayed).

(ii) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and obligations
under this Agreement with respect to the Loans assigned, and each such assignment shall be
of a constant, and not a varying, percentage of all rights and obligations under this
Agreement;

(iii) Required Consents. No consent shall be required for any assignment
except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

(A) the consent of the Borrower (such consent not to be unreasonably withheld
or delayed) shall be required unless (1) an Event of Default has occurred and is
continuing at the time of such assignment or (2) such assignment is to a Lender, an
Affiliate of a Lender or an Approved Fund; and

(B) the consent of the Agent (such consent not to be unreasonably withheld or
delayed) shall be required if such assignment is to a Person that is not
a Lender, an Affiliate of a Lender or an Approved Fund with respect to such
Lender.

 

49

 

(iv) Assignment and Assumption. The parties to each assignment shall execute
and deliver to the Agent an Assignment and Assumption, together with a processing and
recordation fee in the amount of $3,500; provided, however, that no such fee
shall be payable in the case of an assignment made at the request of the Borrower to an
existing Lender. The assignee, if it is not a Lender, shall deliver to the Agent an
Administrative Questionnaire.

(v) No Assignment to Borrower. No such assignment shall be made to the
Borrower or any of the Borrower’s Affiliates or Subsidiaries.

(vi) No Assignment to Natural Persons. No such assignment shall be made to a
natural person.

Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this
Section and notice thereof to the Borrower, from and after the effective date specified in each
Assignment and Assumption, the assignee thereunder shall be a party to this Agreement 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 2.09, 2.12 and 8.04 with respect to facts
and circumstances occurring prior to the effective date of such assignment. Upon request, the
Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment
or transfer by a Lender of rights or obligations under this Agreement that does not comply with
this subsection 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 subsection (d) of this Section.

(c) Register. The Agent shall maintain at the Agent’s Office a copy of each
Assignment and Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the
Register shall be conclusive, absent manifest error, and the Borrower, the Agent and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.

 

50

 

(d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Agent, sell participations to any Person (other than a natural person, an
Affected Lender or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of the Loans owing to it); provided that (i) such
Lender’s obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible
to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Agent
and the Lenders shall continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement and (iv) no participant under any such
participation shall have any right to approve any amendment or waiver of any provision of this
Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the
extent that such amendment, waiver or consent would reduce the principal of, or interest on, any
Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to
such participation, or postpone any date fixed for any payment of principal of, or interest on, any
Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to
such participation.

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 this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification addressing the matters set forth
in clause (iv) above to the extent subject to such participation. Subject to subsection (e) of
this Section, the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.09, 2.12 and 8.04(e) to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by Law,
each Participant also shall be entitled to the benefits of Section 8.05 as though it were a Lender,
provided such Participant agrees to be subject to Section 2.13 as though it were a Lender.

(e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 2.09 or 2.12 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 2.12 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
2.12(e) as though it were a Lender.

(f) Certain Pledges. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its Note, if any) to
secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender
from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as
a party hereto.

(g) The words “execution,” “signed,” “signature,” and words of like import in any Assignment
and Assumption shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or enforceability as a
manually executed signature or the use of a paper-based recordkeeping system, as the case may be,
to the extent and as provided for in any applicable Law, including the Federal Electronic
Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform
Electronic Transactions Act.

 

51

 

Section 8.08 Confidentiality. Neither the Agent nor any Lender may disclose to any
Person any confidential, proprietary or non-public information of the Borrower furnished to the
Agent or the Lenders by the Borrower (such information being referred to collectively herein as the
“Borrower Information”), except that each of the Agent and the Lenders may disclose
Borrower Information (i) to its and its affiliates’ employees, officers, directors, agents and
advisors having a need to know in connection with this Agreement (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential nature of such
Borrower Information and instructed to keep such Borrower Information confidential on substantially
the same terms as provided herein), (ii) to the extent requested by any regulatory authority, (iii)
to the extent required by applicable Laws or regulations or by any subpoena or similar legal
process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (vi) subject to an agreement containing provisions substantially the same as
those of this Section 8.08, (A) to any assignee or participant or prospective assignee or
participant, (B) to any direct, indirect, actual or prospective counterparty (and its advisor) to
any swap, derivative or securitization transaction related to the obligations under this Agreement
and (C) to any credit insurance provider relating to the Borrower and its Obligations, (vii) to the
extent such Borrower Information (A) is or becomes generally available to the public on a
non-confidential basis other than as a result of a breach of this Section 8.08 by the Agent or such
Lender or their Related Parties, or (B) is or becomes available to the Agent or such Lender on a
nonconfidential basis from a source other than the Borrower (provided that the source of such
information was not known by the recipient after inquiry to be bound by a confidentiality agreement
with or other contractual, legal or fiduciary obligation of confidentiality to the Borrower or any
other Person with respect to such information) and (viii) with the consent of the Borrower. The
obligations under this Section 8.08 shall survive for two calendar years after the date of the
termination of this Agreement.

Section 8.09 Governing Law. This Agreement and the Notes shall be governed by, and
construed in accordance with, the Laws of the State of New York (including Sections 5-1401 and
5-1402 of the General Obligations Law but otherwise without regard to conflict of law principles).

Section 8.10 Counterparts; Integration. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other
electronic imaging means shall be effective as delivery of a manually executed counterpart of this
Agreement. This Agreement and the other Loan Documents constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.

 

52

 

Section 8.11 Jurisdiction, Etc.

(a) Each of the parties hereto hereby submits to the non-exclusive jurisdiction of any New
York State court or federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each
of the parties hereto hereby agrees that all claims in respect of any such action or proceeding may
be heard and determined in any such New York State court or, to the extent permitted by Law, in
such federal court. Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement or the Notes in the courts of any
jurisdiction.

(b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection that 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 the
Notes in any New York State court or federal court of the United States of America sitting in New
York City, and any appellate court from any thereof. 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.

Section 8.12 Payments Set Aside. To the extent that any payment by or on behalf of
the Borrower is made to the Agent or any Lender, or the Agent or any Lender exercises its right of
setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant
to any settlement entered into by the Agent or such Lender in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law
or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment
had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to
the Agent upon demand its applicable share (without duplication) of any amount so recovered from or
repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is
made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The
obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in
full of the Obligations and the termination of this Agreement.

Section 8.13 Patriot Act. The Agent and each Lender 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 “Act”), it is required to obtain, verify and record information
that identifies each borrower (including the Borrower), guarantor or grantor (the “Loan
Parties”), which information includes the name and address of each Loan Party and other
information that will allow such Lender to identify such Loan Party in accordance with the Act.
The Borrower shall provide, to the extent commercially reasonable, such information and take such
actions as are reasonably requested by the Agent or any Lender in order to assist the Agent and
such Lender in maintaining compliance with the Act.

Section 8.14 Waiver of Jury Trial. EACH OF THE BORROWER, THE AGENT AND THE LENDERS
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR THE ACTIONS OF THE
BORROWER, THE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.

 

53

 

Section 8.15 No Advisory or Fiduciary Responsibility. In connection with all aspects
of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit
facilities provided for hereunder and any related arranging or other services in connection
therewith (including in connection with any amendment, waiver or other modification hereof or of
any other Loan Document) are an arm’s-length commercial transaction between the Borrower, on the
one hand, and the Agent, each of the Lenders and each of the Arrangers, on the other hand, and the
Borrower is capable of evaluating and understanding and understands and accepts the terms, risks
and conditions of the transactions contemplated hereby and by the other Loan Documents (including
any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process
leading to such transaction, each of the Agent, the Lenders and the Arrangers is and has been
acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower
or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither
the Agent nor any Lender or Arranger has assumed or will assume an advisory, agency or fiduciary
responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby
or the process leading thereto, including with respect to any amendment, waiver or other
modification hereof or of any other Loan Document (irrespective of whether the Agent or any Lender
or Arranger has advised or is currently advising the Borrower or any of its Affiliates on other
matters) and neither the Agent nor any Lender or Arranger has any obligation to the Borrower with
respect to the transactions contemplated hereby except those obligations expressly set forth herein
and in the other Loan Documents; (iv) the Agent, each of the Lenders and the Arrangers and their
respective Affiliates may be engaged in a broad range of transactions that involve interests that
differ from those of the Borrower and its Affiliates, and neither the Agent nor any Lender or
Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or
fiduciary relationship; and (v) the Agent and each Lender and Arranger have not provided and will
not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions
contemplated hereby (including any amendment, waiver or other modification hereof or of any other
Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax
advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the
fullest extent permitted by Law, any claims that it may have against the Agent and each Lender and
Arranger with respect to any breach or alleged breach of agency or fiduciary duty in connection
with the Loan Documents.

Section 8.16 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the execution and delivery
hereof and thereof. Such representations and warranties have been or will be relied upon by the
Agent and each Lender, regardless of any investigation made by the Agent or any Lender or on their
behalf, and shall continue in full force and effect as long as any Loan or any other Obligation
hereunder shall remain unpaid or unsatisfied.

 

54

 

Section 8.17 Severability. If any provision of this Agreement or the other Loan
Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and
enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not
be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.
The invalidity of a provision in a particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]

 

55

 

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

	 	 	 	 	 	 	 
	 	 	PINNACLE WEST CAPITAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Lee R. Nickloy
 

Name: Lee R. Nickloy
	 	 
	 

	 	 	 	Title: Vice President & Treasurer	 	 

 

S-1

 

	 	 	 	 	 	 	 
	ADMINISTRATIVE AGENT:	 	UNION BANK, N.A., 
as Agent, a Joint Lead Arranger and a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Efrain Soto
 

Name: Efrain Soto
	 	 
	 

	 	 	 	Title: Vice President	 	 

 

S-2

 

	 	 	 	 	 	 	 
	LENDERS:	 	THE ROYAL BANK OF
SCOTLAND FINANCE (IRELAND), 

as
Syndication Agent, a Joint Lead Arranger and a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Len O’Connell
 

Name: Len O’Connell
	 	 
	 

	 	 	 	Title: Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Muiris O’Dwyer
 

Name: Muiris O’Dwyer
	 	 
	 

	 	 	 	Title: Director	 	 

 

S-3

 

	 	 	 	 	 	 	 
	 	 	SUNTRUST BANK, as Documentation Agent and a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Andrew Johnson
 

Name: Andrew Johnson
	 	 
	 

	 	 	 	Title: Director	 	 
	 
	 	 	 	 	 	 
	 	 	SUNTRUST ROBINSON HUMPHREY, INC., as a Joint Lead Arranger	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jeff Titus
 

Name: Jeff Titus
	 	 
	 

	 	 	 	Title: Mg Director	 	 

 

S-4

 

	 	 	 	 	 	 	 
	 	 	SCOTIABANC INC., as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J.F. Todd
 

Name: J.F. Todd
	 	 
	 

	 	 	 	Title: Managing Director	 	 

 

S-5

 

	 	 	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION, as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Holland Williams
 

Name: Holland Williams
	 	 
	 

	 	 	 	Title: AVP & Portfolio Mgr.	 	 

 

S-6

 

SCHEDULE 1.01

COMMITMENTS AND RATABLE SHARES

	 	 	 	 	 	 	 	 	 
	Lender	 	Commitment	 	 	Ratable Share	 
	 
	 	 	 	 	 	 	 	 
	Union Bank, N.A.
	 	$	35,000,000.00	 	 	 	20.0	%
	 
	 	 	 	 	 	 	 	 
	The Royal Bank of Scotland Finance (Ireland)
	 	$	35,000,000.00	 	 	 	20.0	%
	 
	 	 	 	 	 	 	 	 
	SunTrust Bank
	 	$	35,000,000.00	 	 	 	20.0	%
	 
	 	 	 	 	 	 	 	 
	Scotiabanc Inc.
	 	$	35,000,000.00	 	 	 	20.0	%
	 
	 	 	 	 	 	 	 	 
	U.S. Bank National Association
	 	$	35,000,000.00	 	 	 	20.0	%
	 
	 	 	 	 	 	 	 	 
	TOTAL
	 	$	175,000,000.00	 	 	 	100.00	%
	 
	 	 	 	 	 	 

 

 

 

SCHEDULE 4.01(j)

SUBSIDIARIES

Arizona Public Service Company

 

 

 

SCHEDULE 4.01(k)

EXISTING INDEBTEDNESS

None

 

 

 

SCHEDULE 8.02

CERTAIN ADDRESSES FOR NOTICES

BORROWER:

Pinnacle West Capital Corporation

400 North Fifth Street

Mail Station 9040

Phoenix, AZ 85004

Attention:      Treasurer

Telephone:      (602) 250-3300

Telecopier:      (602) 250-3902

Electronic       Lee.Nickloy@PinnacleWest.com

AGENT:

Agent’s Office

(for payments):

Union Bank, N.A.

1980 Saturn Drive

Mail Code: 4-957-161

Monterey Park, CA 91755

Attention:      Rodolfo Quintero

Telephone:      (323) 720-2575

Telecopier:      (323) 656-2837

Electronic Mail:      rodolfo.quintero@unionbank.com

Agent’s Account/Wiring Information:

Union Bank, N.A., Monterey Park, CA

ABA No.:          122-000-496

Account No:       77070-196431

Account Name:    Clearing Account

Ref:       Pinnacle West Capital Corporation

Other Notices as Agent:

Union Bank, N.A.

445 South Figueroa Street, 15th floor

Los Angeles, CA 90071

Attention:       Pascal Uttinger

Telephone:       (213) 236-5549

Telecopier:       (213) 236-4096

Electronic Mail:       pascal.uttinger@unionbank.comExhibit 10.4

Exhibit 10.4

PERFORMANCE SHARE AGREEMENT

UNDER THE

PINNACLE WEST CAPITAL CORPORATION

2007 LONG-TERM INCENTIVE PLAN

THIS AWARD AGREEMENT is made and entered into as of February 15, 2011 (the “Date of
Grant”), by and between Pinnacle West Capital Corporation (the “Company”), and
                                         (“Employee”).

BACKGROUND

	A.	 	The Board of Directors of the Company has adopted, and the Company’s shareholders have
approved, the Pinnacle West Capital Corporation 2007 Long-Term Incentive Plan (the “Plan”),
pursuant to which Performance Shares and Dividend Equivalents may be granted to employees of
the Company and its Subsidiaries and certain other individuals.

	B.	 	The Company desires to grant to Employee Performance Shares and Dividend Equivalents under
the terms of the Plan.
	 
	C.	 	Pursuant to the Plan, the Company and Employee agree as follows:

AGREEMENT

	 	1.	 	Grant of Award. Pursuant to action of the Committee, which was taken
on the Date of Grant, the Company grants to Employee                     (_____) Performance
Shares and Dividend Equivalents. The Performance Shares granted under this Section
1 are referred to in this Award Agreement as the “Base Grant.”

	 	2.	 	Award Subject to Plan. This Performance Share Award and the related
Dividend Equivalent Award are granted under and are expressly subject to all of the
terms and provisions of the Plan, which terms are incorporated herein by reference, and
this Award Agreement.

	 	3.	 	Performance Period. The Performance Period for this Award begins
January 1, 2011 and ends December 31, 2013.
	 
	 	4.	 	Payment.

	 	(a)	 	Performance Shares Payable In Stock. As soon as
practicable in the fiscal year immediately following the end of the Performance
Period, the Company will determine (i) the Company’s Total Shareholder Return
(as defined herein) as compared to the Total Shareholder Return of the
companies in the S&P 1500 Super Composite Electric Utility Index (the
“Growth Index”) over the Performance Period and (ii) the Company’s
Average Performance with respect to the Performance Metrics (as defined
herein). The Company will then deliver to Employee one (1) share of the
Company’s Stock for each then-outstanding Performance Share under this Award
Agreement, subject to adjustment pursuant to Section 5 below. The
Company anticipates that the Stock payout, if any, related to the Company’s
Total Shareholder Return will be made on or about January 25, 2014. The
Company anticipates that the Stock payout, if any, related to the Performance
Metrics will be made on or about November 30, 2014. In no event will the Stock
payouts described in this Subsection 4(a) be made later than December
31, 2014.

 

 

 

	 	(b)	 	Retirement. In the case of Employee’s Retirement (as
defined herein) during the Performance Period, Employee shall be deemed to have
been employed by the
Company through the end of the Performance Period and Employee will receive
the Stock and Dividend Equivalents, if any, to which Employee is entitled at
the time specified in this Section; provided, however, in the event Employee
is terminated for Cause regardless of Employee’s Retirement or eligibility
for Retirement, Employee shall not be deemed to have been employed through
the end of the Performance Period and will forfeit the right to receive any
Stock hereunder. For purposes of this Award Agreement, (i) “Retirement”
means a termination of employment which constitutes an “Early Retirement” or
a “Normal Retirement” under the Pinnacle West Capital Corporation Retirement
Plan, and (ii) “Cause” means (A) embezzlement, theft, fraud, deceit and/or
dishonesty by the Employee involving the property, business or affairs of the
Company or any of its Subsidiaries, or (B) an act of moral turpitude which in
the sole judgment of the Chief Executive Officer of the Company reflects
adversely on the business or reputation of the Company or any of its
Subsidiaries or negatively affects any of the Company’s or any of its
Subsidiaries’ employees or customers.

	 	(c)	 	Dividend Equivalents. In satisfaction of the Dividend
Equivalents Award made pursuant to Section 1, at the time of the
Company’s delivery of Stock to Employee pursuant to Subsection 4(a)
above, the Company also will deliver to Employee fully transferrable shares of
stock equal in value to the amount of dividends, if any, that Employee would
have received if Employee had directly owned the Stock to which the Performance
Shares relate from the Date of Grant to the date of the Stock payout, plus
interest on such amount at the rate of 5 percent compounded quarterly, as
determined pursuant to the Plan. The number of shares of Stock distributed to
Employee will be determined by dividing the amount due by the Fair Market Value
of one share of Stock as of the date of the Stock payout. No fractional Stock
shall be issued. If the Stock payout results in a fractional share of one-half
or greater, such fraction will be increased to provide for the issuance of a
full share of Stock.

	 	(d)	 	Pension. The value of the shares of Stock distributed
upon payment for the Performance Shares and Dividend Equivalents will be
disregarded for purposes of calculating the amount of Employee’s benefit under
any Company retirement plans.

	 	5.	 	Performance Criteria and Adjustments. Fifty percent (50%) of the
Performance Shares awarded under this Award Agreement will be determined pursuant to
Section 5(a) and fifty percent (50%) of the Performance Shares awarded under this Award
Agreement will be determined pursuant to Section 5(b). In no event will Employee be
entitled to receive a number of Performance Shares pursuant to this Award Agreement
greater than 2.0 times the Base Grant.

	 	(a)	 	Adjustment of Base Grant for Total Shareholder Return.
Fifty percent (50%) of the Base Grant will increase or decrease based upon the
Company’s “Total Shareholder Return” as compared to the Total Shareholder
Return of the companies in the Growth Index during the Performance Period, as
follows:

	 	 	 
	If the Company’s Total Shareholder Return Over The	 	 
	Performance Period As Compared to the Total	 	The Number of
	Shareholder Return of the Companies in the Growth	 	Performance Shares will
	Index is:	 	be:
	90th Percentile or greater
	 	1.0 X Base Grant
	75th Percentile
	 	.75 X Base Grant
	50th Percentile
	 	0.5 X Base Grant
	25th Percentile
	 	0.25 X Base Grant
	Less than 25th Percentile
	 	None

 

2

 

If intermediate percentiles are achieved, the number of Performance
Shares awarded will be prorated (partial shares will be rounded down to the
nearest whole share when applicable). For example, if the Company’s Total
Shareholder Return during the Performance Period places the Company’s
performance in the 60th percentile, then the number of Performance Shares
would be increased to 0.60 (0.5 X 60/50) multiplied by the Base Grant. In no
event will Employee be entitled to receive a number of Performance Shares
pursuant to this Subsection 5(a) greater than 1.0 times the Base
Grant.

	 	(b)	 	Adjustment of Base Grant for Performance Metrics.
Fifty percent (50%) of the Base Grant will increase or decrease based upon the
Company’s “Average Performance” with respect to the “Performance Metrics,” as
follows:

	 	 	 
	 	 	The Number of
	 	 	Performance Shares will
	If the Company’s Average Performance is:	 	be:
	90th Percentile or greater
	 	1.0 X Base Grant
	75th Percentile
	 	.75 X Base Grant
	50th Percentile
	 	0.5 X Base Grant
	25th Percentile
	 	0.25 X Base Grant
	Less than 25th Percentile
	 	None

If intermediate percentiles are achieved, the number of Performance
Shares awarded pursuant to this
Subsection 5(b) will be prorated
(partial shares will be rounded down to the nearest whole share when
applicable). For example, if the Company’s Average Performance during the
Performance Period places the Company’s performance in the 60th percentile,
then the number of Performance Shares would be increased to .60 (0.5 X 60/50)
multiplied by the Base Grant. In no event will Employee be entitled to
receive a number of Performance Shares pursuant to this Subsection
(b) greater than 1.0 times the Base Grant.

	 	6.	 	Definitions.

	 	(a)	 	Performance Metrics. The “Performance Metrics”
for the Performance Period are: (i) the JD Power Residential Survey for
investor-owned utilities in the Western Region; (ii) the System Average
Interruption Frequency Index (Major Events Excluded) (“SAIFI”); (iii)
Arizona Public Service Company’s customer to employee improvement ratio; (iv)
the OSHA rate (All Incident Injury Rate); (v) nuclear capacity factor; and (vi)
coal capacity factor.

	 	(1)	 	With respect to the Performance Metric described
in clause (i) of this Subsection 6(a), the JD Power
Residential Survey will provide data on an annual basis reflecting the
Company’s percentile ranking, relative to other participating companies.

	 	(2)	 	With respect to the Performance Metric described
in clause (ii) of this Subsection 6(a), the Edison
Electric Institute (“EEI”) will provide on an annual basis the
quartile rankings (or percentile rankings, if available) associated with
the SAIFI result of the participating companies; the Company will
determine its SAIFI result for the year in question and determine its
quartile ranking (or percentile ranking, if percentile rankings are
available) based on the information provided by EEI.

 

3

 

	 	(3)	 	With respect to the Performance Metric described
in clause (iii) of this Subsection 6(a), SNL, an
independent third party data system, will provide data on an annual
basis regarding the customer and employee counts; the
Company will use its customer and employee counts for the year in
question and determine its percentile ranking based on the information
provided by SNL. Only those companies whose customers and employees
were included in the data provided by SNL in each of the years of the
Performance Period will be considered.

	 	(4)	 	With respect to the Performance Metric described
in clause (iv) of this Subsection 6(a), EEI will provide
data on an annual basis regarding the OSHA rate of the participating
companies; the Company will calculate its OSHA rate for the year in
question and determine its percentile ranking based on the information
provided by EEI.

	 	(5)	 	With respect to the Performance Metric described
in clause (v) of this Subsection 6(a), SNL will provide
data on an annual basis regarding the nuclear capacity factors of the
participating nuclear plants; the Company will calculate its nuclear
capacity factor for the year in question and determine its percentile
ranking based on the information provided by SNL. Only those plants
that were included in the data provided by SNL in each of the years of
the Performance Period will be considered.

	 	(6)	 	With respect to the Performance Metric described
in clause (vi) of this Subsection 6(a), SNL will provide
data on an annual basis regarding the coal capacity factors of the
participating coal plants; the Company will calculate its coal capacity
factor for the year in question and determine its percentile ranking
based on the information provided by SNL. Only those plants that were
included in the data provided by SNL in each of the years of the
Performance Period will be considered.

	 	(7)	 	The Company’s percentile ranking during the
Performance Period for each Performance Metric will be the average of
the Company’s percentile ranking for each Performance Metric during each
of the three years of the Performance Period (each, an “Average
Performance Metric”); provided, however, that if a Performance
Metric for 2012 is not calculable by December 15, 2013, the Performance
Metric shall consist of the three most recent years for which such
Performance Metric is calculable. The Company’s “Average
Performance,” for purposes of determining any Base Grant adjustments
pursuant to Subsection 5(b) above will be the average of the
Average Performance Metrics. If only quartile, rather than percentile,
rankings are available for a particular Performance Metric, the Average
Performance Metric for any such Performance Metric shall be expressed as
a percentile. For example, if the Performance Metric was in the top
quartile for two Performance Periods and in the lowest quartile in the
other Performance Period, the average of these quartiles would be 3 (the
average of 4, 4, and 1) and the Average Performance Metric would be the
75th percentile (3 /4). The calculations in this
Subsection 6(a)(7) will be verified by the Company’s internal
auditors.

	 	(8)	 	If either EEI or SNL discontinues providing the
data specified above, the Committee shall select a data source that, in
the Committee’s judgment, will provide data most comparable to the data
provided by EEI or SNL, as the case may be. If the JD Power Residential
Survey for investor-owned utilities in the Western Region (or a
successor JD Power survey) is not available during each of the years of
the Performance Period, the Performance Metric associated with the JD
Power Residential Survey (Subsection 6(b)(1)) will be
disregarded and not included in the Company’s Average Performance for
purposes of determining any Base Grant adjustments pursuant to
Subsection 5(b).

 

4

 

	 	(b)	 	Total Shareholder Return. “Total Shareholder
Return” for the Performance Period is the measure of a company’s stock
price appreciation plus any dividends paid during the Performance Period. Only
those companies that were included in the Growth Index in each of the years of
the Performance Period will be considered. Total Shareholder Return for the
Company and the companies in the Growth Index will be determined using the
Daily Comparative Return as calculated by Bloomberg (or other independent third
party data system). If the Growth Index is discontinued, the Committee shall
select the most comparable index then in use for the sector comparison. In
addition, if the sector comparison is no longer representative of the Company’s
industry or business, the Committee shall replace the Growth Index with the
most representative index then in use. Once the Total Shareholder Returns of
the Company and all relevant companies in the Growth Index have been
determined, the member companies will be ranked from greatest to least.
Percentiles will be calculated based on a company’s relative ranking. For
example, company 1 out of 26 companies is given a percentile of 96.2% (1.0 —
1/26). Percentiles will be carried out to one (1) decimal place. If the
Company is not in the Growth Index, then its percentile will be interpolated
between the companies listed in the relative ranking. These calculations will
be verified by the Company’s internal auditors.

	 	7.	 	Termination of Award. This Award Agreement will terminate and be of no
further force or effect on the date that Employee is no longer actively employed by the
Company or any of its Subsidiaries, whether due to voluntary or involuntary
termination, death, retirement, disability, or otherwise, except as specifically set
forth in Section 4. Employee will, however, be entitled to receive any Stock
and Dividend Equivalents payable under Section 4 of this Award Agreement if
Employee’s employment terminates after the end of the Performance Period but before
Employee’s receipt of such Stock and Dividend Equivalents.
	 
	 	8.	 	Section 409A Compliance.

	 	(a)	 	Purpose of this Provision. Section 409A of the Code
imposes a number of requirements on “non-qualified deferred compensation” plans
and arrangements. Based on regulations issued by the Internal Revenue Service,
the Company has concluded that this Performance Share Award is subject to
Section 409A. As a result, unless the Plan and this Award Agreement are
administered to comply with Section 409A and the new rules, Employee will be
required to pay an additional twenty percent (20%) tax (in addition to regular
income taxes) on the compensation provided by this Award Agreement. In
addition, under Section 409A additional interest will be payable.

	 	(b)	 	Compliance with Section 409A. The Company intends to
comply with Section 409A by assuring that all amounts to which Employee becomes
entitled hereunder are payable at a specified time or pursuant to a fixed
schedule within the meaning of Treas. Reg. § 1.409A-3(a)(4). As a result, no
payment or transfer to Employee shall be made at the time specified in Section
4. The provisions of this Subsection 8(b) apply to all amounts due
pursuant to this Award Agreement.

	 	(c)	 	Miscellaneous Payment Provisions. If a payment is not
made due to a dispute in payments, payments can be delayed in accordance with
Treas. Reg. § 1.409A-3(g).

	 	(d)	 	Restriction on Acceleration or Further Deferral. Under
no circumstances may the time or schedule of any payment made or benefit
provided pursuant to this Award Agreement be accelerated or subject to a
further deferral except as otherwise permitted or required pursuant to
regulations and other guidance issued pursuant to Section 409A of the Code.

 

5

 

	 	(e)	 	No Elections. Employee does not have any right to make
any election regarding the time or form of any payment due under this Award
Agreement other than the election described in Section 4(b).

	 	(f)	 	Compliant Operation and Interpretation. The Plan and
this Award Agreement shall be administered in compliance with Section 409A and
each provision of the Award Agreement and the Plan shall be interpreted, to the
extent possible, to comply with Section 409A.

	 	9.	 	Tax Withholding. Employee is responsible for any and all federal,
state, and local income, payroll or other tax obligations or withholdings
(collectively, the “Taxes”) arising out of this Award. Employee shall pay any and all
Taxes due in connection with a payout of Stock hereunder by check or by having the
Company withhold shares of Stock from such payout. Within 75 days after the Date of
Grant, Employee must elect, on the election form described in Section 4(b), how
Employee will satisfy the tax obligations upon a payout. In the absence of a timely
election by Employee, Employee’s tax withholding obligation will be satisfied through
the Company’s withholding of shares of Stock as set forth above.

	 	10.	 	Continued Employment. Nothing in the Plan or this Award Agreement
shall be interpreted to interfere with or limit in any way the right of the Company or
its Subsidiaries to terminate Employee’s employment or services at any time. In
addition, nothing in the Plan or this Award Agreement shall be interpreted to confer
upon Employee the right to continue in the employ or service of the Company or its
Subsidiaries.

	 	11.	 	Non-Transferability. Neither this Award nor any rights under this
Award Agreement may be assigned, transferred, or in any manner encumbered except by
will or the laws of descent and distribution, and any attempted assignment, transfer,
mortgage, pledge or encumbrance except as herein authorized, will be void and of no
effect.

	 	12.	 	Definitions: Copy of Plan and Plan Prospectus. To the extent not
specifically defined in this Award Agreement, all capitalized terms used in this Award
Agreement will have the same meanings ascribed to them in the Plan. Employee will
receive a copy of the Plan and the related Plan Prospectus. In the event of any
conflict between the terms and conditions of this Award Agreement and the Plan, the
provisions of the Plan shall control.

	 	13.	 	Amendment. Except as otherwise provided in the Plan, this Award
Agreement may be amended only by a written agreement executed by the Company and
Employee.

	 	14.	 	Choice of Law. This Award Agreement will be governed by the laws of
the State of Arizona, excluding any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Award Agreement to another
jurisdiction.

An authorized representative of the Company has signed this Award Agreement as of the Date of
Grant.

	 	 	 	 	 	 	 
	 	 	PINNACLE WEST CAPITAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Its:	 	 	 	 
	 

	 	 	 	 

	 	 

 

6

 

Pinnacle West Capital Corporation

PERFORMANCE SHARE AWARD

ELECTION FORM

INFORMATION ABOUT YOU

							
	 	 	 	 	 	 	 
	Last
	 	First
	 	Middle Initial
	 	Employee ID#

TAX WITHHOLDING ELECTION

I hereby elect to satisfy any tax withholding obligation associated with my
receipt of Stock pursuant to my Performance Share Award in the following form
(place an “X” in the “Check” column or in the “Stock” column):

	 	 	 
	Check
	 	Stock
	(I will write a check for my taxes that are
due and deliver it to the Company 
within one
(1) day of the release of the Stock)

	 	(The Company should withhold
shares 
of my Stock to cover
my taxes)

	o
	 	o

	 	 	 	 	 	 	 	 	 	 	 
	To the extent permitted by law, I hereby
elect Federal tax withholding of _____
percent (minimum may not be less than 25%
and maximum may not exceed 35%)

	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

PARTICIPANT NAME (PLEASE PRINT)
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 

PARTICIPANT SIGNATURE
	 	 
	 	 	 	 

DATE
	 	 

IMPORTANT NOTE: Please complete and return this Election Form to Jennifer Mellegers at Mail Station
9996 by
 _____, 2011.

 

 

7

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