UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission File Number 1-5924
TUCSON ELECTRIC POWER COMPANY
(Exact Name of Registrant as Specified in its Charter)
ARIZONA 86-0062700
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
220 WEST SIXTH STREET, TUCSON, ARIZONA P.O. BOX 711
85701 85702
(Address of Principal Executive Offices) (Zip Code)
(520) 571-4000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
At November 5, 1997, 32,139,434 shares of the registrant's Common Stock,
no par value (the only class of Common Stock), were outstanding.
TABLE OF CONTENTS
Page
------
Definitions.............................................................iii
Independent Accountants' Review Report....................................1
PART I - FINANCIAL INFORMATION
Item 1. -- Financial Statements
Comparative Condensed Consolidated Statements of Income..............2
Comparative Condensed Consolidated Statements of Cash Flows..........3
Comparative Condensed Consolidated Balance Sheets....................4
Notes to Condensed Consolidated Financial Statements
Note 1. Tax Assessments.............................................5
Note 2. Rate Matters................................................5
Note 3. Springerville Coal Contract.................................6
Note 4. Consolidated Subsidiaries...................................6
Note 5. Long-Term Debt..............................................6
Note 6. Income Taxes................................................7
Note 7. New Accounting Standard.....................................8
Note 8. Reclassifications...........................................8
Item 2. -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview.............................................................9
Competition
Wholesale.......................................................10
Retail..........................................................11
Holding Company Proposal............................................14
Retail Rate Proposal................................................14
Accounting for the Effects of Regulation............................15
Investments in Energy Related Ventures..............................15
Dividends on Common Stock...........................................16
Earnings............................................................17
Results of Operations
Results of Utility Operations
Sales and Revenues..............................................18
Operating Expenses..............................................19
Other Income....................................................20
Interest Expense...............................................20
Events Affecting Future Results of Utility Operations
NTUA Wholesale Power Contract...................................20
Springerville Coal Supply Contract..............................21
Liquidity and Capital Resources..........................................21
Cash Flows..........................................................21
Financing Developments
Sale of New Bonds...............................................22
Financing Application Filed with ACC............................23
Year 2000 Issue..........................................................24
Safe Harbor for Forward-Looking Statements...............................24
PART II - OTHER INFORMATION
Item 1. -- Legal Proceedings
Tax Assessments..................................................25
Item 6. -- Exhibits and Reports on Form 8-K.............................25
Signature Page...........................................................26
Exhibit Index............................................................27
DEFINITIONS
The abbreviations and acronyms used in the 1997 Third Quarter Form 10-Q are
defined below:
- ----------------------------------------------------------------------------
ACC.................... Arizona Corporation Commission.
ADOR................... Arizona Department of Revenue.
AET.................... Advanced Energy Technologies, Inc.
Common Stock........... The Company's common stock, without par value.
Company or TEP......... Tucson Electric Power Company.
EITF................... Emerging Issues Task Force of the Financial
Accounting Standards Board.
FAS 71................. Statement of Financial Accounting Standards #71:
Accounting for the Effects of Certain Types of
Regulation.
FAS 101................ Statement of Financial Accounting Standards #101:
Regulated Enterprises - Accounting for the
Discontinuation of Application of FAS 71.
FAS 121................ Statement of Financial Accounting Standards #121:
Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of.
FERC................... Federal Energy Regulatory Commission.
First Mortgage Bonds... First mortgage bonds issued under the General First
Mortgage.
General First Mortgage. The Indenture, dated as of April 1, 1941, of Tucson
Gas,Electric Light and Power Company to The Chase
National Bank of the City of New York, as trustee,
as supplemented and amended.
IDBs................... Industrial development revenue or pollution control
bonds.
Irvington.............. Irvington Generating Station.
Irvington Lease........ The leveraged lease arrangement relating to Irvington
Unit 4.
kWh.................... Kilowatt-hour(s).
MEH.................... Millenium Energy Holdings, Inc.
MRA.................... Master restructuring agreement between the Company
and the Banks which includes the Renewable Term Loan,
Revolving Credit and certain replacement
reimbursement agreements.
MSR.................... Modesto, Santa Clara and Redding Public Power Agency.
MW..................... Megawatt(s).
NEV.................... New Energy Ventures, LLC.
1994 Rate Order........ ACC Rate Order concerning an increase in the
Company's retail base rates and certain regulatory
write-offs, issued January 11, 1994.
1996 Rate Order........ ACC Rate Order concerning an
increase in the Company's retail base rates and the
recovery of Springerville Unit 2 costs, issued March
29, 1996.
NTUA................... Navajo Tribal Utility Authority.
NOL.................... Net Operating Loss carryforward for income tax
purposes.
Renewable Term Loan.... Credit facility that replaced the Term Loan pursuant
to the MRA Sixth Amendment, dated as of November 1,
1994, and effective March 7, 1995.
Revolving Credit....... $50 million revolving credit facility entered into
between a syndicate of banks and the Company.
SEC.................... Securities and Exchange Commission.
Shareholders........... Holders of Common Stock.
Springerville.......... Springerville Generating Station.
Springerville Coal
Handling Facilities
Leases................ Leveraged lease arrangements relating to the coal
handling facilities serving Springerville.
Springerville Common
Facilities Leases..... Leveraged lease arrangements relating to one-half
interest in certain facilities at Springerville used
in common with Springerville Unit 1 and Springerville
Unit 2.
Springerville Unit 1
Leases................ Leveraged lease arrangements relating to
Springerville Unit 1, and one half interest in
certain facilities at Springerville used in common
with Springerville Unit 1 and Springerville Unit 2.
SSP.................... Shared Savings Proposal filed with the ACC July 9,
1997 requesting a 1.1% annual retail rate reduction.
Valencia............... Valencia Energy Company, previously a wholly owned
subsidiary of the Company, merged into the Company on
May 31, 1996.
VSP.................... Voluntary Severance Plan offered to Company employees
and implemented in May 1996.
WSCC................... Western Systems Coordinating Council.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
Tucson Electric Power Company and its Stockholders
220 West Sixth Street
Tucson, Arizona 85701
We have reviewed the accompanying condensed consolidated balance sheet of
Tucson Electric Power Company and subsidiaries (the Company) as of September
30, 1997 and the related condensed consolidated statements of income for the
three-month and nine-month periods ended September 30, 1997 and 1996 and cash
flows for the nine-month periods ended September 30, 1997 and 1996. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet and statement of capitalization of
the Company as of December 31, 1996 and the related consolidated statements of
income, cash flows, and changes in stockholders' equity (deficit) for the year
then ended (not presented herein); and in our report dated January 27, 1997, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1996 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
DELOITTE & TOUCHE LLP
Tucson, Arizona
October 20, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
The September 30 condensed consolidated financial statements are
unaudited but reflect all normal recurring accruals and other adjustments
which are, in the opinion of management, necessary for a fair presentation of
the results for the interim periods covered. Due to seasonal fluctuations in
sales, the quarterly results are not indicative of annual operating results.
Also see Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations. This quarterly report should be
reviewed in conjunction with the Company's 1996 Form 10-K.
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
September 30,
1997 1996
-Thousands of Dollars-
Operating Revenues
Retail Customers $201,566 $195,261
Amortization of MSR Option Gain Regulatory Liability - 5,014
Sales for Resale 29,523 22,803
--------- ---------
Total Operating Revenues 231,089 223,078
--------- ---------
Operating Expenses
Fuel and Purchased Power 66,243 60,198
Capital Lease Expense 25,786 25,824
Amortization of Springerville Unit 1 Allowance (7,009) (7,273)
Other Operations 28,402 23,535
Maintenance and Repairs 8,284 7,991
Depreciation and Amortization 21,598 24,735
Taxes Other Than Income Taxes 12,517 21,573
Voluntary Severance Plan Expense(Gain) - (3,443)
Income Taxes 19,158 17,322
--------- ---------
Total Operating Expenses 174,979 170,462
--------- ---------
Operating Income 56,110 52,616
--------- ---------
Other Income (Deductions)
Income Taxes 13,337 66,510
Reversal of Loss Provision - 8,472
Interest Income 2,035 1,264
Other Income (Deductions) (1,214) 637
--------- ---------
Total Other Income (Deductions) 14,158 76,883
--------- ---------
Interest Expense
Long-Term Debt - Net 16,935 14,843
Interest Imputed on Losses Recorded at Present Value 8,101 8,006
Other Interest Expense 1,817 4,152
--------- ---------
Total Interest Expense 26,853 27,001
--------- ---------
Net Income $ 43,415 $102,498
========= =========
Average Shares of Common Stock Outstanding (000) 32,136 32,133
========= =========
Net Income per Average Share $ 1.35 $ 3.19
========= =========
See Notes to Condensed Consolidated Financial Statements.
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended
September 30,
1997 1996
-Thousands of Dollars-
Operating Revenues
Retail Customers $490,752 $482,511
Amortization of MSR Option Gain Regulatory Liability 8,105 15,040
Sales for Resale 69,483 58,088
--------- ---------
Total Operating Revenues 568,340 555,639
--------- ---------
Operating Expenses
Fuel and Purchased Power 163,382 156,128
Capital Lease Expense 78,450 78,073
Amortization of Springerville Unit 1 Allowance (21,028) (21,818)
Other Operations 82,785 71,983
Maintenance and Repairs 29,899 26,345
Depreciation and Amortization 64,817 73,285
Taxes Other Than Income Taxes 38,235 51,310
Voluntary Severance Plan Expense(Gain) - 10,555
Income Taxes 21,070 12,934
--------- ---------
Total Operating Expenses 457,610 458,795
--------- ---------
Operating Income 110,730 96,844
--------- ---------
Other Income (Deductions)
Income Taxes 39,280 80,371
Reversal of Loss Provision 10,154 8,472
Interest Income 6,434 4,166
Other Income (Deductions) (3,149) 706
--------- ---------
Total Other Income (Deductions) 52,719 93,715
--------- ---------
Interest Expense
Long-Term Debt - Net 47,505 44,600
Interest Imputed on Losses Recorded at Present Value 24,555 24,592
Other Interest Expense 6,581 8,161
--------- ---------
Total Interest Expense 78,641 77,353
--------- ---------
Net Income $ 84,808 $113,206
========= =========
Average Shares of Common Stock Outstanding (000) 32,135 32,133
========= =========
Net Income per Average Share $ 2.64 $ 3.52
========= =========
See Notes to Condensed Consolidated Financial Statements.
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1997 1996
-Thousands of Dollars-
Cash Flows from Operating Activities
Cash Receipts from Retail Customers $496,765 $491,791
Cash Receipts from Sales for Resale 67,850 56,096
Fuel and Purchased Power Costs Paid (154,333) (137,145)
Wages Paid, Net of Amounts Capitalized (48,115) (61,657)
Payment of Other Operations and Maintenance Costs (68,277) (56,420)
Capital Lease Interest Paid (80,469) (83,200)
Interest Paid, Net of Amounts Capitalized (47,057) (49,153)
Taxes Paid, Net of Amounts Capitalized (60,735) (65,612)
Contract Termination Fee Paid (40,000) -
Emission Allowance Inventory Sale - 4,120
Interest Received 6,344 4,716
Income Taxes Paid (1,050) (1,066)
Other 1,529 (3,101)
--------- ---------
Net Cash Flows - Operating Activities 72,452 99,369
--------- ---------
Cash Flows from Investing Activities
Construction Expenditures (47,937) (51,092)
Investments in and Loans to Joint Ventures (3,998) (6,116)
Other 1,567 250
--------- ---------
Net Cash Flows - Investing Activities (50,368) (56,958)
--------- ---------
Cash Flows from Financing Activities
Proceeds from Issuance of Long-Term Debt 125,067 31,400
Proceeds from Borrowings on the Renewable Term Loan - 14,000
Payments to Retire Long-Term Debt (112,310) (25,575)
Payments on Renewable Term Loan (31,000) (14,000)
Payments to Retire Capital Lease Obligations (13,969) (35,629)
Other (381) 297
--------- ---------
Net Cash Flows - Financing Activities (32,593) (29,507)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (10,509) 12,904
Cash and Cash Equivalents, Beginning of Year 130,291 85,094
--------- ---------
Cash and Cash Equivalents, End of Period $119,782 $ 97,998
========= =========
See Notes to Condensed Consolidated Financial Statements.
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION
Nine Months Ended
September 30,
1997 1996
-Thousands of Dollars-
Net Income $ 84,808 $ 113,206
Adjustments to Reconcile Net Income to Net Cash Flows
Depreciation and Amortization Expense 64,817 73,285
Deferred Income Taxes and
Investment Tax Credits - Net (19,260) (68,504)
Lease Payments Deferred 6,771 3,386
Regulatory Amortizations, Net of Interest Imputed
on Losses Recorded at Present Value (4,578) (12,266)
Contract Termination Fee (39,038) -
Reversal of Loss Provision (10,154) (8,472)
Other (279) (2,673)
Changes in Assets and Liabilities which Provided
(Used) Cash Exclusive of Changes Shown Separately
Accounts Receivable (34,964) (25,611)
Materials and Fuel (6,900) 1,291
Accounts Payable 7,805 582
Taxes Accrued 15,386 25,313
Other Current Assets and Liabilities 4,678 (7,717)
Other Deferred Assets and Liabilities 3,360 7,549
--------- ---------
Net Cash Flows - Operating Activities $ 72,452 $ 99,369
========= =========
See Notes to Condensed Consolidated Financial Statements.
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1997 1996
- Thousands of Dollars -
Utility Plant
Plant in Service $2,156,454 $2,129,205
Utility Plant Under Capital Leases 893,064 893,064
Construction Work in Progress 84,181 74,210
----------- -----------
Total Utility Plant 3,133,699 3,096,479
Less Accumulated Depreciation and Amortization (965,695) (922,947)
Less Accumulated Amortization of Capital Leases (69,267) (56,240)
Less Springerville Unit 1 Allowance (166,664) (163,388)
----------- -----------
Total Utility Plant - Net 1,932,073 1,953,904
----------- -----------
Investments and Other Property 71,372 69,289
----------- -----------
Current Assets
Cash and Cash Equivalents 119,782 130,291
Accounts Receivable 100,869 65,905
Materials and Fuel 37,256 30,356
Deferred Income Taxes - Current 6,981 10,223
Other 14,879 14,026
----------- -----------
Total Current Assets 279,767 250,801
----------- -----------
Deferred Debits - Regulatory Assets
Income Taxes Recoverable Through Future Rates 171,921 173,731
Deferred Common Facility Costs 58,857 60,762
Deferred Contract Termination Fee 49,038 -
Deferred Springerville Unit 2 Costs 13,913 21,260
Deferred Lease Expense 12,332 15,067
Other Deferred Regulatory Assets 8,472 8,004
Deferred Debits - Other 16,399 15,723
----------- -----------
Total Deferred Debits 330,932 294,547
----------- -----------
Total Assets $2,614,144 $2,568,541
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND OTHER LIABILITIES
September 30, December 31,
1997 1996
- Thousands of Dollars -
Capitalization
Common Stock $ 645,296 $ 645,243
Capital Stock Expense (6,357) (6,357)
Accumulated Deficit (420,790) (505,598)
----------- -----------
Common Stock Equity 218,149 133,288
Capital Lease Obligations 887,820 895,867
Long-Term Debt 1,205,951 1,223,025
----------- -----------
Total Capitalization 2,311,920 2,252,180
----------- -----------
Current Liabilities
Short-Term Debt - 3,567
Current Obligations Under Capital Leases 15,163 10,383
Current Maturities of Long-Term Debt 500 1,635
Accounts Payable 36,611 28,806
Interest Accrued 45,447 57,404
Taxes Accrued 39,393 24,007
Contract Termination Fee Payable 10,000 -
Other 16,462 15,614
----------- -----------
Total Current Liabilities 163,576 141,416
----------- -----------
Deferred Credits and Other Liabilities
Deferred Income Taxes - Noncurrent 74,722 96,422
Accumulated Deferred Investment Tax Credits
Regulatory Liability 12,576 15,188
MSR Option Gain Regulatory Liability - 7,853
Other Regulatory Liabilities 17,602 17,596
Other 33,748 37,886
----------- -----------
Total Deferred Credits and Other Liabilities 138,648 174,945
----------- -----------
Total Capitalization and Other Liabilities $2,614,144 $2,568,541
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
NOTE 1. TAX ASSESSMENTS
- ------------------------
Ruling on Arizona Sales Tax Assessments - Coal Sales
The Arizona Department of Revenue (ADOR) issued transaction privilege
(sales) tax assessments to the Company alleging that Valencia was liable for
sales tax on gross income received from coal sales, transportation and coal-
handling services to the Company for the period November 1985 through May
1996. The Company protested these assessments. On September 12, 1996, the
Arizona Court of Appeals upheld the validity of the assessment issued for the
period November 1985 through March 1990. On July 1, 1997, the Arizona
Supreme Court granted a Petition for Review filed by the Company. Oral
argument for the Petition for Review is scheduled to begin December 18, 1997.
Additionally, the Company is protesting the assessments for the period April
1990 through May 1996.
Previously, the Company had recorded an expense through the Consolidated
Statements of Income and related liability for the amount of sales taxes and
interest thereon which the Company believed was probable of incurrence for
the period November 1985 through May 1996. Generally, Arizona law requires
payment of an assessment prior to pursuing the appellate process. The
Company has previously paid, under protest, a total of $23 million of the
disputed sales tax assessments, subject to refund in the event the Company
prevails.
On May 31, 1996, Valencia was merged into the Company. Effective with
the merger, Valencia no longer supplies coal to the Company. Instead the
Company acquires coal directly from the supplier. As a result, the Company
believes it is not liable for sales tax computed on a basis similar to the
assessments described above subsequent to May 31, 1996. For periods
subsequent to May 31, 1996, the Company continues to record an estimated
interest expense on the above assessments.
Arizona Sales Tax Assessments - Leases
The ADOR has issued transaction privilege (sales) tax assessments to the
lessors from whom the Company leases certain property. The assessments
allege sales tax liability on a component of rents paid by the Company on the
Springerville Unit 1 Leases, Springerville Common Facilities Leases,
Irvington Lease and Springerville Coal Handling Facilities Leases.
Assessments cover the period August 1, 1988 to September 30, 1993. Pursuant
to indemnification provisions of the lease agreements, if the ADOR prevails
the Company must reimburse the lessors for taxes paid by them.
In the opinion of management, the Company has recorded, through the
Consolidated Statements of Income in current and prior years, a liability for
the amount of sales taxes and interest thereon for which the Company believes
incurrence is probable as of September 30, 1997. In the event that the
assessments by the ADOR are sustained, an additional liability would result.
Although it is reasonably possible that the ultimate resolution of such
matter could result in additional sales tax expense of up to approximately
$21 million in excess of amounts recorded, management and outside tax counsel
believe that the Company has meritorious defenses to mitigate or eliminate
the assessed amounts.
Based on the current status of the legal proceedings, the Company
believes that the ultimate resolution of such dispute will occur over a
period of two to four years. Based on consultations with counsel and
considering the amounts already accrued, the Company believes that the
resolution of this tax matter should not have a material adverse effect on
the Company's Consolidated Financial Statements.
NOTE 2. RATE MATTERS
- ---------------------
On July 9, 1997, the Company filed with the ACC a request for an annual
rate reduction of $6.8 million (or 1.1%) for retail customers. This filing
is in the form of a Shared Savings Proposal (SSP) which promotes a sharing of
benefits with customers of cost containment efforts and the mitigation of
potential stranded costs associated with the introduction of retail electric
competition in Arizona. The cost containment savings were realized primarily
from renegotiated fuel contracts and the Company's Voluntary Severance
Program, which reduced the Company's workforce by approximately 15%. No date
has been set for formal consideration of the matter by the ACC.
The Company proposed that additional savings be used by the Company to
mitigate potential stranded costs through accelerated amortization of retail
excess capacity deferrals. Retail excess capacity deferrals represent those
operating and capital costs associated with Springerville Unit 2 capacity,
which were deemed by the ACC to not be recoverable in retail rates prior to
the 1994 and 1996 Rate Orders. Such retail excess capacity deferrals totaled
$89.9 million and $93.6 million at September 30, 1997 and December 31, 1996,
respectively. Such deferrals are not reflected in the accompanying Condensed
Consolidated Balance Sheets because such retail excess capacity deferrals,
while deferred for regulatory purposes, were not deferred for financial
reporting purposes but were expensed as incurred. The proposed $7.2 million
increase in annual amortization expense for such excess capacity deferrals
would decrease the amortization period from 20 years to 7.76 years. The
proposed increase in amortization expense would be reflected in the Company's
regulatory accounting records but would have no impact on the expenses
included in the Company's financial accounting statements.
NOTE 3. SPRINGERVILLE COAL CONTRACT
- ------------------------------------
On June 27, 1997, the Company signed an agreement with the coal supplier
for the Springerville Generating Station to terminate the existing coal
supply contract and enter into a new, more cost effective contract with the
same supplier. A $50 million termination fee was incurred by the Company and
is payable in three installments: $30 million paid on June 30, 1997, $10
million paid on September 30, 1997, and $10 million due March 31, 1998. The
previous coal supply contract covered the useful lives of Springerville Units
1 and 2 and contained a bilateral option to renegotiate the contract price
and escalation procedures in 2009 and every five years thereafter. The new
coal contract has an initial term of 13 years, beginning July 1, 1997, with
an option to extend ten years thereafter. The new contract also contains more
favorable terms to the Company for certain volume, incremental volume, base
price, incremental price and price adjustment mechanism requirements.
The Company applied, as part of the SSP, to the ACC requesting that the
termination fee be recorded as a regulatory asset and amortized to fuel
expense over the 13-year term of the new agreement. On July 29, 1997, the
ACC issued an interim accounting order allowing the Company to defer the $50
million termination fee as a regulatory asset in the Company's Condensed
Consolidated Balance Sheet until the ACC decides whether the $50 million
termination fee should be recovered through retail rates. The interim
accounting order also allowed the Company to begin amortizing the termination
fee to fuel expense. If the ACC ultimately disallows recovery, the
unamortized portion of the $50 million termination fee would immediately be
expensed. No date has been set for formal consideration of the matter by the
ACC.
NOTE 4. CONSOLIDATED SUBSIDIARIES
- ----------------------------------
Upon dissolution of certain subsidiaries which formed a part of the
Company's former investment operations, in June 1997, the Company reversed a
provision for loss, recorded in prior years, resulting in income of
approximately $10.2 million.
Effective September 1, 1997, Millenium Energy Holdings, Inc. (MEH), a
wholly owned subsidiary of the Company, exercised an option to acquire a 50%
ownership in New Energy Ventures, LLC (NEV). NEV is a buyer's agent
providing load aggregation and advisory services to energy consumers.
Concurrently with the exercise of the option, MEH made a capital contribution
in the amount of $0.8 million and extended a $3.0 million member loan to NEV.
The investment in NEV is included in the Company's Condensed Consolidated
Balance Sheet at September 30, 1997 under Investments and Other Property and
in the Company's Condensed Consolidated Statement of Cash Flows for the nine
months ended September 30, 1997 as Investments in and Loans to Joint
Ventures.
NOTE 5. LONG-TERM DEBT
- -----------------------
In February 1997, the Company repaid the outstanding Renewable Term Loan
balance of $31 million thereby reducing its Long-Term Debt. At September 30,
1997, the Company had $127.5 million available for borrowing under the
Renewable Term Loan.
In April 1997, the City of Farmington, New Mexico issued $80.4 million
of Pollution Control Revenue Bonds for the benefit of the Company. The
proceeds were used in June 1997 to redeem $47.9 million principal amount of
previously issued 6.25% bonds that would have matured in 2003 and $32.5
million principal amount of previously issued 6.10% bonds that would have
matured in 2007. The new bonds, which are unsecured, bear interest at 6.95%
and mature in 2020.
In April 1997, the Coconino County, Arizona Pollution Control
Corporation issued $36.7 million of Pollution Control Revenue Bonds for the
benefit of the Company. The net proceeds loaned to the Company were used, in
part, to redeem, in June 1997, $16.7 million principal amount of previously
issued variable rate bonds that would have matured in 2031 and the remaining
portion is being used to fund $20 million of construction costs of additional
pollution abatement facilities at Navajo Generating Station. The new bonds,
which are unsecured, bear interest at 7.125% and mature in 2032.
In April 1997, the Coconino County, Arizona Pollution Control
Corporation issued $14.7 million of Pollution Control Revenue Bonds for the
benefit of the Company. The net proceeds loaned to the Company were used in
June 1997 to redeem $14.7 million principal amount of previously issued
variable rate bonds that would have matured in 2031. The new bonds, which
are unsecured, bear interest at 7.00% and mature in 2032.
In October 1997, the Industrial Development Authority of the County of
Pima, Arizona issued $247.5 million of Industrial Development Revenue Bonds
for the benefit of the Company. The net proceeds from the issuance will be
used in November 1997, to redeem $245 million principal amount of previously
issued variable rate bonds that would have matured between 2018 and 2025 and
to finance improvements to the Company's lower voltage electric transmission
and distribution system in Pima County, Arizona. The new bonds, which are
unsecured, were sold in three series: Series A ($22.5 million) bears interest
at 6.10% and matures in 2025; Series B ($150 million) and Series C ($75
million) bear interest at 6.00% and mature in 2029.
NOTE 6. INCOME TAXES
- ---------------------
The expense (benefit) for income taxes included in the Comparative
Condensed Consolidated Statements of Income consists of the following:
Three Months Ended
September 30,
1997 1996
---------- ----------
- Thousands of Dollars -
Operating Expenses:
Deferred Tax Expense
Federal $ 15,143 $ 13,785
State 4,015 3,552
---------- ----------
Total 19,158 17,337
Investment Tax Credit Amortization - (15)
---------- ----------
Total Expense Included in Operating Expenses 19,158 17,322
---------- ----------
Other Income (Deductions):
Deferred Tax Expense
Federal 339 3,760
State 114 978
---------- ----------
Total 453 4,738
Reduction in Valuation Allowance (13,120) (70,283)
Investment Tax Credit Amortization (670) (965)
---------- ----------
Total Benefit Included in
Other Income (Deductions) (13,337) (66,510)
---------- ----------
Total Expense (Benefit) for Federal
And State Income Taxes $ 5,821 $ (49,188)
========== ==========
Nine Months Ended
September 30,
1997 1996
---------- ----------
- Thousands of Dollars -
Operating Expenses:
Deferred Tax Expense
Federal $ 16,671 $ 10,320
State 4,409 2,659
---------- ----------
Total 21,080 12,979
Investment Tax Credit Amortization (10) (45)
---------- ----------
Total Expense Included in Operating Expenses 21,070 12,934
---------- ----------
Other Income (Deductions):
Deferred Tax Expense
Federal 4,538 3,377
State 1,197 937
---------- ----------
Total 5,735 4,314
Reduction in Valuation Allowance (42,413) (81,296)
Investment Tax Credit Amortization (2,602) (3,389)
---------- ----------
Total Benefit Included in
Other Income (Deductions) (39,280) (80,371)
---------- ----------
Total Expense (Benefit) for Federal
And State Income Taxes $ (18,210) $ (67,437)
========== ==========
The differences between the income tax expense (benefit) and the amount
obtained by multiplying income before income taxes by the U.S. statutory
federal income tax rate are as follows:
Three Months Ended
September 30,
1997 1996
---------- ----------
- Thousands of Dollars -
Federal Income Tax Expense at
Statutory Rate $ 17,233 $ 18,659
State Income Tax Expense,
Net of Federal Deduction 2,656 2,868
Investment Tax Credit Amortization (670) (980)
Reduction in Valuation Allowance (13,120) (70,283)
Other (278) 548
---------- ----------
Total Expense (Benefit) for Federal
and State Income Taxes $ 5,821 $ (49,188)
========== ==========
Nine Months Ended
September 30,
1997 1996
---------- ----------
- Thousands of Dollars -
Federal Income Tax Expense at
Statutory Rate $ 23,309 $ 16,019
State Income Tax Expense,
Net of Federal Deduction 3,591 2,462
Investment Tax Credit Amortization (2,612) (3,434)
Reduction in Valuation Allowance (42,413) (81,296)
Use of Capital Loss Carryforwards - (1,663)
Other (85) 475
---------- ----------
Total Expense (Benefit) for Federal
and State Income Taxes $ (18,210) $ (67,437)
========== ==========
The reduction in the valuation allowance and corresponding NOL benefit are
primarily due to revisions in the estimated amount of NOLs that the Company
expects to utilize on future income tax returns. At September 30, 1997, on a
cumulative basis the Company has recognized in its income statement the full
amount of the NOL benefit that the Company expects to utilize on future
income tax returns. Additional amounts of NOL benefit which may be
recognized in the future in the Company's income statement are at present
indeterminate due to the interplay of open tax years for which tax
assessments may be made and varying expiration dates of federal and state NOL
carryforwards.
NOTE 7. NEW ACCOUNTING STANDARD
- --------------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (FAS 128), Earnings per
Share. This Statement simplifies the standards for computing earnings per
share (EPS) and replaces the presentation of primary EPS with a presentation
of basic EPS. It requires a dual presentation of basic and diluted EPS for
companies with complex capital structures on the face of the income
statement. The Company is required to adopt FAS 128 in the fourth quarter of
1997. The Company does not expect the adoption of FAS 128 to have a material
impact on the Company's calculation of EPS.
NOTE 8. RECLASSIFICATIONS
- --------------------------
Minor reclassifications have been made to the prior year financial
statements to conform to the current year's presentation.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
The following contains information regarding the results of the Company's
operations during the third quarter and first nine months of 1997 compared with
the third quarter and first nine months of 1996, the outlook for dividends on
Common Stock, and changes in liquidity and capital resources of the Company
during the third quarter and first nine months of 1997. Also management's
expectations of identifiable material trends are discussed.
OVERVIEW
- --------
Earnings for the Company declined during the third quarter and first nine
months of 1997 relative to the same periods in 1996 primarily due to lower
recognition of NOL tax benefits in the third quarter of 1997. Net income was
$43.4 million in the third quarter of 1997, compared with $102.5 million in the
third quarter of 1996. Income tax benefits related to prior period net
operating losses totaled $13.1 million in the third quarter of 1997 compared
with $70.3 million in the third quarter of 1996. Other one-time items impacting
third quarter results include $3.3 million in pre-tax new business investment
expenses in the third quarter of 1997 and the following items recorded in the
third quarter of 1996: an $8.5 million pre-tax reversal of loss provision
related to the Company's former investment subsidiaries, a $3.4 million pre-tax
pension gain related to the Company's Voluntary Severance Plan, and a $9.2
million pre-tax charge related to a court ruling on contested sales tax
expense. Excluding the recognition of these tax benefits and other one-time
adjustments, the Company's ongoing net income increased by 7% to $32.3 million
in the third quarter of 1997 from $30.1 million in the same period of 1996.
Factors contributing to this improvement were growth in the number of customers
in the Company's retail service area as well as increased kilowatt-hour sales
to both retail and wholesale customers.
Net income for the first nine months of 1997 was $84.8 million, compared
with $113.2 million during the comparable 1996 period. Income tax benefits
related to prior period net operating losses for the nine month periods were
$42.4 million for 1997 and $81.3 million for 1996. Other one-time items
impacting the nine month results, in addition to those listed above for the
third quarter, include a $14.0 million pre-tax VSP expense recorded in the
second quarter of 1996 (resulting in a nine month net pre-tax expense of $10.6
million), a $10.2 million pre-tax reversal of loss provision recorded in the
second quarter of 1997 related to the Company's former investment subsidiaries,
$7.0 million in pre-tax new business investment expenses in 1997 and $2.8
million in pre-tax VSP expense related to post-retirement benefits other than
pensions recorded in the first quarter of 1997. Excluding the recognition of
tax benefits and other one-time adjustments, the Company's ongoing net income
increased by 9% to $42.2 million for the first nine months of 1997 from $38.5
million in the same period in 1996. See Results of Utility Operations below.
Despite such improvements, the Company's financial prospects continue to
be subject to significant economic, regulatory and other uncertainties, some of
which are beyond the Company's control. These uncertainties include the extent
to which the Company, due to continued high financial and operating leverage,
can alter operations and reduce costs in response to industry changes or
unanticipated economic downturns. The Company's success will depend, in part,
on the Company's ability to contain the costs of serving retail customers and
the level of sales to such customers. Although the Company anticipates
continued growth in sales over the next five years primarily as a result of
anticipated population and economic growth in the Tucson area, a number of
factors such as changes in the economic and regulatory environment and the
increasingly competitive electric markets could affect the Company's levels of
sales.
The Company is developing strategies to address the uncertainties
discussed above as well as to position itself to benefit from the changing
regulatory environment. Such strategies include the implementation of enhanced
cost measurement and management techniques, organizational realignment and
staffing reductions, and the development of new entities to provide energy
services to markets beyond the Company's retail service territory. Based on
cost containment measures implemented by the Company, a proposal to share
savings with the Company's retail customers was recently filed by the Company
with the ACC. See Retail Rate Proposal below. Additionally, the Company
successfully extended the power sale agreement with a key wholesale customer
and has taken steps to reduce the cost of fuel supplied to the Company's
largest generating facility. See Results of Operations, Events Affecting
Future Results of Utility Operations below.
If the Company is unable to make sales at prices adequate to recover its
costs or if, for other reasons, the Company fails to maintain or improve its
cash flows, the Company's ability to meet its obligations may be jeopardized.
During the period 1999-2003, $192 million of the Company's long-term debt
obligations will mature. Excluding letters of credit relating to bonds that
will be redeemed in November 1997, letters of credit supporting $529 million of
the Company's long-term variable rate debt obligations also have scheduled
expiration dates between December 31, 1999 and December 31, 2002. See
Financing Developments below. Should the credit ratings on the Company's
senior debt securities reach investment grade levels on certain dates or during
certain periods subsequent to January 1, 1998, the expiration dates for such
letters of credit would move forward to the period December 31, 1998 to
December 31, 2000. In the event that expiring letters of credit are not
replaced or extended, the corresponding variable rate debt obligations would
be subject to mandatory redemption. While the Company intends to pay or
refinance maturing bonds, and to replace or extend expiring letters of credit,
there can be no assurance that the Company will be able to pay such debt or
replace or extend such letters of credit. The Company's future cash flows will
also be affected by the level of interest rates due to the significant amount
of variable rate debt outstanding. See Liquidity and Capital Resources below.
The Company's capital structure is highly leveraged. Although the Company has
been successful in 1997 in refinancing certain of its tax-exempt variable rate
debt on an unsecured fixed rate basis, the Company's ability to raise capital
(through either public or private financings) is limited. The Company's ability
to obtain debt financing is limited due to the restrictive covenants contained
in existing obligations to creditors. To the extent the Company refinances its
debt obligations in order to repay them when due, such refinancing may be made
on terms which may be adverse to the Company. Such terms could include, among
other things, higher interest rates and various restrictive covenants, such as
dividend payment restrictions. Access to equity capital may be limited because
of the Company's present inability to pay dividends. See Dividends on Common
Stock below.
As described in Liquidity and Capital Resources, Financing Developments
below, the Company filed an application with the ACC for authority to implement
various financings intended to address the financial uncertainties outlined
above. This strategy includes the proposed refinancing of certain variable
rate tax-exempt obligations on a fixed-rate basis, the proposed replacement
of the credit facilities provided under the MRA with one or more new credit
facilities, the proposed refinancing of certain first mortgage bonds, and the
proposed implementation of a direct stock purchase plan. The ACC approved a
portion of this financing application on August 26, 1997, which allowed the
Company to proceed with the refinancing of certain tax-exempt variable rate
debt obligations on October 1, 1997. The ACC is expected to rule on the
remaining portions of the financing application in the fourth quarter of 1997.
During the next twelve months, the Company expects to be able to fund
operating activities and construction expenditures with internal cash flows,
existing cash balances, and, if necessary, drawdowns under the Renewable Term
Loan and/or borrowings under the Revolving Credit. As discussed in
Liquidity and Capital Resources below, there are a variety of factors that
could cause actual cash flows to differ materially from projected cash flows.
As of November 5, 1997, the Company's cash balance including cash equivalents
was approximately $137 million. Cash balances are invested in investment grade,
money-market securities with an emphasis on preserving the principal amount
invested.
COMPETITION
- -----------
WHOLESALE
The Company competes with other utilities, marketers and independent power
producers in the sale of electric capacity and energy in the wholesale market.
The Company's prices for wholesale sales of capacity and energy, generally, are
not permitted to exceed rates determined on a cost of service basis. In the
current market, wholesale prices are substantially below costs determined on a
fully allocated cost of service basis, but, in all instances, wholesale sales
have been made at prices which exceed the level necessary to recover fuel and
other variable costs. It is expected that competition to sell capacity will
remain vigorous, and that prices may remain at or near current levels for at
least the next several years, due to increased competition and surplus capacity
in the southwestern United States. Competition for the sale of capacity and
energy is influenced by many factors, including the availability of capacity in
the southwestern United States, the availability and prices of natural gas and
oil, spot energy prices and transmission access. In addition, the Energy Policy
Act of 1992 has promoted increased competition in the wholesale electric power
markets by encouraging the participation of utility affiliates, independent
power producers and other non-utility participants in the development of power
generation.
The FERC issued two orders pertaining to transmission access in April
1996. FERC Order No. 888, among other things, requires all public utilities
that own, control, or operate interstate transmission facilities to offer
transmission service to others under a single tariff that incorporates certain
minimum terms and conditions of transmission service established by the FERC.
This tariff must also be used by public utilities for their own wholesale
market transactions. Transmission and generation services for new wholesale
service are to be unbundled and priced separately. A Phase I open access tariff
containing the terms and conditions outlined in the Order was filed by the
Company on July 9, 1996. The Company subsequently filed a Stipulation in Offer
of Settlement regarding the proposed tariff. On July 17, 1997, the FERC
approved the settlement. That settlement approved the Company's rates for
service,made amendments to certain wholesale contracts and required the Company
to make a Section 205 filing for its 69kV-138kV transmission system, the rates
for which were agreed upon in the settlement. The Company made its Section 205
filing for its 69kV-138kV on August 15, 1997. FERC accepted that filing on
October 10, 1997, thereby incorporating the rates for 69kV-138kV transmission
service into the Company's Open Access Tariff.
FERC Order No. 889 requires transmission service providers to establish or
participate in an open access same-time information system (OASIS) that provides
information on the availability of transmission capacity to wholesale market
participants. The order also establishes standards of conduct that are designed
to prevent employees of a public utility engaged in marketing functions from
obtaining preferential access to OASIS-related information or from engaging in
unduly discriminatory business practices. The Company is in compliance with
these requirements.
On March 4, 1997, the FERC issued Orders 888-A and 889-A which require the
Company to make an additional compliance filing of its tariff and to comply
with certain additional OASIS requirements. The Company has made its compliance
tariff filing and is in the process of complying with the additional OASIS
requirements.
The Company and several other electric utilities located in the
southwestern United States have recently begun to investigate the feasibility
of forming an independent system operator for the region. It is presently
contemplated that such an organization, if formed, would be responsible for
ensuring transmission reliability and nondiscriminatory access to the regional
transmission grid. All of the major transmission owners in the Southwest, as
well as a number of users of the transmission system, are involved in the
feasibility study. Three sets of public meetings were held in order to obtain
public input to the study. The initial feasibility study was completed in
September 1997 and the participants are reviewing the results prior to deciding
whether to proceed with the detailed developmental work. The formation of an
independent system operator would be subject to approval by the FERC and state
regulatory authorities in the region. The financial aspects of forming an
independent system operator, including the potential effects on the Company's
future results of operations, will be examined as part of the development work.
Given the level of competition already present in the wholesale market for
electricity, the Company does not believe that FERC Order No. 888 or Order No.
889 will have a material effect on the Company's future results of operations.
However, such orders could assume greater significance if the Company's retail
service territory were to be opened to competing suppliers of electricity.
RETAIL
Under current law, the Company is not in direct competition with any other
regulated electric utility for electric service in the Company's retail service
territory. However, the Company does compete against gas service suppliers and
others who may provide energy services which would be substitutes for,or permit
bypass of, the Company's services. In addition, in December 1996, the ACC
adopted rules that, if implemented, require a phase-in of retail electric
competition in Arizona over a four year period beginning January 1, 1999.
Currently, electric energy for meeting retail customers' needs primarily
competes with natural gas, an alternative fuel source for certain retail energy
uses. Such uses may include heating, cooling and a limited number of other
energy applications. In most applications, electric energy is a cost effective
source of energy compared with natural gas. Also, customers, particularly
industrial and large commercial customers, may own and operate facilities to
generate their own electric energy requirements. If such facilities meet
certain technical and operational standards, they may be eligible for treatment
under federal law as "qualifying facilities", which in turn would permit the
owner to require the local electric utility to purchase the output of such
facilities at the latter's "avoided cost" pursuant to the Public Utility
Regulatory Policies Act of 1978, as amended. Such facilities may be operated by
the customers themselves or by other entities engaged for such purpose. The
company presently does not have any material contracts which require it to
purchase the output of qualifying facilities.
The Company actively markets energy and customized energy-related services
to meet customer needs. The Company has to date lost no customers to self-
generation in part because of such efforts. For example, the Company's two
principal mining customers, which provide approximately 8% of the Company's
total annual revenues from retail customers, each have considered self-
generation. However, new contracts and/or amendments were executed with both of
such mining customers that included, among other things, price reductions and
term extensions. In 1996, the Company negotiated contract amendments with its
largest mining customer. The contract amendments include, among other things,
price reductions and a change in service from a firm basis to an interruptible
basis, which includes a market pricing mechanism covering a portion of the
customer's electrical load. Such contract is scheduled to expire in January
2003. The contract with the Company's other principal mining customer is
scheduled to expire in March 2001. In June 1997, the Company entered into a new
electric service agreement with this customer to furnish additional load to a
new copper solvent extraction plant. Also, in September 1997, the ACC approved
an amendment to this customer's electric service agreement which allows for a
reduction in price, an increase in load, the provision of interruptible service
and a change in payment procedures. The conditions of this amendment will
expire with the contract. Early terminations of the contracts by mining
customers require at least one and up to two years prior notice. No such
notices have been received. The ability to enter into or extend contracts, to
avoid early termination, and to retain customers will be dependent on, among
other things, the Company's ability to contain its costs, market conditions and
alternatives available to customers. Changes in service requirements (from a
firm basis to an interruptible basis) may also permit the Company to delay
additions to peaking capacity.
In December 1996, the ACC voted to adopt rules on retail electric
competition. The rules, if implemented, require each "Affected Utility"
(defined below) to open its retail service area to competing electric service
providers on a phased-in basis over the period 1999 to 2003. Beginning no later
than January 1, 1999, retail customers representing at least 20% of each
Affected Utility's 1995 peak demand will be eligible to choose their electric
service provider from companies certificated by the ACC. Such service providers
would include Affected Utilities as well as other entities (including power
marketers and out-of-state utilities) that apply for and receive a certificate
of convenience and necessity from the ACC. Beginning no later than January 1,
2001,retail customers representing at least 50% of each Affected Utility's 1995
peak demand will be eligible to choose their service provider. All remaining
retail customers would then be eligible to choose from certificated service
providers by January 1, 2003. Under the rules, Affected Utilities will be
required to provide distribution wheeling services (i.e., retail wheeling) at
rates approved by the ACC in order to facilitate sales by competing energy
providers. Such wheeling services would involve the transmission of energy
produced by other entities over the Company's transmission and distribution
system to consumers located in the Company's present retail service area.
While retail wheeling will expose the Company's service area to increased
competition, it will also open additional retail markets into which the Company
may sell its electric power.
The Affected Utilities whose service territories will be open to competing
service providers under the rules include the Company, Arizona Public Service
Company, Citizens Utilities Company, and several electric cooperatives.
However, electric cooperatives will be permitted to request a modification to
the phase-in schedule in order to preserve their tax exempt status or to modify
power supply arrangements and related loan agreements. Each of the Affected
Utilities will be eligible to offer electric service to customers of other
certificated entities within Arizona. Participation in competitive retail
markets by other electric utilities which are not regulated by the ACC, such as
the Salt River Project and certain municipal utilities, will be permitted under
the rules on a similar reciprocal basis (i.e., these utilities would have to
allow their service territories to be similarly open to competing service
providers).
The rules require new market entrants to obtain a certificate of
convenience and necessity from the ACC prior to offering retail electric
service. New market entrants will be required to demonstrate adequate technical
and financial capabilities to the ACC prior to certification. In addition, by
January 1, 1999, all competitive market participants, including Affected
Utilities, will be required to obtain at least one-half of one percent of the
energy sold competitively in the Arizona retail market from new solar
generating resources. This required percentage will increase to one percent on
January 1, 2002. New solar resources are defined under the rules as
photovoltaic or solar thermal resources that are installed on or after January
1, 1997. Electric service providers not in compliance with these solar
resource standards will be subject to a penalty of up to 30 cents per kWh to
be applied to the kWh deficiency in solar energy provided.
The rules specify that the ACC will allow the recovery of unmitigated
stranded costs by Affected Utilities. Stranded cost is defined in the rules as
the net difference between the value of prudent jurisdictional assets and
obligations under traditional regulation and the market value of those assets
and obligations in a competitive retail market. In order to recover stranded
costs,utilities would have to demonstrate to the ACC that they have taken every
feasible, cost effective measure to mitigate or offset stranded costs, and
utilities would have to file estimates of unmitigated stranded costs with the
ACC which are fully supported by analyses and records of market transactions
undertaken by willing buyers and sellers. Furthermore, Affected Utilities would
have to seek ACC approval of distribution charges or other means of recovering
unmitigated stranded costs from customers who reduce or terminate service as a
direct result of retail competition. The rules specify that other issues
related to the analysis and recovery of stranded costs would be examined by a
working group following adoption of the rules. Until such time as the ACC
adopts specific guidelines for quantifying unmitigated stranded costs,including
the methods used to identify and value jurisdictional assets and obligations,
the Company believes that any estimate of unmitigated stranded costs would be
highly speculative.
Each Affected Utility will be required to file unbundled service tariffs
with the ACC by December 31, 1997, for the following services: distribution
wheeling service, metering and meter reading services, billing and collection
services, open access transmission service (as approved by the FERC, if
applicable), ancillary services (as defined by FERC Order No. 888), information
services such as the provision of customer information to other service
providers, and other ancillary services necessary for safe and reliable system
operation. Until such time as the ACC determines that retail competition has
been substantially implemented, each Affected Utility will also have to provide
standard offer bundled service equivalent to the services currently being
provided at regulated rates to all consumers located in their current retail
service areas.
Pursuant to the rules, working groups have been formed to analyze various
issues related to retail competition. Each working group consists of members
representing a wide variety of interests including the ACC Staff, consumers,
Affected Utilities, and potential new service providers. Separate working
groups have been established to investigate issues related to the
quantification and recovery of stranded costs, the unbundling of utility
services and rates,the maintenance of system reliability and safety, the
methods to be used in determining consumer participation during the early phase
- -in periods, and certain legal issues related to the rules. Reports by the
working groups for stranded costs and unbundling of utility services and rates
have been delivered to the ACC and are in the process of being reviewed.
Reports by the other working groups are expected in the fourth quarter of 1997.
The Company is actively participating in each of the working groups
investigating retail competition issues.
On January 10, 1997, the Company filed with the ACC a motion for
reconsideration and request for stay of the rules. Concerns expressed by the
Company in its motion included the potential impact on system reliability,
mechanisms for stranded cost quantification and recovery,the ability to compete
fairly with public power entities and recipients of federal preference power,
and certain legal deficiencies which would likely result in legal appeals and
litigation. On January 30, 1997, the Company's motion for reconsideration was
deemed denied by the ACC by operation of law. On February 28,1997, the Company
filed an appeal of the ACC order in both the Arizona Superior Court and the
Arizona Court of Appeals. On June 19, 1997, the Arizona Court of Appeals
dismissed the appeal at the request of the Company. At the same time, the
Company filed a motion for Summary Judgment in the Arizona Superior Court. This
motion was argued and the results are pending before the judge. At the present
time, the Company is unable to predict the outcome of the Superior Court appeal
or the effects such rules, in their present form, would have on the Company's
future results of operations.
The Arizona Legislature is also investigating the potential merits of
retail electric competition. Legislation was passed in 1996 requiring the
establishment of a joint legislative study committee on electric industry
competition. This committee is charged with studying and making recommendations
on a wide variety of issues related to electric industry competition. The
committee is to complete a report to the legislature no later than December 31,
1997. Such report is to contain a proposal for electric utility competition for
implementation by December 31, 1999. An advisory committee on electric industry
competition was also created, consisting of members representing electric
consumers, electric utilities, various State offices and agencies, and other
interested parties. The Company has a representative on such advisory committee
who is actively participating as a committee member. Three subcommittees of the
advisory committee were formed for purposes of evaluating the timing of retail
competition, reviewing tax issues related to retail competition and identifying
specific legislative actions necessary to implement retail competition. The
reports have been issued and the Legislature is now considering the
recommendations.
The Company cannot predict whether or not there will be competing or
conflicting initiatives on industry restructuring from both the ACC and the
Arizona Legislature. However, the Company believes that certain matters
contained in the ACC's rules on retail competition may require legislative
changes, while other matters may require constitutional amendments.
Additionally, several federal initiatives regarding retail electric competition
have been introduced in Congress which, if passed, could modify, augment or
preempt the actions taken by the ACC or the Arizona Legislature. The Company
will continue to assess the likely impact of the ACC's rules on retail
competition, proposed legislation on retail competition, and other potential
market reforms on the Company. At the present time the Company is unable to
predict the ultimate impact of increased retail competition on the Company's
future results of operations. See Accounting for the Effects of Regulation
below for a discussion of the potential impact of increased competition on the
Company's accounting policies.
HOLDING COMPANY PROPOSAL
- ------------------------
On April 4, 1997, the Company filed with the ACC a notice of
intent to organize a public utility holding company. If approved, the
Company intends to establish, through a one-for-one share exchange, a
new corporate structure in which the Company will be a subsidiary of a
new holding company named UniSource Energy Corporation. The Company
is seeking to establish a holding company structure because the
Company believes that it is in the best interests of its Shareholders
for the Company to participate in various segments of the evolving and
expanding electric energy business. The Company believes that such
participation would be facilitated and enhanced by the holding company
structure, a structure commonly used in the electric industry and
other industries to conduct different lines of business. In May 1995,
Shareholders approved the formation of a holding company and the
related one-for-one share exchange. If regulatory approvals are
received, it is likely that no further Shareholder approval would be
required to effect the share exchange. On September 25, 1997, the
FERC approved the Company's application to form a holding company. On
October 2 and 3, 1997, the ACC held hearings on the Company's holding
company application. The Company expects a decision from the ACC
sometime in the fourth quarter of 1997.
If the holding company structure is established, substantially
all of the assets of the holding company initially following the share
exchange would consist of the Company's Common Stock. The holding
company would rely primarily on funding sources other than TEP to fund
its operations and to capitalize affiliate companies because the
Company is currently prohibited from paying dividends (see
Dividends on Common Stock below) and because the Company may be
prohibited from making investments in the holding company or
affiliated companies. Also, the ACC's affiliated interest rules would
limit certain transactions between the holding company and the Company
unless approved by the ACC. Accordingly, funds for the holding
company would be limited until the holding company obtains outside
financing or until the affiliate companies are able to pay cash
dividends to the holding company. The Company is reviewing various
methods for the holding company to obtain outside financing, including
the issuance of new equity by the holding company.
In the unlikely event the holding company incurs liabilities in
excess of cash flow available from the Company, the affiliate
companies or outside financings, the holding company might not have
sufficient cash available to meet such liabilities. Under such
circumstances the Company may be required to seek waivers of the
provisions of certain of its credit agreements and leases and the
affiliated interest rules in order to permit the Company to provide
interim financing to the holding company. There can be no assurance
that a holding company structure will be implemented in the future,
that the holding company will be able to obtain outside financing, or
that the Company would be able to obtain necessary waivers if so
required.
RETAIL RATE PROPOSAL
- --------------------
On July 9, 1997, the Company filed with the ACC a request for an
annual rate reduction of $6.8 million (or 1.1%) for retail customers.
Previously, pursuant to the March 1996 Rate Order by the ACC, the
Company implemented a 1.1% retail rate increase, and agreed to a rate
moratorium period whereby the Company committed not to file for a
change in base rates prior to January 1, 2000, except under certain
circumstances which include the sharing with customers of benefits of
cost containment efforts.
The July 1997 filing is in the form of a Shared Savings Proposal
(SSP) which promotes a sharing of benefits with customers of cost
containment efforts and the mitigation of potential stranded costs
associated with the introduction of retail electric competition in
Arizona. In the SSP, the Company identified approximately $23 million
in annual pre-tax cost containment measures of which $20.8 million is
allocable to ACC jurisdictional operation. These savings were
realized primarily from renegotiated fuel contracts and the Company's
Voluntary Severance Program, which reduced the Company's workforce by
approximately 15%. No date has been set for formal consideration of
the matter by the ACC.
The proposed $6.8 million rate reduction represents a 50/50
sharing with customers of $13.6 million of cost containment efforts.
The Company proposed that additional savings be used by the Company to
mitigate potential stranded costs through accelerated amortization of
retail excess capacity deferrals. Retail excess capacity deferrals
represent those operating and capital costs associated with
Springerville Unit 2 capacity, which were deemed by the ACC to not be
recoverable in retail rates prior to the 1994 and 1996 Rate Orders.
Such retail excess capacity deferrals totaled $89.9 million and $93.6
million at September 30, 1997 and December 31, 1996, respectively.
The proposed $7.2 million increase in annual amortization expense for
such retail excess capacity deferrals would decrease the amortization
period from 20 years to 7.76 years. The proposed increase in
amortization expense would be reflected in the Company's regulatory
accounting records but would have no impact on the expenses included
in the Company's financial accounting statements. See
Note 2 of Notes to Condensed Consolidated Financial Statements,Rate
Matters.
ACCOUNTING FOR THE EFFECTS OF REGULATION
- ----------------------------------------
The Company prepares its financial statements in accordance with
the provisions of FAS 71. This statement requires a cost-based rate-
regulated utility to reflect the effect of regulatory decisions in its
financial statements. In certain circumstances, FAS 71 requires that
certain costs and/or obligations be reflected in a deferral account in
the balance sheet and not be reflected in the statement of income or
loss until matching revenues are recognized. Therefore, the Company's
Consolidated Balance Sheets at September 30, 1997, and at December 31,
1996, contain certain line items (for example, Deferred Debits -
Regulatory Assets, Accumulated Deferred Investment Tax Credits
Regulatory Liability, MSR Option Gain Regulatory Liability, and Other
Regulatory Liabilities) solely as a result of the application of FAS
71. In addition, a number of line items in the Company's Consolidated
Statements of Income for the quarters ended September 30, 1997 and
1996, and the nine months ended September 30, 1997 and 1996, also
reflect the application of FAS 71.
As noted in Competition, Retail above, on December 23, 1996,
the ACC voted to adopt rules on retail electric competition. However,
the ACC has not yet adopted specific guidelines for quantifying
unmitigated stranded costs, including the methods used to identify and
value jurisdictional assets and obligations. The Company, in reliance
on previous rate orders, believes that it will recover the full costs
of its investments in utility plant assets and regulatory assets. If
less than full recovery is provided, write-offs of assets may occur
and the Company may be unable to continue to apply FAS 71.
Further, in response to the legislation adopted by the State of
California in 1996 establishing competitive markets for electricity in
that state, the SEC questioned the continued applicability of FAS 71
by the generation operations of California investor-owned utilities
even though the recovery of stranded costs is provided through a
statutory funding mechanism. In May and July 1997 the Financial
Accounting Standards Board Emerging Issues Task Force (EITF)
considered this issue, as similar legislation has been passed or
initiated in states other than California. Based on the conclusions
of the EITF, at some point in the future, the Company may be unable to
continue to apply FAS 71 to the generation portion of the business,
even if it believes it will recover the full amount of its costs under
the ACC competition phase-in plan. The Company is unable to predict
the outcome of these matters.
If, at some point in the future, the Company determines that all
or a portion of the Company's regulated operations no longer meet the
criteria for continued application of FAS 71, the Company would be
required to adopt the provisions of FAS 101 for that portion of the
operations for which FAS 71 no longer applied. Adoption of FAS 101
would require the Company to write off its regulatory assets and
liabilities as of the date of adoption of FAS 101 and would preclude
the future deferral in the balance sheet of costs not recovered
through rates at the time such costs were incurred, even if such costs
were expected to be recovered in the future. Based on the balances of
the Company's regulatory assets and liabilities as of September 30,
1997, the Company estimates that if FAS 101 were adopted and applied
to all segments of the Company's operations, an extraordinary loss of
$183 million, which includes a reduction for the related deferred
income taxes of $101 million, would be required. The Company's cash
flows would not be affected by the adoption of FAS 101.
At the present time, the Company recovers the costs of its plant
assets through its regulated revenues. If in the future the Company
discontinues accounting according to the provisions of FAS 71, the
Company would also need to consider whether the markets in which the
Company is then selling power will allow the Company to recover the
costs of its plant assets. At that time, if market prices and other
recoveries are not expected to allow the Company to recover the costs
of its plant assets, additional write-downs may be required in
accordance with the provisions of FAS 121.
INVESTMENTS IN ENERGY-RELATED VENTURES
- --------------------------------------
As described in Note 4 of Notes to Condensed Consolidated Financial
Statements,Consolidated Subsidiaries, a wholly owned subsidiary of the
Company, Millenium Energy Holdings, Inc., exercised an option to acquire a
50% ownership interest in New Energy Ventures, LLC (NEV) effective
September 1, 1997. NEV is a buyer's agent providing load aggregation
and advisory services to customers in California and the Northeastern
region of the United States. Prior to exercising its option to
acquire NEV, the Company provided funding to NEV pursuant to a
consulting services contract since its formation in 1995. NEV seeks
contracts to operate on either (i) a fixed commodity basis or a
limited shared savings basis, such that NEV will be paid a percentage
of the electricity cost saving that accrue to their clients, or (ii)
as a fee based advisor on energy services, cogeneration, independent
power or third party provider options.
In addition to the Company's investment in NEV, the Company
continues to evaluate and pursue other energy related investment
opportunities. Nations Energy Corporation (Nations), a wholly-owned
subsidiary established for the purpose of investing in independent
power projects, continues to pursue projects in both the domestic and
foreign markets. Advanced Energy Technologies, Inc. (AET), a wholly
owned subsidiary of the Company, holds a 50% ownership interest in
Global Solar Energy, LLC (Global Solar), an energy-related company
which developed a proprietary process for manufacturing flexible,
thin-film, photo-voltaic cells. Global Solar has recently established
a manufacturing facility in Tucson, AZ and currently plans to begin
commercial production in 1998. In July 1997, SWPP Investment Company
(SWPP), a wholly-owned subsidiary, entered into a joint venture with
three Mexican investment partners to form Sentinel Concrete Utility
Poles, a domestic distributor of concrete power poles and related
products. SWPP holds a 50% ownership interest in this joint venture.
SWPP International, Ltd. (SWPPI), a wholly owned subsidiary of SWPP,
holds a 50% ownership interest in a manufacturer and international
distributor of concrete power poles and related products. Southwest
Energy Solutions, Inc. (SES), a wholly owned subsidiary formed in
January 1997, provides ancillary energy products and services to
retail customers.
In comparison to the Company's investment in regulated utility
assets, the Company's current investments in Nations, AET, SWPP, SES,
and NEV are not material in terms of recorded assets or net income.
As of September 30, 1997, the Company's Condensed Consolidated Balance
Sheet reflects an investment in energy-related ventures of
approximately $26 million (included in Investments and Other
Property).
DIVIDENDS ON COMMON STOCK
- -------------------------
The Company is precluded by restrictive covenants in certain
debt agreements from declaring or paying dividends. No dividend on
common stock has been declared or paid since 1989.
Under the applicable provisions of amendments to the Arizona
General Corporation Law, a company is permitted to make distributions
to shareholders unless, after giving effect to such distribution,
either (i) the company would not be able to pay its debts as they come
due in the usual course of business, or (ii) the company's total
assets would be less than the sum of its total liabilities plus the
amount necessary to satisfy any liquidation preferences of
shareholders with preferential rights. The Company is not currently
prevented from declaring and paying a dividend under such provisions.
The Company's ability to pay a dividend is restricted by certain
covenants of the General First Mortgage. So long as certain series of
First Mortgage Bonds (aggregating $184 million in principal amount)
are outstanding, these covenants restrict the payment of dividends on
Common Stock if certain cash flow coverage and retained earnings tests
are not met. The cash flow coverage test would prevent the Company
from paying dividends on its Common Stock until such time as the
Company's cash flow coverage ratio, as defined therein, is greater or
equal to a ratio of 2 to 1, and the retained earnings test would
permit dividend payments if the Company has positive retained earnings
rather than an accumulated deficit. As of September 30, 1997, the
Company had a cash flow coverage ratio in excess of 2 to 1 and the
Company's accumulated deficit was $421 million. Such covenants will
remain in effect until the First Mortgage Bonds of such series have
been paid or redeemed. The latest maturity of such First Mortgage
Bonds is in 2003.
The MRA contains a dividend restriction based on the amount of
retained earnings. Such restriction will no longer apply if (i) the
Renewable Term Loan and the Revolving Credit have been paid in full
and the commitments relating thereto have been terminated and (ii) the
Company's senior long-term debt is rated investment grade. At
November 5, 1997, there was no outstanding balance due under the
Renewable Term Loan, and to date no amounts have been borrowed under
the Revolving Credit. Commitments relating to such facilities permit
the Company to borrow $127.5 million under the Renewable Term Loan and
$50 million under the Revolving Credit. The Company's senior long-
term debt is currently rated below investment grade.
In order for the Company to pay a dividend when such covenants
would otherwise restrict such payment, the Company would have to (i)
obtain a waiver or an amendment to the MRA's retained earnings
covenant, or replace the MRA with one or more new bank credit
facilities, and (ii) redeem all outstanding First Mortgage Bonds of
the series that contain dividend restrictions or amend the General
First Mortgage. Such General First Mortgage amendment would require
approval by holders of 75% of all First Mortgage Bonds.
In addition to such restrictive covenants, the Federal Power Act
states that dividends shall not be paid out of funds properly included
in the capital account. It is unclear whether such provisions of the
Federal Power Act restrict the Company from paying dividends.
EARNINGS
- --------
The Company recorded net income of $43.4 million in the third
quarter of 1997 compared with net income of $102.5 million in the
third quarter of 1996. The net income per average share of Common
Stock was $1.35 for the third quarter of 1997 compared with net income
per average share of Common Stock of $3.19 for the third quarter of
1996. Excluding the impact of the recognition of tax benefits and
other one-time adjustments, 1997 third quarter ongoing net income was
$32.3 million or $1.01 per share compared with ongoing net income of
$30.1 million or $0.94 per share for the third quarter of 1996.
For the first nine months of 1997, the Company recorded net
income of $84.8 million, compared with net income of $113.2 million
for the first nine months of 1996. The net income per average share
of Common Stock was $2.64 for the first nine months of 1997, compared
with a net income per average share of Common Stock of $3.52 for the
first nine months of 1996. Excluding the impact of the recognition of
tax benefits and other one-time adjustments, ongoing net income for
the first nine months of 1997 was $42.2 million or $1.31 per share
compared with $38.5 million or $1.20 million per share for the first
nine months of 1996.
RESULTS OF OPERATIONS
- ---------------------
RESULTS OF UTILITY OPERATIONS
SALES AND REVENUES
Comparisons of kilowatt-hour sales and electric revenues are
shown below:
Three Months Ended Increase/(Decrease)
September 30 1997 1996 Amount Percent
- ------------------------- --------- --------- -------- -------
Electric kWh Sales (000):
Retail Customers 2,321,385 2,240,499 80,886 3.6%
Sales for Resale 921,220 836,721 84,499 10.1
--------- --------- -------
Total 3,242,605 3,077,220 165,385 5.4
Electric Revenues (000):
Retail Customers $201,566 $195,261 $ 6,305 3.2%
Amortization of MSR
Option Gain
Regulatory Liability 0 5,014 (5,014) (100.0)
Sales for Resale 29,523 22,803 6,720) 29.5
--------- --------- ---------
Total $231,089 $223,078 $ 8,011 3.6
========= ========= =========
Nine Months Ended Increase/(Decrease)
September 30 1997 1996 Amount Percent
- -------------------------- --------- --------- -------- -------
Electric kWh Sales (000):
Retail Customers 5,830,042 5,718,042 112,000 2.0%
Sales for Resale 2,385,481 2,231,072 154,409 6.9
---------- --------- ---------
Total 8,215,523 7,949,114 266,409 3.4
Electric Revenues (000):
Retail Customers $490,752 $482,511 $ 8,241 1.7%
Amortization of MSR
Option Gain
Regulatory Liability 8,105 15,040 (6,935) (46.1)
Sales for Resale 69,483 58,088 11,395 19.6
---------- -------- ---------
Total $568,340 $555,639 $ 12,701 2.3
========== ======== =========
KWh sales to retail customers increased by 3.6% in the third
quarter of 1997 compared with the third quarter of 1996 due to warmer
weather conditions and a 2.1% increase in the average number of retail
customers. KWh sales to retail customers increased by 2.0% in the
first nine months of 1997 compared with the same period in 1996, due
primarily to a 2.4% increase in average number of retail customers for
the nine month period. Based on cooling degree days, a commonly used
measure in the electric industry that is calculated by subtracting 75
from the average of the high and low daily temperatures, the Tucson
area registered an increase of approximately 18% in such cooling
degree days for the third quarter of 1997 compared with the same
period in 1996, and an increase of approximately 7% in such cooling
degree days compared with the ten year average for the same period
from 1987 to 1996. Cooling degree days for the third quarter of 1997
were 1016, compared to 862 for the third quarter of 1996 and 953 for
the ten year average.
Revenues from sales to retail customers increased by 3.2% in the
third quarter of 1997 compared with the third quarter of 1996 due to
the higher kWh sales discussed above. The increase in retail revenues
for the quarter was slightly less than the increase in retail kWh
sales due to a 6% decrease in revenues per kWh sold to mining
customers. The change in average price of sales to mining customers
reflects the impact of the renegotiation of the contract with the
Company's largest mining customer in 1996. Revenues from sales to
retail customers in the first nine months of 1997 increased by 1.7%
compared with the same period in 1996. The increase in kWh sales for
the first nine months of the year offset the average price decrease to
mining customers discussed above.
KWh sales for resale increased by 10.1% in the third quarter and
by 6.9% in the first nine months of 1997 relative to the same periods
in 1996. Higher economy energy sales accounted for the third quarter
increase. Revenues from sales for resale were 29.5% higher in the
third quarter and 19.6% higher in the first nine months of 1997
compared to the same periods in 1996 due to higher market prices for
wholesale economy energy in all quarters of 1997. Factors
contributing to higher market prices in the third quarter include
higher natural gas prices, increased demand due to warmer temperatures
in the southwestern United States, and WSCC imposed restrictions on
the Pacific Intertie, limiting energy availability from the Northwest.
Higher natural gas prices and a reduction in regional generating
capacity due to planned and force outages of generating facilities in
the southwestern United States contributed to the higher market prices
in the first half of 1997.
Revenue from the Amortization of the MSR Option Gain Regulatory
Liability was $5.0 million lower in the third quarter and $6.9 million
lower in the first nine months of 1997 compared with the same periods
in 1996. This Regulatory Liability was fully amortized as of May
1997.
OPERATING EXPENSES
Fuel and Purchased Power expense increased by 10% in the third
quarter and 4.6% in the first nine months of 1997 compared with the
same period in 1996. The increases in fuel and purchased power
expense outpaced the growth in total kWh sales for both periods, with
increased usage of gas-fired generation in the third quarter and
increased purchases of higher cost economy energy in the second and
third quarters of 1997 due to unscheduled outages at remote plants and
to meet retail and wholesale energy requirements. The increase in
purchased power expense was partially offset by the absence of take-
or-pay payments for fuel in the first nine months of 1997, compared to
take-or-pay payments of $3.0 million for the same period in 1996.
Other Operations expense increased by $4.9 million in the third
quarter and $10.8 million in the first nine months of 1997 relative to
the same periods in 1996. These increases include higher expenses
related to funding of new energy-related businesses, as well as a
first quarter 1997 VSP-related adjustment to post-retirement benefits
expense.
Maintenance and Repairs expense increased by $0.3 million in the
third quarter and $3.6 million in the first nine months of 1997
compared to the same periods in 1996 due primarily to scheduled
maintenance work at the Springerville station in the first and second
quarters of 1997.
Depreciation and Amortization expense decreased by $3.1 million
in the third quarter and $8.5 million in the first nine months of 1997
compared with the same periods in 1996. These decreases were
attributable to the completion in January 1997 of a three year
amortization for Springerville Unit 2 Rate Synchronization Costs
established in the 1994 Rate Order, as well as an extension of the
depreciable life for pollution control facilities as required by the
Company's 1996 Rate Order.
Taxes Other Than Income Taxes decreased by $9.1 million in the
third quarter and $13.1 million in the first nine months of 1997
compared with the same periods in 1996. This was primarily due to a
charge of $7.3 million in the third quarter of 1996 related to a court
ruling on contested sales tax assessments. See Note 1 of Notes to
Condensed Consolidated Financial Statements, Tax Assessments.
Property tax rates and property valuations for tax purposes were also
lower in 1997.
Voluntary Severance Plan Expense (Gain) for the third quarter of
1996 reflected a net gain of $3.4 million. This net gain was
comprised of a $3.7 million benefit reflecting curtailments and
settlements of pension liabilities related to the VSP, as well as
additional charges of $0.3 million related to the VSP. During the
first nine months of 1996, a net expense of $10.6 million was recorded
to reflect the Company's implementation of the VSP.
Income Tax expense included in Operating Expenses increased by
$1.8 million in the third quarter and by $8.1 million in the first
nine months of 1997 compared with the same periods in 1996 due to an
increase in pre-tax operating income, net of interest expense.
OTHER INCOME
Income tax benefits included in Other Income decreased $53.2
million in the third quarter and $41.1 million in the first nine
months of 1997 compared with the same periods of 1996 due primarily to
decreased NOL benefit recognition. The company recognized $13.1
million of NOL benefit in the third quarter of 1997 compared to $70.3
million in the third quarter of 1996. As of the end of September
1997, on a cumulative basis the Company has recognized in its income
statement the full amount of NOL benefit that the Company expects to
utilize on future income tax returns. Additional amounts of NOL
benefit which may be recognized in the future in the Company's income
statement are at present indeterminate due to the interplay of open
tax years for which tax assessments may be made and varying expiration
dates of federal and state NOL carryforwards.
A Reversal of Loss Provision in the amount of $8.5 million was
recorded in the third quarter of 1996. The reversal of loss provision
relates to the satisfaction by the Company's former investment
subsidiaries of approximately $8.5 million of short-term debt
obligations through the assignment of certain finance receivables held
by such investment subsidiaries. Results for the first nine months of
1997 include a Reversal of Loss provision in the amount of $10.2
million recorded in the second quarter of 1997 to reflect the
dissolution of certain subsidiaries which formed part of the Company's
former investment operations.
See Note 4 of Notes to Condensed Consolidated Financial Statements,
Consolidated Subsidiaries.
INTEREST EXPENSE
Interest expense on long-term debt increased in the third quarter
and first nine months of 1997 relative to the same periods in 1996 due
to the refinancing of certain variable and fixed rate debt obligations
with unsecured fixed rate debt obligations, having later maturity
dates, at higher interest rates (see Financing Developments--
Sale of New Bonds, below), as well as higher average interest rates
on the Company's variable debt obligations. The weighted average
interest rate on the Company's variable rate debt obligations was 3.7%
for the first nine months of 1997 compared to 3.5% for the same period
in 1996.
Other Interest Expense was lower in the third quarter and first
nine months of 1997 compared with the same periods in 1996 due to $1.9
million in interest expense incurred in the third quarter of 1996
related to the 1996 contested sales tax assessment of $7.3 million.
EVENTS AFFECTING FUTURE RESULTS OF UTILITY OPERATIONS
NTUA WHOLESALE POWER CONTRACT
On June 26, 1997, the Company signed an agreement to extend and
restructure its current wholesale power sale agreement with the Navajo
Tribal Utility Authority (NTUA). NTUA has purchased approximately 60
MW of power annually since 1993. Under the terms of the Amended and
Restated Power Supply Agreement, firm capacity sales will be provided
in two phases. The first phase runs through May 31, 1999, the
original termination date under the replaced agreement. The second
phase will extend through December 31, 2009. During phase one, the
Company will continue to serve NTUA's full power requirements in
excess of energy and capacity from NTUA's hydroelectric resource. The
new contract also provides NTUA the opportunity and ability to serve
new industrial loads through purchases in the wholesale marketplace.
Phase two of the agreement calls for NTUA to continue purchasing firm
power from the Company, while becoming a partial requirements customer
with a variety of options to serve its remaining needs. The Company
will provide 40 MW of firm power to NTUA in the summer months and 50
MW of firm power in the winter months.
The Company's annual revenues from wholesale sales to NTUA under
the previous terms of the sales agreement were approximately $16.5
million per year. In phase one of the restructured agreement, the
Company's annual revenues from sales to NTUA are estimated to be
approximately $15 million per year. In the first year of phase two,
revenues from sales to NTUA are estimated to range from $9 million to
$16 million.
The new agreement was approved by the FERC on August 20, 1997.
Under the new agreement, the Company will provide generation service
pursuant to the Power Supply Agreement, while providing the
transmission and ancillary services necessary to actually deliver
power pursuant to separate network service and operating agreements in
accordance with the requirements of FERC Order 888.
SPRINGERVILLE COAL SUPPLY CONTRACT
On June 27, 1997, the Company signed an agreement with Peabody
Coalsales to terminate the then existing coal supply contract for the
Springerville Generating Station, and enter into a new contract with
the same supplier. A $50 million termination fee was incurred by the
Company, payable in three installments: $30 million paid on June 30,
1997, $10 million paid on September 30, 1997, and $10 million due
March 31, 1998. The new contract contains more favorable terms to the
Company than the previous contract for certain volume, incremental
volume, base price, incremental price and price adjustment mechanism
requirements. The Company estimates that savings under the new
contract will be approximately $10 million per year initially and will
increase thereafter, resulting in approximately $97.5 million of
savings on a present value basis over the life of the contract.
The Springerville Generating Station consists of two 380 MW coal
fired generating units which account for 38% of the Company's total
net generating capability. The previous coal supply contract covered
the useful lives of Springerville Units 1 and 2 and contained a
bilateral option to renegotiate the contract price and escalation
procedures in 2009 and at intervals of every five years thereafter,
with various adjustment clauses which would affect the future cost of
delivered coal. The new coal contract has an initial term of 13
years, beginning July 1, 1997, and ending June 30, 2010, with an
option to extend for ten years thereafter. During the extension term,
the coal supplier has the right of first refusal to match competing
offers for a portion of Springerville coal requirements.
On July 29, 1997, the ACC issued an interim accounting order
allowing the Company to defer the $50 million termination fee as a
regulatory asset until the ACC decides whether the termination fee
should be recovered through retail rates. The interim accounting
order also allows the Company to begin amortizing the termination fee
to fuel expense over the 13 year initial term of the agreement. See
Note 3 of Notes to Condensed Consolidated Financial Statements,
Springerville Coal Contract.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company expects to generate sufficient cash flows during 1997
to fund its continuing operating activities and construction
expenditures. However, the Company's projected cash flows are subject
to variation due to changes in wholesale revenues, changes in short-
term interest rates, and other factors. For example, an increase in
short-term interest rates of 100 basis points (1%) would result in an
approximate $6 million increase in annual interest payments. If cash
flows were to fall short of expectations, the Company would rely on
existing cash balances, borrowings under the Renewable Term Loan and,
if necessary, borrowings under the Revolving Credit.
At November 5, 1997, there was no outstanding balance due under
the Renewable Term Loan, and to date, no amount has been borrowed
under the Revolving Credit. The Renewable Term Loan commitment
decreased from $156 million at March 31, 1997 to $134 million at June
30, 1997, and to $127.5 million at September 30, 1997. The commitment
was reduced by $16 million at April 29, 1997 in accordance with the
terms of the MRA provisions regarding the optional prepayment of debt
obligations, which encompassed the April 1997 refinancing of $31.4
million of floating rate IDBs (see Financing Developments below).
Mandatory quarterly commitment reductions of $6.7 million each were
effective as of June 30, 1997 and September 30, 1997 in accordance
with the terms of the MRA, whereby the commitment is scheduled to
decrease by approximately 5% per quarter during 1997 and by 10% per
quarter in 1998 and 1999. The Revolving Credit commitment remained at
$50 million as of November 5, 1997.
The Company's cash and cash equivalents balance at November 5,
1997 was approximately $137 million. Cash balances are invested in
investment grade money-market securities with an emphasis on
preserving the principal amounts invested.
CASH FLOWS
The Company's cash and cash equivalents increased by $21.8
million or 22%, from the September 30, 1996 ending balance to the
September 30, 1997 balance of $119.8 million. This increase was due
to the receipt of net cash flows from operating activities in excess
of the net cash flows required for investing and financing activities
for the twelve month period ended September 30, 1997.
Net cash flows from operating activities decreased in aggregate
by $26.9 million in the first nine months of 1997 compared with the
same period in 1996. This decrease was due to the $40.0 million in
contract termination fees paid to a major coal supplier in the second
and third quarters of 1997 (see Springerville Coal Supply Contract above).
Excluding this contract termination fee, net cash flows from operating
activities increased by $13.1 million, or 13.2%, in the first nine months
of 1997 compared with the same period in 1996. This increase was due
primarily to an increase in cash receipts from retail and wholesale
customers and a $13.5 million reduction in wages paid (net of amounts
capitalized), compared with the same period in 1996. The reduction in
wages paid reflected payments made to employees under the VSP in 1996.
These increases to net cash flows were partially offset by higher fuel and
purchased power costs, an $11.9 million increase in payment of other
operations and maintenance costs in the first nine months of 1997, and
the receipt of $4.1 million in cash related to the sale of emission
allowances in the first quarter of 1996.
Net cash outflows from investing activities decreased in
aggregate by $6.6 million in the first nine months of 1997 compared
with the same period in 1996, due to a reduction in both construction
expenditures and investments and loans to joint ventures.
Net cash outflows from financing activities increased in
aggregate by $3.1 million in the first nine months of 1997 compared
with the same period in 1996.
FINANCING DEVELOPMENTS
SALE OF NEW BONDS
On April 29, 1997, the City of Farmington, New Mexico issued
$80.41 million aggregate principal amount of its 1997 Series A
Pollution Control Revenue Bonds (Tucson Electric Power Company San
Juan Project) for the benefit of the Company. The proceeds from this
issuance were made available to the Company under an installment sale
agreement and were used on June 12, 1997 to redeem all of the City of
Farmington's Series 1973 Pollution Control Revenue bonds (Tucson Gas &
Electric Company San Juan Project), 6.25% due in 2003 ($47.91 million
aggregate principal amount) and all of the City of Farmington's 1977
Series A Collateralized Pollution Control Revenue bonds (Tucson Gas &
Electric Company San Juan Project), 6.10% due 2007 ($32.5 million
aggregate principal amount). The Farmington 1977 Series A bonds were
secured by an equal principal amount of First Mortgage Bonds, which
were cancelled. The new bonds, which are unsecured, bear interest at
a fixed annual rate of 6.95% and mature in October 2020.
On April 29, 1997, the Coconino County, Arizona Pollution Control
Corporation issued $36.7 million aggregate principal amount of its
1997 Series A Pollution Control Revenue Bonds (Tucson Electric Power
Company Navajo Project) for the benefit of the Company. The proceeds
from this issuance were loaned to the Company and were used on June 4,
1997 to (i) redeem all of the 1996 Series A Pollution Control Revenue
Bonds (Tucson Electric Power Company Project), variable rate due 2031
($16.7 million aggregate principal amount) and (ii) fund the
construction of additional pollution abatement facilities at the
Navajo Generating Station. The new bonds, which are unsecured, bear
interest at a fixed annual rate of 7.125% and mature in October 2032.
On April 29, 1997, the Coconino County, Arizona Pollution Control
Corporation also issued $14.7 million aggregate principal amount of
its 1997 Series B Pollution Control Revenue Bonds (Tucson Electric
Power Company Navajo Project) for the benefit of the Company. The
proceeds from this issuance were loaned to the Company and were used
on June 4, 1997 to redeem all of the 1996 Series B Pollution Control
Refunding Revenue Bonds (Tucson Electric Power Company Project),
variable rate due 2031 ($14.7 million aggregate principal amount).
The new bonds, which are unsecured, bear interest at a fixed annual
rate of 7.00% and mature in October 2032.
In addition to the redemption of the Coconino bonds, the letters
of credit which provided credit support, and certain First Mortgage
Bonds, which collateralized the letters of credit, were also
eliminated. Therefore, the aggregate principal amount of Company
debt backed by letters of credit was reduced from $805 million to $774
million and the aggregate principal amount of First Mortgage Bonds
outstanding was reduced by $34.5 million.
On October 1, 1997, the Industrial Development Authority of the
County of Pima, Arizona issued $22.5 million aggregate principal
amount of its 1997 Series A Industrial Development Bonds (Tucson
Electric Power Company Project) for the benefit of the Company. The
proceeds from this issuance have been loaned to the Company and (i)
were used to redeem all of the 1990 Series A Industrial Development
Bonds, variable rate due 2025 ($20 million aggregate principal amount)
on November 5, 1997 and (ii) will finance improvements to the
Company's lower voltage electric transmission and distribution system
in Pima County. The new bonds, which are unsecured, bear interest at
a rate of 6.10% and mature in September 2025.
On October 1, 1997, the Industrial Development Authority of Pima
County, Arizona issued $150 million aggregate principal amount of its
1997 Series B Industrial Development Bonds (Tucson Electric Power
Company Project) for the benefit of the Company. The proceeds from
this issuance have been loaned to the Company and will be used on
November 17, 1997 to redeem $150 million aggregate principal amount of
1982 Series A Industrial Development Bonds, variable rate, due 2022.
The new bonds, which are unsecured, bear interest at a rate of 6.00%
and mature in September 2029.
On October 1, 1997, the Industrial Development Authority of Pima
County, Arizona issued $75 million aggregate principal amount of its
1997 Series C Industrial Development Bonds (Tucson Electric Power
Company Project) for the benefit of the Company. The proceeds from
this issuance have been loaned to the Company and will be used on
November 17, 1997 to redeem $75 million aggregate principal amount of
1983 Series A Industrial Development Bonds, variable rate, due 2018.
The new bonds, which are unsecured, bear interest at a rate of 6.00%
and mature in September 2029.
The redeemed Pima bonds are backed by letters of credit under the
MRA. Upon redemption of such Pima bonds, the aggregate principal
amount of Company debt backed by letters of credit will be reduced
from $774 million to $529 million.
FINANCING APPLICATION FILED WITH ACC
On July 11, 1997, the Company filed an application with the ACC
requesting authority to enter into certain financing transactions.
The proposed financing transactions are intended to extend debt
maturities and letter of credit expiration dates, gain additional
financial and operating flexibility through the replacement or
modification of certain credit agreements, reduce exposure to variable
interest rates, reduce dependence on letters of credit and strengthen
the Company's balance sheet by raising additional equity capital. The
application requests authorization for four financings. First, the
Company seeks authority to refinance up to $450 million of existing
tax-exempt variable rate debt obligations currently backed by letters
of credit. These refinancings are expected to be on a fixed rate,
unsecured basis. Second, the Company seeks authority to replace its
current bank credit facilities under the MRA, with one or more new
bank credit facilities. The Company anticipates that the new credit
facilities will be reduced in size (due to the refinancing activity
described above), will have extended maturities or termination dates,
and will contain less restrictive covenants than those contained in
the MRA. Third, the Company requests authority to refinance up to
$184 million in First Mortgage Bonds, scheduled to mature between 1999
and 2003, with the issuance of new securities consisting of debt
and/or equity securities. Fourth, the Company seeks authority to
establish a direct stock purchase plan, which would allow small
investors to purchase shares directly from the Company. Pursuant to
this plan, the Company would issue from time to time up to 1,000,000
shares of Common Stock, without par value.
On August 26, 1997, the ACC approved the section of the financing
application requesting authority to refinance up to $450 million of
existing tax-exempt variable rate debt obligations. This allowed the
Company to proceed with the October 1, 1997 bond sale transactions
outlined above in Financing Developments--Sale of New Bonds. The ACC
is expected to rule on the remaining portions of the financing
application in the fourth quarter of 1997.
Subject to ACC authorization, the Company intends to replace the
current bank credit facilities under the MRA with one or more new bank
credit facilities during the fourth quarter of 1997 and intends to
pursue the negotiation and consummation of the remaining transactions
over the next two years. Even if ACC authorization is granted, there
can be no assurance that any of the contemplated transactions, other
than the October 1, 1997 bond sale transactions, will be consummated
or that the terms of any transactions which are consummated will
result in the realization of the Company's objectives.
The Company expects to incur increased financing costs as a
result of the completion of the proposed financings. The Company
believes, however, that such costs are outweighed by the related
benefits, including the extension of maturities, reduction in
volatility of capital costs, elimination of certain restrictions on
dividends and increases in equity capital.
YEAR 2000 ISSUE
- ---------------
The Company has and will continue to make modifications to its
computer systems and applications to ensure that year 2000
transactions can be processed. The Company currently estimates that
the costs associated with this project are not material to the
Company's operating results.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
- ------------------------------------------
This Quarterly Report on Form 10-Q contains forward-looking
statements as defined by the Private Securities Litigation Reform Act
of 1995. The Company is including the following cautionary statements
to make applicable and take advantage of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 for any forward-
looking statements made by, or on behalf, of the Company in this
Quarterly Report on Form 10-Q. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements
which are other than statements of historical facts. Such forward-
looking statements may be identified, without limitation, by the use
of the words "anticipates," "estimates," "expects," "intends,"
"plans," "predicts," "projects," and similar expressions. From time
to time, the Company may publish or otherwise make available forward-
looking statements of this nature. All such forward-looking
statements, whether written or oral, and whether made by or on behalf
of the Company, are expressly qualified by these cautionary statements
and any other cautionary statements which may accompany the forward-
looking statements. In addition, the Company disclaims any obligation
to update any forward-looking statements to reflect events or
circumstances after the date hereof.
Forward-looking statements involve risks and uncertainties which
could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements. The Company's
expectations, beliefs and projections are expressed in good faith and
are believed by the Company to have a reasonable basis, including
without limitation, management's examination of historical operating
trends, data contained in the Company's records and other data
available from third parties, but there can be no assurance that
management's expectations, beliefs or projections will result or be
achieved or accomplished. In addition to other factors and matters
discussed elsewhere herein, some of the important factors that, in the
view of the Company, could cause actual results to differ materially
from those discussed in the forward-looking statements include the
following:
1. Effects of restructuring initiatives in the electric industry and
other energy-related industries.
2. Changes in economic conditions, demographic patterns and weather
conditions in the Company's retail service area.
3. Changes affecting the Company's cost of providing electrical
service including, but not limited to, changes in fuel costs,
generating unit operating performance, interest rates, tax laws,
environmental laws, and the general rate of inflation.
4. Changes in governmental policies and regulatory actions with
respect to allowed rates of return, financings, rate structures,
and methods of establishing rates.
5. Changes affecting the cost of competing energy alternatives,
including changes in available generating technologies and changes
in the cost of natural gas.
6. Changes in accounting principles or the application of such
principles to the Company.
PART II - OTHER INFORMATION
ITEM 1. -- LEGAL PROCEEDINGS
TAX ASSESSMENTS
See Note 1 of
Notes to Condensed Consolidated Financial Statements,Tax Assessments.
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
-- See Exhibit Index.
(b) Reports on Form 8-K.
-- The company has not filed any Current Reports on Form 8-K
since filing the Form 10-Q for the Quarter Ending June 30,
1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TUCSON ELECTRIC POWER COMPANY
------------------------------
(Registrant)
Date: November 10, 1997 Ira R. Adler
------------------------------
Ira R. Adler
Senior Vice President and
Principal Financial Officer
EXHIBIT INDEX
4a - Loan Agreement, dated as of September 15, 1997, between The
Industrial Development Authority of the County of Pima and
the Registrant relating to Industrial Development Revenue
Bonds, 1997 Series A (Tucson Electric Power Company Project).
4b - Indenture of Trust, dated as of September 15, 1997, between
The Industrial Development Authority of the County of Pima
and First Trust of New York, National Association,
authorizing Industrial Development Revenue Bonds, 1997 Series
A (Tucson Electric Power Company Project).
4c - Loan Agreement, dated as of September 15, 1997, between The
Industrial Development Authority of the County of Pima and
the Registrant relating to Industrial Development Revenue
Bonds, 1997 Series B (Tucson Electric Power Company Project).
4d - Indenture of Trust, dated as of September 15, 1997, between
The Industrial Development Authority of the County of Pima
and First Trust of New York, National Association,
authorizing Industrial Development Revenue Bonds, 1997 Series
B (Tucson Electric Power Company Project).
4e - Loan Agreement, dated as of September 15, 1997, between The
Industrial Development Authority of the County of Pima and
the Registrant relating to Industrial Development Revenue
Bonds, 1997 Series C (Tucson Electric Power Company Project).
4f - Indenture of Trust, dated as of September 15, 1997, between
The Industrial Development Authority of the County of Pima
and First Trust of New York, National Association,
authorizing Industrial Development Revenue Bonds, 1997 Series
C (Tucson Electric Power Company Project).
15 - Letter regarding unaudited interim financial information.
27 - Financial Data Schedule.
Exhibit 15
Tucson Electric Power Company
220 West Sixth Street
Tucson, Arizona 85701
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of
the unaudited interim financial information of Tucson Electric
Power Company and subsidiaries (the Company) for the three-
month and nine-month periods ended September 30, 1997 and 1996, as
indicated in our report dated October 20, 1997; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is
included in your Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, is incorporated by reference in
Post-Effective Amendment No. 1 to Registration Statement No. 33-
55732 of the Company on Form S-3, Registration Statement No. 33-
58173 of UniSource Energy Corporation on Form S-4, Registration
Statements No. 33-56523, No. 33-57233 and No. 33-57231 of the
Company on Form S-8 and Registration Statement No. 33-31043 on
Form S-3.
We are also aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered
a part of the Registration Statement prepared or certified by
an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Tucson, Arizona
November 10, 1997
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,932,073
<OTHER-PROPERTY-AND-INVEST> 71,372
<TOTAL-CURRENT-ASSETS> 279,767
<TOTAL-DEFERRED-CHARGES> 330,932
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,614,144
<COMMON> 638,939
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (420,790)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 218,149
0
0
<LONG-TERM-DEBT-NET> 1,205,951
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 500
0
<CAPITAL-LEASE-OBLIGATIONS> 887,820
<LEASES-CURRENT> 15,163
<OTHER-ITEMS-CAPITAL-AND-LIAB> 286,561
<TOT-CAPITALIZATION-AND-LIAB> 2,614,144
<GROSS-OPERATING-REVENUE> 568,340
<INCOME-TAX-EXPENSE> 21,070
<OTHER-OPERATING-EXPENSES> 436,540
<TOTAL-OPERATING-EXPENSES> 457,610
<OPERATING-INCOME-LOSS> 110,730
<OTHER-INCOME-NET> 52,719
<INCOME-BEFORE-INTEREST-EXPEN> 163,449
<TOTAL-INTEREST-EXPENSE> 78,641
<NET-INCOME> 84,808
0
<EARNINGS-AVAILABLE-FOR-COMM> 84,808
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 72,452
<EPS-PRIMARY> 2.64
<EPS-DILUTED> 2.64
</TABLE>
Exhibit 4a
=================================================================
LOAN AGREEMENT
(1997 SERIES A)
BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
AND
TUCSON ELECTRIC POWER COMPANY
--------
DATED AS OF SEPTEMBER 15, 1997
--------
Relating To
Industrial Development Revenue Bonds,
1997 Series A
(Tucson Electric Power Company Project)
=================================================================
<PAGE>
TABLE OF CONTENTS*
Page
----
LOAN AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions . . . . . . . . . . . . . . . 1
SECTION 1.02 Incorporation of Certain Definitions by
Reference . . . . . . . . . . . . . . . . 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 Representations and Warranties of the
Authority . . . . . . . . . . . . . . . . 5
SECTION 2.02 Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . 5
ARTICLE III
THE FACILITIES
SECTION 3.01 Construction of the Facilities . . . . . . 6
SECTION 3.02 Insufficient Moneys in Construction Fund . 6
SECTION 3.03 Revision of Plans and Specifications . . . 7
SECTION 3.04 Certification of Completion Date . . . . . 7
SECTION 3.05 Maintenance of Facilities; Remodeling . . . 7
SECTION 3.06 Insurance . . . . . . . . . . . . . . . . . 7
SECTION 3.07 Condemnation . . . . . . . . . . . . . . . 7
SECTION 3.08 Termination of Construction . . . . . . . . 8
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01 Issuance of the Bonds . . . . . . . . . . . 8
SECTION 4.02 Issuance of Other Obligations . . . . . . . 8
SECTION 4.03 The Loans; Disposition of Bond Proceeds . . 8
SECTION 4.04 Disbursements from Construction Fund . . . 9
SECTION 4.05 Investment of Moneys in Funds and
Accounts. . . . . . . . . . . . . . . . . 10
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01 Loan Payments. . . . . . . . . . . . . . 10
SECTION 5.02 Payments Assigned; Obligation Absolute . 10
SECTION 5.03 Payment of Expenses . . . . . . . . . . . 10
SECTION 5.04 Indemnification . . . . . . . . . . . . . 11
SECTION 5.05 Payment of Taxes; Discharge of Liens . . 11
____________________
* This table of contents is not part of the Loan Agreement, and
is for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part
of the Loan Agreement.
<PAGE>
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01 Maintenance of Corporate Existence . . . 11
SECTION 6.02 Permits or Licenses . . . . . . . . . . . 12
SECTION 6.03 Authority's Access to Facilities . . . . 12
SECTION 6.04 Tax-Exempt Status of Interest on Bonds. . 12
SECTION 6.05 Use of Facilities . . . . . . . . . . . . 13
SECTION 6.06 Financing Statements . . . . . . . . . . 13
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01 Conditions . . . . . . . . . . . . . . . 14
SECTION 7.02 Instrument Furnished to the Authority and
Trustee . . . . . . . . . . . . . . . . . 15
SECTION 7.03 Limitation . . . . . . . . . . . . . . . 15
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default . . . . . . . . . . . . 16
SECTION 8.02 Force Majeure . . . . . . . . . . . . . . 16
SECTION 8.03 Remedies . . . . . . . . . . . . . . . . 16
SECTION 8.04 No Remedy Exclusive . . . . . . . . . . . 17
SECTION 8.05 Reimbursement of Attorneys' and Agents'
Fees . . . . . . . . . . . . . . . . . . 17
SECTION 8.06 Waiver of Breach . . . . . . . . . . . . 17
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01 Redemption of Bonds . . . . . . . . . . . 17
SECTION 9.02 Compliance with the Indenture . . . . . . 18
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Term of Agreement . . . . . . . . . . . . 18
SECTION 10.02 Notices . . . . . . . . . . . . . . . . . 18
SECTION 10.03 Parties in Interest . . . . . . . . . . . 18
SECTION 10.04 Amendments . . . . . . . . . . . . . . . 18
SECTION 10.05 Counterparts . . . . . . . . . . . . . . 19
SECTION 10.06 Severability . . . . . . . . . . . . . . 19
SECTION 10.07 Governing Law . . . . . . . . . . . . . . 19
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exhibit A - Description of the Facilities . . . . . . . . . A-1
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (1997 Series A), dated as of September
15, 1997 (this "Agreement"), between THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona (hereinafter called the "Authority"), and TUCSON ELECTRIC
POWER COMPANY, a corporation organized and existing under the
laws of the State of Arizona (hereinafter called the "Company"),
W I T N E S S E T H :
WHEREAS, the Authority is authorized and empowered under
Title 35, Chapter 5, Arizona Revised Statutes, as amended (the
"Act"), to issue its bonds in accordance with the Act and to make
secured or unsecured loans for the purpose of financing or
refinancing the acquisition, construction, improvement or
equipping of projects consisting of land, any building or other
improvement, and all real and personal properties, including but
not limited to machinery and equipment, whether or not now in
existence or under construction, whether located within or
without Pima County, which shall be suitable for, among other
things, facilities for the furnishing of electric energy, gas or
water, air and water pollution control facilities and sewage and
solid waste disposal facilities, and to charge and collect
interest on such loans and pledge the proceeds of loan agreements
as security for the payment of the principal of and interest on
bonds, or designated issues of bonds, issued by the Authority and
any agreements made in connection therewith, whenever the Board
of Directors of the Authority finds such loans to be in
furtherance of the purposes of the Authority or in the public
interest;
WHEREAS, the Authority has heretofore issued and sold
$20,000,000 aggregate principal amount of its Industrial
Development Revenue Bonds, 1990 Series A (Tucson Electric Power
Company Project), all of which remain outstanding (the "1990
Bonds"), the proceeds of which were loaned to the Company to
finance a portion of the costs of the acquisition, construction,
improvement and equipping of certain of the facilities for
furnishing electric energy described in Exhibit A hereto (the
"Facilities");
WHEREAS, the Authority proposes to issue and sell its
revenue bonds for the purpose of financing a portion of the costs
of the acquisition, construction, improvement and equipping of
certain additional items of the Facilities and for the purpose of
refinancing, by the payment or redemption of the 1990 Bonds, or
provision therefor, the portion of the costs of the acquisition,
construction, improvement and equipping of the Facilities
previously financed with the proceeds of the 1990 Bonds; and
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby and in consideration of the premises, DO HEREBY
AGREE as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. The terms defined in this
Article I shall for all purposes of this Agreement have the
meanings herein specified, unless the context clearly requires
otherwise:
Act:
"Act" shall mean Title 35, Chapter 5, Arizona Revised
Statutes, and all acts supplemental thereto or amendatory
thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Authority with respect to this Agreement, the
Indenture and any transaction or event contemplated by this
Agreement or the Indenture, including the compensation and
reimbursement of expenses and advances payable to the Trustee, to
the paying agent, any co-paying agent and the registrar under the
Indenture and a pro rata share of the Authority's annual
operating expenses in accordance with the provisions of paragraph
XII.D. of the Authority's Procedural Pamphlet.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of
September 15, 1997, between the Authority and the Company, and
any and all modifications, alterations, amendments and
supplements hereto.
Authority:
"Authority" shall mean The Industrial Development Authority
of the County of Pima, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona incorporated for and with the approval of Pima County,
Arizona, pursuant to the provisions of the Constitution of the
State of Arizona and the Act, its successors and their assigns.
Authorized Company Representative:
"Authorized Company Representative" shall mean each person
at the time designated to act on behalf of the Company by written
certificate furnished to the Authority and the Trustee containing
the specimen signature of such person and signed on behalf of the
Company by its President, any Vice President or its Treasurer,
together with its Secretary or any Assistant Secretary.
Bond Counsel:
"Bond Counsel" shall mean any firm or firms of nationally
recognized bond counsel experienced in matters pertaining to the
validity of, and exclusion from gross income for federal tax
purposes of interest on bonds issued by states and political
subdivisions, selected by the Company and acceptable to the
Authority.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01 of
the Indenture.
Bonds:
"Bond" or "Bonds" shall mean the Industrial Development
Revenue Bonds, 1997 Series A (Tucson Electric Power Company
Project) of the Authority.
Capital Account:
"Capital Account" shall mean any of the accounts so named
established under Sections 4.01 and 5.01 of the Indenture.
Code:
"Code" shall mean the Internal Revenue Code of 1986 or any
successor statute thereto. Each reference to a section of the
Code herein shall be deemed to include the United States Treasury
Regulations proposed or in effect thereunder and applicable to
the Bonds or the use of the proceeds thereof, unless the context
clearly requires otherwise. Reference to any particular Code
section shall, in the event of a successor Code, be deemed to be
a reference to the successor to such Code section.
Company:
"Company" shall mean Tucson Electric Power Company, a
corporation organized and existing under the laws of the State of
Arizona, its successors and their assigns, including, without
limitation, any successor obligor under Section 6.01 or 7.01 to
the extent of the obligations assumed thereunder.
Completion Date:
"Completion Date" shall mean the date specified in Section
3.04 hereof.
Construction (and other forms of the word "construct"):
"Construction" (and other forms of the word "construct")
shall mean, when used with respect to the Facilities, the
construction of the Facilities and shall include, without
limitation, the acquisition, construction, improvement and
equipping of the Facilities, all as contemplated by the Act.
Construction Fund:
"Construction Fund" shall mean the fund created by Section
5.01 of the Indenture.
Cost of Construction:
"Cost of Construction" shall embrace all costs paid or
incurred by the Company with respect to the Facilities and the
financing thereof for the payment of which the Authority is
authorized to issue bonds under the Act, and shall include
without limitation (a) obligations paid or incurred by the
Company for labor, materials and other expenses and to
contractors, builders and materialmen in connection with the
construction of the Facilities; (b) the costs paid or incurred by
the Company for contract bonds and for insurance of all kinds
that may be deemed by the Company to be desirable or necessary
during the course of construction of the Facilities; (c) the
expenses paid or incurred by the Company for test borings,
surveys, estimates, plans and specifications, and preliminary
investigations therefor, with respect to the Facilities and for
supervising construction, as well as for the performance of all
other duties required by or reasonably necessary for the proper
construction, of the Facilities; (d) Administration Expenses paid
or incurred prior to the Completion Date and legal, accounting,
financial, underwriting, advertising, recording and printing
expenses and all other fees and expenses paid or incurred by the
Company in connection with the issuance and sale of the Bonds;
(e) amounts in respect of interest (exclusive of accrued interest
paid by the initial purchasers upon delivery thereof) accruing
upon the Bonds until the Completion Date; (f) all other costs
that the Company shall be required to pay under the terms of any
contract or contracts for the construction of the Facilities; (g)
any other costs or expenses paid or incurred by the Company, and
any sums required to reimburse the Company for work done by it,
with respect to the Facilities which are properly chargeable to
the capital account of the Company with respect to the Facilities
or would be so chargeable for federal income tax purposes either
with a proper election or but for a proper election to deduct the
same; and (h) amounts required to be paid to the United States by
the Company (on behalf of the Authority) in respect of the Bonds
pursuant to Section 148 of the Code. For purposes of the
application of the proceeds of the Bonds, the Cost of
Construction shall be deemed to include the payment or
redemption, or provision therefor, of any obligations, other than
the Bonds, issued to finance or refinance any of the costs listed
above. The Cost of Construction shall also be deemed to include
all costs paid or incurred with respect to the Facilities by any
Person to whom the Facilities have been leased or sold as a whole
or in part, provided that such costs, had they been paid or
incurred by the Company, would otherwise constitute a portion of
the Cost of Construction.
Facilities:
"Facilities" shall mean the real and personal properties,
machinery and equipment currently existing, under construction
and to be constructed which are described in Exhibit A hereto, as
revised from time to time to reflect any changes therein,
additions thereto, substitutions therefor and deletions therefrom
permitted by the terms hereof, subject, however, to the
provisions of Section 7.01 hereof.
Indenture:
"Indenture" shall mean the Indenture of Trust, dated as of
September 15, 1997, between the Authority and the Trustee
relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.
Investment Account:
"Investment Account" shall mean any of the accounts so named
established under Sections 4.01 and 5.01 of the Indenture.
Loan Payments:
"Loan Payments" shall mean the payments required to be made
by the Company pursuant to Section 5.01 hereof.
1990 Bonds:
"1990 Bonds" shall mean the $20,000,000 aggregate principal
amount of the Authority's Industrial Development Revenue Bonds,
1990 Series A (Tucson Electric Power Company Project).
Outstanding:
"Outstanding", when used in reference to the Bonds, shall
mean, as at any particular date, the aggregate of all Bonds
authenticated and delivered under the Indenture except:
(a) those canceled by the Trustee at or prior to such
date or delivered to or acquired by the Trustee at or prior
to such date for cancellation;
(b) those deemed to be paid in accordance with Article
VIII of the Indenture; and
(c) those in lieu of or in exchange or substitution
for which other Bonds shall have been authenticated and
delivered pursuant to the Indenture, unless proof
satisfactory to the Trustee and the Company is presented
that such Bonds are held by a bona fide holder in due
course.
Person:
"Person" means (i) any corporation, limited liability
company, partnership, joint venture, association, joint-stock
company, business trust or unincorporated organization, in each
case formed or organized under the laws of the United States of
America, any state thereof or the District of Columbia, or (ii)
the United States of America or any state thereof, or any
political subdivision of either thereof, or any agency, authority
or other instrumentality of any of the foregoing.
Tax Agreement:
"Tax Agreement" shall mean that tax certificate and
agreement, dated the date of the initial authentication and
delivery of the Bonds, between the Authority and the Company,
relating to the requirements of the Code, and any and all
modifications, alterations, amendments and supplements thereto.
Trustee:
"Trustee" shall mean First Trust of New York, National
Association, as trustee under the Indenture, its successors in
trust and their assigns.
SECTION 1.02 Incorporation of Certain Definitions by
Reference. Each capitalized term used herein and not otherwise
defined herein shall have the meaning set forth in the Indenture.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 Representations and Warranties of the
Authority. The Authority makes the following representations and
warranties as the basis for the undertakings on the part of the
Company contained herein:
(a) The Authority is an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona created and existing under the Constitution and laws
of the State of Arizona;
(b) The Authority has the power to enter into this
Agreement and the Indenture and to perform and observe the
agreements and covenants on its part contained herein and
therein, including without limitation the power to issue and
sell the Bonds as contemplated herein and in the Indenture,
and by proper action has duly authorized the execution and
delivery hereof and thereof; and
(c) The execution and delivery of this Agreement and
the Indenture by the Authority do not, and consummation of
the transactions contemplated hereby and fulfillment of the
terms hereof and thereof by the Authority will not, result
in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which the
Authority is now a party or by which it is now bound, or, to
the best knowledge of the Authority, any order, rule or
regulation applicable to the Authority of any court or of
any regulatory body or administrative agency or other
governmental body having jurisdiction over the Authority or
over any of its properties, or the Constitution or laws of
the State of Arizona.
SECTION 2.02 Representations and Warranties of the Company.
The Company makes the following representations and warranties as
the basis for the undertakings on the part of the Authority
contained herein:
(a) The Company is a corporation duly organized and
existing in good standing under the laws of the State of
Arizona and duly qualified as a foreign corporation in the
State of New Mexico;
(b) The Company has power to enter into this Agreement
and to perform and observe the agreements and covenants on
its part contained herein and by proper corporate action has
duly authorized the execution and delivery hereof and of all
other documents required hereby to be executed by the
Company;
(c) The execution and delivery of this Agreement by
the Company do not, and consummation of transactions
contemplated hereby and fulfillment of the terms hereof by
the Company will not, result in a breach of any of the terms
or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party or by which it is
now bound, or the Restated Articles of Incorporation or
by-laws of the Company, or any order, rule or regulation
applicable to the Company of any court or of any regulatory
body or administrative agency or other governmental body
having jurisdiction over the Company or over any of its
properties, or any statute of any jurisdiction applicable to
the Company;
(d) The Arizona Corporation Commission has approved
all matters relating to the Company's participation in the
transactions contemplated by this Agreement which require
said approval, and no other consent, approval, authorization
or other order of any regulatory body or administrative
agency or other governmental body is legally required for
the Company's participation therein, except such as may have
been obtained or may be required under the securities laws
of any jurisdiction;
(e) The Facilities are to be used solely for purposes
contemplated by the Act and are located or are to be located
within the State of Arizona; and
(f) The Company estimates that all of the proceeds of
the Bonds (exclusive of accrued interest, if any, paid by
the initial purchasers of such Bonds upon delivery thereof)
will be expended to pay the Cost of Construction.
ARTICLE III
THE FACILITIES
SECTION 3.01 Construction of the Facilities. The Company
shall cause the Facilities to be constructed with all reasonable
dispatch in order to effectuate the purposes of the Act. The
Company shall have the sole responsibility under this Agreement
for the construction of the Facilities and may perform the same
itself or through its agents, and may make or issue such
contracts, orders, receipts and instructions, and in general do
or cause to be done all such other things as it may in its sole
discretion consider requisite or advisable for the construction
of the Facilities and for fulfilling its obligations under this
Article III. The Company shall have full authority and the sole
right under this Agreement to supervise and control, directly or
indirectly, all aspects of the construction of the Facilities.
The Authority shall have no right, title or interest in the
Facilities, nor any obligation regarding the facilities.
SECTION 3.02 Insufficient Moneys in Construction Fund. If
the moneys in the Construction Fund, together with any other
moneys made available to pay the Cost of Construction, shall not
be sufficient to pay the Cost of Construction in full, then the
Company shall pay all that portion of the Cost of Construction in
excess of the moneys available therefor.
The Authority does not make any warranty, either express or
implied, that the moneys which will be paid into the Construction
Fund will be sufficient to pay the Cost of Construction in full.
If the Company makes any payments pursuant to this Section
3.02, it shall not be entitled to any reimbursement therefor from
the Authority (except from the proceeds of any obligations
subsequently issued by the Authority in respect of the
Facilities), the Trustee or the Owners of the Bonds, nor shall it
be entitled to any diminution in or postponement of the payment
of the Loan Payments or the payment of any other amounts payable
under this Agreement.
SECTION 3.03 Revision of Plans and Specifications. The
Company may cause one or more revisions to be made to the plans
and specifications for the Facilities (including without
limitation any changes therein, additions thereto, substitutions
therefor and deletions therefrom), at any time and from time to
time prior to the Completion Date in any respect; provided,
however, that, if any such revision shall render inaccurate the
description of the Facilities contained in Exhibit A hereto, the
Company shall deliver to the Authority and the Trustee (a) a
revised Exhibit A containing a description of the Facilities as
revised, the accuracy of which shall have been certified by an
Authorized Company Representative, and (b) an opinion of Bond
Counsel to the effect that the Facilities as described in the
revised Exhibit A are such that the expenditure of the proceeds
of the Bonds pursuant to this Agreement will not, in and of
itself, impair the validity of the Bonds under the Act or the
exclusion from gross income for federal tax purposes of interest
on the Bonds. A revision of Exhibit A hereto pursuant to this
Section 3.03 shall not constitute an amendment, change or
modification of this Agreement within the meaning of Article XII
of the Indenture.
SECTION 3.04 Certification of Completion Date. The
Completion Date shall be the date on which the Facilities are
completed in their entirety and ready to be placed in service and
operated, all as determined by the Company. Promptly after the
Completion Date, the Company shall submit to the Authority and
the Trustee a certificate, executed by an Authorized Company
Representative, which shall specify the Completion Date and shall
state that (a) construction of the Facilities has been completed
and the Cost of Construction has been paid, except for any
portion thereof which has been incurred but is not then due and
payable, or the liability for the payment of which is being
contested or disputed by the Company, and for the payment of
which the Trustee is directed to retain specified amounts of
moneys in specified accounts within the Construction Fund, and
(b) the Facilities are suitable for operation for the purposes
for which they were designed. Notwithstanding the foregoing,
such certificate may state that it is given without prejudice to
any rights against third parties which exist at the date thereof
or which may subsequently come into being.
SECTION 3.05 Maintenance of Facilities; Remodeling. The
Company shall at all times to cause the Facilities, and every
element and unit thereof, to be maintained, preserved and kept in
thorough repair, working order and condition and cause all
needful and proper repairs and renewals thereto to be made;
provided, however, that the Company may cause the operation of
the Facilities, or any element or unit thereof, to be
discontinued if, in the judgment of the Company, it is no longer
advisable to operate the same, or if the Company intends to sell
or dispose of the same and within a reasonable time shall
endeavor to effectuate such sale or disposition.
After the Completion Date, the Company may, subject to the
provisions of Section 6.05 hereof, at its own expense remodel the
Facilities or make such substitutions, modifications and
improvements to the Facilities from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes,
which remodeling, substitutions, modifications and improvements
shall be included under the terms of this Agreement as part of
the Facilities.
SECTION 3.06 Insurance. The Company shall keep the
Facilities insured against fire and other risks to the extent
usually insured against by companies owning and operating similar
property, by reputable insurance companies or, at the Company's
election, with respect to all or any element or unit of the
Facilities, by means of an adequate insurance fund set aside and
maintained by it out of its own earnings or in conjunction with
other companies through an insurance fund, trust or other
agreement or, by means of unfunded self-insurance as may be
reasonable and customary by companies owning and operating
similar property. All proceeds of such insurance shall be for
the account of the Company.
SECTION 3.07 Condemnation. The Company shall be entitled
to the entire proceeds of any condemnation award or portion
thereof made for damages to or takings of the Facilities or other
property of the Company.
SECTION 3.08 Termination of Construction. (a) Anything
in this Agreement to the contrary notwithstanding, the Company
shall have the right at any time to terminate the construction of
the Facilities, in whole, if the Company shall have determined
that the continued construction or operation of the Facilities,
in whole, is impracticable, uneconomical or undesirable for any
reason.
(b) Promptly after the termination of the construction of
the Facilities, the Company shall submit to the Authority and the
Trustee a certificate, executed by an Authorized Company
Representative, which shall state the reasons for such
termination and shall state that the Cost of Construction, to the
extent of the construction of the Facilities as of the date of
such termination, has been paid, except for any Costs of
Construction which have been incurred but are not then due and
payable, or the liability for the payment of which is being
contested or disputed by the Company, and for the payment of
which the Trustee is directed to retain specified amounts of
moneys in specified accounts within the Construction Fund.
Notwithstanding the foregoing, such certificate may state that it
is given without prejudice to any rights against third parties
which exist at the date thereof or which may subsequently come
into being.
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01 Issuance of the Bonds. The Authority shall
issue the Bonds under and in accordance with the Indenture,
subject to the provisions of the bond purchase agreement among
the Authority, the initial purchaser or purchasers of the Bonds
and the Company. The Company hereby approves the issuance of the
Bonds and all terms and conditions thereof.
SECTION 4.02 Issuance of Other Obligations. The Authority
and the Company expressly reserve the right to enter into, to the
extent permitted by law, but shall not be obligated to enter
into, an agreement or agreements other than this Agreement with
respect to the issuance by the Authority, under an indenture or
indentures other than the Indenture, of obligations to provide
additional funds to pay the Cost of Construction of the
Facilities or obligations to refund all or any principal amount
of the Bonds, or any combination thereof.
SECTION 4.03 The Loans; Disposition of Bond Proceeds. The
Authority and the Company shall enter into escrow arrangements
with the trustee for the 1990 Bonds and shall cause $20,000,000
of the proceeds of the Bonds to be deposited in escrow with such
trustee to be applied to the payment of the 1990 Bonds upon the
redemption thereof. The Authority shall from time to time lend
to the Company the remaining proceeds of the issuance and sale of
the Bonds, other than accrued interest, if any, paid by the
initial purchaser or purchasers thereof, for the purposes
specified in this Agreement, such proceeds to be applied as
hereinafter and in the Indenture provided.
The Authority shall establish the Bond Fund and the
Construction Fund with the Trustee in accordance with Sections
4.01 and 5.01 of the Indenture. The proceeds of the issuance and
sale of the Bonds, other than the $20,000,000 deposited in escrow
with the trustee for the 1990 Bonds as hereinabove provided and
accrued interest, if any, paid by the initial purchaser or
purchasers thereof, shall be deposited into the Construction
Fund, and any such accrued interest shall be deposited into the
Bond Fund, all in accordance with the provisions of the
Indenture.
The moneys on deposit in the Construction Fund shall be
applied by the Trustee as provided in Section 4.04 hereof and as
otherwise provided in Article V of the Indenture. Until the
moneys on deposit in the Construction Fund are so applied, such
moneys shall be and remain the property of the Authority, subject
to the lien of the Indenture, and the Company shall have no
right, title or interest therein except as expressly provided in
this Agreement and the Indenture. However, in order to secure
the payment by the Company of the Loan Payments, and the payment
by the Authority of the principal of and premium, if any, and
interest on the Bonds, and the performance and observance by the
Company and the Authority of all covenants and conditions
expressed herein and in the Indenture and contained in the Bonds,
the Company hereby mortgages, pledges, assigns, creates and
grants a security interest in and confirms to the Trustee such
right, title and interest as the Company may be deemed to have or
hereafter acquire in the proceeds of the issuance and sale of the
Bonds to be deposited into the Construction Fund and the proceeds
from the investment and reinvestment thereof, upon terms and
conditions co-extensive with those set forth in the Indenture
with respect to the lien and security interest of the Trustee in
the Trust Estate (as defined in the Indenture).
SECTION 4.04 Disbursements from Construction Fund. (a) To
the extent that moneys on deposit in the Construction Fund shall
not otherwise have been applied in accordance with the provisions
of Article V of the Indenture, such moneys shall be loaned to the
Company from time to time to reimburse the Company for portions
of the Cost of Construction paid by it or to make payments to
persons designated by the Company in respect of portions of the
Cost of Construction, upon receipt by the Trustee of requisitions
executed by, or communications by telegram, telex or facsimile
transmission from, an Authorized Company Representative, which
requisitions or communications shall state with respect to each
payment to be made: (i) the requisition number, (ii) the name and
address of the person, firm or corporation to whom payment is due
or has been made (or, in the case of payments to the Bond Fund,
instructions to make such payments thereto), (iii) the amount
paid or to be paid, (iv) the account or accounts within the
Construction Fund from which payment of such requisition, or any
portion thereof, shall be made, (v) (A) that each obligation,
item of cost or expense with respect to which such requisition is
being made has been properly incurred and has been paid or is
then due and payable as an item of the Cost of Construction, is a
proper charge against the Construction Fund, and has not been the
basis of any previous final payment therefrom or from the
proceeds of any other obligations issued by the Authority or (B)
in the event that a portion of the Bonds shall have been paid,
redeemed or deemed to have been paid within the meaning of
Article VIII of the Indenture by reason of the application of the
proceeds of the sale of any obligations issued under an indenture
other than the Indenture and if the payment of such requisition
is to be made into the construction, acquisition or other similar
fund created under such other indenture, that upon disbursement
from such construction, acquisition or other similar fund, each
obligation, item of cost or expense mentioned in the requisition
for such disbursement will have been properly incurred and will
have been paid or will then be due and payable as an item of the
Cost of Construction, will be a proper charge against the
construction, acquisition or other similar fund under such
indenture, and will not have been the basis of any previous final
payment therefrom or from the proceeds of any other revenue bonds
issued by the Authority, (vi) that the payment of such
requisition will not result in a breach of any of the covenants
of the Company contained in subsection (c) or (d) of this Section
4.04 and (vii) that, to the best of the knowledge of such
Authorized Company Representative, there shall not have occurred
and be continuing any Event of Default described in Section 8.01
hereof. Any such communication by telegram, telex or facsimile
transmission shall be promptly confirmed by a requisition
executed by an Authorized Company Representative. The Company
shall furnish to the Authority a copy of each requisition
delivered to the Trustee promptly upon request therefor.
(b) In paying any requisition under this Section 4.04, the
Trustee shall be entitled to conclusively rely as to the
completeness and accuracy of all statements in such requisition
upon the approval of such requisition by an Authorized Company
Representative, execution thereof to be conclusive evidence of
such approval, and the Company shall indemnify and save harmless
the Authority and the Trustee from any liability incurred in
connection with any requisition so executed by an Authorized
Company Representative.
(c) The Company shall submit requisitions for Costs of
Construction in compliance with the requirements therefor
contained in the Tax Agreement, which on a cumulative aggregate
basis, if paid, would result in less than 97% of the sum of the
total amount of the proceeds of the Bonds expended, for any
purpose, being used to provide facilities for the local
furnishing of electric energy or other exempt facilities,
including facilities functionally related or subordinate thereto,
within the meaning of Section 142 of the Code; provided, however,
that the moneys paid from the Investment Account within the
Construction Fund shall be disregarded for purposes of the
foregoing covenant and all computations made in accordance
therewith if the Company shall have furnished to the Authority
and the Trustee an opinion of Bond Counsel to the effect that
such moneys may be so disregarded without impairing the exclusion
from gross income for federal tax purposes of interest on the
Bonds.
(d) The Company shall not submit or cause to be
submitted to the Trustee any requisition pursuant to this Section
4.04, and shall have no claim upon any moneys in the Construction
Fund, so long as there shall have occurred and be continuing any
Event of Default described in Section 8.01 hereof.
SECTION 4.05 Investment of Moneys in Funds and Accounts.
The Company and the Authority agree that any moneys held in any
fund or account created by the Indenture shall be invested as
provided in the Indenture.
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01 Loan Payments. In consideration of the
issuance of the Bonds and the disposition of the proceeds thereof
as contemplated in Section 4.03 hereof, the Company shall pay, or
cause to be paid, to the Trustee for the account of the Authority
an amount equal to the aggregate principal amount of the Bonds
from time to time Outstanding and, as interest on its obligation
to pay such amount, an amount equal to premium, if any, and
interest on such Bonds, such amounts to be paid in installments
due on the dates, in the amounts and in the manner provided in
the Indenture for the Authority to cause amounts to be deposited
in the Bond Fund for the payment of the principal of and premium,
if any, and interest on the Bonds whether at stated maturity,
upon redemption or acceleration or otherwise; provided, however,
that the obligation of the Company to make any such payment
hereunder shall be reduced by the amount of any reduction under
the Indenture of the amount of the corresponding payment required
to be made by the Authority thereunder.
SECTION 5.02 Payments Assigned; Obligation Absolute. It is
understood and agreed that all Loan Payments are, by the
Indenture, to be pledged by the Authority to the Trustee, and
that all rights and interest of the Authority hereunder (except
for the Authority's rights under Sections 5.03, 5.04, 6.03 and
8.05 hereof and any rights of the Authority to receive notices,
certificates, requests, requisitions and other communications
hereunder) are to be pledged and assigned to the Trustee. The
Company assents to such pledge and assignment and agrees that the
obligation of the Company to make the Loan Payments shall be
absolute, irrevocable and unconditional and shall not be subject
to cancellation, termination or abatement, or to any defense
other than payment or to any right of set-off, counterclaim or
recoupment arising out of any breach by the Authority or the
Trustee or any other party under this Agreement, the Indenture or
otherwise, or out of any obligation or liability at any time
owing to the Company by the Authority, the Trustee or any other
party, and, further, that the Loan Payments and the other
payments due hereunder shall continue to be payable at the times
and in the amounts herein and therein specified, whether or not
the Facilities, or any portion thereof, shall have been completed
or shall have been destroyed by fire or other casualty, or title
thereto, or the use thereof, shall have been taken by the
exercise of the power of eminent domain, and that there shall be
no abatement of or diminution in any such payments by reason
thereof, whether or not the Facilities shall be used or useful,
whether or not any applicable laws, regulations or standards
shall prevent or prohibit the use of the Facilities, or for any
other reason, all of the foregoing being subject, however, to the
provisions of Sections 6.01 and 7.01 hereof.
SECTION 5.03 Payment of Expenses. The Company shall pay,
or, to the extent permitted by this Agreement, cause to be paid
out of the Construction Fund, all Administration Expenses,
including, without limitation, Administration Expenses incurred
at and subsequent to the time the Bonds are deemed to have been
paid in accordance with Article VIII of the Indenture. The
payment of the compensation and the reimbursement of expenses and
advances of the Trustee, of the paying agent, any co-paying agent
and the registrar under the Indenture shall be made directly to
such entities.
SECTION 5.04 Indemnification. The Company releases the
Authority, the Trustee and their directors, officers, employees
and agents from, agrees that the Authority and the Trustee shall
not be liable for, and agrees to indemnify and hold the
Authority, the Trustee and their directors, officers, employees
and agents free and harmless from, any liability (including,
without limitation, attorneys' and other agents' fees and
expenses) for any loss or damage to property or any injury to or
death of any person that may be occasioned by any cause
whatsoever pertaining to the Facilities, except (i) in the case
of the Trustee, as a result of the negligence or bad faith or
willful misconduct of the Trustee or its directors, officers,
employees and agents; and (ii) in the case of the Authority, as
a result of the gross negligence or bad faith of the Authority or
its directors, officers, employees and agents.
The Company shall indemnify and hold the Authority and the
Trustee, free and harmless from any loss, claim, damage, tax,
penalty, liability, disbursement, litigation expenses, attorneys'
and other agents' fees and expenses or court costs arising out
of, or in any way relating to, the execution or performance of
this Agreement, the issuance or sale of the Bonds, actions taken
under the Indenture or any other cause whatsoever pertaining to
the Facilities, except (i) in the case of the Trustee, as a
result of the negligence or bad faith or willful misconduct of
the Trustee; and (ii) in the case of the Authority, as a result
of the gross negligence or bad faith of the Authority.
The Company shall indemnify and hold the Authority and its
directors, officers, employees and agents free and harmless from
any loss, claim, damage, tax, penalty, liability, disbursement,
litigation expenses, attorney's fees and expenses or court costs
arising out of or in any way relating to any untrue statement or
alleged untrue statement of any material fact or omission or
alleged omission to state a material fact necessary to make the
statements made, in light of the circumstances under which they
were made, not misleading in any official statement or other
offering material utilized in connection with the sale of any
Bonds.
SECTION 5.05 Payment of Taxes; Discharge of Liens. The
Company shall: (a) pay, or make provision for payment of, all
lawful taxes and assessments, including income, profits, property
or excise taxes, if any, or other municipal or governmental
charges, levied or assessed by any federal, state or municipal
government or political body upon the Facilities or any part
thereof or upon the Authority with respect to the Loan Payments,
when the same shall become due; and (b) pay or cause to be
satisfied and discharged or make adequate provision to satisfy
and discharge, within sixty (60) days after the same shall
accrue, any lien or charge upon the Loan Payments, and all lawful
claims or demands for labor, materials, supplies or other charges
which, if unpaid, might be or become a lien upon such amounts;
provided, that, if the Company shall first notify the Authority
and the Trustee of its intention so to do, the Company may in
good faith contest any such lien or charge or claims or demands
in appropriate legal proceedings, and in such event may permit
the items so contested and identified as such by the Company to
remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom, unless the Trustee shall notify
the Company in writing that, in the opinion of counsel to the
Trustee based upon material facts disclosed to the Trustee
without any duty of investigation, by nonpayment of any such
items the lien of the Indenture as to the Loan Payments will be
materially endangered, in which event the Company shall promptly
pay and cause to be satisfied and discharged all such unpaid
items. The Authority shall cooperate fully with the Company in
any such contest.
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01 Maintenance of Corporate Existence. Except as
permitted in this Section 6.01, the Company shall maintain its
corporate existence, shall not sell, transfer or otherwise
dispose of all of its assets, as or substantially as an entirety,
and shall not consolidate with or merge with or into another
corporation. The Company may consolidate with or merge into
another corporation incorporated under the laws of the United
States of America, any state thereof or the District of Columbia,
or sell, transfer or otherwise dispose of all of its assets, as
or substantially as an entirety, to any Person, if the surviving
or resulting corporation (if other than the Company) or the
transferee Person, as the case may be, prior to or simultaneously
with such merger, consolidation, sale, transfer or disposition,
assumes, by delivery to the Trustee and the Authority of an
instrument in writing satisfactory in form to the Trustee, all
the obligations of the Company under this Agreement, including,
without limitation, obligations of the Company under Section 5.01
hereof. Upon such an assumption following any such sale, transfer
or other disposition of assets, the Company shall be released and
discharged from all liability in respect of all obligations under
this Agreement. Notwithstanding the foregoing, in the case of
any such sale, transfer or other disposition of assets, which do
not include the Facilities, the Company shall remain liable in
respect of obligations under this Agreement other than the
obligations under Section 5.01 hereof, and the transferee shall
not be required to assume any obligations hereunder other than
the obligations under Section 5.01 hereof; provided, however,
that the transferee shall be required to assume all such other
obligations unless the Company shall have delivered to the
Authority and the Trustee an opinion of Bond Counsel to the
effect that the non-assumption by the transferee of such other
obligations will not impair the validity under the Act of the
Bonds and will not adversely affect the exclusion from gross
income for federal tax purposes of interest on the Bonds.
If consolidation, merger or sale, transfer or other
disposition is made as permitted by this Section 6.01, the
provisions of this Section 6.01 shall continue in full force and
effect and no further consolidation, merger or sale or other
transfer shall be made except in compliance with the provisions
of this Section 6.01.
Anything in this Agreement to the contrary notwithstanding,
the sale, transfer or other disposition by the Company of all of
its facilities (a) for the generation of electric energy, (b) for
the transmission of electric energy or (c) for the distribution
of electric energy, in each case considered alone, or all of its
facilities described in clauses (a) and (b), considered together,
or all of its facilities described in clauses (b) and (c),
considered together, shall in no event be deemed to constitute a
sale, transfer or other disposition of all the properties of the
Company, as or substantially as an entirety, unless, immediately
following such sale, transfer or other disposition, the Company
shall own no properties in the other such categories of property
not so sold, transferred or otherwise disposed of. The character
of particular facilities shall be determined by reference to the
Uniform System of Accounts prescribed for public utilities and
licensees subject to the Federal Power Act, as amended, to the
extent applicable.
SECTION 6.02 Permits or Licenses. In the event that it may
be necessary for the proper performance of this Agreement on the
part of the Company or the Authority that any application or
applications for any permit or license to do or to perform
certain things be made to any governmental or other agency by the
Company or the Authority, the Company and the Authority each
shall, upon the request of either, execute such application or
applications.
SECTION 6.03 Authority's Access to Facilities. The
Authority shall have the right, upon appropriate prior notice to
the Company, to have reasonable access to the Facilities during
normal business hours for the purpose of making examinations and
inspections of the same.
SECTION 6.04 Tax-Exempt Status of Interest on Bonds. (a)
It is the intention of the parties hereto that interest on the
Bonds shall be and remain tax-exempt, and to that end the
covenants and agreements of the Authority and the Company in this
Section 6.04 and the Tax Agreement are for the benefit of the
Owners from time to time of the Bonds.
(b) Each of the Company and the Authority covenants
and agrees for the benefit of the Owners from time to time of the
Bonds that it will not directly or indirectly use or permit the
use of (to the extent within its control) the proceeds of any of
the Bonds or any other funds, or take or omit to take any action,
if and to the extent such use, or the taking or omission to take
such action, would cause any of the Bonds to be "arbitrage bonds"
within the meaning of Section 148 of the Code or otherwise
subject to federal income taxation by reason of Section 103 and
141 through 150 of the Code and any applicable regulations
promulgated thereunder. To such ends, the Authority and the
Company shall comply with all requirements of such Section 148 to
the extent applicable to the Bonds. In the event that at any
time the Authority or the Company is of the opinion that for
purposes of this Section 6.04(b) it is necessary to restrict or
limit the yield on the investment of any moneys held by the
Trustee under the Indenture, the Authority or the Company shall
so notify the Trustee in writing.
Without limiting the generality of the foregoing, the
Company and the Authority agree that there shall be paid from
time to time all amounts required to be rebated to the United
States of America pursuant to Section 148(f) of the Code and any
applicable Treasury Regulations. This covenant shall survive
payment in full or defeasance of the Bonds and the satisfaction
and discharge of the Indenture. The Company specifically
covenants to pay or cause to be paid, the Rebate Requirement as
defined and described in the Tax Agreement.
(c) The Authority certifies and represents that it has
not taken, and the Authority covenants and agrees that it will
not take, any action which results in interest paid on the Bonds
being included in gross income of the Owners of the Bonds for
federal tax purposes pursuant to Sections 103 and 141 of the Code
and any regulations thereunder; and the Company certifies and
represents that it has not taken or (to the extent within its
control) permitted to be taken, and the Company covenants and
agrees that it will not take or (to the extent within its
control) permit to be taken any action which will cause the
interest on the Bonds to become includable in gross income for
federal income tax purposes; provided, however, that neither the
Company nor the Authority shall be deemed to have violated these
covenants if the interest on any of the Bonds becomes taxable to
a person solely because such person is a "substantial user" of
the Facilities or a "related person" within the meaning of
Section 147(a) of the Code; and provided, further, that none of
the covenants and agreements herein contained shall require
either the Company or the Authority to enter an appearance or
intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws,
rules or regulations or in connection with any decisions of any
court or administrative agency or other governmental body
affecting the taxation of interest on the Bonds. The Company
acknowledges having read Section 7.08 of the Indenture and agrees
to perform all duties imposed on it by such Section 7.08, by this
Section and by the Tax Agreement. Insofar as Section 7.08 of the
Indenture and the Tax Agreement impose duties and
responsibilities on the Company, they are specifically
incorporated herein by reference.
(d) Notwithstanding any provision of this Section 6.04
and Section 7.08 of the Indenture, if the Company shall provide
to the Authority and the Trustee an opinion of Bond Counsel to
the effect that any specified action required under this Section
6.04 and Section 7.08 of the Indenture is no longer required or
that some further or different action is required to maintain the
tax-exempt status of interest on the Bonds, the Company, the
Trustee and the Authority may conclusively rely upon such opinion
in complying with the requirements of this Section 6.04, and the
covenants hereunder shall be deemed to be modified to that
extent.
SECTION 6.05 Use of Facilities. So long as any Bonds are
Outstanding and the Facilities are operated by or for the benefit
of the Company, the Company shall cause the Facilities to be used
for purposes contemplated by the Act and in the Tax Agreement.
SECTION 6.06 Financing Statements. The Company shall file
and record, or cause to be filed and recorded, all financing
statements and continuation statements referred to in Section
7.07 of the Indenture.
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01 Conditions. The Company's interest in this
Agreement may be assigned as a whole or in part, and its interest
in the Facilities may be leased, sold, transferred or otherwise
disposed of by the Company as a whole or in part (whether an
interest in a specific element or unit or an undivided interest),
to any Person; provided, however, that no such assignment, lease,
sale, transfer or other disposition (a) shall relieve the Company
from its primary liability for its obligations under Section 5.01
hereof or (b) shall be made unless the assignee, lessee,
purchaser or other transferee, as the case may be, prior to or
simultaneously with such assignment, lease, sale, transfer or
other disposition, assumes, by delivery of an instrument in
writing satisfactory in form to the Trustee and the Authority,
all other obligations of the Company hereunder to the extent of
the interest assigned, leased, sold, transferred or otherwise
disposed of, and the Company shall be released of and discharged
from such obligations to the extent so assumed. Notwithstanding
the foregoing, (a) if (i) the Company's interest in this
Agreement shall be assigned as a whole or in undivided part, (ii)
the Company's interest in the Facilities shall be leased as a
whole or in undivided part and the term of such leasehold or the
term of any extension or extensions thereof at the option of the
Company shall extend beyond the maturity date of the Bonds or
(iii) the Company's interest in the Facilities shall be sold,
transferred or otherwise disposed of as a whole or in undivided
part, and (b) in the event that the assignee, lessee, purchaser
or other transferee shall assume the obligations of the Company
under Section 5.01 hereof for the remaining term of this
Agreement, to the extent of such assignment, lease, sale,
transfer or other disposition, the Company shall be released from
and discharged of all liability in respect of such obligations to
the extent so assumed (but only to such extent); provided,
however, that the release and discharge of the Company pursuant
to clause (b) shall be conditioned upon the delivery by the
Company to the Authority and the Trustee of a certificate of an
Independent Expert (as hereinafter defined) describing the
interests so assigned, leased, sold, transferred or otherwise
disposed of, together with all other rights, interests, assets
and/or properties assigned, leased, sold, transferred or
otherwise disposed of by the Company to the same Person in the
same or a related transaction, stating that such rights,
interests, assets and/or properties so described constitute
facilities for the generation, transmission and/or distribution
of electric energy and stating that, in the opinion of such
Independent Expert, the Fair Value (as hereinafter defined) of
such rights, interests, assets and/or properties to the Person
acquiring the same is not less than an amount equal to 10/7 of
the sum of (x) the aggregate principal amount of the Bonds then
Outstanding and (y) the outstanding principal amount of all other
obligations of the Company representing indebtedness for borrowed
money or for the deferred purchase price of property which are
being assumed by such Person; provided, further, that after any
such assumption, release and discharge as aforesaid, the Company
may again assume such obligations under Section 5.01 hereof, in
whole or in part, at any time and from time to time, and, to the
extent of any such assumption by the Company (but only to such
extent), the aforesaid assignee, lessee, purchaser or other
transferee shall be released from and discharged of all liability
in respect of such obligations.
Anything herein to the contrary notwithstanding, the Company
shall not make any assignment, lease or sale as provided in the
immediately preceding paragraph unless it shall have furnished to
the Authority and the Trustee an opinion of Bond Counsel to the
effect that the proposed assignment, lease or sale will not
impair the validity under the Act of the Bonds and will not
adversely affect the exclusion of interest on the Bonds from
gross income for federal tax purposes.
After any lease, sale, transfer or other disposition of any
element or unit of the Facilities, or any interest therein, the
Company may, at its option, cause such element or unit, or
interest therein, to no longer be deemed to be part of the
Facilities for the purposes of this Agreement by delivering to
the Authority and the Trustee the agreements or other documents
required pursuant to Section 7.02 hereof together with an
instrument signed by an Authorized Company Representative stating
that such element or unit, or interest therein, shall no longer
be deemed to be part of the Facilities for the purposes of this
Agreement.
For purposes of this Section 7.01:
(a) "Independent Expert" means a Person which (i) is
an engineer, appraiser or other expert and which, with
respect to any certificate to be delivered pursuant to this
Section, is qualified to pass upon the matter set forth in
such certificate and (ii)(A) is in fact independent, (B)
does not have any direct material financial interest in the
transferee or in any obligor upon the Bonds or under this
Agreement or in any affiliate of the transferee or any such
obligor, (C) is not connected with the transferee or any
such obligor as an officer, employee, promoter, underwriter,
trustee, partner, director or any person performing similar
functions and (D) is approved by the Trustee in the exercise
of reasonable care; for purposes of this definition
"engineer" means a Person engaged in the engineering
profession or otherwise qualified to pass upon engineering
matters (including, but not limited to, a Person licensed as
a professional engineer, whether or not then engaged in the
engineering profession); and for purposes of this definition
"appraiser" means a Person engaged in the business of
appraising property or otherwise qualified to pass upon the
Fair Value or fair market value of property.
(b) "Fair Value" means the fair value of the
interests, rights, assets and/or properties assigned,
leased, sold, transferred or otherwise disposed of (but, in
the case of a lease, only to the extent of such lease) as
may be determined by reference to (i) except in the case of
a lease, the amount which would be likely to be obtained in
an arm's-length transaction with respect to such interests,
rights, assets and/or properties between an informed and
willing buyer and an informed and willing seller, under no
compulsion, respectively, to buy or sell, (ii) in the case
of a lease, the amount (discounted to present value at a
rate not lower than the taxable equivalent of the yield to
maturity of the Bonds based on prevailing market prices
immediately prior to the first public announcement of the
proposed transaction) which would be likely to be obtained
in an arm's-length transaction with respect to such
interests, rights, assets and/or properties between an
informed and willing lessee and an informed and willing
lessor, neither under any compulsion to lease; (iii) the
amount of investment with respect to such interests, rights,
assets and/or properties which, together with a reasonable
return thereon, would be likely to be recovered through
ordinary business operations or otherwise, (iv) the cost,
accumulated depreciation and replacement cost with respect
to such interests, rights, assets and/or properties and/or
(v) any other relevant factors; provided, however, that (x)
Fair Value shall be determined without deduction for any
mortgage, deed of trust, pledge, security interest,
encumbrance, lease, reservation, restriction, servitude,
charge or similar right or any other lien of any kind and
(y) the Fair Value to the transferee of any property shall
not reflect any reduction relating to the fact that such
property may be of less value to a Person which is not the
owner, lessee or operator of the property or any portion
thereof than to a Person which is such owner, lessee or
operator. Fair Value may be determined, without physical
inspection, by the use of accounting and engineering records
and other data maintained by the Company or the transferee
or otherwise available to the Independent Expert certifying
the same.
SECTION 7.02 Instrument Furnished to the Authority and
Trustee. The Company shall, within fifteen (15) days after the
delivery thereof, furnish to the Authority and the Trustee a true
and complete copy of the agreements or other documents
effectuating any such assignment, lease, sale, transfer or other
disposition.
SECTION 7.03 Limitation. This Agreement shall not be
assigned nor shall the Facilities be leased, sold, transferred or
otherwise disposed of, in whole or in part, except as provided in
this Article VII or in Section 6.01 or 5.02 hereof. This Article
VII shall not apply to any sale, transfer or other disposition by
the Company of all of its assets, as or substantially as an
entirety, as contemplated in Section 6.01.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default. Each of the following
events shall constitute and is referred to in this Agreement as
an "Event of Default":
(a) a failure by the Company to make any Loan Payment,
which failure shall have resulted in an "Event of Default"
under clause (a) or (b) of Section 9.01 of the Indenture;
(b) a failure by the Company to pay when due any
amount required to be paid under this Agreement or to
observe and perform any covenant, condition or agreement on
its part to be observed or performed (other than a failure
described in clause (a) above), which failure shall continue
for a period of sixty (60) days after written notice,
specifying such failure and requesting that it be remedied,
shall have been given to the Company by the Authority or the
Trustee, unless the Authority and the Trustee shall agree in
writing to an extension of such period prior to its
expiration; provided, however, that the Authority and the
Trustee shall be deemed to have agreed to an extension of
such period if corrective action is initiated by the Company
within such period and is being diligently pursued; or
(c) the dissolution or liquidation of the Company, or
failure by the Company promptly to lift any execution,
garnishment or attachment of such consequence as will impair
its ability to make any payments under this Agreement, or
the entry of an order for relief by a court of competent
jurisdiction in any proceeding for its liquidation or
reorganization under the provisions of any bankruptcy act or
under any similar act which may be hereafter enacted, or an
assignment by the Company for the benefit of its creditors,
or the entry by the Company into an agreement of composition
with its creditors (the term "dissolution or liquidation of
the Company," as used in this clause, shall not be construed
to include the cessation of the corporate existence of the
Company resulting either from a merger or consolidation of
the Company into or with another corporation or a
dissolution or liquidation of the Company following a
transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions
contained in Section 6.01 hereof).
SECTION 8.02 Force Majeure. The provisions of Section 8.01
hereof are subject to the following limitations: if by reason of
acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders of any kind of the government of
the United States or of the State of Arizona, or any department,
agency, political subdivision, court or official of any of them,
or any civil or military authority; insurrections; riots;
epidemics; landslides; lightning; earthquakes; volcanoes; fires;
hurricanes; tornadoes; storms; floods; washouts; droughts;
arrests; restraint of government and people; civil disturbances;
explosions; breakage or accident to machinery; partial or entire
failure of utilities; or any cause or event not reasonably within
the control of the Company, the Company is unable in whole or in
part to carry out any one or more of its agreements or
obligations contained herein, other than its obligations under
Sections 5.01, 5.03, 5.05 and 6.01 hereof, the Company shall not
be deemed in default by reason of not carrying out said agreement
or agreements or performing said obligation or obligations during
the continuance of such inability. The Company shall make
reasonable effort to remedy with all reasonable dispatch the
cause or causes preventing it from carrying out its agreements;
provided, that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion
of the Company, and the Company shall not be required to make
settlement of strikes, lockouts and other industrial disturbances
by acceding to the demands of the opposing party or parties when
such course is in the judgment of the Company unfavorable to the
Company.
SECTION 8.03 Remedies. (a) Upon the occurrence and
continuance of any Event of Default described in clause (a) of
Section 8.01 hereof, and further upon the condition that, in
accordance with the terms of the Indenture, the Bonds shall have
been declared to be immediately due and payable pursuant to any
provision of the Indenture, the Loan Payments shall, without
further action, become and be immediately due and payable.
Any waiver of any "Event of Default" under the Indenture and
a rescission and annulment of its consequences shall constitute a
waiver of the corresponding Event or Events of Default under this
Agreement and a rescission and annulment of the consequences
thereof.
(b) Upon the occurrence and continuance of any Event of
Default, the Authority, or the Trustee with respect to the rights
of the Authority assigned to the Trustee by the Indenture, may
take any action at law or in equity to collect any payments then
due and thereafter to become due, or to enforce performance and
observance of any obligation, agreement or covenant of the
Company hereunder.
(c) Any amounts collected by the Trustee from the Company
pursuant to this Section 8.03 shall be applied in accordance with
the Indenture.
SECTION 8.04 No Remedy Exclusive. No remedy conferred upon
or reserved to the Authority hereby is intended to be exclusive
of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law
or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but
any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the
Authority to exercise any remedy reserved to it in this Article
VIII, it shall not be necessary to give any notice, other than
such notice as may be herein expressly required.
SECTION 8.05 Reimbursement of Attorneys' and Agents' Fees.
If the Company shall default under any of the provisions hereof
and the Authority or the Trustee shall employ attorneys or agents
or incur other reasonable expenses for the collection of payments
due hereunder or for the enforcement of performance or observance
of any obligation or agreement on the part of the Company
contained herein, the Company will on demand therefor reimburse
the Authority or the Trustee and any predecessor Trustee, as the
case may be, for the reasonable fees of such attorneys and such
other reasonable expenses so incurred.
SECTION 8.06 Waiver of Breach. In the event any obligation
created hereby shall be breached by either of the parties and
such breach shall thereafter be waived by the other party, such
waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder. In view
of the assignment of certain of the Authority's rights and
interest hereunder to the Trustee, the Authority shall have no
power to waive any breach hereunder by the Company in respect of
such rights and interest without the consent of the Trustee, and
the Trustee may exercise any of such rights of the Authority
hereunder.
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01 Redemption of Bonds. The Authority shall
take, or cause to be taken, the actions required by the Indenture
to discharge the lien created thereby through the redemption, or
provision for payment or redemption, of all Bonds then
Outstanding, or to effect the redemption, or provision for
payment or redemption, of less than all the Bonds then
Outstanding, upon receipt by the Authority and the Trustee from
the Company of a notice designating the principal amount of the
Bonds to be redeemed, or for the payment or redemption of which
provision is to be made, and, in the case of redemption of Bonds,
or provision therefor, specifying the date of redemption and the
applicable redemption provision of the Indenture. Such
redemption date shall not be less than 45 days from the date such
notice is given (unless a shorter notice is satisfactory to the
Trustee). Unless otherwise stated therein, such notice shall be
revocable by the Company at any time prior to the time at which
the Bonds to be redeemed, or for the payment or redemption of
which provision is to be made, are first deemed to be paid in
accordance with Article VIII of the Indenture. The Company shall
furnish any moneys or Government Obligations (as defined in the
Indenture) required by the Indenture to be deposited with the
Trustee or otherwise paid by the Authority in connection with any
of the foregoing purposes.
SECTION 9.02 Compliance with the Indenture. Anything in
this Agreement to the contrary notwithstanding, the Authority and
the Company shall take all actions required by this Agreement and
the Indenture in order to comply with any provisions of the
Indenture requiring the mandatory redemption of Bonds.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Term of Agreement. This Agreement shall
remain in full force and effect from the date hereof until the
right, title and interest of the Trustee in and to the Trust
Estate (as defined in the Indenture) shall have ceased,
terminated and become void in accordance with Article VIII of the
Indenture and until all payments required under this Agreement
shall have been made. Notwithstanding the foregoing, the
covenants contained in Section 5.03, 5.04, Section 6.04 and 8.05
hereof shall survive the termination of this Agreement.
SECTION 10.02 Notices. Except as otherwise provided in
this Agreement, all notices, certificates, requests, requisitions
and other communications hereunder shall be in writing and shall
be sufficiently given and shall be deemed given when mailed by
registered mail, postage prepaid, addressed as follows: if to the
Authority, c/o Russo, Cox & Russo, P.C., 1820 East River Road,
Suite 230, Tucson, Arizona 85718; if to the Company, at 220 West
Sixth Street, Tucson, Arizona 85702, Attention: Treasurer; and if
to the Trustee, at such address as shall be designated by it in
the Indenture. A copy of each notice, certificate, request or
other communication given hereunder to the Authority, the
Company, or the Trustee shall also be given to the others. The
Authority, the Company, and the Trustee may, by notice given
hereunder, designate any further or different addresses to which
subsequent notices, certificates, requests or other
communications shall be sent.
SECTION 10.03 Parties in Interest. This Agreement shall
inure to the benefit of and shall be binding upon the Authority,
the Company and their respective successors and assigns, and no
other person, firm or corporation shall have any right, remedy or
claim under or by reason of this Agreement; provided, however,
that the lien and security interest granted to the Trustee in
Section 4.03 hereof, as well as the rights and remedies granted
to the Authority in Article VIII hereof, shall inure to the
benefit of the Trustee, on behalf of the Owners from time to time
of the Bonds, and shall be enforceable by the Trustee as a third
party beneficiary or as assignee of the Authority; and provided,
further, that neither Pima County, Arizona nor the State of
Arizona shall in any event be liable for the payment of the
principal of or premium, if any, or interest on the Bonds or for
the performance of any pledge, mortgage, obligation or agreement
created by or arising out of this Agreement or the issuance of
the Bonds, and further that neither the Bonds nor any such
obligation or agreement of the Authority shall be construed to
constitute an indebtedness of Pima County, Arizona or the State
of Arizona within the meaning of any constitutional or statutory
provisions whatsoever, but shall be limited obligations of the
Authority payable solely out of the revenues derived from this
Agreement, or from the sale of the Bonds, or from the investment
or reinvestment of any of the foregoing, as provided herein and
in the Indenture.
SECTION 10.04 Amendments. This Agreement may be amended
only by written agreement of the parties hereto, subject to the
limitations set forth herein and in the Indenture.
SECTION 10.05 Counterparts. This Agreement may be executed
in any number of counterparts, each of which, when so executed
and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Agreement.
SECTION 10.06 Severability. If any clause, provision or
section of this Agreement shall, for any reason, be held illegal
or invalid by any court, the illegality or invalidity of such
clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this
Agreement shall be construed and enforced as if such illegal or
invalid clause, provision or section had not been contained
herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement
or obligation shall be deemed to be the agreement or obligation
of the Authority or the Company, as the case may be, to the full
extent permitted by law.
SECTION 10.07 Governing Law. The laws of the State of
Arizona shall govern the construction and enforcement of this
Agreement, except that the provisions of Section 13.09 of the
Indenture, construed as provided in Section 13.07 of the
Indenture, shall apply to this Agreement as if contained herein.
SECTION 10.08 Notice Regarding Cancellation of Contracts.
As required by the provisions of Section 38-511, Arizona Revised
Statutes, as amended, notice is hereby given that political
subdivisions of the State of Arizona or any of their departments
or agencies may, within three (3) years of its execution, cancel
any contract, without penalty or further obligation, made by the
political subdivisions or any of their departments or agencies on
or after September 30, 1988, if any person significantly involved
in initiating, negotiating, securing, drafting or creating the
contract on behalf of the political subdivisions or any of their
departments or agencies is, at any time while the contract or any
extension of the contract is in effect, an employee or agent of
any other party to the contract in any capacity or a consultant
to any other party of the contract with respect to the subject
matter of the contract. The cancellation shall be effective when
written notice from the chief executive officer or governing body
of the political subdivision is received by all other parties to
the contract unless the notice specifies a later time.
The Company covenants and agrees not to employ as an
employee, agent or, with respect to the subject matter of this
Agreement, a consultant, any person significantly involved in
initiating, negotiating, securing, drafting or creating such
Agreement on behalf of the Authority within three (3) years from
the execution hereof, unless a waiver is provided by the
Authority.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed as of the day and year first above
written.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
By: /s/ Stanley Lehman
----------------------------------
President
TUCSON ELECTRIC POWER COMPANY
By: /s/ Kevin Larson
-----------------------------------
Vice President
<PAGE>
EXHIBIT A
A portion of the costs of the construction, improvement or
equipping of the following Facilities will be financed or
refinanced with the proceeds of the Industrial Development
Revenue Bonds, 1997 Series A (Tucson Electric Power Company
Project) issued by The Industrial Development Authority of the
County of Pima and referred to in the foregoing Loan Agreement.
_____________
Certain additions and improvements to the Company's lower
voltage electric transmission and distribution system of the City
of Tucson and environs in Pima County and to Fort Huachuca in
adjacent Cochise County, Arizona and additions and improvements
to the Irvington Generating Station located in the City of
Tucson, more particularly described in the Tax Certificate and
Agreement, dated as of October 1, 1997, between The Industrial
Development Authority of the County of Pima and Tucson Electric
Power Company.
Exhibit 4b
=================================================================
INDENTURE OF TRUST
(1997 SERIES A)
BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
AND
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
------------
DATED AS OF SEPTEMBER 15, 1997
------------
AUTHORIZING
INDUSTRIAL DEVELOPMENT REVENUE BONDS,
1997 SERIES A
(TUCSON ELECTRIC POWER COMPANY PROJECT)
=================================================================
<PAGE>
TABLE OF CONTENTS*
Page
----
Parties . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . 1
Granting Clause . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE BONDS
Section 2.01. Creation of Bonds. . . . . . . . . . . . . . . 9
Section 2.02. Form of Bonds. . . . . . . . . . . . . . . . . 9
Section 2.03. Execution of Bonds. . . . . . . . . . . . . . 10
Section 2.04. Authentication of Bonds. . . . . . . . . . . . 10
Section 2.05. Bonds Not General Obligations. . . . . . . . . 10
Section 2.06. Prerequisites to Authentication of Bonds. . . 10
Section 2.07. Lost or Destroyed Bonds or Bonds Canceled
in Error . . . . . . . . . . . . . . . . . . 11
Section 2.08. Transfer, Registration and Exchange of Bonds . 11
Section 2.09. Other Obligations . . . . . . . . . . . . . . 13
Section 2.10 Temporary Bonds. . . . . . . . . . . . . . . . 13
Section 2.11. Cancellation of Bonds . . . . . . . . . . . . 13
Section 2.12. Payment of Principal and Interest . . . . . . 13
Section 2.13. Applicability of Book-Entry Provisions . . . . 14
ARTICLE III
REDEMPTION OF BONDS
Section 3.01. Redemption Provisions . . . . . . . . . . . . 14
Section 3.02. Selection of Bonds to be Redeemed . . . . . . 15
Section 3.03. Procedure for Redemption . . . . . . . . . . . 16
Section 3.04. Payment of Redemption Price . . . . . . . . . 16
Section 3.05. No Partial Redemption After Default . . . . . 17
ARTICLE IV
THE BOND FUND
-------------------
* This table of contents is not a part of the Indenture, and is for
convenience only. The captions herein are of no legal effect and
do not vary the meaning or legal effect of any part of the
Indenture.
<PAGE>
Section 4.01. Creation of Bond Fund . . . . . . . . . . . . 17
Section 4.02. Liens . . . . . . . . . . . . . . . . . . . . 17
Section 4.03. Deposits into Bond Fund . . . . . . . . . . . 17
Section 4.04. Use of Moneys in Bond Fund . . . . . . . . . . 18
Section 4.05. Custody of Bond Fund; Withdrawal of Moneys . . 18
Section 4.06. Bonds Not Presented for Payment . . . . . . . 18
Section 4.07. Moneys Held in Trust . . . . . . . . . . . . . 19
ARTICLE V
THE CONSTRUCTION FUND
Section 5.01. Creation of, and Disbursements from,
Construction Fund . . . . . . . . . . . . . 19
Section 5.02. Completion of Facilities; Termination
of Construction. . . . . . . . . . . . . . . 20
Section 5.03. Redemption of All Outstanding Bonds . . . . . 21
Section 5.04. Acceleration of Bonds . . . . . . . . . . . . 21
Section 5.05. Refunding of Bonds . . . . . . . . . . . . . . 21
Section 5.06. Moneys Held in Trust . . . . . . . . . . . . . 22
ARTICLE VI
INVESTMENTS
Section 6.01. Investments . . . . . . . . . . . . . . . . . 22
ARTICLE VII
GENERAL COVENANTS
Section 7.01. No General Obligations . . . . . . . . . . . . 23
Section 7.02. Performance of Covenants of the Authority;
Representations . . . . . . . . . . . . . . 23
Section 7.03. Maintenance of Rights and Powers; Compliance
with Laws . . . . . . . . . . . . . . . . . 23
Section 7.04. Enforcement of Obligations of the Company;
Amendments . . . . . . . . . . . . . . . . . 23
Section 7.05. Further Instruments. . . . . . . . . . . . . . 23
Section 7.06. No Disposition of Trust Estate. . . . . . . . 24
Section 7.07. Financing Statements. . . . . . . . . . . . 24
Section 7.08. Tax Covenants; Rebate Fund. . . . . . . . . . 24
Section 7.09. Notices of Trustee. . . . . . . . . . . . . . 25
ARTICLE VIII
DEFEASANCE
Section 8.01. Defeasance. . . . . . . . . . . . . . . . . . 25
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Events of Default. . . . . . . . . . . . . . . 26
Section 9.02. Remedies. . . . . . . . . . . . . . . . . . . 27
Section 9.03. Restoration to Former Position. . . . . . . . 27
Section 9.04. Owners' Right to Direct Proceedings. . . . . . 28
Section 9.05. Limitation on Owners' Right to
Institute Proceedings. . . . . . . . . . . . 28
Section 9.06. No Impairment of Right to Enforce Payment. . . 28
Section 9.07. Proceedings by Trustee without Possession
of Bonds. . . . . . . . . . . . . . . . . . 28
Section 9.08. No Remedy Exclusive. . . . . . . . . . . . . . 28
Section 9.09. No Waiver of Remedies. . . . . . . . . . . . . 29
Section 9.10. Application of Moneys. . . . . . . . . . . . . 29
Section 9.11. Severability of Remedies. . . . . . . . . . . 29
ARTICLE X
TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
Section 10.01. Acceptance of Trusts. . . . . . . . . . . . . 30
Section 10.02. No Responsibility for Recitals. . . . . . . . 30
Section 10.03. Limitations on Liability. . . . . . . . . . . 30
Section 10.04. Compensation, Expenses and Advances. . . . . . 30
Section 10.05. Notice of Events of Default. . . . . . . . . . 31
Section 10.06. Action by Trustee. . . . . . . . . . . . . . . 31
Section 10.07. Good Faith Reliance. . . . . . . . . . . . . . 31
Section 10.08. Dealings in Bonds and with the Authority
and the Company. . . . . . . . . . . . . . . 31
Section 10.09. Allowance of Interest. . . . . . . . . . . . . 32
Section 10.10. Construction of Indenture. . . . . . . . . . . 32
Section 10.11. Resignation of Trustee. . . . . . . . . . . . 32
Section 10.12. Removal of Trustee. . . . . . . . . . . . . . 32
Section 10.13. Appointment of Successor Trustee. . . . . . . 32
Section 10.14. Qualifications of Successor Trustee. . . . . . 33
Section 10.15. Judicial Appointment of Successor Trustee. . . 33
Section 10.16. Acceptance of Trusts by Successor Trustee. . . 33
Section 10.17. Successor by Merger or Consolidation. . . . . 33
Section 10.18. Standard of Care. . . . . . . . . . . . . . . 34
Section 10.19. Notice to Owners of Bonds of Event of Default. 34
Section 10.20. Intervention in Litigation of the Authority. . 34
Section 10.21. Paying Agent; Co-Paying Agents. . . . . . . . 34
Section 10.22. Qualifications of Paying Agent and
Co-Paying Agents; Resignation; Removal. . . 35
Section 10.23. Registrar. . . . . . . . . . . . . . . . . . . 35
Section 10.24. Qualifications of Registrar; Resignation;
Removal. . . . . . . . . . . . . . . . . . . 36
Section 10.25. Several Capacities. . . . . . . . . . . . . . 36
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND
PROOF OF OWNERSHIP OF BONDS
Section 11.01. Execution of Instruments; Proof of Ownership. 36
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
Section 12.01. Limitations. . . . . . . . . . . . . . . . . . 37
Section 12.02. Supplemental Indentures without Owner Consent. 37
Section 12.03. Supplemental Indentures with Consent of
Owners . . . . . . . . . . . . . . . . . . . 38
Section 12.04. Effect of Supplemental Indenture. . . . . . . 39
Section 12.05. Consent of the Company. . . . . . . . . . . . 39
Section 12.06. Amendment of Loan Agreement without Consent
of Owners. . . . . . . . . . . . . . . . . . 39
Section 12.07. Amendment of Loan Agreement with Consent
of Owners. . . . . . . . . . . . . . . . . . 39
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Successors of the Authority. . . . . . . . . . 40
Section 13.02. Parties in Interest. . . . . . . . . . . . . . 40
Section 13.03. Severability. . . . . . . . . . . . . . . . . 40
Section 13.04. No Personal Liability of Authority Officials. 40
Section 13.05. Bonds Owned by the Authority or the Company. . 40
Section 13.06. Counterparts. . . . . . . . . . . . . . . . . 41
Section 13.07. Governing Law. . . . . . . . . . . . . . . . . 41
Section 13.08. Notices. . . . . . . . . . . . . . . . . . . . 41
Section 13.09. Holidays. . . . . . . . . . . . . . . . . . . 41
Section 13.10. Statutory Notice Regarding Cancellation
of Contracts. . . . . . . . . . . . . . . 41
Testimonium . . . . . . . . . . . . . . . . . . . . . . . . 43
Signatures and Seals . . . . . . . . . . . . . . . . . . . 43
Exhibit A - Form of Bond . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Form of Endorsement of Transfer . . . . . . . . . B-1
Exhibit C - Form of Certificate of Authentication . . . . . . C-1
<PAGE>
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (1997 A Series), dated as of September
15, 1997 (this "Indenture"), between THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona (hereinafter called the "Authority"), and First Trust of
New York, National Association, as trustee (hereinafter called
the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Authority is authorized and empowered under Title
35, Chapter 5, Arizona Revised Statutes, as amended (the "Act"),
to issue its bonds in accordance with the Act and to make secured
or unsecured loans for the purpose of financing or refinancing
the acquisition, construction, improvement or equipping of
projects consisting of land, any building or other improvement,
and all real and personal properties, including but not limited
to machinery and equipment, whether or not now in existence or
under construction, whether located within or without Pima
County, which shall be suitable for, among other things,
facilities for the furnishing of electric energy, gas or water,
air and water pollution control facilities and sewage and solid
waste disposal facilities, and to charge and collect interest on
such loans and pledge the proceeds of loan agreements as security
for the payment of the principal of and interest on bonds, or
designated issues of bonds, issued by the Authority and any
agreements made in connection therewith, whenever the Board of
Directors of the Authority finds such loans to be in furtherance
of the purposes of the Authority or in the public interest;
WHEREAS, the Authority has heretofore issued and sold
$20,000,000 aggregate principal amount of its Industrial
Development Revenue Bonds, 1990 Series A (Tucson Electric Power
Company Project), all of which remain outstanding (the "1990
Bonds"), the proceeds of which were loaned to Tucson Electric
Power Company, an Arizona corporation (the "Company"), for the
purpose of financing a portion of the costs of the acquisition,
construction, improvement and equipping of certain of its
facilities for the furnishing of electric energy (the
"Facilities"); and
WHEREAS, the Authority proposes to issue and sell its revenue
bonds as provided herein (the "Bonds") for the purpose of
financing a portion of the costs of the acquisition,
construction, improvement and equipping certain additional items
of the Facilities and for the purpose of refinancing, by the
payment or redemption of the 1990 Bonds, or provision therefor,
the portion of the costs of the acquisition, construction,
improvement and equipping of the Facilities previously financed
with the proceeds of the 1990 Bonds, all as described in Exhibit
A to the Loan Agreement, dated as of September 15, 1997 (the
"Loan Agreement"), between the Authority and the Company;
NOW, THEREFORE, for and in consideration of these premises and
the mutual covenants herein contained, of the acceptance by the
Trustee of the trusts hereby created, of the purchase and
acceptance of the Bonds by the Owners (as hereinafter defined)
thereof and of the sum of one dollar lawful money of the United
States of America, to it duly paid by the Trustee at or before
the execution and delivery of these presents, and for other good
and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, in order to secure the payment of the
principal of and premium, if any, and interest on the Bonds at
any time Outstanding (as hereinafter defined) under this
Indenture according to their tenor and effect and the performance
and observance by the Authority of all the covenants and
conditions expressed or implied herein and contained in the
Bonds, the Authority does hereby grant, bargain, sell, convey,
mortgage, pledge and assign, and grant a security interest in,
the Trust Estate (as hereinafter defined) to the Trustee, its
successors in trust and their assigns forever;
TO HAVE AND TO HOLD all the same with all privileges and
appurtenances hereby conveyed and assigned, or agreed or intended
so to be, to the Trustee, its successors in trust and their
assigns forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set
forth, first, for the equal and proportionate benefit and
security of all Owners of the Bonds issued under and secured by
this Indenture without preference, priority or distinction as to
the lien of any Bonds over any other Bonds;
PROVIDED, HOWEVER, that if, after the right, title and
interest of the Trustee in and to the Trust Estate shall have
ceased, terminated and become void in accordance with Article
VIII hereof, the principal of and premium, if any, and interest
on the Bonds shall have been paid to the Owners thereof, or shall
have been paid to the Company pursuant to Section 4.06 hereof,
then and in that case these presents and the estate and rights
hereby granted shall cease, terminate and be void, and thereupon
the Trustee shall cancel and discharge this Indenture and execute
and deliver to the Authority and the Company such instruments in
writing as shall be requisite to evidence the discharge hereof;
otherwise this Indenture is to be and remain in full force and
effect.
THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is
expressly declared, that all Bonds issued and secured hereunder
are to be issued, authenticated and delivered, and the Trust
Estate and the other estate and rights hereby granted are to be
dealt with and disposed of, under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and
purposes as hereinafter expressed, and the Authority has agreed
and covenanted, and does hereby agree and covenant, with the
Trustee and with the respective Owners, from time to time, of the
Bonds, as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The terms defined in this Article
I shall, for all purposes of this Indenture, have the meanings
herein specified, unless the context clearly requires otherwise:
Act:
"Act" shall mean Title 35, Chapter 5, Arizona Revised
Statutes, and all acts supplemental thereto or amendatory
thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Authority with respect to the Loan Agreement,
this Indenture and any transaction or event contemplated by the
Loan Agreement or this Indenture, including the compensation and
reimbursement of expenses and advances payable to the Trustee, to
the Paying Agent, any Co-Paying Agent and the Registrar and a pro
rata share of the Authority's annual operating expenses in
accordance with the provisions of paragraph XII.D. of the
Authority's Procedural Pamphlet.
Authority
"Authority" shall mean The Industrial Development Authority of
the County of Pima, an Arizona nonprofit corporation designated
by law as a political subdivision of the State of Arizona
incorporated for and with the approval of Pima County, Arizona,
pursuant to the provisions of the Constitution of the State of
Arizona and the Act, its successors and their assigns.
Authorized Company Representative:
"Authorized Company Representative" shall mean each person at
the time designated to act on behalf of the Company by written
certificate furnished to the Authority and the Trustee containing
the specimen signature of such person and signed on behalf of the
Company by its President, any Vice President or its Treasurer,
together with its Secretary or any Assistant Secretary.
Bond Counsel:
"Bond Counsel" shall mean any firm or firms of nationally
recognized bond counsel experienced in matters pertaining to the
validity of, and exclusion from gross income for federal tax
purposes of interest on bonds issued by states and political
subdivisions, selected by the Company and acceptable to the
Authority.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01
hereof.
Bonds:
"Bond" or "Bonds" shall mean the bonds authorized to be issued
under this Indenture.
Capital Account:
"Capital Account" shall mean any of the accounts so named
established under Sections 4.01 and 5.01 hereof.
Code:
"Code" shall mean the Internal Revenue Code of 1986 or any
successor statute thereto. Each reference to a section of the
Code herein shall be deemed to include the United States Treasury
Regulations proposed or in effect thereunder and applicable to
the Bonds or the use of proceeds thereof, unless the context
clearly requires otherwise. References to any particular Code
section shall, in the event of a successor Code, be deemed to be
a reference to the successor to such Code section.
Company:
"Company" shall mean Tucson Electric Power Company, a
corporation organized and existing under the laws of the State of
Arizona, its successors and their assigns, including without
limitation, any successor obligor under Section 6.01 or 7.01 of
the Loan Agreement to the extent of the obligations assumed
thereunder.
Completion Date:
"Completion Date" shall mean the date specified in Section
3.04 of the Loan Agreement.
Construction (and other forms of the word "construct"):
"Construction" (and other forms of the word "construct") shall
mean, when used with respect to the Facilities, the construction
of the Facilities and shall include, without limitation, the
acquisition, construction, improvement and equipping of the
Facilities, all as contemplated by the Act.
Construction Fund:
"Construction Fund" shall mean the fund created by Section
5.01 hereof.
Cost of Construction:
"Cost of Construction" shall embrace all costs paid or
incurred by the Company with respect to the Facilities and the
financing thereof for the payment of which the Authority is
authorized to issue bonds under the Act, and shall include
without limitation (a) obligations paid or incurred by the
Company for labor, materials and other expenses and to
contractors, builders and materialmen in connection with the
construction of the Facilities; (b) the costs paid or incurred by
the Company for contract bonds and for insurance of all kinds
that may be deemed by the Company to be desirable or necessary
during the course of construction of the Facilities; (c) the
expenses paid or incurred by the Company for test borings,
surveys, estimates, plans and specifications, and preliminary
investigations therefor, with respect to the Facilities and for
supervising construction, as well as for the performance of all
other duties required by or reasonably necessary for the proper
construction, of the Facilities; (d) Administration Expenses paid
or incurred prior to the Completion Date and legal, accounting,
financial, underwriting, advertising, recording and printing
expenses and all other fees and expenses paid or incurred by the
Company in connection with the issuance and sale of the Bonds;
(e) amounts in respect of interest (exclusive of accrued interest
paid by the initial purchasers upon delivery thereof) accruing
upon the Bonds until the Completion Date; (f) all other costs
that the Company shall be required to pay under the terms of any
contract or contracts for the construction of the Facilities; (g)
any other costs or expenses paid or incurred by the Company, and
any sums required to reimburse the Company for work done by it,
with respect to the Facilities which are properly chargeable to
the capital account of the Company with respect to the Facilities
or would be so chargeable for federal income tax purposes either
with a proper election or but for a proper election to deduct the
same; and (h) amounts required to be paid to the United States by
the Company (on behalf of the Authority) in respect of the Bonds
pursuant to Section 148 of the Code. For purposes of the
application of the proceeds of the Bonds, the Cost of
Construction shall be deemed to include the payment or
redemption, or provision therefor, of any obligations, other than
the Bonds, issued to finance or refinance any of the costs listed
above. The Cost of Construction shall also be deemed to include
all costs paid or incurred with respect to the Facilities by any
Person (as defined in the Loan Agreement) to whom the Facilities
have been leased or sold as a whole or in part, provided that
such costs, had they been paid or incurred by the Company, would
otherwise constitute a portion of the Cost of Construction.
Depositary:
"Depositary" shall mean The Depository Trust Company or any
successor thereto as a securities repository for the Bonds.
Facilities:
"Facilities" shall mean the real and personal properties,
machinery and equipment currently existing, under construction
and to be constructed which are described in Exhibit A to the
Loan Agreement, as revised from time to time to reflect any
changes therein, additions thereto, substitutions therefor and
deletions therefrom permitted by the terms of the Loan Agreement,
subject, however, to the provisions of Section 7.01 of the Loan
Agreement.
General Account:
"General Account" shall mean the account so named established
under Section 4.01 hereof.
Government Obligations:
"Government Obligations" shall mean:
(a) direct obligations of, or obligations the principal of
and interest on which are unconditionally guaranteed by, the
United States of America entitled to the benefit of the full
faith and credit thereof; and
(b) certificates, depositary receipts or other instruments
which evidence a direct ownership interest in obligations
described in clause (a) above or in any specific interest or
principal payments due in respect thereof; provided, however,
that the custodian of such obligations or specific interest or
principal payments shall be a bank or trust company organized
under the laws of the United States of America or of any state
or territory thereof or of the District of Columbia, with a
combined capital stock surplus and undivided profits of at
least $50,000,000; and provided, further, that except as may
be otherwise required by law, such custodian shall be
obligated to pay to the holders of such certificates,
depositary receipts or other instruments the full amount
received by such custodian in respect of such obligations or
specific payments and shall not be permitted to make any
deduction therefrom.
Indenture:
"Indenture" shall mean this Indenture of Trust, dated as of
September 15, 1997, between the Authority and the Trustee, and
any and all modifications, alterations, amendments and
supplements thereto.
Investment Account:
"Investment Account" shall mean any of the accounts so named
established under Sections 4.01 and 5.01 hereof.
Investment Securities:
"Investment Securities" shall mean any of the following
obligations or securities on which neither the Company nor any of
its subsidiaries is the obligor: (a) Government Obligations; (b)
interest bearing deposit accounts (which may be represented by
certificates of deposit) in national, state or foreign banks
having a combined capital and surplus of not less than
$10,000,000; (c) bankers' acceptances drawn on and accepted by
commercial banks having a combined capital and surplus of not
less than $10,000,000; (d) (i) direct obligations of, (ii)
obligations the principal of and interest on which are
unconditionally guaranteed by, and (iii) any other obligations
the interest on which is exempt from federal income taxation
issued by, any state of the United States of America, the
District of Columbia or the Commonwealth of Puerto Rico, or any
political subdivision, agency, authority or other instrumentality
of any of the foregoing, which, in any case, are rated by a
nationally recognized rating agency in any of its three highest
rating categories; (e) obligations of any agency or
instrumentality of the United States of America; (f) commercial
or finance company paper which is rated by a nationally
recognized rating agency in any of its three highest rating
categories; (g) corporate debt securities issued by corporations
having debt securities rated by a nationally recognized rating
agency in any of its three highest rating categories; (h)
repurchase agreements with banking or financial institutions
having a combined capital and surplus of not less than
$10,000,000 with respect to any of the foregoing obligations or
securities; (i) shares or interests in registered investment
companies whose assets consist of obligations or securities which
are described in any other clause of this sentence; and (j) any
other obligations which may lawfully be purchased by the Trustee.
The commercial banks and banking institutions referred to above
may include the entities acting as Trustee, Paying Agent,
Co-Paying Agent and Registrar, hereunder if such entities shall
otherwise satisfy the requirements set forth above.
Loan Agreement:
"Loan Agreement" shall mean the Loan Agreement, dated as of
September 15, 1997, between the Authority and the Company
relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.
Loan Payments:
"Loan Payments" shall mean the payments required to be made by
the Company pursuant to Section 5.01 of the Loan Agreement.
1990 Bonds:
"1990 Bonds" shall mean the $20,000,000 aggregate principal
amount of the Authority's Industrial Development Revenue Bonds,
1990 Series A (Tucson Electric Power Company Project).
Notice by Mail:
"Notice by Mail" or "notice" of any action or condition "by
Mail" shall mean a written notice meeting the requirements of
this Indenture mailed by first-class mail to the Owners of
specified registered Bonds at the addresses shown in the
registration books maintained pursuant to Section 2.08 hereof;
provided, however, that if, because of the temporary or permanent
suspension of delivery of first-class mail or for any other
reason, it is impossible or impracticable to give such notice by
first-class mail, then such giving of notice in lieu thereof,
which may include publication, as shall be made with the approval
of the Trustee (or, if there be no trustee hereunder, the
Authority) shall constitute a sufficient giving of such notice.
Notice by Publication:
"Notice by Publication" or "notice" of any action or condition
"by Publication" shall mean publication of a notice meeting the
requirements of this Indenture in a newspaper or financial
journal of general circulation in The City of New York, New York,
which carries financial news, is printed in the English language
and is customarily published on each business day; provided,
however, that any successive weekly publication of notice
required hereunder may be made, unless otherwise expressly
provided herein, on the same or different days of the week and in
the same or different newspapers or financial journals; and
provided, further, that if, because of the temporary or permanent
suspension of the publication or general circulation of any
newspaper or financial journal or for any other reason, it is
impossible or impracticable to publish such notice in the manner
herein described, then such publication in lieu thereof as shall
be made with the approval of the Trustee (or, if there be no
trustee hereunder, the Authority) shall constitute a sufficient
publication of such notice.
Outstanding:
"Outstanding", when used in reference to the Bonds, shall
mean, as at any particular date, the aggregate of all Bonds
authenticated and delivered under this Indenture except:
(a) those canceled by the Trustee at or prior to such date
or delivered to or acquired by the Trustee at or prior to such
date for cancellation;
(b) those deemed to be paid in accordance with Article VIII
hereof; and
(c) those in lieu of or in exchange or substitution for
which other Bonds shall have been authenticated and delivered
pursuant to this Indenture, unless proof satisfactory to the
Trustee and the Company is presented that such Bonds are held
by a bona fide holder in due course.
Owner:
"Owner" shall mean the person in whose name any Bond is
registered upon the registration books maintained pursuant to
Section 2.08 hereof. The Company may be an Owner.
Paying Agent; Co-Paying Agent; Principal Office thereof:
"Paying Agent" and "Co-Paying Agent" shall mean the paying
agent and any co-paying agent appointed in accordance with
Section 10.21 hereof. "Principal Office" of the Paying Agent or
any Co-Paying Agent shall mean the office thereof designated in
writing to the Trustee.
Rebate Fund:
"Rebate Fund" shall mean the fund created by Section 7.08
hereof.
Receipts and Revenues of the Authority from the Loan Agreement:
"Receipts and Revenues of the Authority from the Loan
Agreement" shall mean all moneys paid or payable to the Trustee
for the account of the Authority by the Company in respect of the
Loan Payments and payments pursuant to Section 9.01 of the Loan
Agreement, and all receipts of the Trustee which, under the
provisions of this Indenture, reduce the amount of such payments.
Record Date:
"Record Date" shall mean the close of business on the
fifteenth (15th) day of the calendar month immediately preceding
each regularly scheduled interest payment date.
Registrar; Principal Office thereof:
"Registrar" shall mean the registrar appointed in accordance
with Section 10.23 hereof. "Principal Office" of the Registrar
shall mean the office thereof designated in writing to the
Trustee.
Supplemental Indenture:
"Supplemental Indenture" shall mean any indenture of the
Authority modifying, altering, amending, supplementing or
confirming this Indenture for any purpose, in accordance with the
terms hereof.
Supplemental Loan Agreement:
"Supplemental Loan Agreement" shall mean any agreement between
the Authority and the Company modifying, altering, amending or
supplementing the Loan Agreement, in accordance with the terms
thereof and hereof.
Tax Agreement:
"Tax Agreement" shall mean that tax certificate and agreement,
dated the date of the initial authentication and delivery of the
Bonds, between the Authority and the Company, relating to the
requirements of the Code, and any and all modifications,
alterations, amendments and supplements thereto.
Trust Estate:
"Trust Estate" shall mean at any particular time all right,
title and interest of the Authority in and to the Loan Agreement
(except its rights under Sections 5.03, 5.04, 6.03 and 8.05
thereof and any rights of the Authority to receive notices,
certificates, requests, requisitions and other communications
thereunder), including without limitation, the Receipts and
Revenues of the Authority from the Loan Agreement, the Bond Fund
and the Construction Fund and all moneys and Investment
Securities from time to time on deposit therein (excluding,
however, any moneys or Investment Securities held in the Rebate
Fund), any and all other moneys and obligations (other than
Bonds) which at such time are deposited or are required to be
deposited with, or are held or are required to be held by or on
behalf of, the Trustee, the Paying Agent or any Co-Paying Agent
in trust under any of the provisions of this Indenture and all
other rights, titles and interests which at such time are subject
to the lien of this Indenture; provided, however, that in no
event shall there be included in the Trust Estate (a) moneys or
obligations deposited with or held by the Trustee in the Rebate
Fund pursuant to Section 7.08 hereof or (b) moneys or obligations
deposited with or paid to the Trustee for the redemption or
payment of Bonds which are deemed to have been paid in accordance
with Article VIII hereof or moneys held pursuant to Section 4.06
hereof.
Trustee; Principal Office thereof:
"Trustee" shall mean First Trust of New York, National
Association, as trustee under this Indenture, its successors in
trust and their assigns. "Principal Office" of the Trustee shall
mean the principal corporate trust office of the Trustee, which
office at the date of acceptance by the Trustee of the duties and
obligations imposed on the Trustee by this Indenture is located
at the address specified in Section 13.08 hereof.
ARTICLE II
THE BONDS
Section 2.01. Creation of Bonds. There is hereby authorized
and created under this Indenture, for the purpose of providing
moneys to pay a part of the Cost of Construction and for the
purpose of refinancing the 1990 Bonds, an issue of Bonds,
entitled to the benefit, protection and security of this
Indenture, in the aggregate principal amount of Twenty-two
Million Four Hundred Sixty Thousand Dollars ($22,460,000). Each
of the Bonds shall be designated by the title "The Industrial
Development Authority of the County of Pima Industrial
Development Revenue Bond, 1997 Series A (Tucson Electric Power
Company Project)". The Bonds shall mature, subject to prior
redemption upon the terms and conditions hereinafter set forth,
on September 1, 2025 and shall bear interest from the date
thereof until payment of the principal or redemption price
thereof shall have been made or provided for in accordance with
the provisions hereof, whether at maturity, upon redemption or
otherwise, at the rate of six and one-tenth per centum (6.10%)
per annum, with interest thereon payable semi-annually on each
March 1 and September 1, commencing March 1, 1998. Interest
shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Section 2.02. Form of Bonds. Bonds shall be authenticated
and delivered hereunder solely as fully registered bonds without
coupons in the denomination of $5,000 or integral multiples
thereof. Bonds shall be numbered as determined by the Trustee.
Bonds authenticated prior to the first interest payment date
shall be dated September 15, 1997. Bonds authenticated on or
subsequent to the first interest payment date shall be dated the
interest payment date next preceding the date of authentication
thereof, unless such date of authentication shall be an interest
payment date to which interest on the Bonds has been paid in full
or duly provided for, in which case they shall be dated such date
of authentication; provided, however, that if, as shown by the
records of the Trustee, interest on the Bonds shall be in
default, Bonds issued in exchange for Bonds surrendered for
transfer or exchange shall be dated the date to which interest
has been paid in full on the Bonds surrendered.
Principal of and premium, if any, on Bonds shall be payable to
the Owners of such Bonds upon presentation and surrender of such
Bonds at the Principal Office of the Paying Agent or any
Co-Paying Agent. Interest on the Bonds shall be paid by check
drawn upon the Paying Agent and mailed to the Owners of such
Bonds as of the close of business on the Record Date with respect
to each interest payment date at the registered addresses of such
Owners as they shall appear as of the close of business on such
Record Date on the registration books maintained pursuant to
Section 2.08 hereof notwithstanding the cancellation of any such
Bond upon any exchange or registration of transfer subsequent to
such Record Date, except that if and to the extent that there
should be a default on the payment of interest on any Bond, such
defaulted interest shall be paid to the Owners in whose name such
Bond (or any Bond or Bonds issued upon any exchange or
registration of transfer thereof) is registered as of the close
of business on a date selected by the Trustee in its discretion,
but not more than 15 days or less than 10 days prior to the date
of payment of such defaulted interest; notwithstanding the
foregoing, upon request to the Paying Agent by an Owner of not
less than $1,000,000 in aggregate principal amount of Bonds,
interest on such Bonds and, after presentation and surrender of
such Bonds, the principal thereof shall be paid to such Owner by
wire transfer to the account maintained within the continental
United States specified by such Owner or, if such Owner maintains
an account with the entity acting as Paying Agent, by deposit
into such account. Payment as aforesaid shall be made in such
coin or currency of the United States of America as, at the
respective times of payment, shall be legal tender for the
payment of public and private debts.
The Bonds and the form for registration of transfer and the
form of certificate of authentication to be printed on the Bonds
are to be in substantially the forms thereof set forth in
Exhibits A, B and C hereto, respectively, with necessary or
appropriate variations, omissions and insertions as permitted or
required by this Indenture.
Section 2.03. Execution of Bonds. The Bonds shall be
executed on behalf of the Authority by the President or a Vice
President of the Authority and shall have affixed, impressed or
reproduced thereon the official seal of the Authority which shall
be attested by the Secretary or an Assistant Secretary of the
Authority. Each of the foregoing officers may execute or cause
to be executed with a facsimile signature in lieu of his manual
signature the Bonds, provided the signature of either the
President or a Vice President of the Authority or the Secretary
or Assistant Secretary of the Authority shall, if required by
applicable laws, be manually subscribed.
In case any officer of the Authority whose signature or a
facsimile of whose signature shall appear on the Bonds shall
cease to be such officer before the authentication by the Trustee
and delivery of such Bonds, such signature or such facsimile
shall nevertheless be valid and sufficient for all purposes, the
same as if such officer had remained in office until delivery;
and any Bond may be signed on behalf of the Authority by such
persons as, at the time of execution of such Bond, shall be the
proper officers of the Authority, even though at the date of such
Bond or of the execution and delivery of this Indenture any such
person was not such officer.
Section 2.04. Authentication of Bonds. Only such Bonds as
shall have endorsed thereon a certificate of authentication
substantially in the form set forth in Exhibit C hereto duly
executed by the Trustee shall be entitled to any right or benefit
under this Indenture. No Bond shall be valid or obligatory for
any purpose unless and until such certificate of authentication
shall have been duly executed by the Trustee, and such executed
certificate of authentication of the Trustee upon any such Bonds
shall be conclusive evidence that such Bond has been
authenticated and delivered under this Indenture. The Trustee's
certificate of authentication on any Bond shall be deemed to have
been executed by it if signed with an authorized signature of the
Trustee, but it shall not be necessary that the same person sign
the certificate of authentication on all of the Bonds issued
hereunder. This Section 2.04 is subject to the provisions of
Section 10.17 hereof.
Section 2.05. Bonds Not General Obligations. Neither Pima
County, Arizona nor the State of Arizona shall in any event be
liable for the payment of the principal of or premium, if any, or
interest on the Bonds, and neither the Bonds nor the premium, if
any, or the interest thereon, shall be construed to constitute an
indebtedness of Pima County, Arizona or the State of Arizona
within the meaning of any constitutional or statutory provisions
whatsoever. The Bonds and the premium, if any, and the interest
thereon shall be limited obligations of the Authority payable
solely from the Receipts and Revenues of the Authority from the
Loan Agreement and the other moneys pledged therefor under this
Indenture, and such fact shall be plainly stated on the face of
each Bond.
Section 2.06. Prerequisites to Authentication of Bonds. The
Authority shall execute and deliver to the Trustee and the
Trustee shall authenticate the Bonds and deliver said Bonds to
the initial purchasers thereof as may be directed hereinafter in
this Section 2.06.
Prior to the delivery on original issuance by the Trustee of
any authenticated Bonds there shall be or have been delivered to
the Trustee:
(a) a duly certified copy of a resolution of the Board of
Directors of the Authority authorizing the execution and
delivery of this Indenture and the Loan Agreement and the
issuance of the Bonds;
(b) an original duly executed counterpart or a duly
certified copy of the Loan Agreement;
(c) a request and authorization to the Trustee on behalf of
the Authority, signed by its President or a Vice President, to
authenticate and deliver the Bonds in the aggregate principal
amount determined by this Indenture to the purchaser or
purchasers therein identified upon payment to the Trustee, but
for the account of the Authority, of a sum specified in such
request and authorization plus any accrued interest on such
Bonds to the date of delivery; and
(d) a written statement on behalf of the Company, executed
by the President, any Vice President or the Treasurer, (i)
approving the issuance and delivery of the Bonds and (ii)
consenting to each and every provision of this Indenture.
Section 2.07. Lost or Destroyed Bonds or Bonds Canceled in
Error. If any Bond, whether in temporary or definitive form, is
lost (whether by reason of theft or otherwise), destroyed
(whether by mutilation, damage, in whole or in part, or
otherwise) or canceled in error, the Authority may execute and
the Trustee may authenticate a new Bond of like date and
denomination and bearing a number not contemporaneously
outstanding; provided that (a) in the case of any mutilated Bond,
such mutilated Bond shall first be surrendered to the Trustee and
(b) in the case of any lost Bond or Bond destroyed in whole,
there shall be first furnished to the Authority, the Trustee and
the Company evidence of such loss or destruction. In every case,
the applicant for a substitute Bond shall furnish the Authority,
the Trustee and the Company such security or indemnity as may be
required by any of them. In the event any lost or destroyed Bond
or a Bond canceled in error shall have matured or is about to
mature, or has been called for redemption, instead of issuing a
substitute Bond the Trustee may, in its discretion, pay the same
without surrender thereof if there shall be first furnished to
the Authority, the Trustee and the Company evidence of such loss,
destruction or cancellation, together with indemnity,
satisfactory to them. Upon the issuance of any substitute Bond,
the Authority and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto. The Trustee may charge the Owner
of any such Bond with the Trustee's reasonable fees and expenses
in connection with any transaction described in this Section
2.07.
Every substitute Bond issued pursuant to the provisions of
this Section 2.07 by virtue of the fact that any Bond is lost,
destroyed or canceled in error shall constitute an additional
contractual obligation of the Authority, whether or not the Bond
so lost, destroyed or canceled shall be at any time enforceable,
and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Bonds duly
issued hereunder. All Bonds shall be held and owned upon the
express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the
replacement or payment of lost, destroyed or improperly canceled
Bonds, notwithstanding any law or statute now existing or
hereafter enacted.
Section 2.08. Transfer, Registration and Exchange of Bonds.
The Registrar shall maintain and keep, at its Principal Office,
books for the registration and registration of transfer of Bonds,
which, at all reasonable times, shall be open for inspection by
the Authority, the Trustee and the Company; and, upon
presentation for such purpose of any Bond entitled to
registration or registration of transfer at the Principal Office
of the Registrar, the Registrar shall register or register the
transfer in such books, under such reasonable regulations as the
Registrar may prescribe. The Registrar shall make all necessary
provisions to permit the exchange or registration of transfer of
Bonds at its Principal Office.
The transfer of any Bond shall be registered upon the
registration books of the Registrar at the written request of the
Owner thereof or his attorney duly authorized in writing, upon
surrender thereof at the Principal Office of the Registrar,
together with a written instrument of transfer satisfactory to
the Registrar duly executed by the Owner or his duly authorized
attorney. Upon the registration of transfer of any such Bond or
Bonds, the Authority shall issue in the name of the transferee,
in authorized denominations, a new Bond or Bonds in the same
aggregate principal amount as the surrendered Bond or Bonds.
The Authority, the Trustee, the Paying Agent, any Co-Paying
Agent and the Registrar may deem and treat the Owner of any Bond
as the absolute owner of such Bond, whether such Bond shall be
overdue or not, for the purpose of receiving payment of, or on
account of, the principal of and premium, if any, and, except as
provided in Section 2.02 hereof, interest on such Bond and for
all other purposes, and neither the Authority, the Trustee, the
Paying Agent, any Co-Paying Agent nor the Registrar shall be
affected by any notice to the contrary. All such payments so
made to any such Owner or upon his order shall be valid and
effective to satisfy and discharge the liability upon such Bond
to the extent of the sum or sums so paid.
Bonds, upon surrender thereof at the Principal Office of the
Registrar may, at the option of the Owner thereof, be exchanged
for an equal aggregate principal amount of Bonds of any
authorized denomination.
In all cases in which the privilege of exchanging Bonds or
registering the transfer of Bonds is exercised, the Authority
shall execute and the Trustee shall authenticate and deliver
Bonds in accordance with the provisions of this Indenture. For
every such exchange or registration of transfer of Bonds, whether
temporary or definitive, the Authority, the Registrar, or the
Trustee may make a charge sufficient to reimburse it for any tax
or other governmental charge required to be paid with respect to
such exchange or registration of transfer, which sum or sums
shall be paid by the person requesting such exchange or
registration of transfer as a condition precedent to the exercise
of the privilege of making such exchange or registration of
transfer. The Registrar shall not be obligated (a) to make any
such exchange or registration of transfer of Bonds during the
fifteen (15) days next preceding the date on which notice of any
proposed redemption of Bonds is given or (b) to make any exchange
or registration of transfer of any Bonds called for redemption.
The Bonds are to be initially registered in the name of Cede &
Co., as nominee for the Depositary. Such Bonds shall not be
transferable or exchangeable, nor shall any purported transfer be
registered, except as follows:
(a) such Bonds may be transferred in whole, and appropriate
registration of transfer effected, if such transfer is by such
nominee to the Depositary, or by the Depositary to another
nominee thereof, or by any nominee of the Depositary to any
other nominee thereof, or by the Depositary or any nominee
thereof to any successor securities depositary or any nominee
thereof; and
(b) such Bond may be exchanged for definitive Bonds
registered in the respective names of the beneficial holders
thereof, and thereafter shall be transferable without
restriction, if:
(i) the Depositary shall have notified the Company and
the Trustee that it is unwilling or unable to continue to
act as securities depositary with respect to such Bonds and
the Trustee shall not have been notified by the Company
within ninety (90) days of the identity of a successor
securities depositary with respect to such Bonds;
(ii) the Company shall have delivered to the Trustee a
written instrument to the effect that such Bonds shall be so
exchangeable on and after a date specified therein; or
(iii) (1) an Event of Default shall have occurred and be
continuing, (2) the Trustee shall have given notice of such
Event of Default pursuant to Section 10.19 hereof and (3)
there shall have been delivered to the Authority, the
Company and the Trustee an opinion of counsel to the effect
that the interests of the beneficial owners of such Bonds in
respect thereof will be materially impaired unless such
owners become owners of definitive Bonds.
The Bonds delivered to the Depositary may contain a legend
reflecting the foregoing restrictions on registration of transfer
and exchange.
Section 2.09. Other Obligations. The Authority expressly
reserves the right to issue, to the extent permitted by law, but
shall not be obligated to issue, obligations under another
indenture or indentures to provide additional funds to pay the
Cost of Construction of the Facilities or to refund all or any
principal amount of the Bonds, or any combination thereof.
Section 2.10 Temporary Bonds. Pending the preparation of
definitive Bonds, the Authority may execute and the Trustee shall
authenticate and deliver temporary Bonds. Temporary Bonds shall
be issuable as registered Bonds without coupons, of any
authorized denomination, and substantially in the form of the
definitive Bonds but with such omissions, insertions and
variations as may be appropriate for temporary Bonds, all as may
be determined by the Authority. Temporary Bonds may contain such
reference to any provisions of this Indenture as may be
appropriate. Every temporary Bond shall be executed by the
Authority and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with like
effect, as the definitive Bonds. As promptly as practicable the
Authority shall execute and shall furnish definitive Bonds and
thereupon temporary Bonds may be surrendered in exchange therefor
without charge at the Principal Office of the Trustee, and the
Trustee shall authenticate and deliver in exchange for such
temporary Bonds a like aggregate principal amount of definitive
Bonds of authorized denominations. Until so exchanged the
temporary Bonds shall be entitled to the same benefits under this
Indenture as definitive Bonds.
Section 2.11. Cancellation of Bonds. All Bonds which shall
have been surrendered to the Paying Agent or any Co-Paying Agent
for payment or redemption, and all Bonds which shall have been
surrendered to the Registrar for exchange or registration of
transfer, shall be delivered to the Trustee for cancellation.
All Bonds delivered to or acquired by the Trustee for
cancellation shall be canceled and destroyed by the Trustee. The
Trustee shall furnish to the Authority, the Paying Agent, the
Registrar and the Company counterparts of certificates evidencing
such cancellation and destruction and specifying such Bonds by
number.
Section 2.12. Payment of Principal and Interest. For the
payment of interest on the Bonds, the Authority shall cause to be
deposited in the Bond Fund, on each interest payment date, solely
out of the Receipts and Revenues of the Authority from the Loan
Agreement and other moneys pledged therefor, an amount sufficient
to pay the interest to become due on such interest payment date.
The obligation of the Authority to cause any such deposit to be
made hereunder shall be reduced by the amount of moneys in the
Bond Fund available on such interest payment date for the payment
of interest on the Bonds.
For the payment of the principal of the Bonds upon maturity,
the Authority shall cause to be deposited in the Bond Fund, on
the stated or accelerated date of maturity, solely out of the
Receipts and Revenues of the Authority from the Loan Agreement
and other moneys pledged therefor, an amount sufficient to pay
the principal of the Bonds. The obligation of the Authority to
cause any such deposit to be made hereunder shall be reduced by
the amount of moneys in the Bond Fund available on the maturity
date for the payment of the principal of the Bonds.
Section 2.13. Applicability of Book-Entry Provisions.
Anything in this Indenture to the contrary notwithstanding, (a)
the provisions of the Blanket Issuer Letter of Representations,
dated February 26, 1996, between the Authority and The Depository
Trust Company relating to the manner of and procedures for
payment and redemption of Bonds and related matters shall apply
so long as such Depositary shall be the Owner of all Outstanding
Bonds and (b) the Authority, the Trustee or the Paying Agent, as
applicable, may enter into a similar agreement, on terms
satisfactory to the Company, with any subsequent Depositary and
the provisions thereof shall apply so long as such Depositary
shall be the Owner of all Outstanding Bonds.
ARTICLE III
REDEMPTION OF BONDS
Section 3.01. Redemption Provisions. (a) The Bonds shall be
subject to redemption by the Authority, at the direction of the
Company, on any date on or after September 1, 2002 in whole at
any time or in part from time to time, at the applicable
redemption price (expressed as a percentage of principal amount)
set forth below, plus accrued interest to the redemption date:
Redemption Period Redemption Price
----------------- ----------------
September 1, 2002 through 102%
August 31, 2003
September 1, 2003 through 101%
August 31, 2004
September 1, 2004 and 100%
thereafter
(b) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, in whole at any
time at the principal amount thereof plus accrued interest to
the redemption date, if:
(i) the Company shall have determined that the continued
operation of the Facilities is impracticable, uneconomical
or undesirable for any reason;
(ii) all or substantially all of the Facilities shall
have been condemned or taken by eminent domain; or
(iii) the operation of the Facilities shall have been
enjoined or shall have otherwise been prohibited by, or
shall conflict with, any order, decree, rule or regulation
of any court or of any federal, state or local regulatory
body, administrative agency or other governmental body.
(c) The Bonds shall be subject to mandatory redemption by
the Authority, at the principal amount thereof plus accrued
interest to the redemption date, on the 180th day (or such
earlier date as may be designated by the Company) after a
final determination by a court of competent jurisdiction or an
administrative agency, to the effect that, as a result of a
failure by the Company to perform or observe any covenant,
agreement or representation contained in the Loan Agreement,
the interest payable on the Bonds is included for federal
income tax purposes in the gross income of the owners thereof,
other than any owner of a Bond who is a "substantial user" of
the Facilities or a "related person" within the meaning of
Section 147(a) of the Code. No determination by any court or
administrative agency shall be considered final for the
purposes of this Section 3.01 (c) unless the Company shall
have been given timely notice of the proceeding which resulted
in such determination and an opportunity to participate in
such proceeding, either directly or through an owner of a
Bond, and until the conclusion of any appellate review sought
by any party to such proceeding or the expiration of the time
for seeking such review. The Bonds shall be redeemed either in
whole or in part in such principal amount that, in the opinion
of Bond Counsel, the interest payable on the Bonds, including
the Bonds remaining outstanding after such redemption, would
not be included in the gross income of any owner thereof,
other than an owner of a Bond who is a "substantial user" of
the Facilities or a "related person" within the meaning of
Section 147(a) of the Code.
(d) In the event that the aggregate of the amounts
deposited pursuant to Section 5.02 hereof into the Capital
Account and the Investment Account maintained within the Bond
Fund, together with any income or other gain from the
investment thereof, shall at any time, or from time to time,
be equal to or greater than $5,000, but only to the extent
that such amounts are required under Section 4.04(b) hereof to
be applied to the redemption of Bonds, the Authority shall
redeem Bonds, at the principal amount thereof plus accrued
interest to the redemption date, in the largest aggregate
principal amount which does not exceed the amount of such
deposit or deposits, together with such income or gain, on the
next interest payment date on which a redemption may be made
in accordance with the provisions of Section 3.03(a) or (b)
hereof and on which Bonds, in such amount, are otherwise
redeemable at the principal amount thereof under subsection
(a) or (b) of this Section 3.01.
Section 3.02. Selection of Bonds to be Redeemed. If less
than all the Bonds shall be called for redemption under any
provision of this Indenture permitting such partial redemption,
the particular Bonds or portions of Bonds to be redeemed shall be
selected by the Trustee, in such manner as the Trustee in its
discretion may deem proper, in the aggregate principal amount
designated to the Trustee by the Company or otherwise as required
by this Indenture; provided, however, that if, as indicated in a
certificate of an Authorized Company Representative delivered to
the Trustee, the Company shall have offered to purchase all Bonds
then Outstanding and less than all such Bonds have been tendered
to the Company for such purchase, the Trustee, at the direction
of an Authorized Company Representative, shall select for
redemption all such Bonds which shall not have been so tendered;
and provided, further, that the portion of any Bond to be
redeemed shall be in the principal amount of $5,000 or some
integral multiple thereof and that, in selecting Bonds for
redemption, the Trustee shall treat each Bond as representing
that number of Bonds which is obtained by dividing the principal
amount of such Bond by $5,000. If it is determined that one or
more, but not all, of the $5,000 units of principal amount
represented by any such Bond is to be called for redemption,
then, upon notice of intention to redeem such $5,000 unit or
units, the Owner of such Bond shall forthwith surrender such Bond
to the Paying Agent or any Co-Paying Agent for (y) payment to
such Owner of the redemption price (including the redemption
premium, if any, and accrued interest to the date fixed for
redemption) of the $5,000 unit or units of principal amount
called for redemption and (z) delivery to such Owner of a new
Bond or Bonds in the aggregate principal amount of the unredeemed
balance of the principal amount of any such Bond. Bonds
representing the unredeemed balance of the principal amount of
any such Bond shall be delivered to the Owner thereof, without
charge therefor. If the Owner of any such Bond of a denomination
greater than $5,000 shall fail to present such Bond to the Paying
Agent or any Co-Paying Agent for payment and exchange as
aforesaid, such Bond shall, nevertheless, become due and payable
on the date fixed for redemption to the extent of the $5,000 unit
or units of principal amount called for redemption (and to that
extent only).
Section 3.03. Procedure for Redemption. (a) In the event any
of the Bonds are called for redemption, the Trustee shall give
notice, in the name of the Authority, of the redemption of such
Bonds, which notice shall (i) specify the Bonds to be redeemed,
the redemption date, the redemption price, and the place or
places where amounts due upon such redemption will be payable
(which shall be the Principal Office of the Paying Agent or any
Co-Paying Agent) and, if less than all of the Bonds are to be
redeemed, the numbers of the Bonds to be redeemed, and the
portion of the principal amount of any Bond to be redeemed in
part, (ii) state any condition to such redemption and (iii) state
that on the redemption date, and upon the satisfaction of any
such condition, the Bonds or portions thereof to be redeemed
shall cease to bear interest. Such notice may set forth any
additional information relating to such redemption. Such notice
shall be given by Mail at least thirty (30) days prior to the
date fixed for redemption to the Owners of the Bonds to be
redeemed; provided, however, that failure duly to give such
Notice by Mail, or any defect therein, shall not affect the
validity of any proceedings for the redemption of Bonds as to
which there shall have been no such failure or defect. If a
notice of redemption shall be unconditional, or if the conditions
of a conditional notice or redemption shall have been satisfied,
then upon presentation and surrender of Bonds so called for
redemption at the place or places of payment, such Bonds shall be
redeemed. The Trustee shall promptly deliver to the Company a
copy of each such notice of redemption.
(b) With respect to any notice of redemption of Bonds in
accordance with subsection (a) or (b) of Section 3.01 hereof,
unless, upon the giving of such notice, such Bonds shall be
deemed to have been paid within the meaning of Article VIII
hereof, such notice shall state that such redemption shall be
conditional upon the receipt, by the Trustee at or prior to
the opening of business on the date fixed for such redemption,
of moneys sufficient to pay the principal of and premium, if
any, and interest on such Bonds to be redeemed, and that if
such moneys shall not have been so received said notice shall
be of no force and effect and the Authority shall not be
required to redeem such Bonds. In the event that such notice
of redemption contains such a condition and such moneys are
not so received, the redemption shall not be made and the
Trustee shall within a reasonable time thereafter give notice,
in the manner in which the notice of redemption was given,
that such moneys were not so received.
(c) Any Bonds and portions of Bonds which have been duly
selected for redemption shall cease to bear interest on the
specified redemption date provided that moneys sufficient to
pay the principal of, premium, if any, and interest on such
Bonds shall be on deposit with the Trustee on the date fixed
for redemption so that such Bonds will be deemed to be paid in
accordance with Article VIII hereof.
Section 3.04. Payment of Redemption Price. For the
redemption of any of the Bonds, the Authority shall cause to be
deposited in the Bond Fund, on the redemption date, solely out of
the Receipts and Revenues of the Authority from the Loan
Agreement, an amount sufficient to pay the principal of and
premium, if any, and interest to become due on such redemption
date. The obligation of the Authority to cause any such deposit
to be made hereunder shall be reduced by the amount of moneys in
the Bond Fund available on such redemption date for payment of
the principal of and premium, if any, and accrued interest on the
Bonds to be redeemed.
Section 3.05. No Partial Redemption After Default. Anything
in this Indenture to the contrary notwithstanding, if there shall
have occurred and be continuing an Event of Default defined in
clause (a) or (b) of the first paragraph of Section 9.01 hereof,
there shall be no redemption of less than all of the Bonds at the
time Outstanding other than a partial redemption in connection
with an offer by the Company to purchase all Bonds Outstanding as
contemplated in the first proviso to the first sentence of
Section 3.02 hereof.
ARTICLE IV
THE BOND FUND
Section 4.01. Creation of Bond Fund. There is hereby created
and established with the Trustee a trust fund in the name of the
Authority to be designated "The Industrial Development Authority
of The County of Pima Industrial Development Revenue Bonds, 1997
Series A (Tucson Electric Power Company Project) Bond Fund". The
Trustee shall establish and maintain within the Bond Fund a
"Capital Account", an "Investment Account" and a "General
Account". In addition, the Trustee shall establish and maintain
such segregated subaccounts within the Capital Account or the
Investment Account and such other segregated subaccounts within
the Bond Fund as may be requested by an Authorized Company
Representative. The Bond Fund, and all moneys and certificated
securities therein, shall be kept in the possession of the
Trustee.
Section 4.02. Liens. The Authority shall not create any lien
upon the Bond Fund or upon the Receipts and Revenues of the
Authority from the Loan Agreement other than the lien hereby
created.
Section 4.03. Deposits into Bond Fund. (a) There shall be
deposited into the Bond Fund:
(i) the accrued interest, if any, on the Bonds accrued to
the date of delivery thereof and paid by the initial
purchasers thereof, such accrued interest to be deposited
into the General Account;
(ii) all amounts required to be deposited into the Bond
Fund by Section 5.02 hereof, such amounts to be deposited
into the Capital Account or the Investment Account;
(iii) all amounts required to be deposited into the Bond
Fund by Sections 5.03 and 5.04 hereof, such amounts to be
deposited into the General Account;
(iv) all Loan Payments, such payments and moneys to be
deposited into the General Account; and
(v) all other moneys received by the Trustee under and
pursuant to any provision of the Loan Agreement, other than
Sections 5.03, 5.04 and 8.05 thereof, or from any other
source when accompanied by directions by the Company that
such moneys are to be paid into the Bond Fund, such moneys
to be deposited into the account specified by such provision
of the Loan Agreement or by such directions, or, if no
specification is made, into the General Account.
(b) All income or other gain from the investment of moneys
in the Capital Account or the Investment Account shall be
deposited into the Investment Account. All income or other
gain from the investment of moneys in the General Account
shall be deposited into the General Account.
Section 4.04. Use of Moneys in Bond Fund. (a) Moneys, if
any, paid into the Bond Fund pursuant to clause (i) of Section
4.03(a) hereof shall be applied to the payment of interest on the
Bonds. Except as otherwise provided in Sections 4.06, 9.01 and
10.04 hereof, all other moneys in the Bond Fund constituting part
of the Trust Estate shall be used solely for the payment of the
principal of and premium, if any, and interest on the Bonds as
the same shall become due and payable at maturity, upon
redemption or otherwise.
(b) Moneys deposited pursuant to Section 5.02 hereof into
the Capital Account or the Investment Account maintained
within the Bond Fund, and any income or other gain from the
investment thereof, shall be applied by the Trustee (i) in
whole or in part (A) to the purchase of Bonds in such amounts,
at such prices, at such times and otherwise as directed by an
Authorized Company Representative, or to the redemption, at
the direction of the Company, of Bonds pursuant to subsection
(a) or, if applicable, (b) or (e) of Section 3.01 hereof or
(B) in any other manner directed by an Authorized Company
Representative which, as indicated in an opinion of Bond
Counsel furnished by the Company to the Authority and the
Trustee, will not, in and of itself, impair the validity under
the Act of the Bonds or the exclusion of the interest on the
Bonds from gross income for federal income tax purposes, or,
in the absence of any such purchase, redemption or direction
on or prior to the forty-fifth (45th) day prior to the first
interest payment date specified in Section 3.01(d) hereof,
(ii) to the payment of principal upon the redemption, from
time to time, of Bonds pursuant to Section 3.01(d) hereof, any
moneys which are not so applied to be retained in the accounts
into which they were deposited and applied by the Trustee to
the payment of principal of Bonds either at maturity or upon
the redemption of all or any portion of the Bonds, whichever
occurs first. Pending the application of moneys deposited
into the Bond Fund pursuant to Section 5.02 hereof, such
moneys may be invested in Investment Securities in the manner
permitted by Section 6.01 hereof, provided that such
investment shall not produce a yield greater than the yield on
the Bonds unless, as indicated in an opinion of Bond Counsel
furnished by the Company to the Authority and the Trustee,
investments producing a greater yield would not, in and of
itself, impair the exclusion from gross income for federal tax
purposes of the interest on the Bonds.
(c) In the event that all of the Bonds cease to be
Outstanding, any moneys remaining in the Capital Account or
the Investment Account shall be deposited into the General
Account.
Section 4.05. Custody of Bond Fund; Withdrawal of Moneys.
The Bond Fund shall be in the custody of the Trustee but in the
name of the Authority and the Authority hereby authorizes and
directs the Trustee to withdraw from the Bond Fund and furnish to
the Paying Agent funds constituting part of the Trust Estate
sufficient to pay the principal of and premium, if any, and
interest on the Bonds as the same shall become due and payable,
and to withdraw from the Bond Fund funds sufficient to pay any
other amounts payable therefrom as the same shall become due and
payable.
Section 4.06. Bonds Not Presented for Payment. In the event
any Bonds shall not be presented for payment when the principal
thereof and premium, if any, thereon become due, either at
maturity or at the date fixed for redemption thereof or
otherwise, if moneys sufficient to pay such Bonds are held by the
Paying Agent or any Co-Paying Agent for the benefit of the Owners
thereof, the Paying Agent shall segregate and hold such moneys in
trust, without liability for interest thereon, for the benefit of
the Owners of such Bonds, who shall, except as provided in the
following paragraph, thereafter be restricted exclusively to such
fund or funds for the satisfaction of any claim of whatever
nature on their part under this Indenture or relating to said
Bonds.
Any moneys which the Paying Agent shall segregate and hold in
trust for the payment of the principal of and premium, if any, or
interest on any Bond and remaining unclaimed for one year after
such principal, premium, if any, or interest has become due and
payable shall, upon the Company's written request to the Paying
Agent, be paid to the Company, with notice to the Trustee of such
action; provided, however, that before the Paying Agent shall be
required to make any such repayment, the Paying Agent shall, at
the expense of the Company cause notice to be given once by
Publication to the effect that such money remains unclaimed and
that, after a date specified therein, which shall not be less
than thirty (30) days from the date of such notice by
Publication, any unclaimed balance of such moneys then remaining
will be paid to the Company. After the payment of such unclaimed
moneys to the Company, the Owner of such Bond shall thereafter
look only to the Company for the payment thereof, and all
liability of the Authority, the Trustee and the Paying Agent with
respect to such moneys shall thereupon cease.
Section 4.07. Moneys Held in Trust. All moneys and
Investment Securities held by the Trustee in the Bond Fund, and
all moneys required to be deposited with or paid to the Trustee
for deposit into the Bond Fund, and all moneys withdrawn from the
Bond Fund and held by the Trustee, the Paying Agent, any
Co-Paying Agent, shall be held by the Trustee, the Paying Agent
or any Co-Paying Agent, as the case may be, in trust, and such
moneys and Investment Securities (other than moneys held pursuant
to Section 4.06 hereof and moneys or Investment Securities held
in the Rebate Fund established in furtherance of the obligations
of the Company under clause (b) of Section 6.04 of the Loan
Agreement), while so held or so required to be deposited or paid,
shall constitute part of the Trust Estate and be subject to the
lien and security interest created hereby in favor of the Trustee
for the benefit of the Owners from time to time of the Bonds.
The Company shall have no right, title or interest in the Bond
Fund, except such rights as may arise after the right, title and
interest of the Trustee in and to the Trust Estate and all
covenants, agreements and other obligations of the Authority
under this Indenture shall have ceased, terminated and become
void and shall have been satisfied and discharged in accordance
with Article VIII hereof.
ARTICLE V
THE CONSTRUCTION FUND
Section 5.01. Creation of, and Disbursements from,
Construction Fund. (a) There is hereby created and established
with the Trustee a trust fund in the name of the Authority to be
designated "The Industrial Development Authority of the County of
Pima Industrial Development Revenue Bonds, 1997 Series A (Tucson
Electric Power Company Project) Construction Fund". The Trustee
shall establish and maintain within the Construction Fund a
"Capital Account" and an "Investment Account". The Trustee shall
establish and maintain any subaccount within the Capital Account
or the Investment Account which may be requested by an Authorized
Company Representative. The Construction Fund, and all moneys
and certificated securities therein, shall be kept in the
possession of the Trustee. The Authority shall not create any
lien upon the Construction Fund other than the lien hereby
created.
(b) The proceeds from the issuance and sale of the Bonds,
other than the $20,000,000 deposited in escrow with the
trustee for the 1990 Bonds as provided in Section 4.03 of the
Loan Agreement and accrued interest, if any, on such Bonds to
the date of delivery thereof paid by the initial purchasers
thereof, shall be deposited into the Capital Account. All
income or other gain from the investment of moneys in the
Capital Account or the Investment Account shall be deposited
into the Investment Account. In the event that all or a
portion of the proceeds of the Bonds shall have been applied
to the payment or redemption, or provision therefor, of any
obligations issued by the Authority other than Bonds, any
balance remaining in the construction, acquisition or other
similar fund maintained in respect of such obligations, which
balance shall have been delivered to the Trustee accompanied
by a direction of the Company that such balance be deposited
into the Construction Fund, shall be deposited into the
Capital Account and the Investment Account in accordance with
such direction.
(c) The Trustee is hereby authorized and directed to
disburse moneys in the Construction Fund to or upon the order
of the Company from time to time upon receipt by the Trustee
of requisitions executed by, or communications by telegram,
telex or facsimile transmission from, an Authorized Company
Representative, which requisitions or communications shall
state with respect to each payment to be made: (i) the
requisition number, (ii) the name and address of the person,
firm or corporation to whom payment is due or has been made
(or, in the case of payments to the Bond Fund, instructions to
make such payments thereto), (iii) the amount paid or to be
paid, (iv) the account or accounts within the Construction
Fund from which payment of such requisition, or any portion
thereof, shall be made, (v)(A) that each obligation, item of
cost or expense with respect to which such requisition is
being made has been properly incurred and has been paid or is
then due and payable as an item of the Cost of Construction,
is a proper charge against the Construction Fund, and has not
been the basis of any previous final payment therefrom or from
the proceeds of any other obligations issued by the Authority
or (B) in the event that a portion of the Bonds shall have
been paid, redeemed or deemed to have been paid within the
meaning of Article VIII hereof by reason of the application of
the proceeds of the sale of any obligations issued under an
indenture other than this Indenture and if the payment of such
requisition is to be made into the construction, acquisition
or other similar fund created under such other indenture, that
upon disbursement from such construction, acquisition or other
similar fund, each obligation, item of cost or expense
mentioned in the requisition for such disbursement shall have
been properly incurred and shall have been paid or will then
be due and payable as an item of the Cost of Construction,
(vi) that the payment of such requisition will not result in a
breach of any of the covenants of the Company contained in
Section 4.04 (c) or (d) of the Loan Agreement and (vii) that,
to the best of the knowledge of such Authorized Company
Representative, there shall not have occurred and be
continuing any event of default under the Loan Agreement. In
Section 4.04 of the Loan Agreement the Company has agreed that
any such communication by telegram, telex or facsimile
transmission shall be promptly confirmed by a requisition
executed by an Authorized Company Representative.
(d) In paying any requisition under this Section 5.01, the
Trustee shall be entitled to rely as to the completeness and
accuracy of all statements in such requisition upon the
approval of such requisition by an Authorized Company
Representative, execution thereof to be conclusive evidence of
such approval, and the Company has by the provisions of the
Loan Agreement covenanted and agreed to indemnify and save
harmless the Trustee from any liability incurred in connection
with the payment of any requisition so executed by an
Authorized Company Representative.
The Trustee shall keep and maintain adequate records
pertaining to each account within the Construction Fund and all
disbursements therefrom and, upon receipt of a certificate
furnished pursuant to Section 3.04 or Section 3.08(b) of the Loan
Agreement, the Trustee shall, if requested by the Authority or
the Company, file an accounting thereof with the Authority and
with the Company.
Section 5.02. Completion of Facilities; Termination of
Construction. Upon receipt by the Trustee of a certificate
furnished pursuant to Section 3.04 or Section 3.08(b) of the Loan
Agreement, any balance remaining in the Capital Account or the
Investment Account maintained within the Construction Fund (other
than amounts retained by the Trustee at the direction of the
Company pursuant to Section 3.04 or 3.08 of the Loan Agreement or
in furtherance of the covenant of the Company contained in clause
(b) of Section 6.04 of the Loan Agreement) shall (a) be applied
in whole or in part (i) to the purchase of Bonds in such amounts,
at such prices, at such times and otherwise as directed by an
Authorized Company Representative, or (ii) in any other manner
directed by the Company which, as indicated in an opinion of Bond
Counsel furnished by the Company to the Authority and the
Trustee, will not impair the validity under the Act of the Bonds
or the exclusion of the interest on the Bonds from gross income
for federal income tax purposes or (b) in the absence of any such
purchase or direction within sixty (60) days of the receipt by
the Trustee of such certificate (or such shorter period as the
Company shall direct), be deposited by the Trustee into the
corresponding account maintained within the Bond Fund. From time
to time as the proper disposition of the amounts retained by the
Trustee in the Construction Fund as aforesaid shall be
determined, to the extent that such amounts are not paid out in
full by the Trustee pursuant to Section 5.01 or 6.01 hereof, the
Company shall so notify the Trustee and the Authority by one or
more certificates as aforesaid and any amounts from time to time
no longer to be so retained by the Trustee shall be applied as
aforesaid. Pending the application of any moneys remaining in
the Construction Fund following the receipt of the aforesaid
certificate, such moneys may be invested in Investment Securities
in the manner permitted by Section 6.01 hereof, provided that
such investments (other than investments made with the moneys
retained by the Trustee at the direction of the Company pursuant
to Section 3.04 or 3.08 of the Loan Agreement) shall not produce
a yield greater than the yield on the Bonds unless, as indicated
in an opinion of Bond Counsel furnished by the Company to the
Authority and the Trustee, investments producing a greater yield
would not, in and of itself, impair the exclusion from gross
income for federal tax purposes of the interest on the Bonds.
Section 5.03. Redemption of All Outstanding Bonds. Except as
set forth in Section 5.05 hereof, in the event that all
Outstanding Bonds are to be redeemed, the Trustee shall, without
further authorization, deposit into the General Account within
the Bond Fund all amounts remaining in the Construction Fund
constituting part of the Trust Estate, with advice to the
Authority and the Company of such action, such deposit to be made
on the date fixed for such redemption.
Section 5.04. Acceleration of Bonds. In the event that the
principal of the Bonds shall have become due and payable pursuant
to Section 9.01 hereof, the Trustee shall, without further
authorization, deposit into the General Account within the Bond
Fund all amounts constituting part of the Trust Estate remaining
in the Construction Fund, with advice to the Authority and the
Company of such action, such deposit to be made on the date fixed
for such acceleration.
Section 5.05. Refunding of Bonds. In the event that all
Outstanding Bonds are paid, redeemed or deemed to have been paid
within the meaning of Article VIII hereof by reason of the
application of the proceeds of the sale of any obligations the
interest on which is exempt from federal income taxation, under
an indenture other than this Indenture, the Trustee shall,
without further authorization, withdraw all amounts constituting
part of the Trust Estate remaining in the Capital Account and the
Investment Account maintained within the Construction Fund and
deposit such amounts into corresponding accounts in the
construction, acquisition or other similar fund created under the
indenture under which such obligations are issued, with advice to
the Authority and the Company of such action, such withdrawals
and deposits to be made, in accordance with the provisions of
such indenture, on the date on which such Bonds are so paid,
redeemed or deemed to have been paid; provided, however, that if
Bonds shall have been paid, redeemed or deemed to have been paid
within the meaning of Article VIII hereof by reason of the
application of the proceeds of the sale of more than one issue of
obligations the interest on which is excluded from gross income
for federal income tax purposes under indentures other than this
Indenture, the Trustee shall, if directed by an Authorized
Company Representative, withdraw all amounts remaining in the
Capital Account and the Investment Account maintained within the
Construction Fund and such amounts shall be allocated among, and
deposited into, as directed by such Authorized Company
Representative, corresponding accounts in the construction,
acquisition or other similar funds created under the indentures
under which such obligations are issued, with advice to the
Authority and the Company of such action, such withdrawals and
deposits to be made, in accordance with the provisions of such
indentures, on the date on which all Bonds are so paid, redeemed
or deemed to have been paid.
Section 5.06. Moneys Held in Trust. All moneys and
Investment Securities held by the Trustee in the Construction
Fund, shall be held by the Trustee, in trust and such moneys and
Investment Securities (other than any moneys or Investment
Securities held in any subaccount within the Construction Fund
established in furtherance of the obligations of the Company
under Section 6.04(b) of the Loan Agreement) while so held or so
required to be deposited or paid, shall constitute part of the
Trust Estate and be subject to the lien and security interest
created hereby in favor of the Trustee for the benefit of the
Owners from time to time of the Bonds. The Company shall have no
right, title or interest in the Construction Fund, except that,
to the extent not required to be applied in another manner by any
provision hereof, moneys held by the Trustee in the Construction
Fund shall be disbursed by the Trustee to the Company upon and to
the extent of, but solely upon and to the extent of, satisfaction
of the conditions set forth in Section 5.01(c) hereof.
ARTICLE VI
INVESTMENTS
Section 6.01. Investments. The moneys in the Construction
Fund and in the Bond Fund shall, at the direction of the Company,
be invested and reinvested in Investment Securities. Any
Investment Securities may be purchased subject to options or
other rights in third parties to acquire the same. In addition,
except with respect to moneys or Investment Securities held
within the General Account of the Bond Fund, the Trustee shall,
at the direction of the Company, enter into (i) reverse
repurchase agreements, option agreements and agreements to lend
securities with respect to any Investment Securities held by it
and (ii) transactions for the purchase or sale of financial
futures contracts in obligations which constitute Investment
Securities or options on financial futures contracts in
obligations which constitute Investment Securities. Subject to
the further provisions of this Section 6.01, such investments
shall be made by the Trustee as directed and designated by the
Company in a certificate of, or telephonic advice promptly
confirmed by a certificate of, an Authorized Company
Representative. As and when any amounts thus invested may be
needed for disbursements from the Construction Fund or the Bond
Fund, the Trustee shall request the Company to designate such
investments to be sold or otherwise converted into cash to the
credit of such fund as shall be sufficient to meet such
disbursement requirements and shall then follow any directions in
respect thereto of an Authorized Company Representative. As long
as no Event of Default (as defined in Section 9.01 hereof) shall
have occurred and be continuing, the Company shall have the right
to designate the investments to be sold and to otherwise direct
the Trustee in the sale or conversion to cash of the investments
made with the moneys in the Construction Fund and in the Bond
Fund, provided that the Trustee shall be entitled to conclusively
assume the absence of any such Event of Default unless it has
notice thereof within the meaning of Section 10.05 hereof.
ARTICLE VII
GENERAL COVENANTS
Section 7.01. No General Obligations. Each and every
covenant herein made, including all covenants made in the various
sections of this Article VII, is predicated upon the condition
that neither Pima County, Arizona nor the State of Arizona shall
in any event be liable for the payment of the principal of, or
premium, if any, or interest on the Bonds or for the performance
of any pledge, mortgage, obligation or agreement created by or
arising out of this Indenture or the issuance of the Bonds, and
further that neither the Bonds, nor the premium, if any, or
interest thereon, nor any such obligation or agreement of the
Authority shall be construed to constitute an indebtedness of
Pima County, Arizona or the State of Arizona within the meaning
of any constitutional or statutory provisions whatsoever. The
Bonds and the interest and premium, if any, thereon shall be
limited obligations of the Authority payable solely from the
Receipts and Revenues of the Authority from the Loan Agreement
and the other moneys pledged therefor.
The Authority shall promptly cause to be paid, solely from the
sources stated herein, the principal of and premium, if any, and
interest on every Bond issued under this Indenture at the place,
on the dates and in the manner provided herein and in said Bonds
according to the true intent and meaning thereof.
Section 7.02. Performance of Covenants of the Authority;
Representations. The Authority shall faithfully perform at all
times any and all covenants, undertakings, stipulations and
provisions contained in this Indenture, in any and every Bond
executed, authenticated and delivered hereunder, and in all
proceedings pertaining thereto. The Authority represents that it
is duly authorized under the Constitution and laws of the State
of Arizona to issue the Bonds authorized hereby, to enter into
the Loan Agreement and this Indenture, and to pledge and assign
to the Trustee the Trust Estate, and that the Bonds in the hands
of the Owners thereof are and will be valid and binding limited
obligations of the Authority.
Section 7.03. Maintenance of Rights and Powers; Compliance
with Laws. The Authority shall at all times use its best efforts
to maintain its corporate existence or assure the assumption of
its obligations under this Indenture by any public body
succeeding to its powers under the Act; and it shall at all times
use its best efforts to comply with all valid acts, rules,
regulations, orders and directions of any legislative, executive,
administrative or judicial body known to it to be applicable to
the Loan Agreement and this Indenture.
Section 7.04. Enforcement of Obligations of the Company;
Amendments. Upon receipt of written notification from the
Trustee, the Authority shall cooperate with the Trustee in
enforcing the obligation of the Company to pay or cause to be
paid all the payments and other costs and charges payable by the
Company under the Loan Agreement. The Authority shall not enter
into any agreement with the Company amending the Loan Agreement
without the prior written consent of the Trustee and compliance
with Sections 12.06 and 12.07 of this Indenture (a revision to
Exhibit A to the Loan Agreement not being deemed an amendment for
purposes of this Section).
Section 7.05. Further Instruments. The Authority shall, upon
the reasonable request of the Trustee, from time to time execute
and deliver such further instruments and take such further action
as may be reasonable and as may be required to carry out the
purposes of this Indenture; provided, however, that no such
instruments or actions shall pledge the credit or taxing power of
the State of Arizona, Pima County, the Authority or any other
political subdivision of said State.
Section 7.06. No Disposition of Trust Estate. Except as
permitted by this Indenture, the Authority shall not sell, lease,
pledge, assign or otherwise dispose of or encumber its interest
in the Trust Estate and will promptly pay or cause to be
discharged or make adequate provision to discharge any lien or
charge on any part thereof not permitted hereby.
Section 7.07. Financing Statements. The Authority and the
Trustee shall cooperate with the Company in causing appropriate
financing statements, naming the Trustee as pledgee of the
Receipts and Revenues of the Authority from the Loan Agreement
and of the other moneys pledged under the Indenture for the
payment of the principal of and premium, if any, and interest on
the Bonds, and as pledgee and assignee of the balance of the
Trust Estate, and the Authority shall cooperate with the Trustee
and the Company in causing appropriate continuation statements to
be duly filed and recorded in the appropriate state and county
offices as required by the provisions of the Uniform Commercial
Code or other similar law as adopted in the State of Arizona and
any other applicable jurisdiction, as from time to time amended,
in order to perfect and maintain the security interests created
by this Indenture.
Section 7.08. Tax Covenants; Rebate Fund. (a) The Authority
covenants for the benefit of all Owners from time to time of the
Bonds that it will not directly or indirectly use or (to the
extent within its control), permit the use of, the proceeds of
any of the Bonds or any other funds of the Authority, or take or
omit to take any other action, if and to the extent that such
use, or the taking or omission to take such action, would cause
any of the Bonds to be "arbitrage bonds" within the meaning of
Section 148 of the Code or otherwise subject to federal income
taxation by reason of Sections 103 and 141 through 150 of the
Code and any applicable regulations promulgated thereunder. To
that end the Authority covenants to comply with all covenants set
forth in the Tax Agreement, which is hereby incorporated herein
by reference as though fully set forth herein.
(b) The Trustee shall establish and maintain a fund
separate from any other fund established and maintained
hereunder designated "The Industrial Development Authority of
the County of Pima Industrial Development Revenue Bonds, 1997
Series A (Tucson Electric Power Company Project) Rebate Fund"
(herein called the "Rebate Fund") in accordance with the
provisions of the Tax Agreement. Within the Rebate Fund, the
Trustee shall maintain such accounts as shall be directed by
the Company in order for the Authority and the Company to
comply with the provisions of the Tax Agreement. Subject to
the transfer provisions provided in paragraph (c) below, all
money at any time deposited in the Rebate Fund shall be held
by the Trustee in trust, to the extent required to satisfy the
Rebate Requirement (as defined in the Tax Agreement), for
payment to the United States of America, and neither the
Company, the Authority or the Owners shall have any rights in
or claim to such moneys. All amounts deposited into or on
deposit in the Rebate Fund shall be governed by this Section
7.08, by Section 6.04 of the Loan Agreement and by the Tax
Agreement. The Trustee shall conclusively be deemed to have
complied with such provisions if it follows the directions of
the Company, including supplying all necessary information in
the manner set forth in the Tax Agreement, and shall not be
required to take any actions thereunder in the absence of
written directions from the Company.
(c) Upon receipt of the Company's written instructions, the
Trustee shall remit part or all of the balances in the Rebate
Fund to the United States of America, as so directed. In
addition, if the Company so directs, the Trustee shall deposit
moneys into or transfer moneys out of the Rebate Fund from or
into such accounts or funds as directed by the Company's
written directions. Any funds remaining in the Rebate Fund
after all of the Bonds shall have been paid and any Rebate
Requirement shall have been satisfied, or provision therefor
reasonably satisfactory to the Trustee shall have been made,
shall be withdrawn and remitted to the Company.
(d) Notwithstanding any provision of this Indenture, the
obligation to remit the Rebate Requirement to the United
States of America and to comply with all other requirements of
this Section 7.08, Section 6.04 of the Loan Agreement and the
Tax Agreement shall survive the payment of the Bonds and the
satisfaction and discharge of this Indenture.
Section 7.09. Notices of Trustee. The Trustee shall give
notice to both the Authority and the Company whenever it is
required hereby to give notice to either and, additionally, shall
furnish to the Authority and the Company copies of any Notice by
Mail or Publication given by it pursuant to any provision hereof.
ARTICLE VIII
DEFEASANCE
Section 8.01. Defeasance. If the Authority shall pay or
cause to be paid to the Owner of any Bond secured hereby the
principal of and premium, if any, and interest due and payable,
and thereafter to become due and payable, upon such Bond or any
portion of such Bond in the principal amount of $5,000 or any
integral multiple thereof, such Bond or portion thereof shall
cease to be entitled to any lien, benefit or security under this
Indenture. If the Authority shall pay or cause to be paid to the
Owners of all the Bonds secured hereby the principal of and
premium, if any, and interest due and payable, and thereafter to
become due and payable, thereon, and shall pay or cause to be
paid all other sums payable hereunder including, without
limitation, amounts payable pursuant to Section 10.04 hereof,
then, and in that case, the right, title and interest of the
Trustee in and to the Trust Estate shall thereupon cease,
terminate and become void. In such event, the Trustee shall
assign, transfer and turn over to the Company the Trust Estate,
including, without limitation, any surplus in the Bond Fund and
any balance remaining in any other fund created under this
Indenture.
All or any portion of Outstanding Bonds or portions of Bonds
in principal amounts of $5,000 or any integral multiple thereof,
shall prior to the maturity or redemption date thereof be deemed
to have been paid within the meaning and with the effect
expressed in this Article VIII, and the entire indebtedness of
the Authority with respect thereof shall be satisfied and
discharged, when
(a) in the event said Bonds or portions thereof have been
selected for redemption in accordance with Section 3.02
hereof, the Trustee shall have given, or the Company shall
have given to the Trustee in form satisfactory to it
irrevocable instructions to give, on a date in accordance with
the provisions of Section 3.03 hereof, notice of redemption of
such Bonds or portions thereof,
(b) there shall have been deposited with the Trustee either
moneys in an amount which shall be sufficient, or Government
Obligations which shall not contain provisions permitting the
redemption thereof at the option of the issuer, the principal
of and the interest on which, when due, and without regard to
any reinvestment thereof, will provide moneys which, together
with the moneys, if any, deposited with or held by the
Trustee, shall be sufficient, to pay when due the principal of
and premium, if any, and interest due and to become due on
said Bonds or portions thereof on and prior to the redemption
date or maturity date thereof, as the case may be, and
(c) in the event said Bonds or portions thereof do not
mature and are not to be redeemed within the next succeeding
sixty (60) days, the Company shall have given the Trustee in
form satisfactory to it irrevocable instructions to give, as
soon as practicable in the same manner as a notice of
redemption is given pursuant to Section 3.03 hereof, a notice
to the Owners of said Bonds or portions thereof that the
deposit required by clause (b) above has been made with the
Trustee and that said Bonds or portions thereof are deemed to
have been paid in accordance with this Article VIII and
stating the maturity or redemption date upon which moneys are
to be available for the payment of the principal of and
premium, if any, and interest on said Bonds or portions
thereof.
Neither the Government Obligations nor moneys deposited with
the Trustee pursuant to this Article VIII nor principal or
interest payments on any such Government Obligations shall be
withdrawn or used for any purpose other than, and such Government
Obligations, moneys and principal or interest payments shall be
held in trust for, the payment of the principal of and premium,
if any, and interest on said Bonds or portions thereof; provided,
that any cash received from such principal or interest payments
on such Government Obligations deposited with the Trustee, if not
then needed for such purposes, shall, to the extent practicable,
be invested in Government Obligations of the type described in
clause (b) of the preceding paragraph maturing at times and in
amounts sufficient to pay when due the principal of and premium,
if any, and interest to become due on said Bonds or portions
thereof on and prior to such redemption date or maturity date
thereof, as the case may be, and interest earned from such
reinvestments shall be paid over to the Company, as received by
the Trustee, free and clear of any trust, lien or pledge
hereunder. If payment of less than all the Bonds is to be
provided for in the manner and with the effect provided in this
Article VIII, the Trustee shall select such Bonds or portions of
Bonds in the manner specified by Section 3.02 hereof for
selection for redemption of less than all Bonds in the principal
amount designated to the Trustee by the Company. At or prior to
the time of the deposit of any Government Obligations with the
Trustee pursuant to this Section 8.01, the Company shall provide
the Trustee with a certificate of an accountant or an accounting
firm as to the sufficiency of such Government Obligations to pay
when due the principal of and premium, if any, and interest due
and to become due as set forth in clause (b) of the preceding
paragraph.
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Events of Default. Each of the following
events shall constitute and is referred to in this Indenture as
an "Event of Default":
(a) a failure to pay the principal of or premium, if any, on
any of the Bonds when the same shall become due and payable at
maturity, upon redemption or otherwise;
(b) a failure to pay an installment of interest on any of
the Bonds after such interest shall have become due and
payable for a period of thirty (30) days;
(c) a failure by the Authority to observe and perform any
covenant, condition, agreement or provision (other than as
specified in clauses (a) and (b) of this Section 9.01)
contained in the Bonds or in this Indenture on the part of the
Authority to be observed or performed, which failure shall
continue for a period of sixty (60) days after written notice,
specifying such failure and requesting that it be remedied,
shall have been given to the Authority and the Company by the
Trustee, which may give such notice in its discretion and
which shall give such notice at the written request of Owners
of not less than 33% in principal amount of the Bonds then
Outstanding, unless the Trustee, or the Trustee and Owners of
a principal amount of Bonds not less than the principal amount
of Bonds the Owners of which requested that such notice be
given, as the case may be, shall agree in writing to an
extension of such period prior to its expiration; provided,
however, that the Trustee, or the Trustee and the Owners of
such principal amount of Bonds, as the case may be, shall be
deemed to have agreed to an extension of such period if
corrective action is initiated by the Authority, or the
Company on behalf of the Authority, within such period and is
being diligently pursued.
Upon the occurrence and continuance of any Event of Default
described in clause (a) or (b) of the preceding paragraph, the
Trustee may, and at the written request of Owners of not less
than 33% in principal amount of Bonds then Outstanding shall, by
written notice to the Authority and the Company, declare the
Bonds to be immediately due and payable, whereupon they shall,
without further action, become and be immediately due and
payable, anything in this Indenture or in the Bonds to the
contrary notwithstanding, and the Trustee shall give notice
thereof by Mail to all Owners of Outstanding Bonds.
The provisions of the preceding paragraph, however, are
subject to the condition that if, after the principal of the
Bonds shall have been so declared to be due and payable, and
before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the
Authority shall cause to be deposited with the Trustee a sum
sufficient to pay all matured installments of interest upon all
Bonds and the principal of any and all Bonds which shall have
become due otherwise than by reason of such declaration (with
interest upon such principal and, to the extent permissible by
law, on overdue installments of interest, at the rate per annum
borne by the Bonds) and such amounts as shall be sufficient to
cover reasonable compensation and reimbursement of expenses
payable to the Trustee and any predecessor Trustee, and all
Events of Default hereunder other than nonpayment of the
principal of Bonds which shall have become due by said
declaration shall have been remedied, then, in every such case,
such Event of Default shall be deemed waived and such declaration
and its consequences rescinded and annulled, and the Trustee
shall promptly give written notice of such waiver, rescission and
annulment to the Authority and the Company, and, if notice of the
acceleration of the Bonds shall have been given to the Owners of
the Bonds, shall give notice thereof by Mail to all Owners of
Outstanding Bonds; but no such waiver, rescission and annulment
shall extend to or affect any subsequent Event of Default or
impair any right or remedy consequent thereon.
Section 9.02. Remedies. Upon the occurrence and continuance
of any Event of Default, then and in every such case the Trustee
in its discretion may, and upon the written request of Owners of
not less than a majority in principal amount of the Bonds then
Outstanding and receipt of indemnity to its satisfaction shall,
in its own name and as the Trustee of an express trust:
(a) by mandamus, or other suit, action or proceeding at law
or in equity, enforce all rights of the Owners of the Bonds,
and require the Authority or the Company to carry out any
agreements with or for the benefit of such Owners and to
perform its or their duties under the Act, the Loan Agreement
and this Indenture;
(b) bring suit upon the Bonds; or
(c) by action or suit in equity enjoin any acts or things
which may be unlawful or in violation of the rights of the
Owners of the Bonds.
Section 9.03. Restoration to Former Position. In the event
that any proceeding taken by the Trustee to enforce any right
under this Indenture shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the
Trustee, then the Authority, the Trustee and the Owners shall be
restored, subject to any determination in such proceeding, to
their former positions and rights hereunder, respectively, and
all rights, remedies and powers of the Trustee shall continue as
though no such proceeding had been taken.
Section 9.04. Owners' Right to Direct Proceedings. Anything
in this Indenture to the contrary notwithstanding, the Owners of
a majority in principal amount of the Bonds then Outstanding
hereunder shall have the right, by an instrument in writing
executed and delivered to the Trustee, to direct the time, method
and place of conducting all remedial proceedings available to the
Trustee under this Indenture or exercising any trust or power
conferred on the Trustee by this Indenture; provided, however,
that such direction shall not be otherwise than in accordance
with law and the provisions of this Indenture and that the
Trustee shall have the right (but not the obligation) to decline
to follow any such direction if the Trustee, being advised by
counsel, shall determine that the action or proceeding so
directed may not lawfully be taken, or if the Trustee in good
faith shall determine that the action or proceedings so directed
would involve the Trustee in personal liability or if the Trustee
in good faith shall so determine that the actions or forbearances
specified in or pursuant to such direction would be unduly
prejudicial to the interests of Owners not joining in the giving
of said direction, it being understood that the Trustee shall
have no duty to ascertain whether or not such actions or
forbearances are unduly prejudicial to such Owners.
Section 9.05. Limitation on Owners' Right to Institute
Proceedings. No Owner of Bonds shall have any right to institute
any suit, action or proceeding in equity or at law for the
execution of any trust or power hereunder, or any other remedy
hereunder or on said Bonds, unless such Owner previously shall
have given to the Trustee written notice of an Event of Default
as hereinabove provided and unless the Owners of not less than a
majority in principal amount of the Bonds then Outstanding shall
have made written request of the Trustee so to do, after the
right to institute said suit, action or proceeding shall have
accrued, and shall have afforded the Trustee a reasonable
opportunity to proceed to institute the same in either its or
their name, and unless there also shall have been offered to the
Trustee security and indemnity satisfactory to it against the
costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee shall not have complied with such
request within a reasonable time; and such notification, request
and offer of indemnity are hereby declared in every such case, at
the option of the Trustee, to be conditions precedent to the
institution of said suit, action or proceeding; it being
understood and intended that no one or more of the Owners of the
Bonds shall have any right in any manner whatever by his or their
action to affect, disturb or prejudice the security of this
Indenture, or to enforce any right hereunder or under the Bonds,
except in the manner herein provided, and that all suits, actions
and proceedings at law or in equity shall be instituted, had and
maintained in the manner herein provided and for the equal
benefit of all Owners of the Bonds.
Section 9.06. No Impairment of Right to Enforce Payment.
Notwithstanding any other provision in this Indenture, the right
of any Owner of a Bond to receive payment of the principal of and
premium, if any, and interest on such Bond, on or after the
respective due dates expressed therein, or to institute suit for
the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
such Owner.
Section 9.07. Proceedings by Trustee without Possession of
Bonds. All rights of action under this Indenture or under any of
the Bonds secured hereby which are enforceable by the Trustee may
be enforced by it without the possession of any of the Bonds, or
the production thereof on the trial or other proceedings relative
thereto, and any such suit, action or proceeding instituted by
the Trustee shall be brought in its name for the equal and
ratable benefit of the Owners of the Bonds, subject to the
provisions of this Indenture.
Section 9.08. No Remedy Exclusive. No remedy herein
conferred upon or reserved to the Trustee or to the Owners of the
Bonds is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative, and
shall be in addition to every other remedy given hereunder or
under the Loan Agreement, now or hereafter existing at law or in
equity or by statute.
Section 9.09. No Waiver of Remedies. No delay or omission of
the Trustee or of any Owner of a Bond to exercise any right or
power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver of any such default,
or an acquiescence therein; and every power and remedy given by
this Article IX to the Trustee and to the Owners of the Bonds,
respectively, may be exercised from time to time and as often as
may be deemed expedient.
Section 9.10. Application of Moneys. Any moneys received by
the Trustee, by any receiver or by any Owner of a Bond pursuant
to any right given or action taken under the provisions of this
Article IX, after payment of the costs and expenses of the
proceedings resulting in the collection of such moneys and of all
amounts due to the Trustee and any predecessor Trustee under
Section 10.04 hereof, shall be deposited in the Bond Fund and all
moneys so deposited in the Bond Fund during the continuance of an
Event of Default (other than moneys for the payment of Bonds
which had matured or otherwise become payable prior to such Event
of Default or for the payment of interest due prior to such Event
of Default) shall be applied as follows:
(a) Unless the principal of all the Bonds shall have become
due and payable, all such moneys shall be applied (i) first,
to the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, with interest
on overdue installments, if lawful, at the rate per annum
borne by the Bonds, in the order of maturity of the
installments of such interest and, if the amount available
shall not be sufficient to pay in full any particular
installment of interest, then to the payment ratably,
according to the amounts due on such installment, and (ii)
second, to the payment to the persons entitled thereto of the
unpaid principal of any of the Bonds which shall have become
due (other than Bonds called for redemption for the payment of
which money is held pursuant to the provisions of this
Indenture), with interest on such Bonds at their rate from the
respective dates upon which they became due and, if the amount
available shall not be sufficient to pay in full Bonds due on
any particular date, together with such interest, then to the
payment ratably, according to the amount of principal and
interest due on such date, in each case to the persons
entitled thereto, without any discrimination or privilege.
(b) If the principal of all the Bonds shall have become due
and payable, all such moneys shall be applied to the payment
of the principal and interest then due and unpaid upon the
Bonds, with interest on overdue interest and principal, as
aforesaid, without preference or priority of principal over
interest or of interest over principal, or of any installment
of interest over any other installment of interest, or of any
Bond over any other Bond, ratably, according to the amounts
due respectively for principal and interest, to the persons
entitled thereto without any discrimination or privilege.
(c) If the principal of all the Bonds shall have become due
and payable, and if acceleration of the maturity of the Bonds
by reason of such Event of Default shall thereafter have been
rescinded and annulled under the provisions of this Article
IX, then, subject to the provisions of clause (b) of this
Section 9.10 which shall be applicable in the event that the
principal of all the Bonds shall later become due and payable,
the moneys shall be applied in accordance with the provisions
of clause (a) of this Section 9.10.
Section 9.11. Severability of Remedies. It is the purpose
and intention of this Article IX to provide rights and remedies
to the Trustee and the Owners which may be lawfully granted under
the provisions of the Act, but should any right or remedy herein
granted be held to be unlawful, the Trustee and the Owners shall
be entitled, as above set forth, to every other right and remedy
provided in this Indenture and by law.
ARTICLE X
TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
Section 10.01. Acceptance of Trusts. The Trustee hereby
accepts and agrees to execute the trusts hereby created, but only
upon the additional terms set forth in this Article X, to all of
which the Authority agrees and the respective Owners agree by
their acceptance of delivery of any of the Bonds.
Section 10.02. No Responsibility for Recitals. The recitals,
statements and representations contained in this Indenture or in
the Bonds, save only the Trustee's authentication upon the Bonds,
are not made by the Trustee, and the Trustee does not assume, and
shall not have, any responsibility or obligation for the
correctness of any thereof. The Trustee makes no representation
as to the validity or sufficiency of this Indenture or the Bonds.
Section 10.03. Limitations on Liability. The Trustee may
execute any of the trusts or powers hereof and perform the duties
required of it hereunder by or through attorneys, agents,
receivers, or employees, and shall be entitled to advice of
counsel concerning all matters of trust and its duty hereunder,
and the Trustee shall not be answerable for the default or
misconduct of any such attorney, agent, receiver, or employee
selected by it with reasonable care. The Trustee shall not be
answerable for the exercise of any discretion or power under this
Indenture or for anything whatsoever in connection with the trust
created hereby, except only for its own negligence or bad faith.
Anything in this Indenture to the contrary notwithstanding,
the Trustee shall in no event be required to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for
believing that the repayment of such funds or adequate indemnity
against such liability is not reasonably assured to it.
Section 10.04. Compensation, Expenses and Advances. The
Trustee, the Paying Agent and any Co-Paying Agent and the
Registrar under this Indenture shall be entitled to reasonable
compensation for their services rendered hereunder (not limited
by any provision of law regarding the compensation of the trustee
of an express trust) and to reimbursement for their actual
out-of-pocket expenses (including counsel fees) reasonably
incurred in connection therewith except as a result of their
negligence or bad faith, including, without limitation,
compensation for any services rendered, and reimbursement for any
expenses incurred, at and subsequent to the time the Bonds are
deemed to have been paid in accordance with Article VIII hereof.
If the Authority shall fail to perform any of the covenants or
agreements contained in this Indenture, other than the covenants
or agreements in respect of the payment of the principal of and
premium, if any, and interest on the Bonds, the Trustee may, in
its uncontrolled discretion and without notice to the Owners of
the Bonds, at any time and from time to time, make advances to
effect performance of the same on behalf of the Authority, but
the Trustee shall be under no obligation so to do; and any and
all such advances may bear interest at a rate per annum not
exceeding the base rate then in effect for 90-day commercial
loans by the Trustee or a commercial banking affiliate of the
Trustee designated as such by the Trustee in the city in which is
located the Principal Office of the Trustee (or such affiliate,
as the case may be) to borrowers of the highest credit standing;
but no such advance shall operate to relieve the Authority from
any default hereunder. In Section 5.03 of the Loan Agreement,
the Company has agreed that it will pay to the Trustee (including
any predecessor Trustee), the Paying Agent and any Co-Paying
Agent and the Registrar such compensation and reimbursement of
expenses and advances, but the Company may, without creating a
default hereunder, contest in good faith the reasonableness of
any such services, expenses and advances. If the Company shall
have failed to make any payment to the Trustee or any predecessor
Trustee under Section 5.03 of the Loan Agreement and such failure
shall have resulted in an Event of Default under the Loan
Agreement, the Trustee, and any predecessor Trustee, shall have,
in addition to any other rights hereunder, a claim, prior to the
claim of the Owners, for the payment of its compensation and the
reimbursement of its expenses and any advances made by it, as
provided in this Section 10.04, upon the moneys and obligations
in the Bond Fund; provided, however, that neither the Trustee nor
any predecessor Trustee shall have any such claim upon moneys or
obligations deposited with or paid to the Trustee for the
redemption or payment of Bonds which are deemed to have been paid
in accordance with Article VIII hereof.
In Section 5.04 of the Loan Agreement, the Company has agreed
to indemnify the Trustee and any predecessor Trustee to the
extent provided therein.
Section 10.05. Notice of Events of Default. The Trustee shall
not be required to take notice, or be deemed to have notice, of
any default or Event of Default under this Indenture other than
an Event of Default under clause (a) or (b) of the first
paragraph of Section 9.01 hereof, unless an officer assigned by
the Trustee to administer its corporate trust business has been
specifically notified in writing of such default or Event of
Default by Owners of at least 33% in principal amount of the
Bonds then Outstanding. The Trustee may, however, at any time,
in its discretion, require of the Authority and the Company full
information and advice as to the performance of any of the
covenants, conditions and agreements contained herein.
Section 10.06. Action by Trustee. The Trustee shall be under
no obligation to take any action in respect of any default or
Event of Default hereunder or toward the execution or enforcement
of any of the trusts hereby created, or to institute, appear in
or defend any suit or other proceeding in connection therewith,
unless requested in writing so to do by Owners of at least a
majority in principal amount of the Bonds then Outstanding, and,
if in its opinion such action may tend to involve it in expense
or liability, unless furnished, from time to time as often as it
may require, with security and indemnity satisfactory to it. The
foregoing provisions are intended only for the protection of the
Trustee, and shall not affect any discretion or power given by
any provisions of this Indenture to the Trustee to take action in
respect of any default or Event of Default without such notice or
request from the Owners of the Bonds, or without such security or
indemnity.
Section 10.07. Good Faith Reliance. The Trustee shall be
protected and shall incur no liability in acting or proceeding in
good faith upon any resolution, notice, telegram, telex,
facsimile transmission, request, consent, waiver, certificate,
statement, affidavit, voucher, bond, requisition or other paper
or document which it shall in good faith believe to be genuine
and to have been passed or signed by the proper board, body or
person or to have been prepared and furnished pursuant to any of
the provisions of this Indenture or the Loan Agreement, or upon
the written opinion of any attorney, engineer, accountant or
other expert believed by the Trustee to be qualified in relation
to the subject matter, and the Trustee shall be under no duty to
make any investigation or inquiry as to any statements contained
or matters referred to in any such instrument, but may accept and
rely upon the same as conclusive evidence of the truth and
accuracy of such statements. Neither the Trustee, the Paying
Agent, any Co-Paying Agent nor the Registrar shall be bound to
recognize any person as an Owner of a Bond or to take any action
at his request unless the ownership of such Bond is proved as
contemplated in Section 11.01 hereof.
Section 10.08. Dealings in Bonds and with the Authority and
the Company. The Trustee, the Paying Agent, any Co-Paying Agent
or the Registrar, in its individual or any other capacity, may in
good faith buy, sell, own, hold and deal in any of the Bonds
issued hereunder, and may join in any action which any Owner of a
Bond may be entitled to take with like effect as if it did not
act in any capacity hereunder. The Trustee, the Paying Agent,
any Co-Paying Agent or the Registrar, in its individual or any
other capacity, either as principal or agent, may also engage in
or be interested in any financial or other transaction with the
Authority or the Company, and may act as depositary, trustee, or
agent for any committee or body of Owners of Bonds secured hereby
or other obligations of the Authority as freely as if it did not
act in any capacity hereunder.
Section 10.09. Allowance of Interest. The Trustee may, but
shall not be obligated to, allow and credit interest upon any
moneys which it may at any time receive under any of the
provisions of this Indenture, at such rate, if any, as it
customarily allows upon similar funds of similar size and under
similar conditions. All interest allowed on any such moneys
shall be credited as provided in Articles IV and V with respect
to interest on investments.
Section 10.10. Construction of Indenture. The Trustee may
construe any of the provisions of this Indenture insofar as the
same may appear to be ambiguous or inconsistent with any other
provision hereof, and any construction of any such provisions
hereof by the Trustee in good faith shall be binding upon the
Owners of the Bonds.
Section 10.11. Resignation of Trustee. The Trustee may resign
and be discharged of the trusts created by this Indenture by
executing an instrument in writing resigning such trust and
specifying the date when such resignation shall take effect, and
filing the same with the President of the Authority and with the
Company, not less than forty-five (45) days before the date
specified in such instrument when such resignation shall take
effect, and by giving notice of such resignation by Mail to all
Owners of Bonds. Such resignation shall take effect on the later
to occur of (i) the day specified in such instrument and notice,
unless previously a successor Trustee shall have been appointed
as hereinafter provided, in which event such resignation shall
take effect immediately upon the appointment of such successor
Trustee and (ii) the appointment of a successor Trustee.
So long as no event which is, or after notice or lapse of
time, or both, would become, an Event of Default shall have
occurred and be continuing, if the Authority shall have delivered
to the Trustee (i) an instrument appointing a successor Trustee,
effective as of a date specified therein and (ii) an instrument
of acceptance of such appointment, effective as of such date, by
such successor Trustee in accordance with Section 10.16, the
Trustee shall be deemed to have resigned as contemplated in this
Section, the successor Trustee shall be deemed to have been
appointed pursuant to subsection (b) of Section 10.13 and such
appointment shall be deemed to have been accepted as contemplated
in Section 10.16, all as of such date, and all other provisions
of this Article X shall be applicable to such resignation,
appointment and acceptance except to the extent inconsistent with
this paragraph. The Authority shall deliver any such instrument
of appointment at the direction of the Company.
Section 10.12. Removal of Trustee. The Trustee may be removed
at any time by filing with the Trustee so removed, and with the
Authority and the Company, an instrument or instruments in
writing, appointing a successor, or an instrument or instruments
in writing, consenting to the appointment by the Authority (at
the direction of the Company) of a successor and accompanied by
an instrument of appointment by the Authority (at the direction
of the Company) of such successor, and in any event executed by
Owners of not less than a majority in principal amount of the
Bonds then Outstanding, such filing to be made by any Owner of a
Bond or his duly authorized attorney.
Section 10.13. Appointment of Successor Trustee. (a) In case
at any time the Trustee shall be removed, or be dissolved, or if
its property or affairs shall be taken under the control of any
state or federal court or administrative body because of
insolvency or bankruptcy, or for any other reason, then a vacancy
shall forthwith and ipso facto exist and a successor may be
appointed, and in case at any time the Trustee shall resign or be
deemed to have resigned, then a successor may be appointed, by
filing with the Authority and the Company an instrument in
writing appointing such successor Trustee executed by Owners of
not less than a majority in principal amount of Bonds then
Outstanding. Copies of such instrument shall be promptly
delivered by the Authority to the predecessor Trustee, to the
Trustee so appointed and the Company.
(b) Until a successor Trustee shall be appointed by the
Owners of the Bonds as herein authorized, the Authority, shall
appoint a successor Trustee as directed by the Company. After
any appointment by the Authority, it shall cause notice of
such appointment to be given by Mail to all Owners of Bonds.
Any new Trustee so appointed by the Authority shall
immediately and without further act be superseded by a Trustee
appointed by the Owners of the Bonds in the manner above
provided.
(c) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article
shall become effective until the acceptance of appointment by
the successor Trustee.
Section 10.14. Qualifications of Successor Trustee. Every
successor Trustee (a) shall be a bank or trust company duly
organized under the laws of the United States or any state or
territory thereof authorized by law to perform all the duties
imposed upon it by this Indenture and (b) shall have (or the
parent holding company of which shall have) a combined capital
stock, surplus and undivided profits of at least $100,000,000 if
there can be located, with reasonable effort, such an institution
willing and able to accept the trust on reasonable and customary
terms.
Section 10.15. Judicial Appointment of Successor Trustee. In
case at any time the Trustee shall resign and no appointment of a
successor Trustee shall be made pursuant to the foregoing
provisions of this Article X prior to the date specified in the
notice of resignation as the date when such resignation is to
take effect, the retiring Trustee may forthwith apply to a court
of competent jurisdiction for the appointment of a successor
Trustee. If no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this Article X within six
months after a vacancy shall have occurred in the office of
Trustee, any Owner of a Bond may apply to any court of competent
jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
Section 10.16. Acceptance of Trusts by Successor Trustee. Any
successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Authority an instrument accepting such
appointment hereunder, and thereupon such successor Trustee,
without any further act, deed or conveyance, shall become duly
vested with all the estates, property, rights, powers, trusts,
duties and obligations of its predecessor in the trust hereunder,
with like effect as if originally named Trustee herein. Upon
request of such Trustee, such predecessor Trustee and the
Authority shall execute and deliver an instrument transferring to
such successor Trustee all the estates, property, rights, powers
and trusts hereunder of such predecessor Trustee and, subject to
the provisions of Section 10.04 hereof, such predecessor Trustee
shall pay over to the successor Trustee all moneys and other
assets at the time held by it hereunder.
Section 10.17. Successor by Merger or Consolidation. Any
corporation or association into which any Trustee hereunder may
be merged or converted or with which it may be consolidated, or
any corporation or association resulting from any merger or
consolidation to which any Trustee hereunder shall be a party or
any corporation or association succeeding to the corporate trust
business of the Trustee, shall be the successor Trustee under
this Indenture, without the execution or filing of any paper or
any further act on the part of the parties hereto, anything in
this Indenture to the contrary notwithstanding.
If, at the time any such successor to the Trustee shall
succeed to the trusts created by this Indenture, any of the Bonds
shall have been authenticated but not delivered, such successor
Trustee may adopt the certificate of authentication of any
predecessor Trustee and deliver such Bonds so authenticated; and
if at that time, any of the Bonds shall not have been
authenticated, such successor Trustee may authenticate such Bonds
either in the name of any such predecessor hereunder or in the
name of such successor; and, in all such cases, such certificate
of authentication shall have the full force which it is anywhere
in the Bonds or in this Indenture provided that the certificate
of authentication of the Trustee shall have; provided, however,
that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Bonds in the name of any
predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 10.18. Standard of Care. Notwithstanding any other
provisions of this Article X, the Trustee shall, during the
existence of an Event of Default of which the Trustee has actual
notice, exercise such of the rights and powers vested in it by
this Indenture and use the same degree of skill and care in their
exercise as a prudent man would use and exercise under the
circumstances in the conduct of his own affairs.
Section 10.19. Notice to Owners of Bonds of Event of Default.
If an Event of Default occurs of which the Trustee by Section
10.05 hereof is required to take notice and deemed to have
notice, or any other Event of Default occurs of which the Trustee
has been specifically notified in accordance with Section 10.05
hereof, and any such Event of Default shall continue for at least
two days after the Trustee acquires actual notice thereof, unless
the Trustee shall have theretofore given a notice of acceleration
pursuant to Section 9.01 hereof, the Trustee shall give Notice by
Mail to all Owners of Outstanding Bonds.
Section 10.20. Intervention in Litigation of the Authority.
In any judicial proceeding to which the Authority is a party and
which in the opinion of the Trustee and its counsel has a
substantial bearing on the interests of the Owners of Bonds, the
Trustee may intervene on behalf of the Owners of the Bonds and
shall, upon receipt of indemnity satisfactory to it, do so if
requested in writing by Owners of at least a majority in
principal amount of the Bonds then Outstanding if permitted by
the court having jurisdiction in the premises.
Section 10.21. Paying Agent; Co-Paying Agents. The Authority
shall, with the approval of the Company, appoint the Paying Agent
for the Bonds and may at any time or from time to time, with the
approval of the Company, appoint one or more Co-Paying Agents for
the Bonds, subject to the conditions set forth in Section 10.22
hereof. The Paying Agent and each Co-Paying Agent shall
designate to the Trustee its Principal Office and signify its
acceptance of the duties and obligations imposed upon it
hereunder by a written instrument of acceptance delivered to the
Authority and the Trustee in which such Paying Agent or Co-Paying
Agent will agree, particularly:
(a) to hold all sums held by it for the payment of the
principal of and premium, if any, or interest on Bonds in
trust for the benefit of the Owners of the Bonds until such
sums shall be paid to such Owners or otherwise disposed of as
herein provided;
(b) to keep such books and records as shall be consistent
with prudent industry practice, to make such books and records
available for inspection by the Authority, the Trustee and the
Company at all reasonable times and, in the case of a
Co-Paying Agent, to promptly furnish copies of such books and
records to the Paying Agent; and
(c) in the case of a Co-Paying Agent, upon the request of
the Paying Agent, to forthwith deliver to the Paying Agent all
sums so held in trust by such Co-Paying Agent.
The Authority shall cooperate with the Trustee and the Company
to cause the necessary arrangements to be made and to be
thereafter continued whereby funds derived from the sources
specified in Sections 4.03 and 4.04 hereof will be made available
to the Paying Agent and each Co-Paying Agent for the payment when
due of the principal of, premium, if any, and interest on the
Bonds.
Section 10.22. Qualifications of Paying Agent and Co-Paying
Agents; Resignation; Removal. The Paying Agent and any Co-Paying
Agent shall be a corporation or association duly organized under
the laws of the United States of America or any state or
territory thereof, having a combined capital stock, surplus and
undivided profits of at least $15,000,000 and authorized by law
to perform all the duties imposed upon it by this Indenture. The
Paying Agent and any Co-Paying Agent may at any time resign and
be discharged of the duties and obligations created by this
Indenture by giving at least sixty (60) days' notice to the
Authority, the Company and the Trustee. The Paying Agent and any
Co-Paying Agent may be removed at any time, at the direction of
the Company, by an instrument, signed by the Authority, filed
with the Paying Agent or such Co-Paying Agent, as the case may
be, and with the Trustee.
In the event of the resignation or removal of the Paying Agent
or any Co-Paying Agent, the Paying Agent or such Co-Paying Agent,
as the case may be, shall pay over, assign and deliver any moneys
held by it in such capacity to its successor or, if there be no
successor, to the Trustee.
In the event that the Authority shall fail to appoint a Paying
Agent hereunder, or in the event that the Paying Agent shall
resign or be removed, or be dissolved, or if the property or
affairs of the Paying Agent shall be taken under the control of
any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and the
Authority shall not have appointed its successor as Paying Agent,
the Trustee shall ipso facto be deemed to be the Paying Agent for
all purposes of this Indenture until the appointment by the
Authority of the Paying Agent or successor Paying Agent, as the
case may be.
Upon the appointment of a successor Paying Agent, the Trustee
shall give notice thereof by Mail to all Owners of Bonds.
Section 10.23. Registrar. The Authority shall, with the
approval of the Company, appoint the Registrar for the Bonds,
subject to the conditions set forth in Section 10.24 hereof. The
Registrar shall designate to the Trustee its Principal Office and
signify its acceptance of the duties imposed upon it hereunder by
a written instrument of acceptance delivered to the Authority and
the Trustee in which such Registrar will agree, particularly, to
keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available
for inspection by the Authority, the Trustee and the Company at
all reasonable times.
The Authority shall cooperate with the Trustee and the Company
to cause the necessary arrangements to be made and to be
thereafter continued whereby Bonds, executed by the Authority and
authenticated by the Trustee, shall be made available for
exchange, registration and registration of transfer at the
Principal Office of the Registrar. The Authority shall cooperate
with the Trustee, the Registrar and the Company to cause the
necessary arrangements to be made and thereafter continued
whereby the Paying Agent and any Co-Paying Agent shall be
furnished such records and other information, at such times, as
shall be required to enable the Paying Agent and such Co-Paying
Agent to perform the duties and obligations imposed upon them
hereunder.
Section 10.24. Qualifications of Registrar; Resignation;
Removal. The Registrar shall be a corporation or association
duly organized under the laws of the United States of America or
any state or territory thereof, having a combined capital stock,
surplus and undivided profits of at least $15,000,000 and
authorized by law to perform all the duties imposed upon it by
this Indenture. The Registrar may at any time resign and be
discharged of the duties and obligations created by this
Indenture by giving at least sixty (60) days' notice to the
Authority, the Trustee and the Company. The Registrar may be
removed at any time, at the direction of the Company, by an
instrument signed by the Authority filed with the Registrar and
the Trustee.
In the event of the resignation or removal of the Registrar,
the Registrar shall deliver any Bonds held by it in such capacity
to its successor or, if there be no successor, to the Trustee.
In the event that the Authority shall fail to appoint a
Registrar hereunder, or in the event that the Registrar shall
resign or be removed, or be dissolved, or if the property or
affairs of the Registrar shall be taken under the control of any
state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and the
Authority shall not have appointed its successor as Registrar,
the Trustee shall ipso facto be deemed to be the Registrar for
all purposes of this Indenture until the appointment by the
Authority of the Registrar or successor Registrar, as the case
may be.
Upon the appointment of a successor Registrar, the Trustee
shall give notice thereof by Mail to all Owners of Bonds.
Section 10.25. Several Capacities. Anything herein to the
contrary notwithstanding, the same entity may serve hereunder as
the Trustee, the Paying Agent or a Co-Paying Agent and the
Registrar, and in any combination of such capacities to the
extent permitted by law.
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND
PROOF OF OWNERSHIP OF BONDS
Section 11.01. Execution of Instruments; Proof of Ownership.
Any request, direction, consent or other instrument in writing,
whether or not required or permitted by this Indenture to be
signed or executed by Owners of the Bonds, may be in any number
of concurrent instruments of similar tenor and may be signed or
executed by Owners of the Bonds or by an agent appointed by an
instrument in writing. Proof of the execution of any such
instrument and of the ownership of Bonds shall be sufficient for
any purpose of this Indenture and shall be conclusive in favor of
the Trustee with regard to any action taken by it under such
instrument if made in the following manner:
(a) The fact and date of the execution by any person of any
such instrument may be proved by the certificate of any
officer in any jurisdiction who, by the laws thereof, has
power to take acknowledgments within such jurisdiction, to the
effect that the person signing such instrument acknowledged
before him the execution thereof, or by an affidavit of a
witness to such execution.
(b) The ownership or former ownership of Bonds shall be
proved by the registration books kept under the provisions of
Section 2.08 hereof.
Nothing contained in this Article XI shall be construed as
limiting the Trustee to such proof, it being intended that the
Trustee may accept any other evidence of matters herein stated
which it may deem sufficient. Any request or consent of any
Owner of a Bond shall bind every future Owner of the same Bond or
any Bond or Bonds issued in lieu thereof in respect of anything
done by the Trustee or the Authority in pursuance of such request
or consent.
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
Section 12.01. Limitations. Neither this Indenture nor the
Loan Agreement shall be modified or amended in any respect
subsequent to the original issuance of the Bonds except as
provided in and in accordance with and subject to the provisions
of this Article XII and Section 7.04 hereof.
The Trustee may, but shall not be obligated to, enter into any
Supplemental Indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Section 12.02. Supplemental Indentures without Owner Consent.
The Authority and the Trustee may, from time to time and at any
time, without the consent of or notice to the Owners of the
Bonds, enter into Supplemental Indentures as follows:
(a) to cure any formal defect, omission, inconsistency or
ambiguity in this Indenture, provided, however, that such cure
shall not materially and adversely affect the interests of the
Owners of the Bonds;
(b) to grant to or confer or impose upon the Trustee for the
benefit of the Owners of the Bonds any additional rights,
remedies, powers, authority, security, liabilities or duties
which may lawfully be granted, conferred or imposed;
(c) to add to the covenants and agreements of, and
limitations and restrictions upon, the Authority in this
Indenture other covenants, agreements, limitations and
restrictions to be observed by the Authority;
(d) to confirm, as further assurance, any pledge under, and
the subjection to any claim, lien or pledge created or to be
created by, this Indenture, of the Receipts and Revenues of
the Authority from the Loan Agreement or of any other moneys,
securities or funds;
(e) to authorize a different denomination or denominations
of the Bonds and to make correlative amendments and
modifications to this Indenture regarding exchange ability of
Bonds of different denominations, redemptions of portions of
Bonds of particular denominations and similar amendments and
modifications of a technical nature;
(f) to modify, alter, supplement or amend this Indenture in
such manner as shall permit the qualification hereof under the
Trust Indenture Act of 1939, as from time to time amended;
(g) to modify, alter, supplement or amend this Indenture in
such manner as shall be necessary, desirable or appropriate in
order to provide for or eliminate the registration and
registration of transfer of the Bonds through a book-entry or
similar method, whether or not the Bonds are evidenced by
certificates;
(h) to modify, alter, amend or supplement this Indenture in
any other respect which is not materially adverse to the
Owners and which does not involve a change described in clause
(i), (ii), (iii) or (iv) of Section 12.03(a) hereof; and
(i) to provide any additional procedures, covenants or
agreements necessary or desirable to maintain the tax-exempt
status of interest on the Bonds.
Before the Authority and the Trustee shall enter into any
Supplemental Indenture pursuant to this Section 12.02, there
shall have been delivered to the Trustee an opinion of Bond
Counsel stating that such Supplemental Indenture is authorized or
permitted by this Indenture and the Act, complies with their
respective terms, will, upon the execution and delivery thereof,
be valid and binding upon the Authority in accordance with its
terms and will not, in and of itself, adversely affect the
exclusion from gross income for federal tax purposes of the
interest on the Bonds.
Section 12.03. Supplemental Indentures with Consent of Owners.
(a) Except for any Supplemental Indenture entered into pursuant
to Section 12.02 hereof, subject to the terms and provisions
contained in this Section 12.03 and Section 12.05 and not
otherwise, Owners of not less than a majority in aggregate
principal amount of the Bonds then Outstanding which would be
adversely affected thereby shall have the right from time to time
to consent to and approve the execution and delivery by the
Authority and the Trustee of any Supplemental Indenture deemed
necessary or desirable by the Authority for the purposes of
modifying, altering, amending, supplementing or rescinding, in
any particular, any of the terms or provisions contained in this
Indenture; provided, however, that, unless approved in writing by
the Owners of all the Bonds then Outstanding which would be
adversely affected thereby, nothing herein contained shall
permit, or be construed as permitting, (i) a change in the times,
amounts or currency of payment of the principal of or premium, if
any, or interest on any Outstanding Bond, a reduction in the
principal amount or redemption price of any Outstanding Bond or a
change in the rate of interest thereon, or any impairment of the
right of any Owner to institute suit for the payment of any Bond
owned by it, or (ii) the creation of a claim or lien upon, or a
pledge of, the Receipts and Revenues of the Authority from the
Loan Agreement ranking prior to or on a parity with the claim,
lien or pledge created by this Indenture (except as referred to
in Section 10.04 hereof), or (iii) a preference or priority of
any Bond or Bonds over any other Bond or Bonds, or (iv) a
reduction in the aggregate principal amount of Bonds the consent
of the Owners of which is required for any such Supplemental
Indenture or which is required, under Section 12.07 hereof, for
any modification, alteration, amendment or supplement to the Loan
Agreement.
(b) If at any time the Authority shall request the Trustee
to enter into any Supplemental Indenture for any of the
purposes of this Section 12.03, the Trustee shall cause notice
of the proposed Supplemental Indenture to be given by Mail to
all Owners of Outstanding Bonds. Such notice shall briefly
set forth the nature of the proposed Supplemental Indenture
and shall state that a copy thereof is on file at the
Principal Office of the Trustee for inspection by all Owners
of Bonds.
(c) Within two years after the date of the first mailing of
such notice, the Authority and the Trustee may enter into such
Supplemental Indenture in substantially the form described in
such notice only if there shall have first been delivered to
the Trustee (i) the required consents, in writing, of Owners
of Bonds and (ii) an opinion of Bond Counsel stating that such
Supplemental Indenture is authorized or permitted by this
Indenture and the Act, complies with their respective terms
and, upon the execution and delivery thereof, will be valid
and binding upon the Authority in accordance with its terms
and will not, in and of itself, adversely affect the exclusion
from gross income for federal tax purposes of the interest on
the Bonds.
(d) If Owners of not less than the percentage of Bonds
required by this Section 12.03 shall have consented to and
approved the execution and delivery thereof as herein
provided, no Owner shall have any right to object to the
execution and delivery of such Supplemental Indenture, or to
object to any of the terms and provisions contained therein or
the operation thereof, or in any manner to question the
propriety of the execution and delivery thereof, or to enjoin
or restrain the Authority or the Trustee from executing and
delivering the same or from taking any action pursuant to the
provisions thereof.
Section 12.04. Effect of Supplemental Indenture. Upon the
execution and delivery of any Supplemental Indenture pursuant to
the provisions of this Article XII, this Indenture shall be, and
be deemed to be, modified, altered, amended or supplemented in
accordance therewith, and the respective rights, duties and
obligations under this Indenture of the Authority, the Trustee
and Owners of all Bonds then Outstanding shall thereafter be
determined, exercised and enforced under this Indenture subject
in all respects to such modifications, alterations, amendments
and supplements.
Section 12.05. Consent of the Company. Anything herein to the
contrary notwithstanding, any Supplemental Indenture under this
Article XII which affects any rights, powers, agreements or
obligations of the Company under the Loan Agreement or requires a
revision of the Loan Agreement shall not become effective unless
and until the Company shall have consented to such Supplemental
Indenture.
Section 12.06. Amendment of Loan Agreement without Consent of
Owners. Without the consent of or notice to the Owners of the
Bonds, the Authority may enter into any Supplemental Loan
Agreement, and the Trustee may consent thereto, as may be
required (a) by the provisions of the Loan Agreement and this
Indenture, (b) for the purpose of curing any formal defect,
omission, inconsistency or ambiguity therein, (c) to provide any
additional procedures, covenants or agreements necessary or
desirable to maintain the tax-exempt status of interest on the
Bonds, or (d) in connection with any other change therein which
is not materially adverse to the Owners of the Bonds. A revision
of Exhibit A to the Loan Agreement pursuant to Section 3.03
thereof, shall not be deemed a Supplemental Loan Agreement for
purposes of this Indenture.
Before the Authority shall enter into, and the Trustee shall
consent to, any Supplemental Loan Agreement pursuant to this
Section 12.06, there shall have been delivered to the Trustee an
opinion of Bond Counsel stating that such Supplemental Loan
Agreement is authorized or permitted by this Indenture and the
Act, complies with their respective terms, will, upon the
execution and delivery thereof, be valid and binding upon the
Authority and the Company in accordance with its terms and will
not, in and of itself, adversely affect the exclusion from gross
income for federal tax purposes of interest on the Bonds.
Section 12.07. Amendment of Loan Agreement with Consent of
Owners. Except in the case of Supplemental Loan Agreements
referred to in Section 12.06 hereof, the Authority shall not
enter into, and the Trustee shall not consent to, any
Supplemental Loan Agreement without the written approval or
consent of the Owners of not less than a majority in aggregate
principal amount of the Bonds then Outstanding which would be
adversely affected thereby, given and procured as provided in
Section 12.03 hereof; provided, however, that, unless approved in
writing by the Owners of all Bonds then Outstanding which would
be adversely affected thereby, nothing herein contained shall
permit, or be construed as permitting, a change in the
obligations of the Company under Section 5.01 of the Loan
Agreement. If at any time the Authority or the Company shall
request the consent of the Trustee to any such proposed
Supplemental Loan Agreement, the Trustee shall cause notice of
such proposed Supplemental Loan Agreement to be given in the same
manner as provided by Section 12.03 hereof with respect to
Supplemental Indentures. Such notice shall briefly set forth the
nature of such proposed Supplemental Loan Agreement and shall
state that copies of the instrument embodying the same are on
file at the Principal Office of the Trustee for inspection by all
Owners of the Bonds. The Authority may enter into, and the
Trustee may consent to, any such proposed Supplemental Loan
Agreement subject to the same conditions, and with the same
effect, as provided by Section 12.03 hereof with respect to
Supplemental Indentures.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Successors of the Authority. In the event of
the dissolution of the Authority, all the covenants,
stipulations, promises and agreements in this Indenture
contained, by or on behalf of, or for the benefit of, the
Authority, shall bind or inure to the benefit of the successors
of the Authority from time to time and any entity, officer,
board, commission, agency or instrumentality to whom or to which
any power or duty of the Authority shall be transferred.
Section 13.02. Parties in Interest. Except as herein
otherwise specifically provided, nothing in this Indenture
expressed or implied is intended or shall be construed to confer
upon any person, firm or corporation other than the Authority,
the Company and the Trustee and their successors and assigns and
the Owners of the Bonds any right, remedy or claim under or by
reason of this Indenture, this Indenture being intended to be for
the sole and exclusive benefit of the Authority, the Company and
the Trustee and their successors and assigns and the Owners of
the Bonds.
Section 13.03. Severability. In case any one or more of the
provisions of this Indenture or of the Loan Agreement or of the
Bonds shall, for any reason, be held to be illegal or invalid,
such illegality or invalidity shall not affect any other
provisions of this Indenture or of the Loan Agreement or of such
Bonds, and this Indenture and the Loan Agreement and such Bonds
shall be construed and enforced as if such illegal or invalid
provisions had not been contained herein or therein.
Section 13.04. No Personal Liability of Authority Officials.
No covenant or agreement contained in the Bonds or in this
Indenture shall be deemed to be the covenant or agreement of any
director, official, officer, agent, or employee of the Authority
in his individual capacity, and neither the members of the Board
of Directors of the Authority nor any official executing the
Bonds shall be liable personally on the Bonds or be subject to
any personal liability or accountability by reason of the
issuance thereof.
Section 13.05. Bonds Owned by the Authority or the Company.
In determining whether Owners of the requisite aggregate
principal amount of the Bonds have concurred in any direction,
consent or waiver under this Indenture, Bonds which are owned by
the Authority or the Company or by any person directly or
indirectly controlling or controlled by or under direct or
indirect common control with the Company (unless the Authority,
the Company or such person owns all Bonds which are then
Outstanding, determined without regard to this Section 13.05)
shall be disregarded and deemed not to be Outstanding for the
purpose of any such determination, except that, for the purpose
of determining whether the Trustee shall be protected in relying
on any such direction, consent or waiver, only Bonds which the
Trustee knows are so owned shall be so disregarded. Upon the
request of the Trustee, the Company and the Authority shall
furnish to the Trustee a certificate identifying all Bonds, if
any, actually known to either of them to be owned or held by or
for the account of any of the above-described persons, and the
Trustee shall be entitled to rely on such certificate as
conclusive evidence of the facts set forth therein and that all
other Bonds are Outstanding for the purposes of such
determination. Bonds so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Bonds and that the pledgee is not the
Authority or the Company or any person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company. In case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
Section 13.06. Counterparts. This Indenture may be executed
in any number of counterparts, each of which, when so executed
and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Indenture.
Section 13.07. Governing Law. The laws of the State of
Arizona shall govern the construction and enforcement of this
Indenture and of all Bonds, except that the laws of the State of
New York shall govern the construction and enforcement of the
rights and duties of the Trustee hereunder and the construction
of Section 13.09 hereof and the computation of any period of
grace provided herein.
Section 13.08. Notices. Except as otherwise provided in this
Indenture, all notices, certificates, requests requisitions or
other communications by the Authority, the Company, the Trustee,
the Paying Agent, any Co-Paying Agent or the Registrar pursuant
to this Indenture shall be in writing and shall be sufficiently
given and shall be deemed given when mailed by registered mail,
postage prepaid, addressed as follows: If to the Authority, c/o
Russo, Cox & Russo, P.C., 1820 East River Road, Suite 230,
Tucson, Arizona 85718; if to the Company, at 220 West Sixth
Street, Tucson, Arizona 85702, Attention: Treasurer; if to the
Trustee, at 100 Wall Street, Suite 1600, New York, New York
10005, Attention: Vice President; if to the Paying Agent, any
Co-Paying Agent or the Registrar, at the address designated in
the acceptance of appointment or engagement. Any of the
foregoing may, by notice given hereunder to each of the others,
designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be
sent hereunder.
Section 13.09. Holidays. If the date for making any payment
or the last date for performance of any act or the exercising of
any right, as provided in this Indenture, shall be a Saturday,
Sunday or a public holiday in the city in which is located the
Principal Office of the Trustee, such payment may be made or act
performed or right exercised on the next succeeding business day,
with the same force and effect as if done on the nominal date
provided in this Indenture, and no interest shall accrue for the
period after such nominal date. If the last day of any period of
grace, as provided in this Indenture, shall be a Saturday, Sunday
or a public holiday in the city in which is located the Principal
Office of the Trustee, the last day of such period of grace shall
be deemed to be the next succeeding business day.
Section 13.10. Statutory Notice Regarding Cancellation of
Contracts. As required by the provisions of Section 38-511,
Arizona Revised Statutes, as amended, notice is hereby given that
political subdivisions of the State of Arizona or any of their
departments or agencies may, within three (3) years of its
execution, cancel any contract, without penalty or further
obligation, made by the political subdivisions or any of their
departments or agencies on or after September 30, 1988, if any
person significantly involved in initiating, negotiating,
securing, drafting or creating the contract on behalf of the
political subdivisions or any of their departments or agencies
is, at any time while the contract or any extension of the
contact is in effect, an employee or agent of any other party to
the contract in any capacity or a consultant to any other party
of the contract with respect to the subject matter of the
contract.
The Trustee covenants and agrees not to employ as an employee,
agent or, with respect to the subject matter of this Indenture, a
consultant, any person actually known by the Trustee to be
significantly involved in initiating, negotiating, securing,
drafting or creating such Indenture on behalf of the Authority
within three (3) years from the execution hereof, unless a waiver
is provided by the Authority.
<PAGE>
IN WITNESS WHEREOF, The Industrial Development Authority of
the County of Pima has caused this Indenture to be executed by
its President and First Trust of New York, National Association
has caused this Indenture to be executed on its behalf by its
Vice President, all as of the day and year first above written.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
By: /s/ Stanley Lehman
----------------------------------
President
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: /s/ P.J. Crowley
----------------------------------
Vice President
<PAGE>
EXHIBIT A
(FORM OF BOND)
No.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
INDUSTRIAL DEVELOPMENT REVENUE BOND,
1997 SERIES A
(TUCSON ELECTRIC POWER COMPANY PROJECT)
INTEREST RATE (PER ANNUM):
MATURITY DATE: DATED:
CUSIP:
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
The Industrial Development Authority of the County of Pima, an
Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona (the "Authority"), for value
received, hereby promises to pay (but only out of the Receipts
and Revenues of the Authority from the Loan Agreement, as
hereinafter defined, and other moneys pledged therefor) to the
Registered Owner identified above or registered assigns, on the
Maturity Date set forth above, upon the presentation and
surrender hereof, the Principal Amount set forth above and to pay
(but only out of the Receipts and Revenues of the Authority from
the Loan Agreement and other moneys pledged therefor), interest
on said Principal Amount until payment of said Principal Amount
has been made or duly provided for, from the date hereof, at the
Interest Rate set forth above, semi-annually on the first days of
March and September in each year, commencing March 1, 1998.
Interest will be calculated on the basis of a 360-day year of
twelve 30-day months.
The principal of and premium, if any, on this Bond are payable
at the principal office of First Trust of New York, National
Association, as Paying Agent, or at the principal office of any
co-paying agent appointed in accordance with the Indenture (as
hereinafter defined), at the option of the Registered Owner
hereof. Interest on this Bond is payable by check drawn upon the
Paying Agent and mailed to the Registered Owner of this Bond as
of the close of business on the Record Date (as defined in the
Indenture), at the registered address of such Registered Owner;
notwithstanding the foregoing, upon request to the Paying Agent
by a Registered Owner of not less than $1,000,000 in aggregate
principal amount of Bonds, interest on such Bonds and, after
presentation and surrender of such Bonds, the principal thereof
shall be paid to such Registered Owner by wire transfer to the
account maintained within the continental United States specified
by such Registered Owner or, if such Registered Owner maintains
an account with the entity acting as Paying Agent, by deposit
into such account. Payment of the principal of and premium, if
any, and interest on this Bond shall be in any coin or currency
of the United States of America as, at the respective times of
payment, shall be legal tender for the payment of public and
private debts.
This Bond is one of the duly authorized Industrial Development
Revenue Bonds, 1997 Series A (Tucson Electric Power Company
Project) (the "Bonds") of the Authority, aggregating Twenty-two
Million Four Hundred Sixty Thousand Dollars ($22,460,000) in
principal amount, issued under and pursuant to the Constitution
and laws of the State of Arizona, particularly Title 35,
Chapter 5, Arizona Revised Statutes, as amended (the "Act"), and
the Indenture of Trust, dated as of September 15, 1997 (the
"Indenture"), between the Authority and First Trust of New York,
National Association, as trustee (the "Trustee"), for the purpose
of financing and refinancing a portion of the costs of the
acquisition, construction, improvement and equipping of certain
facilities for the furnishing of electric energy (the
"Facilities"). Pursuant to the Loan Agreement, dated as of
September 15, 1997 (the "Loan Agreement"), between the Authority
and Tucson Electric Power Company, a corporation organized and
existing under the laws of the State of Arizona (the "Company"),
the proceeds of the Bonds, other than accrued interest, if any,
paid by the initial purchasers thereof, will be loaned from time
to time to the Company.
Neither Pima County, Arizona nor the State of Arizona shall in
any event be liable for the payment of the principal of or
premium, if any, or interest on the Bonds, and neither the Bonds,
nor the premium, if any, or the interest thereon, shall be
construed to constitute an indebtedness of Pima County, Arizona
or the State of Arizona within the meaning of any constitutional
or statutory provisions whatsoever. The Bonds and the premium,
if any, and the interest thereon are limited obligations of the
Authority payable solely from the Receipts and Revenues of the
Authority from the Loan Agreement and other moneys pledged
therefor under the Indenture.
The Bonds are equally and ratably secured, to the extent
provided in the Indenture, by the pledge thereunder of the
"Receipts and Revenues of the Authority from the Loan Agreement",
which term is used herein as defined in the Indenture and which
as therein defined means all moneys paid or payable to the
Trustee for the account of the Authority by the Company in
respect of the loan payments, including all receipts of the
Trustee which, under the provisions of the Indenture, reduce the
amounts of such payments. The Authority has also pledged and
assigned to the Trustee as security for the Bonds all other
rights and interests of the Authority under the Loan Agreement
(other than its rights to indemnification and its administrative
expenses and certain other rights).
The transfer of this Bond shall be registered upon the
registration books kept at the principal office of First Trust of
New York, National Association, as Registrar, at the written
request of the Registered Owner hereof or his attorney duly
authorized in writing, upon surrender of this Bond at said
office, together with a written instrument of transfer
satisfactory to the Registrar duly executed by the Registered
Owner or his duly authorized attorney.
In the manner and with the effect provided in the Indenture,
each of the Bonds may be redeemed prior to maturity, as follows:
(a) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, on any date on or
after September 1, 2002 in whole at any time or in part from
time to time, at the applicable redemption price (expressed as
a percentage of principal amount) set forth below, plus
accrued interest to the redemption date:
Redemption Period Redemption Price
----------------- ----------------
September 1, 2002 through August 31, 2003 102%
September 1, 2003 through August 31, 2004 101%
September 1, 2004 and thereafter 100%
(b) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, in whole at any
time at the principal amount thereof plus accrued interest to
the redemption date, if:
(i) the Company shall have determined that the continued
operation of the Facilities is impracticable, uneconomical
or undesirable for any reason;
(ii) all or substantially all of the Facilities shall
have been condemned or taken by eminent domain; or
(iii) the operation of the Facilities shall have been
enjoined or shall have otherwise been prohibited by, or
shall conflict with, any order, decree, rule or regulation
of any court or of any federal, state or local regulatory
body, administrative agency or other governmental body.
(c) The Bonds shall be subject to mandatory redemption by
the Authority, at the principal amount thereof plus accrued
interest to the redemption date, on the 180th day (or such
earlier date as may be designated by the Company) after a
final determination by a court of competent jurisdiction or an
administrative agency, to the effect that, as a result of a
failure by the Company to perform or observe any covenant,
agreement or representation contained in the Loan Agreement,
the interest payable on the Bonds is included for federal
income tax purposes in the gross income of the owners thereof,
other than any owner of a Bond who is a "substantial user" of
the Facilities or a "related person" within the meaning of
Section 147(a) of the Internal Revenue Code of 1986 (the
"Code"). No determination by any court or administrative
agency shall be considered final for the purposes of this
paragraph (c) unless the Company shall have been given timely
notice of the proceeding which resulted in such determination
and an opportunity to participate in such proceeding, either
directly or through an owner of a Bond, and until the
conclusion of any appellate review sought by any party to such
proceeding or the expiration of the time for seeking such
review. The Bonds shall be redeemed either in whole or in part
in such principal amount that, in the opinion of Bond Counsel,
the interest payable on the Bonds, including the Bonds
remaining outstanding after such redemption, would not be
included in the gross income of any owner thereof, other than
an owner of a Bond who is a "substantial user" of the
Facilities or a "related person" within the meaning of Section
147(a) of the Code.
(d) In the event that the aggregate of the amounts, if any,
of the proceeds of the Bonds remaining unexpended upon the
completion of the Facilities or upon the termination of the
acquisition and construction thereof, together with any income
or other gain from the investment thereof, shall at any time,
or from time to time, be equal to or greater than $5,000, the
Authority shall redeem the Bonds, at the principal amount
thereof plus accrued interest to the redemption date, in the
largest aggregate principal amount which does not exceed the
amount of such proceeds together with income or other gain on
an interest payment date determined as set forth in, and
otherwise in accordance with the provisions of, the Indenture;
provided, however, that the Company may direct that such
proceeds and income be applied to the purchase of the Bonds or
in any other manner which will not impair the validity of the
Bonds or the exemption from gross income for federal tax
purposes of the interest thereon.
If less than all of the Bonds at the time outstanding are to
be called for redemption, the particular Bonds or portions of
Bonds to be redeemed shall be selected by the Trustee, in such
manner as the Trustee in its discretion may deem proper, in the
principal amounts designated to the Trustee by the Company or
otherwise as required by the Indenture.
In the event any of the Bonds are called for redemption, the
Trustee shall give notice, in the name of the Authority, of the
redemption of such Bonds. Such notice shall be given by mailing
a copy of the redemption notice by first-class mail at least
thirty (30) days prior to the date fixed for redemption to the
Registered Owners of the Bonds to be redeemed at the addresses
shown on the registration books; provided, however, that failure
duly to give such notice by mailing, or any defect therein, shall
not affect the validity of any proceedings for the redemption of
the Bonds as to which there shall be no such failure or defect.
With respect to any notice of redemption of Bonds in
accordance with the redemption provisions lettered (a) or (b)
above, unless, upon the giving of such notice, such Bonds shall
be deemed to have been paid within the meaning of the Indenture,
such notice shall state that such redemption, shall be
conditional upon the receipt, by the Trustee on or prior to the
opening of business on the date fixed for such redemption of
moneys sufficient to pay the principal of and premium, if any,
and interest on such Bonds to be redeemed, and that if such
moneys shall not have been so received said notice shall be of no
force and effect and the Authority shall not be required to
redeem such Bonds. In the event that such notice of redemption
contains such a condition and such moneys are not so received,
the redemption shall not be made and the Trustee shall within a
reasonable time thereafter give notice, in the manner in which
the notice of redemption was given, that such moneys were not so
received.
If a notice of redemption shall be unconditional, or if the
conditions of a conditional notice of redemption shall have been
satisfied, then upon presentation and surrender of Bonds so
called for redemption at the place or places of payment, such
Bonds shall be redeemed.
Any Bonds and portions of Bonds which have been duly selected
for redemption shall cease to bear interest on the specified
redemption date provided that moneys sufficient to pay the
principal of, premium, if any, and interest on such Bonds shall
be on deposit with the Trustee on the date fixed for redemption
so that such Bonds will be deemed to be paid in accordance with
the Indenture and such Bonds shall thereafter cease to be
entitled to any lien, benefit or security under the Indenture.
The Registered Owner of this Bond shall have no right to
enforce the provisions of the Indenture, or to institute action
to enforce the covenants therein, or to take any action with
respect to any default under the Indenture, or to institute,
appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture.
With certain exceptions as provided therein, the Indenture and
the Loan Agreement may be modified or amended only with the
consent of the Registered Owners of a majority in aggregate
principal amount of all Bonds outstanding under the Indenture
which would be adversely affected thereby.
Reference is hereby made to the Indenture and the Loan
Agreement, copies of which are on file with the Trustee, for the
provisions, among others, with respect to the nature and extent
of the rights, duties and obligations of the Authority, the
Company, the Trustee and the Registered Owners of the Bonds. The
Registered Owner of this Bond, by the acceptance hereof, is
deemed to have agreed and consented to the terms and provisions
of the Indenture and the Loan Agreement.
Among other things, as provided in the Indenture and subject
to certain limitations therein set forth, this Bond or any
portion of the principal amount hereof will be deemed to have
been paid within the meaning and with the effect expressed in the
Indenture, and the entire indebtedness of the Authority in
respect thereof shall be satisfied and discharged, if there has
been irrevocably deposited with the Trustee, in trust, money in
an amount which will be sufficient and/or Government Obligations
(as defined in the Indenture), the principal of and interest on
which, when due, without regard to any reinvestment thereof, will
provide moneys which, together with moneys deposited with or held
by the Trustee, will be sufficient, to pay when due the principal
of and premium, if any, and interest on this Bond or such portion
of the principal amount hereof when due.
Among other things, the Loan Agreement contains terms,
provisions and conditions relating to the consolidation or merger
of the Company with or into, and the sale, transfer or other
disposition of assets to, another Person (as defined in the Loan
Agreement), to the assumption by such other Person, in certain
circumstances, of all of the obligations of the Company under the
Loan Agreement and to the release and discharge of the Company,
in certain circumstances, from such obligations.
The Authority, the Trustee, the Registrar, the Paying Agent
and any co-paying agent may deem and treat the person in whose
name this Bond is registered as the absolute owner hereof for all
purposes, whether or not this Bond is overdue, and neither the
Authority, the Trustee, the Paying Agent nor any co-paying agent
shall be affected by any notice to the contrary.
It is hereby certified, recited and declared that all acts,
conditions and things required by the Constitution and laws of
the State of Arizona to exist, to have happened and to have been
performed, precedent to and in the execution and delivery of the
Indenture and the issuance of this Bond, do exist, have happened
and have been performed in regular and due form as required by
law.
No covenant or agreement contained in this Bond or the
Indenture shall be deemed to be a covenant or agreement of any
official, officer, agent or employee of the Authority in his
individual capacity, and neither the members of the Board of
Directors of the Authority nor any official executing this Bond,
shall be liable personally on this Bond or be subject to any
personal liability or accountability by reason of the issuance or
sale of this Bond.
This Bond shall not be entitled to any right or benefit under
the Indenture, or be valid or become obligatory for any purpose,
until this Bond shall have been authenticated by the execution by
the Trustee, or its successor as Trustee, of the certificate of
authentication inscribed hereon.
<PAGE>
IN WITNESS WHEREOF, The Industrial Development Authority of
The County of Pima has caused this Bond to be executed with the
manual or facsimile signature of its President or Vice President
and a facsimile of its official seal to be imprinted hereon and
attested with the manual or facsimile signature of its Secretary
or Assistant Secretary.
THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA
(Seal)
By.................................
President
ATTEST:
...........................................
Secretary
<PAGE>
EXHIBIT B
(FORM FOR ORDINARY REGISTRATION OF TRANSFER)
COMPLETE AND SIGN THIS FORM FOR ORDINARY
REGISTRATION OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Please Insert Social Security Or Other Identifying Number of
Assignee
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Please print or typewrite name and address including postal zip
code of assignee
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
this bond and all rights thereunder, hereby irrevocably
constituting and appointing _______________________ attorney to
register such transfer on the registration books in the principal
office of the Registrar, with full power of substitution in the
premises.
Dated:.............. ........................................
NOTE: The signature on this assignment
must correspond with the name as written
on the face of this Bond in every
particular, without alteration,
enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is to certify that this Bond is one of the Bonds
described in the within-mentioned Indenture.
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION,
as Trustee
By................................................
Authorized Officer
Date of Authentication:......................
Exhibit 4c
==================================================================
LOAN AGREEMENT
(1997 Series B)
between
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
and
TUCSON ELECTRIC POWER COMPANY
------------
Dated as of September 15, 1997
------------
Relating To
Industrial Development Revenue Bonds,
1997 Series B
(Tucson Electric Power Company Project)
==================================================================
<PAGE>
TABLE OF CONTENTS*
Page
----
LOAN AGREEMENT . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . 2
SECTION 1.02. Incorporation of Certain Definitions
by Reference . . . . . . . . . . . . 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Representations and Warranties of
the Authority . . . . . . . . . . . 4
SECTION 2.02. Representations and Warranties of
the Company . . . . . . . . . . . . 5
ARTICLE III
THE FACILITIES
SECTION 3.01. Facilities; Property of the Company . 5
SECTION 3.02. Revision of Plans and Specifications . 5
SECTION 3.03. Maintenance of Facilities; Remodeling 6
SECTION 3.04. Insurance . . . . . . . . . . . . . . 6
SECTION 3.05. Condemnation . . . . . . . . . . . . . 6
SECTION 3.06. Termination of Construction . . . . . 6
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01. Issuance of the Bonds . . . . . . . . 6
SECTION 4.02. Issuance of Other Obligations. . . . . 6
SECTION 4.03. The Loan; Disposition of Bond Proceeds 6
SECTION 4.04. Investment of Moneys in Funds and
Accounts . . . . . . . . . . . . . . 7
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01. Loan Payments. . . . . . . . . . . . . 7
SECTION 5.02. Payments Assigned; Obligation Absolute 7
SECTION 5.03. Payment of Expenses . . . . . . . . . 7
SECTION 5.04. Indemnification . . . . . . . . . . . 7
SECTION 5.05. Payment of Taxes; Discharge of Liens . 8
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01. Maintenance of Corporate Existence . . 8
SECTION 6.02. Permits or Licenses . . . . . . . . . 9
--------------------
* This table of contents is not part of the Loan Agreement, and is
for convenience only. The captions herein are of no legal effect
and do not vary the meaning or legal effect of any part of the
Loan Agreement.
<PAGE>
SECTION 6.03. Authority's Access to Facilities . . . 9
SECTION 6.04. Tax-Exempt Status of Interest on Bonds. 9
SECTION 6.05. Use of Facilities . . . . . . . . . . 10
SECTION 6.06. Financing Statements . . . . . . . . . 10
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01. Conditions . . . . . . . . . . . . . . 10
SECTION 7.02. Instrument Furnished to the Authority
and Trustee . . . . . . . . . . . . 12
SECTION 7.03. Limitation . . . . . . . . . . . . . . 12
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default . . . . . . . . . . 12
SECTION 8.02. Force Majeure . . . . . . . . . . . . 12
SECTION 8.03. Remedies . . . . . . . . . . . . . . . 13
SECTION 8.04. No Remedy Exclusive . . . . . . . . . 13
SECTION 8.05. Reimbursement of Attorneys' and
Agents' Fees . . . . . . . . . . . . 13
SECTION 8.06. Waiver of Breach . . . . . . . . . . . 13
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01. Redemption of Bonds . . . . . . . . . 14
SECTION 9.02. Compliance with the Indenture . . . . 14
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Term of Agreement . . . . . . . . . . 14
SECTION 10.02. Notices . . . . . . . . . . . . . . . 14
SECTION 10.03. Parties in Interest . . . . . . . . . 14
SECTION 10.04. Amendments . . . . . . . . . . . . . 15
SECTION 10.05. Counterparts . . . . . . . . . . . . 15
SECTION 10.06. Severability . . . . . . . . . . . . 15
SECTION 10.07. Governing Law . . . . . . . . . . . . 15
SECTION 10.08. Notice Regarding Cancellation
of Contracts. . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibit A - Description of the Facilities . . . . . . . . . . A-1
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (1997 Series B), dated as of September 15,
1997 (this "Agreement"), between THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona (hereinafter called the "Authority"), and TUCSON ELECTRIC
POWER COMPANY, a corporation organized and existing under the
laws of the State of Arizona (hereinafter called the "Company"),
W I T N E S S E T H :
WHEREAS, the Authority is authorized and empowered under Title
35, Chapter 5, Arizona Revised Statutes, as amended (the "Act"),
to issue its bonds in accordance with the Act and to make secured
or unsecured loans for the purpose of financing or refinancing
the acquisition, construction, improvement or equipping of
projects consisting of land, any building or other improvement,
and all real and personal properties, including but not limited
to machinery and equipment, whether or not now in existence or
under construction, whether located within or without Pima
County, which shall be suitable for, among other things,
facilities for the furnishing of electric energy, gas or water,
air and water pollution control facilities and sewage and solid
waste disposal facilities, and to charge and collect interest on
such loans and pledge the proceeds of loan agreements as security
for the payment of the principal of and interest on bonds, or
designated issues of bonds, issued by the Authority and any
agreements made in connection therewith, whenever the Board of
Directors of the Authority finds such loans to be in furtherance
of the purposes of the Authority or in the public interest;
WHEREAS, the Authority has heretofore issued and sold
$75,000,000 aggregate principal amount of its Industrial
Development Revenue Bonds, 1982 Series A (Tucson Electric Power
Company General Project), all of which remain outstanding (the
"1982 Bonds due June 15, 2022"), the proceeds of which were
loaned to the Company to finance and refinance a portion of the
costs of the acquisition, construction, improvement and equipping
of certain of the facilities for furnishing electric energy
described in Exhibit A hereto ("Facilities");
WHEREAS, the Authority has also heretofore issued and sold
$75,000,000 aggregate principal amount of its Industrial
Development Revenue Bonds, 1982 Series A (Tucson Electric Power
Company General Project), all of which remain outstanding (the
"1982 Bonds due July 1, 2022", and, together with the 1982 Bonds
due June 15, 2022, hereinafter collectively referred to as the
"1982 Bonds"), the proceeds of which were loaned to the Company
to finance and refinance certain additional costs of the
Facilities; and
WHEREAS, the Authority proposes to issue and sell its revenue
bonds for the purpose of refinancing, by the payment or
redemption of the 1982 Bonds, or provisions therefor, the portion
of the costs of the Facilities previously financed and/or
refinanced from the proceeds of the 1982 Bonds;
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby and in consideration of the premises, DO HEREBY
AGREE as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Article
I shall for all purposes of this Agreement have the meanings
herein specified, unless the context clearly requires otherwise:
Act:
"Act" shall mean Title 35, Chapter 5, Arizona Revised
Statutes, and all acts supplemental thereto or amendatory
thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Authority with respect to this Agreement, the
Indenture and any transaction or event contemplated by this
Agreement or the Indenture, including the compensation and
reimbursement of expenses and advances payable to the Trustee, to
the paying agent, any co-paying agent and the registrar under the
Indenture and a pro rata share of the Authority's annual
operating expenses in accordance with the provisions of paragraph
XII.D. of the Authority's Procedural Pamphlet.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of
September 15, 1997, between the Authority and the Company, and
any and all modifications, alterations, amendments and
supplements hereto.
Authority:
"Authority" shall mean The Industrial Development Authority of
the County of Pima, an Arizona nonprofit corporation designated
by law as a political subdivision of the State of Arizona
incorporated for and with the approval of Pima County, Arizona,
pursuant to the provisions of the Constitution of the State of
Arizona and the Act, its successors and their assigns.
Authorized Company Representative:
"Authorized Company Representative" shall mean each person at
the time designated to act on behalf of the Company by written
certificate furnished to the Authority and the Trustee containing
the specimen signature of such person and signed on behalf of the
Company by its President, any Vice President or its Treasurer,
together with its Secretary or any Assistant Secretary.
Bond Counsel:
"Bond Counsel" shall mean any firm or firms of nationally
recognized bond counsel experienced in matters pertaining to the
validity of, and exclusion from gross income for federal tax
purposes of interest on bonds issued by states and political
subdivisions, selected by the Company and acceptable to the
Authority.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01 of the
Indenture.
Bonds:
"Bond" or "Bonds" shall mean the Industrial Development
Revenue Bonds, 1997 Series B (Tucson Electric Power Company
Project) of the Authority.
Code:
"Code" shall mean the Internal Revenue Code of 1986 or any
successor statute thereto. Each reference to a section of the
Code herein shall be deemed to include the United States Treasury
Regulations proposed or in effect thereunder and applicable to
the Bonds or the use of the proceeds thereof, unless the context
clearly requires otherwise. Reference to any particular Code
section shall, in the event of a successor Code, be deemed to be
a reference to the successor to such Code section.
Company:
"Company" shall mean Tucson Electric Power Company, a
corporation organized and existing under the laws of the State of
Arizona, its successors and their assigns, including, without
limitation, any successor obligor under Section 6.01 or 7.01 to
the extent of the obligations assumed thereunder.
Completion Date:
"Completion Date" shall be the date on which the Facilities
are completed in their entirety and ready to be placed in service
and operated, all as determined by the Company.
Facilities:
"Facilities" shall mean the real and personal properties,
machinery and equipment currently existing, under construction
and to be constructed which are described in Exhibit A hereto, as
revised from time to time to reflect any changes therein,
additions thereto, substitutions therefor and deletions therefrom
permitted by the terms hereof, subject, however, to the
provisions of Section 7.01 hereof.
Indenture:
"Indenture" shall mean the Indenture of Trust, dated as of
September 15, 1997, between the Authority and the Trustee
relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.
Loan Payments:
"Loan Payments" shall mean the payments required to be made by
the Company pursuant to Section 5.01 hereof.
1954 Code:
"1954 Code" shall mean the Internal Revenue Code of 1954, as
amended.
1982 Bonds:
"1982 Bonds" shall mean the $75,000,000 aggregate principal
amount of the Authority's Industrial Development Revenue Bonds,
1982 Series A (Tucson Electric Power Company General Project) due
June 15, 2022 and $75,000,000 aggregate principal amount of the
Authority's Industrial Development Revenue Bonds, 1982 Series A
(Tucson Electric Power Company General Project) due July 1, 2022.
Outstanding:
"Outstanding", when used in reference to the Bonds, shall
mean, as at any particular date, the aggregate of all Bonds
authenticated and delivered under the Indenture except:
(a) those canceled by the Trustee at or prior to such date
or delivered to or acquired by the Trustee at or prior to such
date for cancellation;
(b) those deemed to be paid in accordance with Article VIII
of the Indenture; and
(c) those in lieu of or in exchange or substitution for
which other Bonds shall have been authenticated and delivered
pursuant to the Indenture, unless proof satisfactory to the
Trustee and the Company is presented that such Bonds are held
by a bona fide holder in due course.
Person:
"Person" means (i) any corporation, limited liability company,
partnership, joint venture, association, joint-stock company,
business trust, or unincorporated organization, in each case
formed or organized under the laws of the United States of
America, any state thereof or the District of Columbia, or (ii)
the United States of America or any state thereof, or any
political subdivision of either thereof, or any agency, authority
or other instrumentality of any of the foregoing.
Tax Agreement:
"Tax Agreement" shall mean that tax certificate and agreement,
dated the date of the initial authentication and delivery of the
Bonds, between the Authority and the Company, relating to the
requirements of the Code, and any and all modifications,
alterations, amendments and supplements thereto.
Trustee:
"Trustee" shall mean First Trust of New York, National
Association, as trustee under the Indenture, its successors in
trust and their assigns.
SECTION 1.02. Incorporation of Certain Definitions by
Reference. Each capitalized term used herein and not otherwise
defined herein shall have the meaning set forth in the Indenture.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Representations and Warranties of the
Authority. The Authority makes the following representations and
warranties as the basis for the undertakings on the part of the
Company contained herein:
(a) The Authority is an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona created and existing under the Constitution and laws
of the State of Arizona;
(b) The Authority has the power to enter into this
Agreement and the Indenture and to perform and observe the
agreements and covenants on its part contained herein and
therein, including without limitation the power to issue and
sell the Bonds as contemplated herein and in the Indenture,
and by proper action has duly authorized the execution and
delivery hereof and thereof; and
(c) The execution and delivery of this Agreement and the
Indenture by the Authority do not, and consummation of the
transactions contemplated hereby and fulfillment of the terms
hereof and thereof by the Authority will not, result in a
breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Authority is now a party
or by which it is now bound, or, to the best knowledge of the
Authority, any order, rule or regulation applicable to the
Authority of any court or of any regulatory body or
administrative agency or other governmental body having
jurisdiction over the Authority or over any of its properties,
or the Constitution or laws of the State of Arizona.
SECTION 2.02. Representations and Warranties of the Company.
The Company makes the following representations and warranties as
the basis for the undertakings on the part of the Authority
contained herein:
(a) The Company is a corporation duly organized and
existing in good standing under the laws of the State of
Arizona and duly qualified as a foreign corporation in the
State of New Mexico;
(b) The Company has power to enter into this Agreement and
to perform and observe the agreements and covenants on its
part contained herein and by proper corporate action has duly
authorized the execution and delivery hereof and all other
documents hereby executed by the Company;
(c) The execution and delivery of this Agreement by the
Company do not, and consummation of transactions contemplated
hereby and fulfillment of the terms hereof by the Company will
not, result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed
of trust or other agreement or instrument to which the Company
is a party or by which it is now bound, or the Restated
Articles of Incorporation or by-laws of the Company, or any
order, rule or regulation applicable to the Company of any
court or of any regulatory body or administrative agency or
other governmental body having jurisdiction over the Company
or over any of its properties, or any statute of any
jurisdiction applicable to the Company;
(d) The Arizona Corporation Commission has approved all
matters relating to the Company's participation in the
transactions contemplated by this Agreement which require said
approval, and no other consent, approval, authorization or
other order of any regulatory body or administrative agency or
other governmental body is legally required for the Company's
participation therein, except such as may have been obtained
or may be required under the securities laws of any
jurisdiction;
(e) The Facilities are to be used solely for purposes
contemplated by the Act and are located or are to be located
within the State of Arizona; and
(f) All of the proceeds of the Bonds (exclusive of accrued
interest, if any, paid by the initial purchasers of such Bonds
upon delivery thereof) will be expended to refinance the
Facilities through the payment or redemption of the 1982
Bonds, or provisions therefor.
ARTICLE III
THE FACILITIES
SECTION 3.01. Facilities; Property of the Company. An
undivided interest in the Facilities shall be the property of the
Company and the Authority shall have no right, title or interest
in the Facilities.
SECTION 3.02. Revision of Plans and Specifications. The
Company may consent to one or more revisions to the plans and
specifications for the Facilities (including without limitation
any changes therein, additions thereto, substitutions therefor
and deletions therefrom), at any time and from time to time prior
to the Completion Date in any respect; provided, however, that,
if any such revision shall render inaccurate the description of
the Facilities contained in Exhibit A hereto, the Company shall
deliver to the Authority and the Trustee (a) a revised Exhibit A
containing a description of the Facilities as revised, the
accuracy of which shall have been certified by an Authorized
Company Representative, and (b) an opinion of Bond Counsel to the
effect that the Facilities as described in the revised Exhibit A
are such that the expenditure of the proceeds of the Bonds
pursuant to this Agreement will not, in and of itself, impair the
validity of the Bonds under the Act or the exclusion from gross
income for federal tax purposes of interest on the Bonds. A
revision of Exhibit A hereto pursuant to this Section 3.02 shall
not constitute an amendment, change or modification of this
Agreement within the meaning of Article XII of the Indenture.
SECTION 3.03. Maintenance of Facilities; Remodeling. The
Company shall at all times cause the Facilities, and every
element and unit thereof, to be maintained, preserved and kept in
thorough repair, working order and condition and cause all
needful and proper repairs and renewals thereto to be made;
provided, however, that the Company may cause the operation of
the Facilities, or any element or unit thereof, to be
discontinued if, in the judgment of the Company, it is no longer
advisable to operate the same, or if the Company intends to sell
or dispose of the same and within a reasonable time shall
endeavor to effectuate such sale or disposition.
After the Completion Date, the Company may, subject to the
provisions of Section 6.05 hereof, at its own expense remodel the
Facilities or make such substitutions, modifications and
improvements to the Facilities from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes,
which remodeling, substitutions, modifications and improvements
shall be included under the terms of this Agreement as part of
the Facilities.
SECTION 3.04. Insurance. The Company shall keep the
Facilities insured against fire and other risks to the extent
usually insured against by companies owning and operating similar
property, by reputable insurance companies or, at the Company's
election, with respect to all or any element or unit of the
Facilities, by means of an adequate insurance fund set aside and
maintained by it out of its own earnings or in conjunction with
other companies through an insurance fund, trust or other
agreement or, by means of unfunded self-insurance as may be
reasonable and customary by companies owning and operating
similar property. All proceeds of such insurance shall be for
the account of the Company.
SECTION 3.05. Condemnation. The Company shall be entitled to
the entire proceeds of any condemnation award or portion thereof
made for damages to or takings of the Facilities or other
property of the Company.
SECTION 3.06. Termination of Construction. Anything in this
Agreement to the contrary notwithstanding, the Company shall have
the right at any time to terminate the construction of the
Facilities, in whole, if the Company shall have determined that
the continued construction or operation of the Facilities, in
whole, is impracticable, uneconomical or undesirable for any
reason.
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01. Issuance of the Bonds. The Authority shall
issue the Bonds under and in accordance with the Indenture,
subject to the provisions of the bond purchase agreement among
the Authority, the initial purchaser or purchasers of the Bonds
and the Company. The Company hereby approves the issuance of the
Bonds and all terms and conditions thereof.
SECTION 4.02. Issuance of Other Obligations. The Authority
and the Company expressly reserve the right to enter into, to the
extent permitted by law, but shall not be obligated to enter
into, an agreement or agreements other than this Agreement with
respect to the issuance by the Authority, under an indenture or
indentures other than the Indenture, of obligations to provide
additional funds to pay the cost of construction of the
Facilities or obligations to refund all or any principal amount
of the Bonds, or any combination thereof.
SECTION 4.03. The Loan; Disposition of Bond Proceeds. The
Authority and the Company shall enter into escrow arrangements
with the trustee for the 1982 Bonds and shall cause the proceeds
of the Bonds, other than accrued interest, if any, paid by the
initial purchaser or purchasers thereof, to be deposited in
escrow with such trustee to be applied to the payment of the 1982
Bonds upon the redemption thereof.
The Authority shall establish the Bond Fund with the Trustee
in accordance with Section 4.01 of the Indenture.
SECTION 4.04. Investment of Moneys in Funds and Accounts.
The Company and the Authority agree that any moneys held in any
fund or account created by the Indenture shall be invested as
provided in the Indenture.
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01. Loan Payments. In consideration of the
issuance of the Bonds and the disposition of the proceeds thereof
as contemplated in Section 4.03 hereof, the Company shall pay, or
cause to be paid, to the Trustee for the account of the Authority
an amount equal to the aggregate principal amount of the Bonds
from time to time Outstanding and, as interest on its obligation
to pay such amount, an amount equal to premium, if any, and
interest on such Bonds, such amounts to be paid in installments
due on the dates, in the amounts and in the manner provided in
the Indenture for the Authority to cause amounts to be deposited
in the Bond Fund for the payment of the principal of and premium,
if any, and interest on the Bonds whether at stated maturity,
upon redemption or acceleration or otherwise; provided, however,
that the obligation of the Company to make any such payment
hereunder shall be reduced by the amount of any reduction under
the Indenture of the amount of the corresponding payment required
to be made by the Authority thereunder.
SECTION 5.02. Payments Assigned; Obligation Absolute. It is
understood and agreed that all Loan Payments are, by the
Indenture, to be pledged by the Authority to the Trustee, and
that all rights and interest of the Authority hereunder (except
for the Authority's rights under Sections 5.03, 5.04, 6.03 and
8.05 hereof and any rights of the Authority to receive notices,
certificates, requests, requisitions and other communications
hereunder) are to be pledged and assigned to the Trustee. The
Company assents to such pledge and assignment and agrees that the
obligation of the Company to make the Loan Payments shall be
absolute, irrevocable and unconditional and shall not be subject
to cancellation, termination or abatement, or to any defense
other than payment or to any right of set-off, counterclaim or
recoupment arising out of any breach by the Authority or the
Trustee or any other party under this Agreement, the Indenture or
otherwise, or out of any obligation or liability at any time
owing to the Company by the Authority, the Trustee or any other
party, and, further, that the Loan Payments and the other
payments due hereunder shall continue to be payable at the times
and in the amounts herein and therein specified, whether or not
the Facilities, or any portion thereof, shall have been completed
or shall have been destroyed by fire or other casualty, or title
thereto, or the use thereof, shall have been taken by the
exercise of the power of eminent domain, and that there shall be
no abatement of or diminution in any such payments by reason
thereof, whether or not the Facilities shall be used or useful,
whether or not any applicable laws, regulations or standards
shall prevent or prohibit the use of the Facilities, or for any
other reason, all of the foregoing being subject, however, to the
provisions of Sections 6.01 and 7.01 hereof.
SECTION 5.03. Payment of Expenses. The Company shall pay all
Administration Expenses, including, without limitation,
Administration Expenses incurred at and subsequent to the time
the Bonds are deemed to have been paid in accordance with Article
VIII of the Indenture. The payment of the compensation and the
reimbursement of expenses and advances of the Trustee, of the
paying agent, any co-paying agent and the registrar under the
Indenture shall be made directly to such entities.
SECTION 5.04. Indemnification. The Company releases the
Authority, the Trustee and their directors, officers, employees
and agents from, agrees that the Authority and the Trustee shall
not be liable for, and agrees to indemnify and hold the
Authority, the Trustee and their directors, officers, employees
and agents free and harmless from, any liability (including,
without limitation, attorneys' and other agents' fees and
expenses) for any loss or damage to property or any injury to or
death of any person that may be occasioned by any cause
whatsoever pertaining to the Facilities, except (i) in the case
of the Trustee, as a result of the negligence or bad faith or
willful misconduct of the Trustee or its directors, officers,
employees and agents; and (ii) in the case of the Authority, as a
result of gross negligence or bad faith of the Authority or its
directors, officers, employees and agents.
The Company will indemnify and hold the Authority and the
Trustee, free and harmless from any loss, claim, damage, tax,
penalty, liability, disbursement, litigation expenses, attorneys'
and other agents' fees and expenses or court costs arising out
of, or in any way relating to, the execution or performance of
this Agreement, the issuance or sale of the Bonds, actions taken
under the Indenture or any other cause whatsoever pertaining to
the Facilities, except (i) in the case the Trustee, as a result
of the negligence or bad faith or willful misconduct of the
Trustee; and (ii) in the case of the Authority, as a result of
the gross negligence or bad faith of the Authority.
The Company will indemnify and hold the Authority and its
directors, officers, employees and agents free and harmless from
any loss, claim, damage, tax, penalty, liability, disbursement,
litigation expenses, attorney's fees and expenses or court costs
arising out of or in any way relating to any untrue statement or
alleged untrue statement of any material fact or omission or
alleged omission to state a material fact necessary to make the
statements made, in light of the circumstances under which they
were made, not misleading in any official statement or other
offering material utilized in connection with the sale of any
Bonds.
SECTION 5.05. Payment of Taxes; Discharge of Liens. The
Company shall: (a) pay, or make provision for payment of, all
lawful taxes and assessments, including income, profits, property
or excise taxes, if any, or other municipal or governmental
charges, levied or assessed by any federal, state or municipal
government or political body upon the Facilities or any part
thereof or upon the Authority with respect to the Loan Payments,
when the same shall become due; and (b) pay or cause to be
satisfied and discharged or make adequate provision to satisfy
and discharge, within sixty (60) days after the same shall
accrue, any lien or charge upon the Loan Payments, and all lawful
claims or demands for labor, materials, supplies or other charges
which, if unpaid, might be or become a lien upon such amounts;
provided, that, if the Company shall first notify the Authority
and the Trustee of its intention so to do, the Company may in
good faith contest any such lien or charge or claims or demands
in appropriate legal proceedings, and in such event may permit
the items so contested and identified as such by the Company to
remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom, unless the Trustee shall notify
the Company in writing that, in the opinion of counsel to the
Trustee, based upon material facts disclosed to the Trustee
without any duty of investigation, by nonpayment of any such
items the lien of the Indenture as to the Loan Payments will be
materially endangered, in which event the Company shall promptly
pay and cause to be satisfied and discharged all such unpaid
items. The Authority shall cooperate fully with the Company in
any such contest.
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01. Maintenance of Corporate Existence. Except as
permitted in this Section 6.01, the Company shall maintain its
corporate existence, shall not sell, transfer or otherwise
dispose of all of its assets, as or substantially as an entirety,
and shall not consolidate with or merge with or into another
corporation. The Company may consolidate with or merge into
another corporation incorporated under the laws of the United
States of America, any state thereof or the District of Columbia,
or sell, transfer or otherwise dispose of all of its assets, as
or substantially as an entirety, to any Person, if the surviving
or resulting corporation (if other than the Company) or the
transferee Person, as the case may be, prior to or simultaneously
with such merger, consolidation, sale, transfer or disposition,
assumes, by delivery to the Trustee and the Authority of an
instrument in writing satisfactory in form to the Trustee, all
the obligations of the Company under this Agreement, including,
without limitation, the obligations of the Company under Section
5.01 hereof. Upon such an assumption following any such sale,
transfer or other disposition of assets, the Company shall be
released and discharged from all liability in respect of all
obligations under this Agreement. Notwithstanding the foregoing,
in the case of any such sale, transfer or other disposition of
assets, which do not include the Facilities, the Company shall
remain liable in respect of all obligations under this Agreement
other than the obligations under Section 5.01 hereof, and the
transferee shall not be required to assume any obligations
hereunder other than the obligations under Section 5.01 hereof;
provided, however, that the transferee shall be required to
assume all such other obligations unless the Company shall have
delivered to the Authority and the Trustee an opinion of Bond
Counsel to the effect that the non-assumption by the transferee
of such other obligations will not impair the validity under the
Act of the Bonds and will not adversely affect the exclusion from
gross income for federal tax purposes of interest on the Bonds.
If consolidation, merger or sale, transfer or other
disposition is made as permitted by this Section 6.01, the
provisions of this Section 6.01 shall continue in full force and
effect and no further consolidation, merger or sale or other
transfer shall be made except in compliance with the provisions
of this Section 6.01.
Anything in this Agreement to the contrary notwithstanding,
the sale, transfer or other disposition by the Company of all of
its facilities (a) for the generation of electric energy, (b) for
the transmission of electric energy or (c) for the distribution
of electric energy, in each case considered alone, or all of its
facilities described in clauses (a) and (b), considered together,
or all of its facilities described in clauses (b) and (c),
considered together, shall in no event be deemed to constitute a
sale, transfer or other disposition of all the properties of the
Company, as or substantially as an entirety, unless, immediately
following such sale, transfer or other disposition, the Company
shall own no properties in the other such categories of property
not so sold, transferred or otherwise disposed of. The character
of particular facilities shall be determined by reference to the
Uniform System of Accounts prescribed for public utilities and
licensees subject to the Federal Power Act, as amended, to the
extent applicable.
SECTION 6.02. Permits or Licenses. In the event that it may
be necessary for the proper performance of this Agreement on the
part of the Company or the Authority that any application or
applications for any permit or license to do or to perform
certain things be made to any governmental or other agency by the
Company or the Authority, the Company and the Authority each
shall, upon the request of either, execute such application or
applications.
SECTION 6.03. Authority's Access to Facilities. The
Authority shall have the right, upon appropriate prior notice to
the Company, to have reasonable access to the Facilities during
normal business hours for the purpose of making examinations and
inspections of the same.
SECTION 6.04. Tax-Exempt Status of Interest on Bonds. (a) It
is the intention of the parties hereto that interest on the Bonds
shall be and remain tax-exempt, and to that end the covenants and
agreements of the Authority and the Company in this Section 6.04
and the Tax Agreement are for the benefit of the Owners from time
to time of the Bonds.
(b) Each of the Company and the Authority covenants and
agrees for the benefit of the Owners from time to time of the
Bonds that it will not directly or indirectly use or permit
the use of (to the extent within its control) the proceeds of
any of the Bonds or any other funds, or take or omit to take
any action, if and to the extent such use, or the taking or
omission to take such action, would cause any of the Bonds to
be "arbitrage bonds" within the meaning of Section 148 of the
Code or otherwise subject to federal income taxation by reason
of Section 103 and 141 through 150 of the Code or Section 103
of the 1954 Code and Title XIII of the Tax Reform Act of 1986,
as applicable, and any applicable regulations promulgated
thereunder. To such ends, the Authority and the Company will
comply with all requirements of such Section 148 to the extent
applicable to the Bonds. In the event that at any time the
Authority or the Company is of the opinion that for purposes
of this Section 6.04(b) it is necessary to restrict or limit
the yield on the investment of any moneys held by the Trustee
under the Indenture, the Authority or the Company shall so
notify the Trustee in writing.
Without limiting the generality of the foregoing, the
Company and the Authority agree that there shall be paid from
time to time all amounts required to be rebated to the United
States of America pursuant to Section 148(f) of the Code and
any applicable Treasury Regulations. This covenant shall
survive payment in full or defeasance of the Bonds and the
satisfaction and discharge of the Indenture. The Company
specifically covenants to pay or cause to be paid the Rebate
Requirement as defined and described in the Tax Agreement.
(c) The Authority certifies and represents that it has not
taken, and the Authority covenants and agrees that it will not
take, any action which results in interest paid on the Bonds
being included in gross income of the Owners of the Bonds for
federal tax purposes pursuant to Sections 103 and 141 of the
Code or to Section 103 of the 1954 Code and Title XIII of the
Tax Reform Act of 1986, as applicable, and any regulations
thereunder; and the Company certifies and represents that it
has not taken or (to the extent within its control) permitted
to be taken, and the Company covenants and agrees that it will
not take or (to the extent within its control) permit to be
taken any action which will cause the interest on the Bonds to
become includable in gross income for federal income tax
purposes; provided, however, that neither the Company nor the
Authority shall be deemed to have violated these covenants if
the interest on any of the Bonds becomes taxable to a person
solely because such person is a "substantial user" of the
Facilities or a "related person" within the meaning of Section
103(b)(13) of the 1954 Code and provided, further, that none
of the covenants and agreements herein contained shall require
either the Company or the Authority to enter an appearance or
intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws,
rules or regulations or in connection with any decisions of
any court or administrative agency or other governmental body
affecting the taxation of interest on the Bonds. The Company
acknowledges having read Section 7.08 of the Indenture and
agrees to perform all duties imposed on it by such Section
7.08, by this Section and by the Tax Agreement. Insofar as
Section 7.08 of the Indenture and the Tax Agreement impose
duties and responsibilities on the Company, they are
specifically incorporated herein by reference.
(d) Notwithstanding any provision of this Section 6.04 and
Section 7.08 of the Indenture, if the Company shall provide to
the Authority and the Trustee an opinion of Bond Counsel to
the effect that any specified action required under this
Section 6.04 and Section 7.08 of the Indenture is no longer
required or that some further or different action is required
to maintain the tax-exempt status of interest on the Bonds,
the Company, the Trustee and the Authority may conclusively
rely upon such opinion in complying with the requirements of
this Section 6.04, and the covenants hereunder shall be deemed
to be modified to that extent.
SECTION 6.05. Use of Facilities. So long as any Bonds are
Outstanding and the Facilities are operated by or for the benefit
of the Company, the Company shall cause the Facilities to be used
for purposes contemplated by the Act and in the Tax Agreement.
SECTION 6.06. Financing Statements. The Company shall file
and record, or cause to be filed and recorded, all financing
statements and continuation statements referred to in Section
7.07 of the Indenture.
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01. Conditions. The Company's interest in this
Agreement may be assigned as a whole or in part, and its interest
in the Facilities may be leased, sold, transferred or otherwise
disposed of by the Company as a whole or in part (whether an
interest in a specific element or unit or an undivided interest),
to any Person; provided, however, that no such assignment, lease,
sale, transfer or other disposition (a) shall relieve the Company
from its primary liability for its obligations under Section 5.01
hereof or (b) shall be made unless the assignee, lessee,
purchaser or other transferee, as the case may be, prior to or
simultaneously with such assignment, lease, sale, transfer or
other disposition, assumes, by delivery of an instrument in
writing satisfactory in form to the Trustee and the Authority,
all other obligations of the Company hereunder to the extent of
the interest assigned, leased, sold, transferred or otherwise
disposed of, and the Company shall be released of and discharged
from such obligations to the extent so assumed. Notwithstanding
the foregoing, (a) if (i) the Company's interest in this
Agreement shall be assigned as a whole or in undivided part, (ii)
the Company's interest in the Facilities shall be leased as a
whole or in undivided part and the term of such leasehold or the
term of any extension or extensions thereof at the option of the
Company shall extend beyond the maturity date of the Bonds or
(iii) the Company's interest in the Facilities shall be sold,
transferred or otherwise disposed of as a whole or in undivided
part, and (b) in the event that the assignee, lessee, purchaser
or other transferee shall assume the obligations of the Company
under Section 5.01 hereof for the remaining term of this
Agreement, to the extent of such assignment, lease, sale,
transfer or other disposition, the Company shall be released from
and discharged of all liability in respect of such obligations to
the extent so assumed (but only to such extent); provided,
however, that the release and discharge of the Company pursuant
to clause (b) shall be conditioned upon the delivery by the
Company to the Authority and the Trustee of a certificate of an
Independent Expert (as hereinafter defined) describing the
interests so assigned, leased, sold, transferred or otherwise
disposed of, together with all other rights, interests, assets
and/or properties assigned, leased, sold, transferred or
otherwise disposed of by the Company to the same Person in the
same or a related transaction, stating that such rights,
interests, assets and/or properties so described constitute
facilities for the generation, transmission and/or distribution
of electric energy and stating that, in the opinion of such
Independent Expert, the Fair Value (as hereinafter defined) of
such rights, interests, assets and/or properties to the Person
acquiring the same is not less than an amount equal to 10/7 of
the sum of (x) the aggregate principal amount of the Bonds then
Outstanding and (y) the outstanding principal amount of all other
obligations of the Company representing indebtedness for borrowed
money or for the deferred purchase price of property which are
being assumed by such Person; provided, further, that after any
such assumption, release and discharge as aforesaid, the Company
may again assume such obligations under Section 5.01 hereof, in
whole or in part, at any time and from time to time, and, to the
extent of any such assumption by the Company (but only to such
extent), the aforesaid assignee, lessee, purchaser or other
transferee shall be released from and discharged of all liability
in respect of such obligations.
Anything herein to the contrary notwithstanding, the Company
shall not make any assignment, lease or sale as provided in the
immediately preceding paragraph unless it shall have furnished to
the Authority and the Trustee an opinion of Bond Counsel to the
effect that the proposed assignment, lease or sale will not
impair the validity under the Act of the Bonds and will not
adversely affect the exclusion of interest on the Bonds from
gross income for federal tax purposes.
After any lease, sale, transfer or other disposition of any
element or unit of the Facilities, or any interest therein, the
Company may, at its option, cause such element or unit, or
interest therein, to no longer be deemed to be part of the
Facilities for the purposes of this Agreement by delivering to
the Authority and the Trustee the agreements or other documents
required pursuant to Section 7.02 hereof together with an
instrument signed by an Authorized Company Representative stating
that such element or unit, or interest therein, shall no longer
be deemed to be part of the Facilities for the purposes of this
Agreement.
For purposes of this Section 7.01:
(a) "Independent Expert" means a Person which (i) is an
engineer, appraiser or other expert and which, with respect to
any certificate to be delivered pursuant to this Section, is
qualified to pass upon the matter set forth in such
certificate and (ii)(A) is in fact independent, (B) does not
have any direct material financial interest in the transferee
or in any obligor upon the Bonds or under this Agreement or in
any affiliate of the transferee or any such obligor, (C) is
not connected with the transferee or any such obligor as an
officer, employee, promoter, underwriter, trustee, partner,
director or any person performing similar functions and (D) is
approved by the Trustee in the exercise of reasonable care;
for purposes of this definition "engineer" means a Person
engaged in the engineering profession or otherwise qualified
to pass upon engineering matters (including, but not limited
to, a Person licensed as a professional engineer, whether or
not then engaged in the engineering profession); and for
purposes of this definition "appraiser" means a Person engaged
in the business of appraising property or otherwise qualified
to pass upon the Fair Value or fair market value of property.
(b) "Fair Value" means the fair value of the interests,
rights, assets and/or properties assigned, leased, sold,
transferred or otherwise disposed of (but, in the case of a
lease, only to the extent of such lease) as may be determined
by reference to (i) except in the case of a lease, the amount
which would be likely to be obtained in an arm's-length
transaction with respect to such interests, rights, assets
and/or properties between an informed and willing buyer and an
informed and willing seller, under no compulsion,
respectively, to buy or sell, (ii) in the case of a lease, the
amount (discounted to present value at a rate not lower than
the taxable equivalent of the yield to maturity of the Bonds
based on prevailing market prices immediately prior to the
first public announcement of the proposed transaction) which
would be likely to be obtained in an arm's-length transaction
with respect to such interests, rights, assets and/or
properties between an informed and willing lessee and an
informed and willing lessor, neither under any compulsion to
lease; (iii) the amount of investment with respect to such
interests, rights, assets and/or properties which, together
with a reasonable return thereon, would be likely to be
recovered through ordinary business operations or otherwise,
(iv) the cost, accumulated depreciation and replacement cost
with respect to such interests, rights, assets and/or
properties and/or (v) any other relevant factors; provided,
however, that (x) Fair Value shall be determined without
deduction for any mortgage, deed of trust, pledge, security
interest, encumbrance, lease, reservation, restriction,
servitude, charge or similar right or any other lien of any
kind and (y) the Fair Value to the transferee of any property
shall not reflect any reduction relating to the fact that such
property may be of less value to a Person which is not the
owner, lessee or operator of the property or any portion
thereof than to a Person which is such owner, lessee or
operator. Fair Value may be determined, without physical
inspection, by the use of accounting and engineering records
and other data maintained by the Company or the transferee or
otherwise available to the Independent Expert certifying the
same.
SECTION 7.02. Instrument Furnished to the Authority and
Trustee. The Company shall, within fifteen (15) days after the
delivery thereof, furnish to the Authority and the Trustee a true
and complete copy of the agreements or other documents
effectuating any such assignment, lease, sale, transfer or other
disposition.
SECTION 7.03. Limitation. This Agreement shall not be
assigned nor shall the Facilities be leased, sold, transferred or
otherwise disposed of, in whole or in part, except as provided in
this Article VII or in Section 6.01 or 5.02 hereof. This Article
VII shall not apply to any sale, transfer or other disposition by
the Company of all of its assets, as or substantially as an
entirety, as contemplated in Section 6.01.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default. Each of the following
events shall constitute and is referred to in this Agreement as
an "Event of Default":
(a) a failure by the Company to make any Loan Payment,
which failure shall have resulted in an "Event of Default"
under clause (a) or (b) of Section 9.01 of the Indenture;
(b) a failure by the Company to pay when due any amount
required to be paid under this Agreement or to observe and
perform any covenant, condition or agreement on its part to be
observed or performed (other than a failure described in
clause (a) above), which failure shall continue for a period
of sixty (60) days after written notice, specifying such
failure and requesting that it be remedied, shall have been
given to the Company by the Authority or the Trustee, unless
the Authority and the Trustee shall agree in writing to an
extension of such period prior to its expiration; provided,
however, that the Authority and the Trustee shall be deemed to
have agreed to an extension of such period if corrective
action is initiated by the Company within such period and is
being diligently pursued; or
(c) the dissolution or liquidation of the Company, or
failure by the Company promptly to lift any execution,
garnishment or attachment of such consequence as will impair
its ability to make any payments under this Agreement, or the
entry of an order for relief by a court of competent
jurisdiction in any proceeding for its liquidation or
reorganization under the provisions of any bankruptcy act or
under any similar act which may be hereafter enacted, or an
assignment by the Company for the benefit of its creditors, or
the entry by the Company into an agreement of composition with
its creditors (the term "dissolution or liquidation of the
Company," as used in this clause, shall not be construed to
include the cessation of the corporate existence of the
Company resulting either from a merger or consolidation of the
Company into or with another corporation or a dissolution or
liquidation of the Company following a transfer of all or
substantially all its assets as an entirety, under the
conditions permitting such actions contained in Section 6.01
hereof).
SECTION 8.02. Force Majeure. The provisions of Section 8.01
hereof are subject to the following limitations: if by reason of
acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders of any kind of the government of
the United States or of the State of Arizona, or any department,
agency, political subdivision, court or official of any of them,
or any civil or military authority; insurrections; riots;
epidemics; landslides; lightning; earthquakes; volcanoes; fires;
hurricanes; tornadoes; storms; floods; washouts; droughts;
arrests; restraint of government and people; civil disturbances;
explosions; breakage or accident to machinery; partial or entire
failure of utilities; or any cause or event not reasonably within
the control of the Company, the Company is unable in whole or in
part to carry out any one or more of its agreements or
obligations contained herein, other than its obligations under
Sections 5.01, 5.03, 5.05, and 6.01 hereof, the Company shall not
be deemed in default by reason of not carrying out said agreement
or agreements or performing said obligation or obligations during
the continuance of such inability. The Company shall make
reasonable effort to remedy with all reasonable dispatch the
cause or causes preventing it from carrying out its agreements;
provided, that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion
of the Company, and the Company shall not be required to make
settlement of strikes, lockouts and other industrial disturbances
by acceding to the demands of the opposing party or parties when
such course is in the judgment of the Company unfavorable to the
Company.
SECTION 8.03. Remedies. (a) Upon the occurrence and
continuance of any Event of Default described in clause (a) of
Section 8.01 hereof, and further upon the condition that, in
accordance with the terms of the Indenture, the Bonds shall have
been declared to be immediately due and payable pursuant to any
provision of the Indenture, the Loan Payments shall, without
further action, become and be immediately due and payable.
Any waiver of any "Event of Default" under the Indenture and a
rescission and annulment of its consequences shall constitute a
waiver of the corresponding Event or Events of Default under this
Agreement and a rescission and annulment of the consequences
thereof.
(b) Upon the occurrence and continuance of any Event of
Default, the Authority, or the Trustee with respect to the rights
of the Authority assigned to the Trustee by the Indenture, may
take any action at law or in equity to collect any payments then
due and thereafter to become due, or to enforce performance and
observance of any obligation, agreement or covenant of the
Company hereunder.
(c) Any amounts collected by the Trustee from the Company
pursuant to this Section 8.03 shall be applied in accordance with
the Indenture.
SECTION 8.04. No Remedy Exclusive. No remedy conferred upon
or reserved to the Authority hereby is intended to be exclusive
of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law
or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver thereof, but
any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the
Authority to exercise any remedy reserved to it in this Article
VIII, it shall not be necessary to give any notice, other than
such notice as may be herein expressly required.
SECTION 8.05. Reimbursement of Attorneys' and Agents' Fees.
If the Company shall default under any of the provisions hereof
and the Authority or the Trustee shall employ attorneys or agents
or incur other reasonable expenses for the collection of payments
due hereunder or for the enforcement of performance or observance
of any obligation or agreement on the part of the Company
contained herein, the Company will on demand therefor reimburse
the Authority or the Trustee and any predecessor Trustee, as the
case may be, for the reasonable fees of such attorneys and such
other reasonable expenses so incurred.
SECTION 8.06. Waiver of Breach. In the event any obligation
created hereby shall be breached by either of the parties and
such breach shall thereafter be waived by the other party, such
waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder. In view
of the assignment of certain of the Authority's rights and
interest hereunder to the Trustee, the Authority shall have no
power to waive any breach hereunder by the Company in respect of
such rights and interest without the consent of the Trustee, and
the Trustee may exercise any of such rights of the Authority
hereunder.
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01. Redemption of Bonds. The Authority shall take,
or cause to be taken, the actions required by the Indenture to
discharge the lien created thereby through the redemption, or
provision for payment or redemption, of all Bonds then
Outstanding, or to effect the redemption, or provision for
payment or redemption, of less than all the Bonds then
Outstanding, upon receipt by the Authority and the Trustee from
the Company of a notice designating the principal amount of the
Bonds to be redeemed, or for the payment or redemption of which
provision is to be made, and, in the case of redemption of Bonds,
or provision therefor, specifying the date of redemption and the
applicable redemption provision of the Indenture. Such
redemption date shall not be less than 45 days from the date such
notice is given (unless a shorter notice is satisfactory to the
Trustee). Unless otherwise stated therein, such notice shall be
revocable by the Company at any time prior to the time at which
the Bonds to be redeemed, or for the payment or redemption of
which provision is to be made, are first deemed to be paid in
accordance with Article VIII of the Indenture. The Company shall
furnish any moneys or Government Obligations (as defined in the
Indenture) required by the Indenture to be deposited with the
Trustee or otherwise paid by the Authority in connection with any
of the foregoing purposes.
SECTION 9.02. Compliance with the Indenture. Anything in
this Agreement to the contrary notwithstanding, the Authority and
the Company shall take all actions required by this Agreement and
the Indenture in order to comply with any provisions of the
Indenture requiring the mandatory redemption of Bonds.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Term of Agreement. This Agreement shall
remain in full force and effect from the date hereof until the
right, title and interest of the Trustee in and to the Trust
Estate (as defined in the Indenture) shall have ceased,
terminated and become void in accordance with Article VIII of the
Indenture and until all payments required under this Agreement
shall have been made. Notwithstanding the foregoing, the
covenants contained in Section 5.03, 5.04, Section 6.04 and 8.05
hereof shall survive the termination of this Agreement.
SECTION 10.02. Notices. Except as otherwise provided in this
Agreement, all notices, certificates, requests, requisitions and
other communications hereunder shall be in writing and shall be
sufficiently given and shall be deemed given when mailed by
registered mail, postage prepaid, addressed as follows: if to the
Authority, c/o Russo, Cox & Russo, P.C., 1820 East River Road,
Suite 230, Tucson, Arizona 85718; if to the Company, at 220 West
Sixth Street, Tucson, Arizona 85702, Attention: Treasurer; and
if to the Trustee, at such address as shall be designated by it
in the Indenture. A copy of each notice, certificate, request or
other communication given hereunder to the Authority, the
Company, or the Trustee shall also be given to the others. The
Authority, the Company, and the Trustee may, by notice given
hereunder, designate any further or different addresses to which
subsequent notices, certificates, requests or other
communications shall be sent.
SECTION 10.03. Parties in Interest. This Agreement shall
inure to the benefit of and shall be binding upon the Authority,
the Company and their respective successors and assigns, and no
other person, firm or corporation shall have any right, remedy or
claim under or by reason of this Agreement; provided, however,
that the rights and remedies granted to the Authority in Article
VIII hereof, shall inure to the benefit of the Trustee, on behalf
of the Owners from time to time of the Bonds, and shall be
enforceable by the Trustee as a third party beneficiary or as
assignee of the Authority; and provided, further, that neither
Pima County, Arizona nor the State of Arizona shall in any event
be liable for the payment of the principal of or premium, if any,
or interest on the Bonds or for the performance of any pledge,
mortgage, obligation or agreement created by or arising out of
this Agreement or the issuance of the Bonds, and further that
neither the Bonds nor any such obligation or agreement of the
Authority shall be construed to constitute an indebtedness of
Pima County, Arizona or the State of Arizona within the meaning
of any constitutional or statutory provisions whatsoever, but
shall be limited obligations of the Authority payable solely out
of the revenues derived from this Agreement, or from the sale of
the Bonds, or from the investment or reinvestment of any of the
foregoing, as provided herein and in the Indenture.
SECTION 10.04. Amendments. This Agreement may be amended
only by written agreement of the parties hereto, subject to the
limitations set forth herein and in the Indenture.
SECTION 10.05. Counterparts. This Agreement may be executed
in any number of counterparts, each of which, when so executed
and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Agreement.
SECTION 10.06. Severability. If any clause, provision or
section of this Agreement shall, for any reason, be held illegal
or invalid by any court, the illegality or invalidity of such
clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this
Agreement shall be construed and enforced as if such illegal or
invalid clause, provision or section had not been contained
herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement
or obligation shall be deemed to be the agreement or obligation
of the Authority or the Company, as the case may be, to the full
extent permitted by law.
SECTION 10.07. Governing Law. The laws of the State of
Arizona shall govern the construction and enforcement of this
Agreement, except that the provisions of Section 13.09 of the
Indenture, construed as provided in Section 13.07 of the
Indenture, shall apply to this Agreement as if contained herein.
SECTION 10.08. Notice Regarding Cancellation of Contracts.
As required by the provisions of Section 38-511, Arizona Revised
Statutes, as amended, notice is hereby given that political
subdivisions of the State of Arizona or any of their departments
or agencies may, within three (3) years of its execution, cancel
any contract, without penalty or further obligation, made by the
political subdivisions or any of their departments or agencies on
or after September 30, 1988, if any person significantly involved
in initiating, negotiating, securing, drafting or creating the
contract on behalf of the political subdivisions or any of their
departments or agencies is, at any time while the contract or any
extension of the contract is in effect, an employee or agent of
any other party to the contract in any capacity or a consultant
to any other party of the contract with respect to the subject
matter of the contract. The cancellation shall be effective when
written notice from the chief executive officer or governing body
of the political subdivision is received by all other parties to
the contract unless the notice specifies a later time.
The Company covenants and agrees not to employ as an employee,
agent or, with respect to the subject matter of this Agreement, a
consultant, any person significantly involved in initiating,
negotiating, securing, drafting or creating such Agreement on
behalf of the Authority within three (3) years from the execution
hereof, unless a waiver is provided by the Authority.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed as of the day and year first above
written.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
By: /s/ Stanley Lehman
--------------------------
President
TUCSON ELECTRIC POWER COMPANY
By: /s/ Kevin Larson
--------------------------
Vice President
<PAGE>
EXHIBIT A
A portion of the costs of the construction, improvement or
equipping of the following Facilities will be refinanced with the
proceeds of the Industrial Development Revenue Bonds, 1997 Series
B (Tucson Electric Power Company Project) issued by The
Industrial Development Authority of the County of Pima and
referred to in the foregoing Loan Agreement.
--------------------
Certain additions and improvements to the Company's low-
voltage transmission and distribution facilities in the City of
Tucson and environs in Pima County and to Fort Huachuca in
adjacent Cochise County, Arizona and additions and improvements
to the Irvington Generating Station located in the City of
Tucson, more particularly described in the Tax Certificate and
Agreement, dated as of October 1, 1997, between The Industrial
Development Authority of the County of Pima and Tucson Electric
Power Company.
Exhibit 4d
===============================================================================
INDENTURE OF TRUST
(1997 SERIES B)
BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
AND
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
---------------------
DATED AS OF SEPTEMBER 15, 1997
---------------------
AUTHORIZING
INDUSTRIAL DEVELOPMENT REVENUE BONDS,
1997 SERIES B
(TUCSON ELECTRIC POWER COMPANY PROJECT)
=============================================================================
<PAGE>
TABLE OF CONTENTS*
Page
----
Parties.................................................................. 1
Recitals................................................................. 1
Granting Clause.......................................................... 2
ARTICLE I
DEFINITIONS
Section 1.01. Definitions........................................... 2
ARTICLE II
THE BONDS
Section 2.01. Creation of Bonds..................................... 8
Section 2.02. Form of Bonds......................................... 8
Section 2.03. Execution of Bonds.................................... 9
Section 2.04. Authentication of Bonds............................... 9
Section 2.05. Bonds Not General Obligations......................... 9
Section 2.06. Prerequisites to Authentication of Bonds.............. 9
Section 2.07. Lost or Destroyed Bonds or Bonds Canceled in
Error................................................................ 10
Section 2.08. Transfer, Registration and Exchange of Bonds.......... 10
Section 2.09. Other Obligations..................................... 12
Section 2.10 Temporary Bonds.......................................... 12
Section 2.11. Cancellation of Bonds................................. 12
Section 2.12. Payment of Principal and Interest..................... 13
Section 2.13. Applicability of Book-Entry Provisions................ 13
ARTICLE III
REDEMPTION OF BONDS
Section 3.01. Redemption Provisions................................. 13
Section 3.02. Selection of Bonds to be Redeemed..................... 14
Section 3.03. Procedure for Redemption.............................. 15
Section 3.04. Payment of Redemption Price........................... 15
Section 3.05. No Partial Redemption After Default................... 15
ARTICLE IV
THE BOND FUND
- --------------------------
* This table of contents is not a part of the Indenture, and is for
convenience only. The captions herein are of no legal effect and
do not vary the meaning or legal effect of any part of the
Indenture.
<PAGE>
Section 4.01. Creation of Bond Fund................................. 16
Section 4.02. Liens................................................. 16
Section 4.03. Deposits into Bond Fund............................... 16
Section 4.04. Use of Moneys in Bond Fund............................ 16
Section 4.05. Custody of Bond Fund; Withdrawal of Moneys............ 16
Section 4.06. Bonds Not Presented for Payment....................... 16
Section 4.07. Moneys Held in Trust.................................. 17
ARTICLE V
DISPOSITION OF PROCEEDS
Section 5.01. Disposition of Proceeds............................... 17
ARTICLE VI
INVESTMENTS
Section 6.01. Investments........................................... 17
ARTICLE VII
GENERAL COVENANTS
Section 7.01. No General Obligations................................ 18
Section 7.02. Performance of Covenants of the Authority;
Representations....................................... 18
Section 7.03. Maintenance of Rights and Powers; Compliance
with Laws............................................. 18
Section 7.04. Enforcement of Obligations of the Company;
Amendments............................................ 19
Section 7.05. Further Instruments................................... 19
Section 7.06. No Disposition of Trust Estate........................ 19
Section 7.07. Financing Statements. ............................... 19
Section 7.08. Tax Covenants; Rebate Fund............................ 19
Section 7.09. Notices of Trustee.................................... 20
ARTICLE VIII
DEFEASANCE
Section 8.01. Defeasance............................................ 20
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Events of Default..................................... 22
Section 9.02. Remedies.............................................. 23
Section 9.03. Restoration to Former Position........................ 23
Section 9.04. Owners' Right to Direct Proceedings................... 23
Section 9.05. Limitation on Owners' Right to Institute
Proceedings........................................... 23
Section 9.06. No Impairment of Right to Enforce Payment............. 24
Section 9.07. Proceedings by Trustee without Possession of
Bonds................................................. 24
Section 9.08. No Remedy Exclusive................................... 24
Section 9.09. No Waiver of Remedies................................. 24
Section 9.10. Application of Moneys................................. 24
Section 9.11. Severability of Remedies.............................. 25
ARTICLE X
TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
Section 10.01. Acceptance of Trusts.................................. 25
Section 10.02. No Responsibility for Recitals........................ 25
Section 10.03. Limitations on Liability.............................. 26
Section 10.04. Compensation, Expenses and Advances................... 26
Section 10.05. Notice of Events of Default........................... 27
Section 10.06. Action by Trustee..................................... 27
Section 10.07. Good Faith Reliance................................... 27
Section 10.08. Dealings in Bonds and with the Authority and
the Company........................................... 27
Section 10.09. Allowance of Interest................................. 28
Section 10.10. Construction of Indenture............................. 28
Section 10.11. Resignation of Trustee................................ 28
Section 10.12. Removal of Trustee.................................... 28
Section 10.13. Appointment of Successor Trustee...................... 28
Section 10.14. Qualifications of Successor Trustee................... 29
Section 10.15. Judicial Appointment of Successor Trustee............. 29
Section 10.16. Acceptance of Trusts by Successor Trustee............. 29
Section 10.17. Successor by Merger or Consolidation.................. 29
Section 10.18. Standard of Care...................................... 30
Section 10.19. Notice to Owners of Bonds of Event of
Default............................................... 30
Section 10.20. Intervention in Litigation of the Authority........... 30
Section 10.21. Paying Agent; Co-Paying Agents........................ 30
Section 10.22. Qualifications of Paying Agent and Co-Paying
Agents; Resignation; Removal.......................... 31
Section 10.23. Registrar............................................. 31
Section 10.24. Qualifications of Registrar; Resignation;
Removal............................................... 32
Section 10.25. Several Capacities.................................... 32
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND
PROOF OF OWNERSHIP OF BONDS
Section 11.01. Execution of Instruments; Proof of Ownership.......... 32
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
Section 12.01. Limitations........................................... 33
Section 12.02. Supplemental Indentures without Owner
Consent............................................... 33
Section 12.03. Supplemental Indentures with Consent of
Owners................................................ 34
Section 12.04. Effect of Supplemental Indenture...................... 35
Section 12.05. Consent of the Company................................ 35
Section 12.06. Amendment of Loan Agreement without Consent
of Owners............................................. 35
Section 12.07. Amendment of Loan Agreement with Consent of
Owners................................................ 35
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Successors of the Authority........................... 36
Section 13.02. Parties in Interest................................... 36
Section 13.03. Severability.......................................... 36
Section 13.04. No Personal Liability of Authority Officials.......... 36
Section 13.05. Bonds Owned by the Authority or the Company........... 36
Section 13.06. Counterparts.......................................... 37
Section 13.07. Governing Law......................................... 37
Section 13.08. Notices............................................... 37
Section 13.09. Holidays.............................................. 37
Section 13.10. Statutory Notice Regarding Cancellation of
Contracts. .......................................... 38
Testimonium.............................................................. 40
Signatures and Seals..................................................... 40
Exhibit A - Form of Bond...................................................A-1
Exhibit B - Form of Endorsement of Transfer................................B-1
Exhibit C - Form of Certificate of Authentication..........................C-1
<PAGE>
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (1997 B Series), dated as of September
15, 1997 (this "Indenture"), between THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of Arizona
(hereinafter called the "Authority"), and First Trust of New York,
National Association, as trustee (hereinafter called the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Authority is authorized and empowered under Title
35, Chapter 5, Arizona Revised Statutes, as amended (the "Act"), to
issue its bonds in accordance with the Act and to make secured or
unsecured loans for the purpose of financing or refinancing the
acquisition, construction, improvement or equipping of projects
consisting of land, any building or other improvement, and all real
and personal properties, including but not limited to machinery and
equipment, whether or not now in existence or under construction,
whether located within or without Pima County, which shall be suitable
for, among other things, facilities for the furnishing of electric
energy, gas or water, air and water pollution control facilities and
sewage and solid waste disposal facilities, and to charge and collect
interest on such loans and pledge the proceeds of loan agreements as
security for the payment of the principal of and interest on bonds, or
designated issues of bonds, issued by the Authority and any agreements
made in connection therewith, whenever the Board of Directors of the
Authority finds such loans to be in furtherance of the purposes of the
Authority or in the public interest;
WHEREAS, the Authority has heretofore issued and sold $75,000,000
aggregate principal amount of its Industrial Development Revenue
Bonds, 1982 Series A (Tucson Electric Power Company General Project)
all of which remain outstanding (the "1982 Bonds due June 15, 2022"),
the proceeds of which were loaned to Tucson Electric Power Company, an
Arizona corporation (the "Company") to finance and refinance a portion
of the costs of the acquisition, construction, improvement and
equipping of certain of its facilities for the furnishing of electric
energy (the "Facilities");
WHEREAS, the Authority has also heretofore issued and sold
$75,000,000 aggregate principal amount of its Industrial Development
Revenue Bonds, 1982 Series A (Tucson Electric Power Company General
Project) all of which remain outstanding (the "1982 Bonds due July 1,
2022", and together with the 1982 Bonds due June 15, 2022, hereinafter
collectively referred to as the "1982 Bonds"), the proceeds of which
were loaned to the Company to finance certain additional costs of the
Facilities; and
WHEREAS, the Authority proposes to issue and sell its revenue
bonds as provided herein (the "Bonds") to refinance, by the payment or
redemption of the 1982 Bonds, or provision therefor, the portion of
the costs of the acquisition, construction, improvement and equipping
of the Facilities paid from the proceeds of the 1982 Bonds, all as
described in Exhibit A to the Loan Agreement, dated as of September
15, 1997 (the "Loan Agreement"), between the Authority and the
Company;
NOW, THEREFORE, for and in consideration of these premises and
the mutual covenants herein contained, of the acceptance by the
Trustee of the trusts hereby created, of the purchase and acceptance
of the Bonds by the Owners (as hereinafter defined) thereof and of the
sum of one dollar lawful money of the United States of America, to it
duly paid by the Trustee at or before the execution and delivery of
these presents, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, in order to
secure the payment of the principal of and premium, if any, and
interest on the Bonds at any time Outstanding (as hereinafter defined)
under this Indenture according to their tenor and effect and the
performance and observance by the Authority of all the covenants and
conditions expressed or implied herein and contained in the Bonds, the
Authority does hereby grant, bargain, sell, convey, mortgage, pledge
and assign, and grant a security interest in, the Trust Estate (as
hereinafter defined) to the Trustee, its successors in trust and their
assigns forever;
TO HAVE AND TO HOLD all the same with all privileges and
appurtenances hereby conveyed and assigned, or agreed or intended so
to be, to the Trustee, its successors in trust and their assigns
forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set
forth, first, for the equal and proportionate benefit and security of
all Owners of the Bonds issued under and secured by this Indenture
without preference, priority or distinction as to the lien of any
Bonds over any other Bonds;
PROVIDED, HOWEVER, that if, after the right, title and interest
of the Trustee in and to the Trust Estate shall have ceased,
terminated and become void in accordance with Article VIII hereof, the
principal of and premium, if any, and interest on the Bonds shall have
been paid to the Owners thereof, or shall have been paid to the
Company pursuant to Section 4.06 hereof, then and in that case these
presents and the estate and rights hereby granted shall cease,
terminate and be void, and thereupon the Trustee shall cancel and
discharge this Indenture and execute and deliver to the Authority and
the Company such instruments in writing as shall be requisite to
evidence the discharge hereof; otherwise this Indenture is to be and
remain in full force and effect.
THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly
declared, that all Bonds issued and secured hereunder are to be
issued, authenticated and delivered, and the Trust Estate and the
other estate and rights hereby granted are to be dealt with and
disposed of, under, upon and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the Authority has agreed and covenanted,
and does hereby agree and covenant, with the Trustee and with the
respective Owners, from time to time, of the Bonds, as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The terms defined in this Article I
shall, for all purposes of this Indenture, have the meanings herein
specified, unless the context clearly requires otherwise:
Act:
"Act" shall mean Title 35, Chapter 5, Arizona Revised Statutes,
and all acts supplemental thereto or amendatory thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Authority with respect to the Loan Agreement, this
Indenture and any transaction or event contemplated by the Loan
Agreement or this Indenture, including the compensation and
reimbursement of expenses and advances payable to the Trustee, to the
Paying Agent, any Co-Paying Agent and the Registrar and a pro rata
share of the Authority's annual operating expenses in accordance with
the provisions of paragraph XII.D. of the Authority's Procedural
Pamphlet.
"Authority" shall mean The Industrial Development Authority of
the County of Pima, an Arizona nonprofit corporation designated by law
as a political subdivision of the State of Arizona incorporated for
and with the approval of Pima County, Arizona, pursuant to the
provisions of the Constitution of the State of Arizona and the Act,
its successors and their assigns.
Authorized Company Representative:
"Authorized Company Representative" shall mean each person at the
time designated to act on behalf of the Company by written certificate
furnished to the Authority and the Trustee containing the specimen
signature of such person and signed on behalf of the Company by its
President, any Vice President or its Treasurer, together with its
Secretary or any Assistant Secretary.
Bond Counsel:
"Bond Counsel" shall mean any firm or firms of nationally
recognized bond counsel experienced in matters pertaining to the
validity of, and exclusion from gross income for federal tax purposes
of interest on bonds issued by states and political subdivisions,
selected by the Company and acceptable to the Authority.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01 hereof.
Bonds:
"Bond" or "Bonds" shall mean the bonds authorized to be issued
under this Indenture.
Code:
"Code" shall mean the Internal Revenue Code of 1986 or any
successor statute thereto. Each reference to a section of the Code
herein shall be deemed to include the United States Treasury
Regulations proposed or in effect thereunder and applicable to the
Bonds or the use of proceeds thereof, unless the context clearly
requires otherwise. References to any particular Code section shall,
in the event of a successor Code, be deemed to be a reference to the
successor to such Code section.
Company:
"Company" shall mean Tucson Electric Power Company, a corporation
organized and existing under the laws of the State of Arizona, its
successors and their assigns, including, without limitation, any
successor obligor under Section 6.01 or 7.01 of the Loan Agreement to
the extent of the obligations assumed thereunder.
Depositary:
"Depositary" shall mean The Depository Trust Company or any
successor thereto as a securities repository for the Bonds.
Facilities:
"Facilities" shall mean the real and personal properties,
machinery and equipment currently existing, under construction and to
be constructed which are described in Exhibit A to the Loan Agreement,
as revised from time to time to reflect any changes therein, additions
thereto, substitutions therefor and deletions therefrom permitted by
the terms of the Loan Agreement, subject, however, to the provisions
of Section 7.01 of the Loan Agreement.
Government Obligations:
"Government Obligations" shall mean:
(a) direct obligations of, or obligations the principal of
and interest on which are unconditionally guaranteed by, the
United States of America entitled to the benefit of the full
faith and credit thereof; and
(b) certificates, depositary receipts or other instruments
which evidence a direct ownership interest in obligations
described in clause (a) above or in any specific interest or
principal payments due in respect thereof; provided, however,
that the custodian of such obligations or specific interest or
principal payments shall be a bank or trust company organized
under the laws of the United States of America or of any state or
territory thereof or of the District of Columbia, with a combined
capital stock surplus and undivided profits of at least
$50,000,000; and provided, further, that except as may be
otherwise required by law, such custodian shall be obligated to
pay to the holders of such certificates, depositary receipts or
other instruments the full amount received by such custodian in
respect of such obligations or specific payments and shall not be
permitted to make any deduction therefrom.
Indenture:
"Indenture" shall mean this Indenture of Trust, dated as of
September 15, 1997, between the Authority and the Trustee, and any and
all modifications, alterations, amendments and supplements thereto.
Investment Securities:
"Investment Securities" shall mean any of the following
obligations or securities on which neither the Company nor any of its
subsidiaries is the obligor: (a) Government Obligations; (b) interest
bearing deposit accounts (which may be represented by certificates of
deposit) in national, state or foreign banks having a combined capital
and surplus of not less than $10,000,000; (c) bankers' acceptances
drawn on and accepted by commercial banks having a combined capital
and surplus of not less than $10,000,000; (d) (i) direct obligations
of, (ii) obligations the principal of and interest on which are
unconditionally guaranteed by, and (iii) any other obligations the
interest on which is exempt from federal income taxation issued by,
any state of the United States of America, the District of Columbia or
the Commonwealth of Puerto Rico, or any political subdivision, agency,
authority or other instrumentality of any of the foregoing, which, in
any case, are rated by a nationally recognized rating agency in any of
its three highest rating categories; (e) obligations of any agency or
instrumentality of the United States of America; (f) commercial or
finance company paper which is rated by a nationally recognized rating
agency in any of its three highest rating categories; (g) corporate
debt securities issued by corporations having debt securities rated by
a nationally recognized rating agency in any of its three highest
rating categories; (h) repurchase agreements with banking or financial
institutions having a combined capital and surplus of not less than
$10,000,000 with respect to any of the foregoing obligations or
securities; (i) shares or interests in registered investment companies
whose assets consist of obligations or securities which are described
in any other clause of this sentence; and (j) any other obligations
which may lawfully be purchased by the Trustee. The commercial banks
and banking institutions referred to above may include the entities
acting as Trustee, Paying Agent, Co-Paying Agent or Registrar
hereunder if such entities shall otherwise satisfy the requirements
set forth above.
Loan Agreement:
"Loan Agreement" shall mean the Loan Agreement, dated as of
September 15, 1997, between the Authority and the Company relating to
the Bonds, and any and all modifications, alterations, amendments and
supplements thereto.
Loan Payments:
"Loan Payments" shall mean the payments required to be made by
the Company pursuant to Section 5.01 of the Loan Agreement.
1954 Code:
"1954 Code" shall mean the Internal Revenue Code of 1954, as
amended.
1982 Bonds:
"1982 Bonds" shall mean the $75,000,000 aggregate principal
amount of the Authority's Industrial Development Revenue Bonds, 1982
Series A (Tucson Electric Power Company General Project) due June 15,
2022 and $75,000,000 aggregate principal amount of the Authority's
Industrial Development Revenue Bonds, 1982 A (Tucson Electric Power
Company General Project) due July 1, 2022.
Notice by Mail:
"Notice by Mail" or "notice" of any action or condition "by Mail"
shall mean a written notice meeting the requirements of this Indenture
mailed by first-class mail to the Owners of specified registered Bonds
at the addresses shown in the registration books maintained pursuant
to Section 2.08 hereof; provided, however, that if, because of the
temporary or permanent suspension of delivery of first-class mail or
for any other reason, it is impossible or impracticable to give such
notice by first-class mail, then such giving of notice in lieu
thereof, which may include publication, as shall be made with the
approval of the Trustee (or, if there be no trustee hereunder, the
Authority) shall constitute a sufficient giving of such notice.
Notice by Publication:
"Notice by Publication" or "notice" of any action or condition
"by Publication" shall mean publication of a notice meeting the
requirements of this Indenture in a newspaper or financial journal of
general circulation in The City of New York, New York, which carries
financial news, is printed in the English language and is customarily
published on each business day; provided, however, that any successive
weekly publication of notice required hereunder may be made, unless
otherwise expressly provided herein, on the same or different days of
the week and in the same or different newspapers or financial
journals; and provided, further, that if, because of the temporary or
permanent suspension of the publication or general circulation of any
newspaper or financial journal or for any other reason, it is
impossible or impracticable to publish such notice in the manner
herein described, then such publication in lieu thereof as shall be
made with the approval of the Trustee (or, if there be no trustee
hereunder, the Authority) shall constitute a sufficient publication of
such notice.
Outstanding:
"Outstanding", when used in reference to the Bonds, shall mean,
as at any particular date, the aggregate of all Bonds authenticated
and delivered under this Indenture except:
(a) those canceled by the Trustee at or prior to such date
or delivered to or acquired by the Trustee at or prior to such
date for cancellation;
(b) those deemed to be paid in accordance with Article VIII
hereof; and
(c) those in lieu of or in exchange or substitution for
which other Bonds shall have been authenticated and delivered
pursuant to this Indenture, unless proof satisfactory to the
Trustee and the Company is presented that such Bonds are held by
a bona fide holder in due course.
Owner:
"Owner" shall mean the person in whose name any Bond is
registered upon the registration books maintained pursuant to Section
2.08 hereof. The Company may be an Owner.
Paying Agent; Co-Paying Agent; Principal Office thereof:
"Paying Agent" and "Co-Paying Agent" shall mean the paying agent
and any co-paying agent appointed in accordance with Section 10.21
hereof. "Principal Office" of the Paying Agent or any Co-Paying Agent
shall mean the office thereof designated in writing to the Trustee.
Rebate Fund:
"Rebate Fund" shall mean the fund created by Section 7.08 hereof.
Receipts and Revenues of the Authority from the Loan Agreement:
"Receipts and Revenues of the Authority from the Loan Agreement"
shall mean all moneys paid or payable to the Trustee for the account
of the Authority by the Company in respect of the Loan Payments and
payments pursuant to Section 9.01 of the Loan Agreement and all
receipts of the Trustee which, under the provisions of this Indenture,
reduce the amount of such payments.
Record Date:
"Record Date" shall mean the close of business on the fifteenth
(15th) day of the calendar month immediately preceding each regularly
scheduled interest payment date.
Registrar; Principal Office thereof:
"Registrar" shall mean the registrar appointed in accordance with
Section 10.23 hereof. "Principal Office" of the Registrar shall mean
the office thereof designated in writing to the Trustee.
Supplemental Indenture:
"Supplemental Indenture" shall mean any indenture of the
Authority modifying, altering, amending, supplementing or confirming
this Indenture for any purpose, in accordance with the terms hereof.
Supplemental Loan Agreement:
"Supplemental Loan Agreement" shall mean any agreement between
the Authority and the Company modifying, altering, amending or
supplementing the Loan Agreement, in accordance with the terms thereof
and hereof.
Tax Agreement:
"Tax Agreement" shall mean that tax certificate and agreement,
dated the date of the initial authentication and delivery of the
Bonds, between the Authority and the Company, relating to the
requirements of the Code and the 1954 Code, and any and all
modifications, alterations, amendments and supplements thereto.
Trust Estate:
"Trust Estate" shall mean at any particular time all right, title
and interest of the Authority in and to the Loan Agreement (except its
rights under Sections 5.03, 5.04, 6.03 and 8.05 thereof and any rights
of the Authority to receive notices, certificates, requests,
requisitions and other communications thereunder), including without
limitation, the Receipts and Revenues of the Authority from the Loan
Agreement, the Bond Fund and all moneys and Investment Securities from
time to time on deposit therein (excluding, however, any moneys or
Investment Securities held in the Rebate Fund), any and all other
moneys and obligations (other than Bonds) which at such time are
deposited or are required to be deposited with, or are held or are
required to be held by or on behalf of, the Trustee, the Paying Agent
or any Co-Paying Agent in trust under any of the provisions of this
Indenture and all other rights, titles and interests which at such
time are subject to the lien of this Indenture; provided, however,
that in no event shall there be included in the Trust Estate (a)
moneys or obligations deposited with or held by the Trustee in the
Rebate Fund pursuant to Section 7.08 hereof or (b) moneys or
obligations deposited with or paid to the Trustee for the redemption
or payment of Bonds which are deemed to have been paid in accordance
with Article VIII hereof or moneys held pursuant to Section 4.06
hereof.
Trustee; Principal Office thereof:
"Trustee" shall mean First Trust of New York, National
Association, as trustee under this Indenture, its successors in trust
and their assigns. "Principal Office" of the Trustee shall mean the
principal corporate trust office of the Trustee, which office at the
date of acceptance by the Trustee of the duties and obligations
imposed on the Trustee by this Indenture is located at the address
specified in Section 13.08 hereof.
ARTICLE II
THE BONDS
Section 2.01. Creation of Bonds. There is hereby authorized and
created under this Indenture, for the purpose of providing moneys to
pay, or redeem, or provide for the redemption therefor, of the 1982
Bonds, an issue of Bonds, entitled to the benefit, protection and
security of this Indenture, in the aggregate principal amount of One
Hundred Fifty Million Dollars ($150,000,000). Each of the Bonds shall
be designated by the title "The Industrial Development Authority of
the County of Pima Industrial Development Revenue Bond, 1997 Series B
(Tucson Electric Power Company Project)". The Bonds shall mature,
subject to prior redemption upon the terms and conditions hereinafter
set forth, on September 1, 2029 and shall bear interest from the date
thereof until payment of the principal or redemption price thereof
shall have been made or provided for in accordance with the provisions
hereof, whether at maturity, upon redemption or otherwise, at the rate
of six per centum (6%) per annum, with interest thereon payable
semi-annually on each March 1 and September 1, commencing March 1,
1998. Interest shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Section 2.02. Form of Bonds. Bonds shall be authenticated and
delivered hereunder solely as fully registered bonds without coupons
in the denomination of $5,000 or integral multiples thereof. Bonds
shall be numbered as determined by the Trustee. Bonds authenticated
prior to the first interest payment date shall be dated September 15,
1997. Bonds authenticated on or subsequent to the first interest
payment date shall be dated the interest payment date next preceding
the date of authentication thereof, unless such date of authentication
shall be an interest payment date to which interest on the Bonds has
been paid in full or duly provided for, in which case they shall be
dated such date of authentication; provided, however, that if, as
shown by the records of the Trustee, interest on the Bonds shall be in
default, Bonds issued in exchange for Bonds surrendered for transfer
or exchange shall be dated the date to which interest has been paid in
full on the Bonds surrendered.
Principal of and premium, if any, on Bonds shall be payable to
the Owners of such Bonds upon presentation and surrender of such Bonds
at the Principal Office of the Paying Agent or any Co-Paying Agent.
Interest on the Bonds shall be paid by check drawn upon the Paying
Agent and mailed to the Owners of such Bonds as of the close of
business on the Record Date with respect to each interest payment date
at the registered addresses of such Owners as they shall appear as of
the close of business on such Record Date on the registration books
maintained pursuant to Section 2.08 hereof notwithstanding the
cancellation of any such Bond upon any exchange or registration of
transfer subsequent to such Record Date, except that if and to the
extent that there should be a default on the payment of interest on
any Bond, such defaulted interest shall be paid to the Owners in whose
name such Bond (or any Bond or Bonds issued upon any exchange or
registration of transfer thereof) is registered as of the close of
business on a date selected by the Trustee in its discretion, but not
more than 15 days or less than 10 days prior to the date of payment of
such defaulted interest; notwithstanding the foregoing, upon request
to the Paying Agent by an Owner of not less than $1,000,000 in
aggregate principal amount of Bonds, interest on such Bonds and, after
presentation and surrender of such Bonds, the principal thereof shall
be paid to such Owner by wire transfer to the account maintained
within the continental United States specified by such Owner or, if
such Owner maintains an account with the entity acting as Paying
Agent, by deposit into such account. Payment as aforesaid shall be
made in such coin or currency of the United States of America as, at
the respective times of payment, shall be legal tender for the payment
of public and private debts.
The Bonds and the form for registration of transfer and the form
of certificate of authentication to be printed on the Bonds are to be
in substantially the forms thereof set forth in Exhibits A, B and C
hereto, respectively, with necessary or appropriate variations,
omissions and insertions as permitted or required by this Indenture.
Section 2.03. Execution of Bonds. The Bonds shall be executed on
behalf of the Authority by the President or a Vice President of the
Authority and shall have affixed, impressed or reproduced thereon the
official seal of the Authority which shall be attested by the
Secretary or an Assistant Secretary of the Authority. Each of the
foregoing officers may execute or cause to be executed with a
facsimile signature in lieu of his manual signature the Bonds,
provided the signature of either the President or a Vice President of
the Authority or the Secretary or Assistant Secretary of the Authority
shall, if required by applicable laws, be manually subscribed.
In case any officer of the Authority whose signature or a
facsimile of whose signature shall appear on the Bonds shall cease to
be such officer before the authentication by the Trustee and delivery
of such Bonds, such signature or such facsimile shall nevertheless be
valid and sufficient for all purposes, the same as if such officer had
remained in office until delivery; and any Bond may be signed on
behalf of the Authority by such persons as, at the time of execution
of such Bond, shall be the proper officers of the Authority, even
though at the date of such Bond or of the execution and delivery of
this Indenture any such person was not such officer.
Section 2.04. Authentication of Bonds. Only such Bonds as shall
have endorsed thereon a certificate of authentication substantially in
the form set forth in Exhibit C hereto duly executed by the Trustee
shall be entitled to any right or benefit under this Indenture. No
Bond shall be valid or obligatory for any purpose unless and until
such certificate of authentication shall have been duly executed by
the Trustee, and such executed certificate of authentication of the
Trustee upon any such Bonds shall be conclusive evidence that such
Bond has been authenticated and delivered under this Indenture. The
Trustee's certificate of authentication on any Bond shall be deemed to
have been executed by it if signed with an authorized signature of the
Trustee, but it shall not be necessary that the same person sign the
certificate of authentication on all of the Bonds issued hereunder.
This Section 2.04 is subject to the provisions of Section 10.17
hereof.
Section 2.05. Bonds Not General Obligations. Neither Pima County,
Arizona nor the State of Arizona shall in any event be liable for the
payment of the principal of or premium, if any, or interest on the
Bonds, and neither the Bonds nor the premium, if any, or the interest
thereon, shall be construed to constitute an indebtedness of Pima
County, Arizona or the State of Arizona within the meaning of any
constitutional or statutory provisions whatsoever. The Bonds and the
premium, if any, and the interest thereon shall be limited obligations
of the Authority payable solely from the Receipts and Revenues of the
Authority from the Loan Agreement and the other moneys pledged
therefor under this Indenture, and such fact shall be plainly stated
on the face of each Bond.
Section 2.06. Prerequisites to Authentication of Bonds. The
Authority shall execute and deliver to the Trustee and the Trustee
shall authenticate the Bonds and deliver said Bonds to the initial
purchasers thereof as may be directed hereinafter in this Section
2.06.
Prior to the delivery on original issuance by the Trustee of any
authenticated Bonds there shall be or have been delivered to the
Trustee:
(a) a duly certified copy of a resolution of the Board of
Directors of the Authority authorizing the execution and delivery
of this Indenture and the Loan Agreement and the issuance of the
Bonds;
(b) an original duly executed counterpart or a duly
certified copy of the Loan Agreement;
(c) a request and authorization to the Trustee on behalf of
the Authority, signed by its President or a Vice President, to
authenticate and deliver the Bonds in the aggregate principal
amount determined by this Indenture to the purchaser or
purchasers therein identified upon payment to the Trustee, but
for the account of the Authority, of a sum specified in such
request and authorization plus any accrued interest on such Bonds
to the date of delivery; and
(d) a written statement on behalf of the Company, executed
by the President, any Vice President or the Treasurer, (i)
approving the issuance and delivery of the Bonds and (ii)
consenting to each and every provision of this Indenture.
Section 2.07. Lost or Destroyed Bonds or Bonds Canceled in Error.
If any Bond, whether in temporary or definitive form, is lost (whether
by reason of theft or otherwise), destroyed (whether by mutilation,
damage, in whole or in part, or otherwise) or canceled in error, the
Authority may execute and the Trustee may authenticate a new Bond of
like date and denomination and bearing a number not contemporaneously
outstanding; provided that (a) in the case of any mutilated Bond, such
mutilated Bond shall first be surrendered to the Trustee and (b) in
the case of any lost Bond or Bond destroyed in whole, there shall be
first furnished to the Authority, the Trustee and the Company evidence
of such loss or destruction. In every case, the applicant for a
substitute Bond shall furnish the Authority, the Trustee and the
Company such security or indemnity as may be required by any of them.
In the event any lost or destroyed Bond or a Bond canceled in error
shall have matured or is about to mature, or has been called for
redemption, instead of issuing a substitute Bond the Trustee may, in
its discretion, pay the same without surrender thereof if there shall
be first furnished to the Authority, the Trustee and the Company
evidence of such loss, destruction or cancellation, together with
indemnity, satisfactory to them. Upon the issuance of any substitute
Bond, the Authority and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto. The Trustee may charge the Owner of any
such Bond with the Trustee's reasonable fees and expenses in
connection with any transaction described in this Section 2.07.
Every substitute Bond issued pursuant to the provisions of this
Section 2.07 by virtue of the fact that any Bond is lost, destroyed or
canceled in error shall constitute an additional contractual
obligation of the Authority, whether or not the Bond so lost,
destroyed or canceled shall be at any time enforceable, and shall be
entitled to all the benefits of this Indenture equally and
proportionately with any and all other Bonds duly issued hereunder.
All Bonds shall be held and owned upon the express condition that, to
the extent permitted by law, the foregoing provisions are exclusive
with respect to the replacement or payment of lost, destroyed or
improperly canceled Bonds, notwithstanding any law or statute now
existing or hereafter enacted.
Section 2.08. Transfer, Registration and Exchange of Bonds. The
Registrar shall maintain and keep, at its Principal Office, books for
the registration and registration of transfer of Bonds, which, at all
reasonable times, shall be open for inspection by the Authority, the
Trustee and the Company; and, upon presentation for such purpose of
any Bond entitled to registration or registration of transfer at the
Principal Office of the Registrar, the Registrar shall register or
register the transfer in such books, under such reasonable regulations
as the Registrar may prescribe. The Registrar shall make all necessary
provisions to permit the exchange or registration of transfer of Bonds
at its Principal Office.
The transfer of any Bond shall be registered upon the
registration books of the Registrar at the written request of the
Owner thereof or his attorney duly authorized in writing, upon
surrender thereof at the Principal Office of the Registrar, together
with a written instrument of transfer satisfactory to the Registrar
duly executed by the Owner or his duly authorized attorney. Upon the
registration of transfer of any such Bond or Bonds, the Authority
shall issue in the name of the transferee, in authorized
denominations, a new Bond or Bonds in the same aggregate principal
amount as the surrendered Bond or Bonds.
The Authority, the Trustee, the Paying Agent, any Co-Paying Agent
and the Registrar may deem and treat the Owner of any Bond as the
absolute owner of such Bond, whether such Bond shall be overdue or
not, for the purpose of receiving payment of, or on account of, the
principal of and premium, if any, and, except as provided in Section
2.02 hereof, interest on, such Bond and for all other purposes, and
neither the Authority, the Trustee, the Paying Agent, any Co-Paying
Agent nor the Registrar shall be affected by any notice to the
contrary. All such payments so made to any such Owner or upon his
order shall be valid and effective to satisfy and discharge the
liability upon such Bond to the extent of the sum or sums so paid.
Bonds, upon surrender thereof at the Principal Office of the
Registrar may, at the option of the Owner thereof, be exchanged for an
equal aggregate principal amount of Bonds of any authorized
denomination.
In all cases in which the privilege of exchanging Bonds or
registering the transfer of Bonds is exercised, the Authority shall
execute and the Trustee shall authenticate and deliver Bonds in
accordance with the provisions of this Indenture. For every such
exchange or registration of transfer of Bonds, whether temporary or
definitive, the Authority, the Registrar, or the Trustee may make a
charge sufficient to reimburse it for any tax or other governmental
charge required to be paid with respect to such exchange or
registration of transfer, which sum or sums shall be paid by the
person requesting such exchange or registration of transfer as a
condition precedent to the exercise of the privilege of making such
exchange or registration of transfer. The Registrar shall not be
obligated (a) to make any such exchange or registration of transfer of
Bonds during the fifteen (15) days next preceding the date on which
notice of any proposed redemption of Bonds is given or (b) to make any
exchange or registration of transfer of any Bonds called for
redemption.
The Bonds are to be initially registered in the name of Cede &
Co., as nominee for the Depositary. Such Bonds shall not be
transferable or exchangeable, nor shall any purported transfer be
registered, except as follows:
(a) such Bonds may be transferred in whole, and appropriate
registration of transfer effected, if such transfer is by such
nominee to the Depositary, or by the Depositary to another
nominee thereof, or by any nominee of the Depositary to any other
nominee thereof, or by the Depositary or any nominee thereof to
any successor securities depositary or any nominee thereof; and
(b) such Bond may be exchanged for definitive Bonds
registered in the respective names of the beneficial holders
thereof, and thereafter shall be transferable without
restriction, if:
(i) the Depositary shall have notified the Company and the
Trustee that it is unwilling or unable to continue to act as
securities depositary with respect to such Bonds and the Trustee
shall not have been notified by the Company within ninety (90)
days of the identity of a successor securities depositary with
respect to such Bonds;
(ii) the Company shall have delivered to the Trustee a
written instrument to the effect that such Bonds shall be so
exchangeable on and after a date specified therein; or
(iii) (1) an Event of Default shall have occurred and be
continuing, (2) the Trustee shall have given notice of such Event
of Default pursuant to Section 10.19 hereof and (3) there shall
have been delivered to the Authority, the Company and the Trustee
an opinion of counsel to the effect that the interests of the
beneficial owners of such Bonds in respect thereof will be
materially impaired unless such owners become owners of
definitive Bonds.
The Bonds delivered to the Depositary may contain a legend
reflecting the foregoing restrictions on registration of transfer and
exchange.
Section 2.09. Other Obligations. The Authority expressly reserves
the right to issue, to the extent permitted by law, but shall not be
obligated to issue, obligations under another indenture or indentures
to provide additional funds to pay the cost of construction of the
Facilities or to refund all or any principal amount of the Bonds, or
any combination thereof.
Section 2.10 Temporary Bonds. Pending the preparation of
definitive Bonds, the Authority may execute and the Trustee shall
authenticate and deliver temporary Bonds. Temporary Bonds shall be
issuable as registered Bonds without coupons, of any authorized
denomination, and substantially in the form of the definitive Bonds
but with such omissions, insertions and variations as may be
appropriate for temporary Bonds, all as may be determined by the
Authority. Temporary Bonds may contain such reference to any
provisions of this Indenture as may be appropriate. Every temporary
Bond shall be executed by the Authority and be authenticated by the
Trustee upon the same conditions and in substantially the same manner,
and with like effect, as the definitive Bonds. As promptly as
practicable the Authority shall execute and shall furnish definitive
Bonds and thereupon temporary Bonds may be surrendered in exchange
therefor without charge at the Principal Office of the Trustee, and
the Trustee shall authenticate and deliver in exchange for such
temporary Bonds a like aggregate principal amount of definitive Bonds
of authorized denominations. Until so exchanged the temporary Bonds
shall be entitled to the same benefits under this Indenture as
definitive Bonds.
Section 2.11. Cancellation of Bonds. All Bonds which shall have
been surrendered to the Paying Agent or any Co-Paying Agent for
payment or redemption, and all Bonds which shall have been surrendered
to the Registrar for exchange or registration of transfer, shall be
delivered to the Trustee for cancellation. All Bonds delivered to or
acquired by the Trustee for cancellation shall be canceled and
destroyed by the Trustee. The Trustee shall furnish to the Authority,
the Paying Agent, the Registrar and the Company counterparts of
certificates evidencing such cancellation and destruction and
specifying such Bonds by number.
Section 2.12. Payment of Principal and Interest. For the payment
of interest on the Bonds, the Authority shall cause to be deposited in
the Bond Fund, on each interest payment date, solely out of the
Receipts and Revenues of the Authority from the Loan Agreement and
other moneys pledged therefor, an amount sufficient to pay the
interest to become due on such interest payment date. The obligation
of the Authority to cause any such deposit to be made hereunder shall
be reduced by the amount of moneys in the Bond Fund available on such
interest payment date for the payment of interest on the Bonds.
For the payment of the principal of the Bonds upon maturity, the
Authority shall cause to be deposited in the Bond Fund, on the stated
or accelerated date of maturity, solely out of the Receipts and
Revenues of the Authority from the Loan Agreement and other moneys
pledged therefor, an amount sufficient to pay the principal of the
Bonds. The obligation of the Authority to cause any such deposit to be
made hereunder shall be reduced by the amount of moneys in the Bond
Fund available on the maturity date for the payment of the principal
of the Bonds.
Section 2.13. Applicability of Book-Entry Provisions. Anything in
this Indenture to the contrary notwithstanding, (a) the provisions of
the Blanket Issuer Letter of Representations, dated February 26, 1996,
between the Authority and The Depository Trust Company relating to the
manner of and procedures for payment and redemption of Bonds and
related matters shall apply so long as such Depositary shall be the
Owner of all Outstanding Bonds and (b) the Authority, the Trustee or
the Paying Agent, as applicable, may enter into a similar agreement,
on terms satisfactory to the Company, with any subsequent Depositary
and the provisions thereof shall apply so long as such Depositary
shall be the Owner of all Outstanding Bonds.
ARTICLE III
REDEMPTION OF BONDS
Section 3.01. Redemption Provisions. (a) The Bonds shall be
subject to redemption by the Authority, at the direction of the
Company, on any date on or after September 1, 2002 in whole at any
time or in part from time to time, at the applicable redemption price
(expressed as a percentage of principal amount) set forth below, plus
accrued interest to the redemption date:
Redemption Period Redemption Price
----------------- ----------------
September 1, 2002 through August 31, 2003 102%
September 1, 2003 through August 31, 2004 101%
September 1, 2004 and thereafter 100%
(b) The Bonds shall be subject to redemption by the Authority, at
the direction of the Company, in whole at any time at the principal
amount thereof plus accrued interest to the redemption date, if:
(i) the Company shall have determined that the continued
operation of the Facilities is impracticable, uneconomical or
undesirable for any reason;
(ii) all or substantially all of the Facilities shall have
been condemned or taken by eminent domain; or
(iii) the operation of the Facilities shall have been
enjoined or shall have otherwise been prohibited by, or shall
conflict with, any order, decree, rule or regulation of any court
or of any federal, state or local regulatory body, administrative
agency or other governmental body.
(c) The Bonds shall be subject to mandatory redemption by the
Authority, at the principal amount thereof plus accrued interest to
the redemption date, on the 180th day (or such earlier date as may be
designated by the Company) after a final determination by a court of
competent jurisdiction or an administrative agency, to the effect
that, as a result of a failure by the Company to perform or observe
any covenant, agreement or representation contained in the Loan
Agreement, the interest payable on the Bonds is included for federal
income tax purposes in the gross income of the owners thereof, other
than any owner of a Bond who is a "substantial user" of the Facilities
or a "related person" within the meaning of Section 103(b)(13) of the
1954 Code. No determination by any court or administrative agency
shall be considered final for the purposes of this Section 3.01 (c)
unless the Company shall have been given timely notice of the
proceeding which resulted in such determination and an opportunity to
participate in such proceeding, either directly or through an owner of
a Bond, and until the conclusion of any appellate review sought by any
party to such proceeding or the expiration of the time for seeking
such review. The Bonds shall be redeemed either in whole or in part in
such principal amount that, in the opinion of Bond Counsel, the
interest payable on the Bonds, including the Bonds remaining
outstanding after such redemption, would not be included in the gross
income of any owner thereof, other than an owner of a Bond who is a
"substantial user" of the Facilities or a "related person" within the
meaning of Section 103(b)(13) of the 1954 Code.
Section 3.02. Selection of Bonds to be Redeemed. If less than all
the Bonds shall be called for redemption under any provision of this
Indenture permitting such partial redemption, the particular Bonds or
portions of Bonds to be redeemed shall be selected by the Trustee, in
such manner as the Trustee in its discretion may deem proper, in the
aggregate principal amount designated to the Trustee by the Company or
otherwise as required by this Indenture; provided, however, that if,
as indicated in a certificate of an Authorized Company Representative
delivered to the Trustee, the Company shall have offered to purchase
all Bonds then Outstanding and less than all such Bonds have been
tendered to the Company for such purchase, the Trustee, at the
direction of an Authorized Company Representative, shall select for
redemption all such Bonds which shall not have been so tendered; and
provided, further, that the portion of any Bond to be redeemed shall
be in the principal amount of $5,000 or some integral multiple thereof
and that, in selecting Bonds for redemption, the Trustee shall treat
each Bond as representing that number of Bonds which is obtained by
dividing the principal amount of such Bond by $5,000. If it is
determined that one or more, but not all, of the $5,000 units of
principal amount represented by any such Bond is to be called for
redemption, then, upon notice of intention to redeem such $5,000 unit
or units, the Owner of such Bond shall forthwith surrender such Bond
to the Paying Agent or any Co-Paying Agent for (y) payment to such
Owner of the redemption price (including the redemption premium, if
any, and accrued interest to the date fixed for redemption) of the
$5,000 unit or units of principal amount called for redemption and (z)
delivery to such Owner of a new Bond or Bonds in the aggregate
principal amount of the unredeemed balance of the principal amount of
any such Bond. Bonds representing the unredeemed balance of the
principal amount of any such Bond shall be delivered to the Owner
thereof, without charge therefor. If the Owner of any such Bond of a
denomination greater than $5,000 shall fail to present such Bond to
the Paying Agent or any Co-Paying Agent for payment and exchange as
aforesaid, such Bond shall, nevertheless, become due and payable on
the date fixed for redemption to the extent of the $5,000 unit or
units of principal amount called for redemption (and to that extent
only).
Section 3.03. Procedure for Redemption. (a) In the event any of
the Bonds are called for redemption, the Trustee shall give notice, in
the name of the Authority, of the redemption of such Bonds, which
notice shall (i) specify the Bonds to be redeemed, the redemption
date, the redemption price, and the place or places where amounts due
upon such redemption will be payable (which shall be the Principal
Office of the Paying Agent or any Co-Paying Agent) and, if less than
all of the Bonds are to be redeemed, the numbers of the Bonds to be
redeemed, and the portion of the principal amount of any Bond to be
redeemed in part, (ii) state any condition to such redemption and
(iii) state that on the redemption date, and upon the satisfaction of
any such condition, the Bonds or portions thereof to be redeemed shall
cease to bear interest. Such notice may set forth any additional
information relating to such redemption. Such notice shall be given by
Mail at least thirty (30) days prior to the date fixed for redemption
to the Owners of the Bonds to be redeemed; provided, however, that
failure duly to give such Notice by Mail, or any defect therein, shall
not affect the validity of any proceedings for the redemption of Bonds
as to which there shall have been no such failure or defect. If a
notice of redemption shall be unconditional, or if the conditions of a
conditional notice or redemption shall have been satisfied, then upon
presentation and surrender of Bonds so called for redemption at the
place or places of payment, such Bonds shall be redeemed. The Trustee
shall promptly deliver to the Company a copy of each such notice of
redemption.
(b) With respect to any notice of redemption of Bonds in
accordance with subsection (a) or (b) of Section 3.01 hereof, unless,
upon the giving of such notice, such Bonds shall be deemed to have
been paid within the meaning of Article VIII hereof, such notice shall
state that such redemption shall be conditional upon the receipt, by
the Trustee at or prior to the opening of business on the date fixed
for such redemption, of moneys sufficient to pay the principal of and
premium, if any, and interest on such Bonds to be redeemed, and that
if such moneys shall not have been so received said notice shall be of
no force and effect and the Authority shall not be required to redeem
such Bonds. In the event that such notice of redemption contains such
a condition and such moneys are not so received, the redemption shall
not be made and the Trustee shall within a reasonable time thereafter
give notice, in the manner in which the notice of redemption was
given, that such moneys were not so received.
(c) Any Bonds and portions of Bonds which have been duly selected
for redemption shall cease to bear interest on the specified
redemption date provided that moneys sufficient to pay the principal
of, premium, if any, and interest on such Bonds shall be on deposit
with the Trustee on the date fixed for redemption so that such Bonds
will be deemed to be paid in accordance with Article VIII hereof.
Section 3.04. Payment of Redemption Price. For the redemption of
any of the Bonds, the Authority shall cause to be deposited in the
Bond Fund, on the redemption date, solely out of the Receipts and
Revenues of the Authority from the Loan Agreement, an amount
sufficient to pay the principal of and premium, if any, and interest
to become due on such redemption date. The obligation of the Authority
to cause any such deposit to be made hereunder shall be reduced by the
amount of moneys in the Bond Fund available on such redemption date
for payment of the principal of and premium, if any, and accrued
interest on the Bonds to be redeemed.
Section 3.05. No Partial Redemption After Default. Anything in
this Indenture to the contrary notwithstanding, if there shall have
occurred and be continuing an Event of Default defined in clause (a)
or (b) of the first paragraph of Section 9.01 hereof, there shall be
no redemption of less than all of the Bonds at the time Outstanding
other than a partial redemption in connection with an offer by the
Company to purchase all Bonds Outstanding as contemplated in the first
proviso to the first sentence of Section 3.02 hereof.
ARTICLE IV
THE BOND FUND
Section 4.01. Creation of Bond Fund. There is hereby created and
established with the Trustee a trust fund in the name of the Authority
to be designated "The Industrial Development Authority of The County
of Pima Industrial Development Revenue Bonds, 1997 Series B (Tucson
Electric Power Company Project) Bond Fund". The Trustee shall
establish and maintain within the Bond Fund such segregated
subaccounts as may be requested by an Authorized Company
Representative. The Bond Fund, and all moneys and certificated
securities therein, shall be kept in the possession of the Trustee.
Section 4.02. Liens. The Authority shall not create any lien upon
the Bond Fund or upon the Receipts and Revenues of the Authority from
the Loan Agreement other than the lien hereby created.
Section 4.03. Deposits into Bond Fund. (a) There shall be
deposited into the Bond Fund:
(i) the accrued interest, if any, on the Bonds accrued to
the date of delivery thereof and paid by the initial purchasers
thereof;
(ii) all Loan Payments; and
(iii) all other moneys received by the Trustee under and
pursuant to any provision of the Loan Agreement, other than
Sections 5.03, 5.04 and 8.05 thereof, or from any other source
when accompanied by directions by the Company that such moneys
are to be paid into the Bond Fund.
(b) All income or other gain from the investment of moneys in the
Bond Fund shall be deposited into the Bond Fund.
Section 4.04. Use of Moneys in Bond Fund. Moneys, if any, paid
into the Bond Fund pursuant to clause (i) of Section 4.03(a) hereof
shall be applied to the payment of interest on the Bonds. Except as
otherwise provided in Sections 4.06, 9.01 and 10.04 hereof, all other
moneys in the Bond Fund constituting part of the Trust Estate shall be
used solely for the payment of the principal of and premium, if any,
and interest on the Bonds as the same shall become due and payable at
maturity, upon redemption or otherwise.
Section 4.05. Custody of Bond Fund; Withdrawal of Moneys. The
Bond Fund shall be in the custody of the Trustee but in the name of
the Authority and the Authority hereby authorizes and directs the
Trustee to withdraw from the Bond Fund and furnish to the Paying Agent
funds constituting part of the Trust Estate sufficient to pay the
principal of and premium, if any, and interest on the Bonds as the
same shall become due and payable, and to withdraw from the Bond Fund
funds sufficient to pay any other amounts payable therefrom as the
same shall become due and payable.
Section 4.06. Bonds Not Presented for Payment. In the event any
Bonds shall not be presented for payment when the principal thereof
and premium, if any, thereon become due, either at maturity or at the
date fixed for redemption thereof or otherwise, if moneys sufficient
to pay such Bonds are held by the Paying Agent or any Co-Paying Agent
for the benefit of the Owners thereof, the Paying Agent shall
segregate and hold such moneys in trust, without liability for
interest thereon, for the benefit of the Owners of such Bonds, who
shall, except as provided in the following paragraph, thereafter be
restricted exclusively to such fund or funds for the satisfaction of
any claim of whatever nature on their part under this Indenture or
relating to said Bonds.
Any moneys which the Paying Agent shall segregate and hold in
trust for the payment of the principal of and premium, if any, or
interest on any Bond and remaining unclaimed for one year after such
principal, premium, if any, or interest has become due and payable
shall, upon the Company's written request to the Paying Agent, be paid
to the Company, with notice to the Trustee of such action; provided,
however, that before the Paying Agent shall be required to make any
such repayment, the Paying Agent shall, at the expense of the Company
cause notice to be given once by Publication to the effect that such
money remains unclaimed and that, after a date specified therein,
which shall not be less than thirty (30) days from the date of such
notice by Publication, any unclaimed balance of such moneys then
remaining will be paid to the Company. After the payment of such
unclaimed moneys to the Company, the Owner of such Bond shall
thereafter look only to the Company for the payment thereof, and all
liability of the Authority, the Trustee and the Paying Agent with
respect to such moneys shall thereupon cease.
Section 4.07. Moneys Held in Trust. All moneys and Investment
Securities held by the Trustee in the Bond Fund, and all moneys
required to be deposited with or paid to the Trustee for deposit into
the Bond Fund, and all moneys withdrawn from the Bond Fund and held by
the Trustee, the Paying Agent, any Co-Paying Agent, shall be held by
the Trustee, the Paying Agent or any Co-Paying Agent, as the case may
be, in trust, and such moneys and Investment Securities (other than
moneys held pursuant to Section 4.06 hereof and moneys or Investment
Securities held in the Rebate Fund established in furtherance of the
obligations of the Company under clause (b) of Section 6.04 of the
Loan Agreement), while so held or so required to be deposited or paid,
shall constitute part of the Trust Estate and be subject to the lien
and security interest created hereby in favor of the Trustee, for the
benefit of the Owners from time to time of the Bonds. The Company
shall have no right, title or interest in the Bond Fund, except such
rights as may arise after the right, title and interest of the Trustee
in and to the Trust Estate and all covenants, agreements and other
obligations of the Authority under this Indenture shall have ceased,
terminated and become void and shall have been satisfied and
discharged in accordance with Article VIII hereof.
ARTICLE V
DISPOSITION OF PROCEEDS
Section 5.01. Disposition of Proceeds. The proceeds from the
issuance and sale of the Bonds shall be applied as provided in Section
4.03 of the Loan Agreement.
ARTICLE VI
INVESTMENTS
Section 6.01. Investments. The moneys in the Bond Fund shall, at
the direction of the Company, be invested and reinvested in Investment
Securities. Any Investment Securities may be purchased subject to
options or other rights in third parties to acquire the same. Subject
to the further provisions of this Section 6.01, such investments shall
be made by the Trustee as directed and designated by the Company in a
certificate of, or telephonic advice promptly confirmed by a
certificate of, an Authorized Company Representative. As and when any
amounts thus invested may be needed for disbursements from the Bond
Fund, the Trustee shall request the Company to designate such
investments to be sold or otherwise converted into cash to the credit
of the Bond Fund as shall be sufficient to meet such disbursement
requirements and shall then follow any directions in respect thereto
of an Authorized Company Representative. As long as no Event of
Default (as defined in Section 9.01 hereof) shall have occurred and be
continuing, the Company shall have the right to designate the
investments to be sold and to otherwise direct the Trustee in the sale
or conversion to cash of the investments made with the moneys in the
Bond Fund, provided that the Trustee shall be entitled to conclusively
assume the absence of any such Event of Default unless it has notice
thereof within the meaning of Section 10.05 hereof.
ARTICLE VII
GENERAL COVENANTS
Section 7.01. No General Obligations. Each and every covenant
herein made, including all covenants made in the various sections of
this Article VII, is predicated upon the condition that neither Pima
County, Arizona nor the State of Arizona shall in any event be liable
for the payment of the principal of, or premium, if any, or interest
on the Bonds or for the performance of any pledge, mortgage,
obligation or agreement created by or arising out of this Indenture or
the issuance of the Bonds, and further that neither the Bonds, nor the
premium, if any, or interest thereon, nor any such obligation or
agreement of the Authority shall be construed to constitute an
indebtedness of Pima County, Arizona or the State of Arizona within
the meaning of any constitutional or statutory provisions whatsoever.
The Bonds and the interest and premium, if any, thereon shall be
limited obligations of the Authority payable solely from the Receipts
and Revenues of the Authority from the Loan Agreement and the other
moneys pledged therefor.
The Authority shall promptly cause to be paid, solely from the
sources stated herein, the principal of and premium, if any, and
interest on every Bond issued under this Indenture at the place, on
the dates and in the manner provided herein and in said Bonds
according to the true intent and meaning thereof.
Section 7.02. Performance of Covenants of the Authority;
Representations. The Authority shall faithfully perform at all times
any and all covenants, undertakings, stipulations and provisions
contained in this Indenture, in any and every Bond executed,
authenticated and delivered hereunder, and in all proceedings
pertaining thereto. The Authority represents that it is duly
authorized under the Constitution and laws of the State of Arizona to
issue the Bonds authorized hereby, to enter into the Loan Agreement
and this Indenture, and to pledge and assign to the Trustee the Trust
Estate, and that the Bonds in the hands of the Owners thereof are and
will be valid and binding limited obligations of the Authority.
Section 7.03. Maintenance of Rights and Powers; Compliance with
Laws. The Authority shall at all times use its best efforts to
maintain its corporate existence or assure the assumption of its
obligations under this Indenture by any public body succeeding to its
powers under the Act; and it shall at all times use its best efforts
to comply with all valid acts, rules, regulations, orders and
directions of any legislative, executive, administrative or judicial
body known to it to be applicable to the Loan Agreement and this
Indenture.
Section 7.04. Enforcement of Obligations of the Company;
Amendments. Upon receipt of written notification from the Trustee, the
Authority shall cooperate with the Trustee in enforcing the obligation
of the Company to pay or cause to be paid all the payments and other
costs and charges payable by the Company under the Loan Agreement. The
Authority shall not enter into any agreement with the Company amending
the Loan Agreement without the prior written consent of the Trustee
and compliance with Sections 12.06 and 12.07 of this Indenture (a
revision to Exhibit A to the Loan Agreement not being deemed an
amendment for purposes of this Section).
Section 7.05. Further Instruments. The Authority shall, upon the
reasonable request of the Trustee, from time to time execute and
deliver such further instruments and take such further action as may
be reasonable and as may be required to carry out the purposes of this
Indenture; provided, however, that no such instruments or actions
shall pledge the credit or taxing power of the State of Arizona, Pima
County, the Authority or any other political subdivision of said
State.
Section 7.06. No Disposition of Trust Estate. Except as permitted
by this Indenture, the Authority shall not sell, lease, pledge, assign
or otherwise dispose of or encumber its interest in the Trust Estate
and will promptly pay or cause to be discharged or make adequate
provision to discharge any lien or charge on any part thereof not
permitted hereby.
Section 7.07. Financing Statements. The Authority and the Trustee
shall cooperate with the Company in causing appropriate financing
statements, naming the Trustee as pledgee of the Receipts and Revenues
of the Authority from the Loan Agreement and of the other moneys
pledged under the Indenture for the payment of the principal of and
premium, if any, and interest on the Bonds, and as pledgee and
assignee of the balance of the Trust Estate, and the Authority shall
cooperate with the Trustee and the Company in causing appropriate
continuation statements to be duly filed and recorded in the
appropriate state and county offices as required by the provisions of
the Uniform Commercial Code or other similar law as adopted in the
State of Arizona and any other applicable jurisdiction, as from time
to time amended, in order to perfect and maintain the security
interests created by this Indenture.
Section 7.08. Tax Covenants; Rebate Fund. (a) The Authority
covenants for the benefit of all Owners from time to time of the Bonds
that it will not directly or indirectly use or (to the extent within
its control), permit the use of, the proceeds of any of the Bonds or
any other funds of the Authority, or take or omit to take any other
action, if and to the extent that such use, or the taking or omission
to take such action, would cause any of the Bonds to be "arbitrage
bonds" within the meaning of Section 148 of the Code or otherwise
subject to federal income taxation by reason of Sections 103 and 141
through 150 of the Code or Section 103 of the 1954 Code, as
applicable, and any applicable regulations promulgated thereunder. To
that end the Authority covenants to comply with all covenants set
forth in the Tax Agreement, which is hereby incorporated herein by
reference as though fully set forth herein.
(b) The Trustee shall establish and maintain a fund separate from
any other fund established and maintained hereunder designated "The
Industrial Development Authority of the County of Pima Industrial
Development Revenue Bonds, 1997 Series B (Tucson Electric Power
Company Project) Rebate Fund" (herein called the "Rebate Fund") in
accordance with the provisions of the Tax Agreement. Within the Rebate
Fund, the Trustee shall maintain such accounts as shall be directed by
the Company in order for the Authority and the Company to comply with
the provisions of the Tax Agreement. Subject to the transfer
provisions provided in paragraph (c) below, all money at any time
deposited in the Rebate Fund shall be held by the Trustee in trust, to
the extent required to satisfy the Rebate Requirement (as defined in
the Tax Agreement), for payment to the United States of America, and
neither the Company, the Authority or the Owners shall have any rights
in or claim to such moneys. All amounts deposited into or on deposit
in the Rebate Fund shall be governed by this Section 7.08, by Section
6.04 of the Loan Agreement and by the Tax Agreement. The Trustee shall
conclusively be deemed to have complied with such provisions if it
follows the directions of the Company, including supplying all
necessary information in the manner set forth in the Tax Agreement,
and shall not be required to take any actions thereunder in the
absence of written directions from the Company.
(c) Upon receipt of the Company's written instructions, the
Trustee shall remit part or all of the balances in the Rebate Fund to
the United States of America, as so directed. In addition, if the
Company so directs, the Trustee shall deposit moneys into or transfer
moneys out of the Rebate Fund from or into such accounts or funds as
directed by the Company's written directions. Any funds remaining in
the Rebate Fund after all of the Bonds shall have been paid and any
Rebate Requirement shall have been satisfied, or provision therefor
reasonably satisfactory to the Trustee shall have been made, shall be
withdrawn and remitted to the Company.
(d) Notwithstanding any provision of this Indenture, the
obligation to remit the Rebate Requirement to the United States of
America and to comply with all other requirements of this Section
7.08, Section 6.04 of the Loan Agreement and the Tax Agreement shall
survive the payment of the Bonds and the satisfaction and discharge of
this Indenture.
Section 7.09. Notices of Trustee. The Trustee shall give notice
to both the Authority and the Company whenever it is required hereby
to give notice to either and, additionally, shall furnish to the
Authority and the Company copies of any Notice by Mail or Publication
given by it pursuant to any provision hereof.
ARTICLE VIII
DEFEASANCE
Section 8.01. Defeasance. If the Authority shall pay or cause to
be paid to the Owner of any Bond secured hereby the principal of and
premium, if any, and interest due and payable, and thereafter to
become due and payable, upon such Bond or any portion of such Bond in
the principal amount of $5,000 or any integral multiple thereof, such
Bond or portion thereof shall cease to be entitled to any lien,
benefit or security under this Indenture. If the Authority shall pay
or cause to be paid to the Owners of all the Bonds secured hereby the
principal of and premium, if any, and interest due and payable, and
thereafter to become due and payable, thereon, and shall pay or cause
to be paid all other sums payable hereunder including, without
limitation, amounts payable pursuant to Section 10.04 hereof, then,
and in that case, the right, title and interest of the Trustee in and
to the Trust Estate shall thereupon cease, terminate and become void.
In such event, the Trustee shall assign, transfer and turn over to the
Company the Trust Estate, including, without limitation, any surplus
in the Bond Fund and any balance remaining in any other fund created
under this Indenture.
All or any portion of Outstanding Bonds or portions of Bonds in
principal amounts of $5,000 or any integral multiple thereof, shall
prior to the maturity or redemption date thereof be deemed to have
been paid within the meaning and with the effect expressed in this
Article VIII, and the entire indebtedness of the Authority with
respect thereof shall be satisfied and discharged, when
(a) in the event said Bonds or portions thereof have been
selected for redemption in accordance with Section 3.02 hereof,
the Trustee shall have given, or the Company shall have given to
the Trustee in form satisfactory to it irrevocable instructions
to give, on a date in accordance with the provisions of Section
3.03 hereof, notice of redemption of such Bonds or portions
thereof,
(b) there shall have been deposited with the Trustee either
moneys in an amount which shall be sufficient, or Government
Obligations which shall not contain provisions permitting the
redemption thereof at the option of the issuer, the principal of
and the interest on which, when due, and without regard to any
reinvestment thereof, will provide moneys which, together with
the moneys, if any, deposited with or held by the Trustee, shall
be sufficient, to pay when due the principal of and premium, if
any, and interest due and to become due on said Bonds or portions
thereof on and prior to the redemption date or maturity date
thereof, as the case may be, and
(c) in the event said Bonds or portions thereof do not
mature and are not to be redeemed within the next succeeding
sixty (60) days, the Company shall have given the Trustee in form
satisfactory to it irrevocable instructions to give, as soon as
practicable in the same manner as a notice of redemption is given
pursuant to Section 3.03 hereof, a notice to the Owners of said
Bonds or portions thereof that the deposit required by clause (b)
above has been made with the Trustee and that said Bonds or
portions thereof are deemed to have been paid in accordance with
this Article VIII and stating the maturity or redemption date
upon which moneys are to be available for the payment of the
principal of and premium, if any, and interest on said Bonds or
portions thereof.
Neither the Government Obligations nor moneys deposited with the
Trustee pursuant to this Article VIII nor principal or interest
payments on any such Government Obligations shall be withdrawn or used
for any purpose other than, and such Government Obligations, moneys
and principal or interest payments shall be held in trust for, the
payment of the principal of and premium, if any, and interest on said
Bonds or portions thereof; provided, that any cash received from such
principal or interest payments on such Government Obligations
deposited with the Trustee, if not then needed for such purposes,
shall, to the extent practicable, be invested in Government
Obligations of the type described in clause (b) of the preceding
paragraph maturing at times and in amounts sufficient to pay when due
the principal of and premium, if any, and interest to become due on
said Bonds or portions thereof on and prior to such redemption date or
maturity date thereof, as the case may be, and interest earned from
such reinvestments shall be paid over to the Company, as received by
the Trustee, free and clear of any trust, lien or pledge hereunder. If
payment of less than all the Bonds is to be provided for in the manner
and with the effect provided in this Article VIII, the Trustee shall
select such Bonds or portions of Bonds in the manner specified by
Section 3.02 hereof for selection for redemption of less than all
Bonds in the principal amount designated to the Trustee by the
Company. At or prior to the time of the deposit of any Government
Obligations with the Trustee pursuant to this Section 8.01, the
Company shall provide the Trustee with a certificate of an accountant
or an accounting firm as to the sufficiency of such Government
Obligations to pay when due the principal of and premium, if any, and
interest due and to become due as set forth in clause (b) of the
preceding paragraph.
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Events of Default. Each of the following events
shall constitute and is referred to in this Indenture as an "Event of
Default":
(a) a failure to pay the principal of or premium, if any, on
any of the Bonds when the same shall become due and payable at
maturity, upon redemption or otherwise;
(b) a failure to pay an installment of interest on any of
the Bonds after such interest shall have become due and payable
for a period of thirty (30) days;
(c) a failure by the Authority to observe and perform any
covenant, condition, agreement or provision (other than as
specified in clauses (a) and (b) of this Section 9.01) contained
in the Bonds or in this Indenture on the part of the Authority to
be observed or performed, which failure shall continue for a
period of sixty (60) days after written notice, specifying such
failure and requesting that it be remedied, shall have been given
to the Authority and the Company by the Trustee, which may give
such notice in its discretion and which shall give such notice at
the written request of Owners of not less than 33% in principal
amount of the Bonds then Outstanding, unless the Trustee, or the
Trustee and Owners of a principal amount of Bonds not less than
the principal amount of Bonds the Owners of which requested that
such notice be given, as the case may be, shall agree in writing
to an extension of such period prior to its expiration; provided,
however, that the Trustee, or the Trustee and the Owners of such
principal amount of Bonds, as the case may be, shall be deemed to
have agreed to an extension of such period if corrective action
is initiated by the Authority, or the Company on behalf of the
Authority, within such period and is being diligently pursued.
Upon the occurrence and continuance of any Event of Default
described in clause (a) or (b) of the preceding paragraph, the Trustee
may, and at the written request of Owners of not less than 33% in
principal amount of Bonds then Outstanding shall, by written notice to
the Authority and the Company, declare the Bonds to be immediately due
and payable, whereupon they shall, without further action, become and
be immediately due and payable, anything in this Indenture or in the
Bonds to the contrary notwithstanding, and the Trustee shall give
notice thereof by Mail to all Owners of Outstanding Bonds.
The provisions of the preceding paragraph, however, are subject
to the condition that if, after the principal of the Bonds shall have
been so declared to be due and payable, and before any judgment or
decree for the payment of the moneys due shall have been obtained or
entered as hereinafter provided, the Authority shall cause to be
deposited with the Trustee a sum sufficient to pay all matured
installments of interest upon all Bonds and the principal of any and
all Bonds which shall have become due otherwise than by reason of such
declaration (with interest upon such principal and, to the extent
permissible by law, on overdue installments of interest, at the rate
per annum borne by the Bonds) and such amounts as shall be sufficient
to cover reasonable compensation and reimbursement of expenses payable
to the Trustee and any predecessor Trustee, and all Events of Default
hereunder other than nonpayment of the principal of Bonds which shall
have become due by said declaration shall have been remedied, then, in
every such case, such Event of Default shall be deemed waived and such
declaration and its consequences rescinded and annulled, and the
Trustee shall promptly give written notice of such waiver, rescission
and annulment to the Authority and the Company, and, if notice of the
acceleration of the Bonds shall have been given to the Owners of the
Bonds, shall give notice thereof by Mail to all Owners of Outstanding
Bonds; but no such waiver, rescission and annulment shall extend to or
affect any subsequent Event of Default or impair any right or remedy
consequent thereon.
Section 9.02. Remedies. Upon the occurrence and continuance of
any Event of Default, then and in every such case the Trustee in its
discretion may, and upon the written request of Owners of not less
than a majority in principal amount of the Bonds then Outstanding and
receipt of indemnity to its satisfaction shall, in its own name and as
the Trustee of an express trust:
(a) by mandamus, or other suit, action or proceeding at law
or in equity, enforce all rights of the Owners of the Bonds, and
require the Authority or the Company to carry out any agreements
with or for the benefit of such Owners and to perform its or
their duties under the Act, the Loan Agreement and this
Indenture;
(b) bring suit upon the Bonds; or
(c) by action or suit in equity enjoin any acts or things
which may be unlawful or in violation of the rights of the Owners
of the Bonds.
Section 9.03. Restoration to Former Position. In the event that
any proceeding taken by the Trustee to enforce any right under this
Indenture shall have been discontinued or abandoned for any reason, or
shall have been determined adversely to the Trustee, then the
Authority, the Trustee and the Owners shall be restored, subject to
any determination in such proceeding, to their former positions and
rights hereunder, respectively, and all rights, remedies and powers of
the Trustee shall continue as though no such proceeding had been
taken.
Section 9.04. Owners' Right to Direct Proceedings. Anything in
this Indenture to the contrary notwithstanding, the Owners of a
majority in principal amount of the Bonds then Outstanding hereunder
shall have the right, by an instrument in writing executed and
delivered to the Trustee, to direct the time, method and place of
conducting all remedial proceedings available to the Trustee under
this Indenture or exercising any trust or power conferred on the
Trustee by this Indenture; provided, however, that such direction
shall not be otherwise than in accordance with law and the provisions
of this Indenture and that the Trustee shall have the right (but not
the obligation) to decline to follow any such direction if the
Trustee, being advised by counsel, shall determine that the action or
proceeding so directed may not lawfully be taken, or if the Trustee in
good faith shall determine that the action or proceedings so directed
would involve the Trustee in personal liability or if the Trustee in
good faith shall so determine that the actions or forbearances
specified in or pursuant to such direction would be unduly prejudicial
to the interests of Owners not joining in the giving of said
direction, it being understood that the Trustee shall have no duty to
ascertain whether or not such actions or forbearances are unduly
prejudicial to such Owners.
Section 9.05. Limitation on Owners' Right to Institute
Proceedings. No Owner of Bonds shall have any right to institute any
suit, action or proceeding in equity or at law for the execution of
any trust or power hereunder, or any other remedy hereunder or on said
Bonds, unless such Owner previously shall have given to the Trustee
written notice of an Event of Default as hereinabove provided and
unless the Owners of not less than a majority in principal amount of
the Bonds then Outstanding shall have made written request of the
Trustee so to do, after the right to institute said suit, action or
proceeding shall have accrued, and shall have afforded the Trustee a
reasonable opportunity to proceed to institute the same in either its
or their name, and unless there also shall have been offered to the
Trustee security and indemnity satisfactory to it against the costs,
expenses and liabilities to be incurred therein or thereby, and the
Trustee shall not have complied with such request within a reasonable
time; and such notification, request and offer of indemnity are hereby
declared in every such case, at the option of the Trustee, to be
conditions precedent to the institution of said suit, action or
proceeding; it being understood and intended that no one or more of
the Owners of the Bonds shall have any right in any manner whatever by
his or their action to affect, disturb or prejudice the security of
this Indenture, or to enforce any right hereunder or under the Bonds,
except in the manner herein provided, and that all suits, actions and
proceedings at law or in equity shall be instituted, had and
maintained in the manner herein provided and for the equal benefit of
all Owners of the Bonds.
Section 9.06. No Impairment of Right to Enforce Payment.
Notwithstanding any other provision in this Indenture, the right of
any Owner of a Bond to receive payment of the principal of and
premium, if any, and interest on such Bond, on or after the respective
due dates expressed therein, or to institute suit for the enforcement
of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Owner.
Section 9.07. Proceedings by Trustee without Possession of Bonds.
All rights of action under this Indenture or under any of the Bonds
secured hereby which are enforceable by the Trustee may be enforced by
it without the possession of any of the Bonds, or the production
thereof on the trial or other proceedings relative thereto, and any
such suit, action or proceeding instituted by the Trustee shall be
brought in its name for the equal and ratable benefit of the Owners of
the Bonds, subject to the provisions of this Indenture.
Section 9.08. No Remedy Exclusive. No remedy herein conferred
upon or reserved to the Trustee or to the Owners of the Bonds is
intended to be exclusive of any other remedy or remedies, and each and
every such remedy shall be cumulative, and shall be in addition to
every other remedy given hereunder or under the Loan Agreement, now or
hereafter existing at law or in equity or by statute.
Section 9.09. No Waiver of Remedies. No delay or omission of the
Trustee or of any Owner of a Bond to exercise any right or power
accruing upon any default shall impair any such right or power or
shall be construed to be a waiver of any such default, or an
acquiescence therein; and every power and remedy given by this Article
IX to the Trustee and to the Owners of the Bonds, respectively, may be
exercised from time to time and as often as may be deemed expedient.
Section 9.10. Application of Moneys. Any moneys received by the
Trustee, by any receiver or by any Owner of a Bond pursuant to any
right given or action taken under the provisions of this Article IX,
after payment of the costs and expenses of the proceedings resulting
in the collection of such moneys and of all amounts due to the Trustee
and any predecessor Trustee under Section 10.04 hereof, shall be
deposited in the Bond Fund and all moneys so deposited in the Bond
Fund during the continuance of an Event of Default (other than moneys
for the payment of Bonds which had matured or otherwise become payable
prior to such Event of Default or for the payment of interest due
prior to such Event of Default) shall be applied as follows:
(a) Unless the principal of all the Bonds shall have become
due and payable, all such moneys shall be applied (i) first, to
the payment to the persons entitled thereto of all installments
of interest then due on the Bonds, with interest on overdue
installments, if lawful, at the rate per annum borne by the
Bonds, in the order of maturity of the installments of such
interest and, if the amount available shall not be sufficient to
pay in full any particular installment of interest, then to the
payment ratably, according to the amounts due on such
installment, and (ii) second, to the payment to the persons
entitled thereto of the unpaid principal of any of the Bonds
which shall have become due (other than Bonds called for
redemption for the payment of which money is held pursuant to the
provisions of this Indenture), with interest on such Bonds at
their rate from the respective dates upon which they became due
and, if the amount available shall not be sufficient to pay in
full Bonds due on any particular date, together with such
interest, then to the payment ratably, according to the amount of
principal and interest due on such date, in each case to the
persons entitled thereto, without any discrimination or
privilege.
(b) If the principal of all the Bonds shall have become due
and payable, all such moneys shall be applied to the payment of
the principal and interest then due and unpaid upon the Bonds,
with interest on overdue interest and principal, as aforesaid,
without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over
any other installment of interest, or of any Bond over any other
Bond, ratably, according to the amounts due respectively for
principal and interest, to the persons entitled thereto without
any discrimination or privilege.
(c) If the principal of all the Bonds shall have become due
and payable, and if acceleration of the maturity of the Bonds by
reason of such Event of Default shall thereafter have been
rescinded and annulled under the provisions of this Article IX,
then, subject to the provisions of clause (b) of this Section
9.10 which shall be applicable in the event that the principal of
all the Bonds shall later become due and payable, the moneys
shall be applied in accordance with the provisions of clause (a)
of this Section 9.10.
Section 9.11. Severability of Remedies. It is the purpose and
intention of this Article IX to provide rights and remedies to the
Trustee and the Owners which may be lawfully granted under the
provisions of the Act, but should any right or remedy herein granted
be held to be unlawful, the Trustee and the Owners shall be entitled,
as above set forth, to every other right and remedy provided in this
Indenture and by law.
ARTICLE X
TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
Section 10.01. Acceptance of Trusts. The Trustee hereby accepts
and agrees to execute the trusts hereby created, but only upon the
additional terms set forth in this Article X, to all of which the
Authority agrees and the respective Owners agree by their acceptance
of delivery of any of the Bonds.
Section 10.02. No Responsibility for Recitals. The recitals,
statements and representations contained in this Indenture or in the
Bonds, save only the Trustee's authentication upon the Bonds, are not
made by the Trustee, and the Trustee does not assume, and shall not
have, any responsibility or obligation for the correctness of any
thereof. The Trustee makes no representation as to the validity or
sufficiency of this Indenture or the Bonds.
Section 10.03. Limitations on Liability. The Trustee may execute
any of the trusts or powers hereof and perform the duties required of
it hereunder by or through attorneys, agents, receivers, or employees,
and shall be entitled to advice of counsel concerning all matters of
trust and its duty hereunder, and the Trustee shall not be answerable
for the default or misconduct of any such attorney, agent, receiver,
or employee selected by it with reasonable care. The Trustee shall not
be answerable for the exercise of any discretion or power under this
Indenture or for anything whatsoever in connection with the trust
created hereby, except only for its own negligence or bad faith.
Anything in this Indenture to the contrary notwithstanding, the
Trustee shall in no event be required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers,
if there shall be reasonable grounds for believing that the repayment
of such funds or adequate indemnity against such liability is not
reasonably assured to it.
Section 10.04. Compensation, Expenses and Advances. The Trustee,
the Paying Agent and any Co-Paying Agent, and the Registrar under this
Indenture shall be entitled to reasonable compensation for their
services rendered hereunder (not limited by any provision of law
regarding the compensation of the trustee of an express trust) and to
reimbursement for their actual out-of-pocket expenses (including
counsel fees) reasonably incurred in connection therewith except as a
result of their negligence or bad faith, including, without
limitation, compensation for any services rendered, and reimbursement
for any expenses incurred, at and subsequent to the time the Bonds are
deemed to have been paid in accordance with Article VIII hereof. If
the Authority shall fail to perform any of the covenants or agreements
contained in this Indenture, other than the covenants or agreements in
respect of the payment of the principal of and premium, if any, and
interest on the Bonds, the Trustee may, in its uncontrolled discretion
and without notice to the Owners of the Bonds, at any time and from
time to time, make advances to effect performance of the same on
behalf of the Authority, but the Trustee shall be under no obligation
so to do; and any and all such advances may bear interest at a rate
per annum not exceeding the base rate then in effect for 90-day
commercial loans by the Trustee or a commercial banking affiliate of
the Trustee designated as such by the Trustee in the city in which is
located the Principal Office of the Trustee (or such affiliate, as the
case may be) to borrowers of the highest credit standing; but no such
advance shall operate to relieve the Authority from any default
hereunder. In Section 5.03 of the Loan Agreement, the Company has
agreed that it will pay to the Trustee (including any predecessor
Trustee), the Paying Agent and any Co-Paying Agent and the Registrar,
such compensation and reimbursement of expenses and advances, but the
Company may, without creating a default hereunder, contest in good
faith the reasonableness of any such services, expenses and advances.
If the Company shall have failed to make any payment to the Trustee or
any predecessor Trustee under Section 5.03 of the Loan Agreement and
such failure shall have resulted in an Event of Default under the Loan
Agreement, the Trustee, and any predecessor Trustee, shall have, in
addition to any other rights hereunder, a claim, prior to the claim of
the Owners, for the payment of its compensation and the reimbursement
of its expenses and any advances made by it, as provided in this
Section 10.04, upon the moneys and obligations in the Bond Fund;
provided, however, that neither the Trustee nor any predecessor
Trustee shall have any such claim upon moneys or obligations deposited
with or paid to the Trustee for the redemption or payment of Bonds
which are deemed to have been paid in accordance with Article VIII
hereof.
In Section 5.04 of the Loan Agreement, the Company has agreed to
indemnify the Trustee and any predecessor Trustee to the extent
provided therein.
Section 10.05. Notice of Events of Default. The Trustee shall not
be required to take notice, or be deemed to have notice, of any
default or Event of Default under this Indenture other than an Event
of Default under clause (a) or (b) of the first paragraph of Section
9.01 hereof, unless an officer assigned by the Trustee to administer
its corporate trust business has been specifically notified in writing
of such default or Event of Default by Owners of at least 33% in
principal amount of the Bonds then Outstanding. The Trustee may,
however, at any time, in its discretion, require of the Authority and
the Company full information and advice as to the performance of any
of the covenants, conditions and agreements contained herein.
Section 10.06. Action by Trustee. The Trustee shall be under no
obligation to take any action in respect of any default or Event of
Default hereunder or toward the execution or enforcement of any of the
trusts hereby created, or to institute, appear in or defend any suit
or other proceeding in connection therewith, unless requested in
writing so to do by Owners of at least a majority in principal amount
of the Bonds then Outstanding, and, if in its opinion such action may
tend to involve it in expense or liability, unless furnished, from
time to time as often as it may require, with security and indemnity
satisfactory to it. The foregoing provisions are intended only for the
protection of the Trustee, and shall not affect any discretion or
power given by any provisions of this Indenture to the Trustee to take
action in respect of any default or Event of Default without such
notice or request from the Owners of the Bonds, or without such
security or indemnity.
Section 10.07. Good Faith Reliance. The Trustee shall be
protected and shall incur no liability in acting or proceeding in good
faith upon any resolution, notice, telegram, telex, facsimile
transmission, request, consent, waiver, certificate, statement,
affidavit, voucher, bond, requisition or other paper or document which
it shall in good faith believe to be genuine and to have been passed
or signed by the proper board, body or person or to have been prepared
and furnished pursuant to any of the provisions of this Indenture or
the Loan Agreement, or upon the written opinion of any attorney,
engineer, accountant or other expert believed by the Trustee to be
qualified in relation to the subject matter, and the Trustee shall be
under no duty to make any investigation or inquiry as to any
statements contained or matters referred to in any such instrument,
but may accept and rely upon the same as conclusive evidence of the
truth and accuracy of such statements. Neither the Trustee, the Paying
Agent, any Co-Paying Agent nor the Registrar shall be bound to
recognize any person as an Owner of a Bond or to take any action at
his request unless the ownership of such Bond is proved as
contemplated in Section 11.01 hereof.
Section 10.08. Dealings in Bonds and with the Authority and the
Company. The Trustee, the Paying Agent, any Co-Paying Agent or the
Registrar, in its individual or any other capacity, may in good faith
buy, sell, own, hold and deal in any of the Bonds issued hereunder,
and may join in any action which any Owner of a Bond may be entitled
to take with like effect as if it did not act in any capacity
hereunder. The Trustee, the Paying Agent, any Co-Paying Agent or the
Registrar, in its individual or any other capacity, either as
principal or agent, may also engage in or be interested in any
financial or other transaction with the Authority or the Company, and
may act as depositary, trustee, or agent for any committee or body of
Owners of Bonds secured hereby or other obligations of the Authority
as freely as if it did not act in any capacity hereunder.
Section 10.09. Allowance of Interest. The Trustee may, but shall
not be obligated to, allow and credit interest upon any moneys which
it may at any time receive under any of the provisions of this
Indenture, at such rate, if any, as it customarily allows upon similar
funds of similar size and under similar conditions. All interest
allowed on any such moneys shall be credited as provided in Article IV
with respect to interest on investments.
Section 10.10. Construction of Indenture. The Trustee may
construe any of the provisions of this Indenture insofar as the same
may appear to be ambiguous or inconsistent with any other provision
hereof, and any construction of any such provisions hereof by the
Trustee in good faith shall be binding upon the Owners of the Bonds.
Section 10.11. Resignation of Trustee. The Trustee may resign and
be discharged of the trusts created by this Indenture by executing an
instrument in writing resigning such trust and specifying the date
when such resignation shall take effect, and filing the same with the
President of the Authority and with the Company, not less than
forty-five (45) days before the date specified in such instrument when
such resignation shall take effect, and by giving notice of such
resignation by Mail to all Owners of Bonds. Such resignation shall
take effect on the later to occur of (i) the day specified in such
instrument and notice, unless previously a successor Trustee shall
have been appointed as hereinafter provided, in which event such
resignation shall take effect immediately upon the appointment of such
successor Trustee and (ii) the appointment of a successor Trustee.
So long as no event which is, or after notice or lapse of time,
or both, would become, an Event of Default shall have occurred and be
continuing, if the Authority shall have delivered to the Trustee (i)
an instrument appointing a successor Trustee, effective as of a date
specified therein and (ii) an instrument of acceptance of such
appointment, effective as of such date, by such successor Trustee in
accordance with Section 10.16, the Trustee shall be deemed to have
resigned as contemplated in this Section, the successor Trustee shall
be deemed to have been appointed pursuant to subsection (b) of Section
10.13 and such appointment shall be deemed to have been accepted as
contemplated in Section 10.16, all as of such date, and all other
provisions of this Article X shall be applicable to such resignation,
appointment and acceptance except to the extent inconsistent with this
paragraph. The Authority shall deliver any such instrument of
appointment at the direction of the Company.
Section 10.12. Removal of Trustee. The Trustee may be removed at
any time by filing with the Trustee so removed, and with the Authority
and the Company, an instrument or instruments in writing, appointing a
successor, or an instrument or instruments in writing, consenting to
the appointment by the Authority (at the direction of the Company) of
a successor and accompanied by an instrument of appointment by the
Authority (at the direction of the Company) of such successor, and in
any event executed by Owners of not less than a majority in principal
amount of the Bonds then Outstanding, such filing to be made by any
Owner of a Bond or his duly authorized attorney.
Section 10.13. Appointment of Successor Trustee. (a) In case at
any time the Trustee shall be removed, or be dissolved, or if its
property or affairs shall be taken under the control of any state or
federal court or administrative body because of insolvency or
bankruptcy, or for any other reason, then a vacancy shall forthwith
and ipso facto exist and a successor may be appointed, and in case at
any time the Trustee shall resign or be deemed to have resigned, then
a successor may be appointed, by filing with the Authority and the
Company an instrument in writing appointing such successor Trustee
executed by Owners of not less than a majority in principal amount of
Bonds then Outstanding. Copies of such instrument shall be promptly
delivered by the Authority to the predecessor Trustee, to the Trustee
so appointed and the Company.
(b) Until a successor Trustee shall be appointed by the Owners of
the Bonds as herein authorized, the Authority, shall appoint a
successor Trustee as directed by the Company. After any appointment by
the Authority, it shall cause notice of such appointment to be given
by Mail to all Owners of Bonds. Any new Trustee so appointed by the
Authority shall immediately and without further act be superseded by a
Trustee appointed by the Owners of the Bonds in the manner above
provided.
(c) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee.
Section 10.14. Qualifications of Successor Trustee. Every
successor Trustee (a) shall be a bank or trust company duly organized
under the laws of the United States or any state or territory thereof
authorized by law to perform all the duties imposed upon it by this
Indenture and (b) shall have (or the parent holding company of which
shall have) a combined capital stock, surplus and undivided profits of
at least $100,000,000 if there can be located, with reasonable effort,
such an institution willing and able to accept the trust on reasonable
and customary terms.
Section 10.15. Judicial Appointment of Successor Trustee. In case
at any time the Trustee shall resign and no appointment of a successor
Trustee shall be made pursuant to the foregoing provisions of this
Article X prior to the date specified in the notice of resignation as
the date when such resignation is to take effect, the retiring Trustee
may forthwith apply to a court of competent jurisdiction for the
appointment of a successor Trustee. If no appointment of a successor
Trustee shall be made pursuant to the foregoing provisions of this
Article X within six months after a vacancy shall have occurred in the
office of Trustee, any Owner of a Bond may apply to any court of
competent jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
Section 10.16. Acceptance of Trusts by Successor Trustee. Any
successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Authority an instrument accepting such appointment
hereunder, and thereupon such successor Trustee, without any further
act, deed or conveyance, shall become duly vested with all the
estates, property, rights, powers, trusts, duties and obligations of
its predecessor in the trust hereunder, with like effect as if
originally named Trustee herein. Upon request of such Trustee, such
predecessor Trustee and the Authority shall execute and deliver an
instrument transferring to such successor Trustee all the estates,
property, rights, powers and trusts hereunder of such predecessor
Trustee and, subject to the provisions of Section 10.04 hereof, such
predecessor Trustee shall pay over to the successor Trustee all moneys
and other assets at the time held by it hereunder.
Section 10.17. Successor by Merger or Consolidation. Any
corporation or association into which any Trustee hereunder may be
merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger or consolidation
to which any Trustee hereunder shall be a party or any corporation or
association succeeding to the corporate trust business of the Trustee,
shall be the successor Trustee under this Indenture, without the
execution or filing of any paper or any further act on the part of the
parties hereto, anything in this Indenture to the contrary
notwithstanding.
If, at the time any such successor to the Trustee shall succeed
to the trusts created by this Indenture, any of the Bonds shall have
been authenticated but not delivered, such successor Trustee may adopt
the certificate of authentication of any predecessor Trustee and
deliver such Bonds so authenticated; and if at that time, any of the
Bonds shall not have been authenticated, such successor Trustee may
authenticate such Bonds either in the name of any such predecessor
hereunder or in the name of such successor; and, in all such cases,
such certificate of authentication shall have the full force which it
is anywhere in the Bonds or in this Indenture provided that the
certificate of authentication of the Trustee shall have; provided,
however, that the right to adopt the certificate of authentication of
any predecessor Trustee or to authenticate Bonds in the name of any
predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.
Section 10.18. Standard of Care. Notwithstanding any other
provisions of this Article X, the Trustee shall, during the existence
of an Event of Default of which the Trustee has actual notice,
exercise such of the rights and powers vested in it by this Indenture
and use the same degree of skill and care in their exercise as a
prudent man would use and exercise under the circumstances in the
conduct of his own affairs.
Section 10.19. Notice to Owners of Bonds of Event of Default. If
an Event of Default occurs of which the Trustee by Section 10.05
hereof is required to take notice and deemed to have notice, or any
other Event of Default occurs of which the Trustee has been
specifically notified in accordance with Section 10.05 hereof, and any
such Event of Default shall continue for at least two days after the
Trustee acquires actual notice thereof, unless the Trustee shall have
theretofore given a notice of acceleration pursuant to Section 9.01
hereof, the Trustee shall give Notice by Mail to all Owners of
Outstanding Bonds.
Section 10.20. Intervention in Litigation of the Authority. In
any judicial proceeding to which the Authority is a party and which in
the opinion of the Trustee and its counsel has a substantial bearing
on the interests of the Owners of Bonds, the Trustee may intervene on
behalf of the Owners of the Bonds and shall, upon receipt of indemnity
satisfactory to it, do so if requested in writing by Owners of at
least a majority in principal amount of the Bonds then Outstanding if
permitted by the court having jurisdiction in the premises.
Section 10.21. Paying Agent; Co-Paying Agents. The Authority
shall, with the approval of the Company, appoint the Paying Agent for
the Bonds and may at any time or from time to time, with the approval
of the Company, appoint one or more Co-Paying Agents for the Bonds,
subject to the conditions set forth in Section 10.22 hereof. The
Paying Agent and each Co-Paying Agent shall designate to the Trustee
its Principal Office and signify its acceptance of the duties and
obligations imposed upon it hereunder by a written instrument of
acceptance delivered to the Authority and the Trustee in which such
Paying Agent or Co-Paying Agent will agree, particularly:
(a) to hold all sums held by it for the payment of the
principal of and premium, if any, or interest on Bonds in trust
for the benefit of the Owners of the Bonds until such sums shall
be paid to such Owners or otherwise disposed of as herein
provided;
(b) to keep such books and records as shall be consistent
with prudent industry practice, to make such books and records
available for inspection by the Authority, the Trustee and the
Company at all reasonable times and, in the case of a Co-Paying
Agent, to promptly furnish copies of such books and records to
the Paying Agent; and
(c) in the case of a Co-Paying Agent, upon the request of
the Paying Agent, to forthwith deliver to the Paying Agent all
sums so held in trust by such Co-Paying Agent.
The Authority shall cooperate with the Trustee and the Company to
cause the necessary arrangements to be made and to be thereafter
continued whereby funds derived from the sources specified in Sections
4.03 and 4.04 hereof will be made available to the Paying Agent and
each Co-Paying Agent for the payment when due of the principal of,
premium, if any, and interest on the Bonds.
Section 10.22. Qualifications of Paying Agent and Co-Paying
Agents; Resignation; Removal. The Paying Agent and any Co-Paying Agent
shall be a corporation or association duly organized under the laws of
the United States of America or any state or territory thereof, having
a combined capital stock, surplus and undivided profits of at least
$15,000,000 and authorized by law to perform all the duties imposed
upon it by this Indenture. The Paying Agent and any Co-Paying Agent
may at any time resign and be discharged of the duties and obligations
created by this Indenture by giving at least sixty (60) days' notice
to the Authority, the Company and the Trustee. The Paying Agent and
any Co-Paying Agent may be removed at any time, at the direction of
the Company, by an instrument, signed by the Authority, filed with the
Paying Agent or such Co-Paying Agent, as the case may be, and with the
Trustee.
In the event of the resignation or removal of the Paying Agent or
any Co-Paying Agent, the Paying Agent or such Co-Paying Agent, as the
case may be, shall pay over, assign and deliver any moneys held by it
in such capacity to its successor or, if there be no successor, to the
Trustee.
In the event that the Authority shall fail to appoint a Paying
Agent hereunder, or in the event that the Paying Agent shall resign or
be removed, or be dissolved, or if the property or affairs of the
Paying Agent shall be taken under the control of any state or federal
court or administrative body because of bankruptcy or insolvency, or
for any other reason, and the Authority shall not have appointed its
successor as Paying Agent, the Trustee shall ipso facto be deemed to
be the Paying Agent for all purposes of this Indenture until the
appointment by the Authority of the Paying Agent or successor Paying
Agent, as the case may be.
Upon the appointment of a successor Paying Agent, the Trustee
shall give notice thereof by Mail to all Owners of Bonds.
Section 10.23. Registrar. The Authority shall, with the approval
of the Company, appoint the Registrar for the Bonds, subject to the
conditions set forth in Section 10.24 hereof. The Registrar shall
designate to the Trustee its Principal Office and signify its
acceptance of the duties imposed upon it hereunder by a written
instrument of acceptance delivered to the Authority and the Trustee in
which such Registrar will agree, particularly, to keep such books and
records as shall be consistent with prudent industry practice and to
make such books and records available for inspection by the Authority,
the Trustee and the Company at all reasonable times.
The Authority shall cooperate with the Trustee and the Company to
cause the necessary arrangements to be made and to be thereafter
continued whereby Bonds, executed by the Authority and authenticated
by the Trustee, shall be made available for exchange, registration and
registration of transfer at the Principal Office of the Registrar. The
Authority shall cooperate with the Trustee, the Registrar and the
Company to cause the necessary arrangements to be made and thereafter
continued whereby the Paying Agent and any Co-Paying Agent shall be
furnished such records and other information, at such times, as shall
be required to enable the Paying Agent and such Co-Paying Agent to
perform the duties and obligations imposed upon them hereunder.
Section 10.24. Qualifications of Registrar; Resignation; Removal.
The Registrar shall be a corporation or association duly organized
under the laws of the United States of America or any state or
territory thereof, having a combined capital stock, surplus and
undivided profits of at least $15,000,000 and authorized by law to
perform all the duties imposed upon it by this Indenture. The
Registrar may at any time resign and be discharged of the duties and
obligations created by this Indenture by giving at least sixty (60)
days' notice to the Authority, the Trustee and the Company. The
Registrar may be removed at any time, at the direction of the Company,
by an instrument signed by the Authority filed with the Registrar and
the Trustee.
In the event of the resignation or removal of the Registrar, the
Registrar shall deliver any Bonds held by it in such capacity to its
successor or, if there be no successor, to the Trustee.
In the event that the Authority shall fail to appoint a Registrar
hereunder, or in the event that the Registrar shall resign or be
removed, or be dissolved, or if the property or affairs of the
Registrar shall be taken under the control of any state or federal
court or administrative body because of bankruptcy or insolvency, or
for any other reason, and the Authority shall not have appointed its
successor as Registrar, the Trustee shall ipso facto be deemed to be
the Registrar for all purposes of this Indenture until the appointment
by the Authority of the Registrar or successor Registrar, as the case
may be.
Upon the appointment of a successor Registrar, the Trustee shall
give notice thereof by Mail to all Owners of Bonds.
Section 10.25. Several Capacities. Anything herein to the
contrary notwithstanding, the same entity may serve hereunder as the
Trustee, the Paying Agent or a Co-Paying Agent and the Registrar and
in any combination of such capacities to the extent permitted by law.
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND
PROOF OF OWNERSHIP OF BONDS
Section 11.01. Execution of Instruments; Proof of Ownership. Any
request, direction, consent or other instrument in writing, whether or
not required or permitted by this Indenture to be signed or executed
by Owners of the Bonds, may be in any number of concurrent instruments
of similar tenor and may be signed or executed by Owners of the Bonds
or by an agent appointed by an instrument in writing. Proof of the
execution of any such instrument and of the ownership of Bonds shall
be sufficient for any purpose of this Indenture and shall be
conclusive in favor of the Trustee with regard to any action taken by
it under such instrument if made in the following manner:
(a) The fact and date of the execution by any person of any
such instrument may be proved by the certificate of any officer
in any jurisdiction who, by the laws thereof, has power to take
acknowledgments within such jurisdiction, to the effect that the
person signing such instrument acknowledged before him the
execution thereof, or by an affidavit of a witness to such
execution.
(b) The ownership or former ownership of Bonds shall be
proved by the registration books kept under the provisions of
Section 2.08 hereof.
Nothing contained in this Article XI shall be construed as
limiting the Trustee to such proof, it being intended that the Trustee
may accept any other evidence of matters herein stated which it may
deem sufficient. Any request or consent of any Owner of a Bond shall
bind every future Owner of the same Bond or any Bond or Bonds issued
in lieu thereof in respect of anything done by the Trustee or the
Authority in pursuance of such request or consent.
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
Section 12.01. Limitations. Neither this Indenture nor the Loan
Agreement shall be modified or amended in any respect subsequent to
the original issuance of the Bonds except as provided in and in
accordance with and subject to the provisions of this Article XII and
Section 7.04 hereof.
The Trustee may, but shall not be obligated to, enter into any
Supplemental Indenture which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise.
Section 12.02. Supplemental Indentures without Owner Consent. The
Authority and the Trustee may, from time to time and at any time,
without the consent of or notice to the Owners of the Bonds, enter
into Supplemental Indentures as follows:
(a) to cure any formal defect, omission, inconsistency or
ambiguity in this Indenture, provided, however, that such cure
shall not materially and adversely affect the interests of the
Owners of the Bonds;
(b) to grant to or confer or impose upon the Trustee for the
benefit of the Owners of the Bonds any additional rights,
remedies, powers, authority, security, liabilities or duties
which may lawfully be granted, conferred or imposed;
(c) to add to the covenants and agreements of, and
limitations and restrictions upon, the Authority in this
Indenture other covenants, agreements, limitations and
restrictions to be observed by the Authority;
(d) to confirm, as further assurance, any pledge under, and
the subjection to any claim, lien or pledge created or to be
created by, this Indenture, of the Receipts and Revenues of the
Authority from the Loan Agreement or of any other moneys,
securities or funds;
(e) to authorize a different denomination or denominations
of the Bonds and to make correlative amendments and modifications
to this Indenture regarding exchange ability of Bonds of
different denominations, redemptions of portions of Bonds of
particular denominations and similar amendments and modifications
of a technical nature;
(f) to modify, alter, supplement or amend this Indenture in
such manner as shall permit the qualification hereof under the
Trust Indenture Act of 1939, as from time to time amended;
(g) to modify, alter, supplement or amend this Indenture in
such manner as shall be necessary, desirable or appropriate in
order to provide for or eliminate the registration and
registration of transfer of the Bonds through a book-entry or
similar method, whether or not the Bonds are evidenced by
certificates;
(h) to modify, alter, amend or supplement this Indenture in
any other respect which is not materially adverse to the Owners
and which does not involve a change described in clause (i),
(ii), (iii) or (iv) of Section 12.03(a) hereof; and
(i) to provide any additional procedures, covenants or
agreements necessary or desirable to maintain the tax-exempt
status of interest on the Bonds.
Before the Authority and the Trustee shall enter into any
Supplemental Indenture pursuant to this Section 12.02, there shall
have been delivered to the Trustee an opinion of Bond Counsel stating
that such Supplemental Indenture is authorized or permitted by this
Indenture and the Act, complies with their respective terms, will,
upon the execution and delivery thereof, be valid and binding upon the
Authority in accordance with its terms and will not, in and of itself,
adversely affect the exclusion from gross income for federal tax
purposes of the interest on the Bonds.
Section 12.03. Supplemental Indentures with Consent of Owners.
(a) Except for any Supplemental Indenture entered into pursuant to
Section 12.02 hereof, subject to the terms and provisions contained in
this Section 12.03 and Section 12.05 and not otherwise, Owners of not
less than a majority in aggregate principal amount of the Bonds then
Outstanding which would be adversely affected thereby shall have the
right from time to time to consent to and approve the execution and
delivery by the Authority and the Trustee of any Supplemental
Indenture deemed necessary or desirable by the Authority for the
purposes of modifying, altering, amending, supplementing or
rescinding, in any particular, any of the terms or provisions
contained in this Indenture; provided, however, that, unless approved
in writing by the Owners of all the Bonds then Outstanding which would
be adversely affected thereby, nothing herein contained shall permit,
or be construed as permitting, (i) a change in the times, amounts or
currency of payment of the principal of or premium, if any, or
interest on any Outstanding Bond, a reduction in the principal amount
or redemption price of any Outstanding Bond or a change in the rate of
interest thereon, or any impairment of the right of any Owner to
institute suit for the payment of any Bond owned by it, or (ii) the
creation of a claim or lien upon, or a pledge of, the Receipts and
Revenues of the Authority from the Loan Agreement ranking prior to or
on a parity with the claim, lien or pledge created by this Indenture
(except as referred to in Section 10.04 hereof), or (iii) a preference
or priority of any Bond or Bonds over any other Bond or Bonds, or (iv)
a reduction in the aggregate principal amount of Bonds the consent of
the Owners of which is required for any such Supplemental Indenture or
which is required, under Section 12.07 hereof, for any modification,
alteration, amendment or supplement to the Loan Agreement.
(b) If at any time the Authority shall request the Trustee to
enter into any Supplemental Indenture for any of the purposes of this
Section 12.03, the Trustee shall cause notice of the proposed
Supplemental Indenture to be given by Mail to all Owners of
Outstanding Bonds. Such notice shall briefly set forth the nature of
the proposed Supplemental Indenture and shall state that a copy
thereof is on file at the Principal Office of the Trustee for
inspection by all Owners of Bonds.
(c) Within two years after the date of the first mailing of such
notice, the Authority and the Trustee may enter into such Supplemental
Indenture in substantially the form described in such notice only if
there shall have first been delivered to the Trustee (i) the required
consents, in writing, of Owners of Bonds and (ii) an opinion of Bond
Counsel stating that such Supplemental Indenture is authorized or
permitted by this Indenture and the Act, complies with their
respective terms and, upon the execution and delivery thereof, will be
valid and binding upon the Authority in accordance with its terms and
will not, in and of itself, adversely affect the exclusion from gross
income for federal tax purposes of the interest on the Bonds.
(d) If Owners of not less than the percentage of Bonds required
by this Section 12.03 shall have consented to and approved the
execution and delivery thereof as herein provided, no Owner shall have
any right to object to the execution and delivery of such Supplemental
Indenture, or to object to any of the terms and provisions contained
therein or the operation thereof, or in any manner to question the
propriety of the execution and delivery thereof, or to enjoin or
restrain the Authority or the Trustee from executing and delivering
the same or from taking any action pursuant to the provisions thereof.
Section 12.04. Effect of Supplemental Indenture. Upon the
execution and delivery of any Supplemental Indenture pursuant to the
provisions of this Article XII, this Indenture shall be, and be deemed
to be, modified, altered, amended or supplemented in accordance
therewith, and the respective rights, duties and obligations under
this Indenture of the Authority, the Trustee and Owners of all Bonds
then Outstanding shall thereafter be determined, exercised and
enforced under this Indenture subject in all respects to such
modifications, alterations, amendments and supplements.
Section 12.05. Consent of the Company. Anything herein to the
contrary notwithstanding, any Supplemental Indenture under this
Article XII which affects any rights, powers, agreements or
obligations of the Company under the Loan Agreement, or requires a
revision of the Loan Agreement, shall not become effective unless and
until the Company shall have consented to such Supplemental Indenture.
Section 12.06. Amendment of Loan Agreement without Consent of
Owners. Without the consent of or notice to the Owners of the Bonds,
the Authority may enter into any Supplemental Loan Agreement, and the
Trustee may consent thereto, as may be required (a) by the provisions
of the Loan Agreement and this Indenture, (b) for the purpose of
curing any formal defect, omission, inconsistency or ambiguity
therein, (c) to provide any additional procedures, covenants or
agreements necessary or desirable to maintain the tax-exempt status of
interest on the Bonds, or (d) in connection with any other change
therein which is not materially adverse to the Owners of the Bonds. A
revision of Exhibit A to the Loan Agreement pursuant to Section 3.03
thereof shall not be deemed a Supplemental Loan Agreement for purposes
of this Indenture.
Before the Authority shall enter into, and the Trustee shall
consent to, any Supplemental Loan Agreement pursuant to this Section
12.06, there shall have been delivered to the Trustee an opinion of
Bond Counsel stating that such Supplemental Loan Agreement is
authorized or permitted by this Indenture and the Act, complies with
their respective terms, will, upon the execution and delivery thereof,
be valid and binding upon the Authority and the Company in accordance
with its terms and will not, in and of itself, adversely affect the
exclusion from gross income for federal tax purposes of interest on
the Bonds.
Section 12.07. Amendment of Loan Agreement with Consent of
Owners. Except in the case of Supplemental Loan Agreements referred to
in Section 12.06 hereof, the Authority shall not enter into, and the
Trustee shall not consent to, any Supplemental Loan Agreement without
the written approval or consent of the Owners of not less than a
majority in aggregate principal amount of the Bonds then Outstanding
which would be adversely affected thereby, given and procured as
provided in Section 12.03 hereof; provided, however, that, unless
approved in writing by the Owners of all Bonds then Outstanding which
would be adversely affected thereby, nothing herein contained shall
permit, or be construed as permitting, a change in the obligations of
the Company under Section 5.01 of the Loan Agreement. If at any time
the Authority or the Company shall request the consent of the Trustee
to any such proposed Supplemental Loan Agreement, the Trustee shall
cause notice of such proposed Supplemental Loan Agreement to be given
in the same manner as provided by Section 12.03 hereof with respect to
Supplemental Indentures. Such notice shall briefly set forth the
nature of such proposed Supplemental Loan Agreement and shall state
that copies of the instrument embodying the same are on file at the
Principal Office of the Trustee for inspection by all Owners of the
Bonds. The Authority may enter into, and the Trustee may consent to,
any such proposed Supplemental Loan Agreement subject to the same
conditions, and with the same effect, as provided by Section 12.03
hereof with respect to Supplemental Indentures.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Successors of the Authority. In the event of the
dissolution of the Authority, all the covenants, stipulations,
promises and agreements in this Indenture contained, by or on behalf
of, or for the benefit of, the Authority, shall bind or inure to the
benefit of the successors of the Authority from time to time and any
entity, officer, board, commission, agency or instrumentality to whom
or to which any power or duty of the Authority shall be transferred.
Section 13.02. Parties in Interest. Except as herein otherwise
specifically provided, nothing in this Indenture expressed or implied
is intended or shall be construed to confer upon any person, firm or
corporation other than the Authority, the Company and the Trustee and
their successors and assigns and the Owners of the Bonds any right,
remedy or claim under or by reason of this Indenture, this Indenture
being intended to be for the sole and exclusive benefit of the
Authority, the Company and the Trustee and their successors and
assigns and the Owners of the Bonds.
Section 13.03. Severability. In case any one or more of the
provisions of this Indenture or of the Loan Agreement or of the Bonds
shall, for any reason, be held to be illegal or invalid, such
illegality or invalidity shall not affect any other provisions of this
Indenture or of the Loan Agreement or of such Bonds, and this
Indenture and the Loan Agreement and such Bonds shall be construed and
enforced as if such illegal or invalid provisions had not been
contained herein or therein.
Section 13.04. No Personal Liability of Authority Officials. No
covenant or agreement contained in the Bonds or in this Indenture
shall be deemed to be the covenant or agreement of any director,
official, officer, agent, or employee of the Authority in his
individual capacity, and neither the members of the Board of Directors
of the Authority nor any official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof.
Section 13.05. Bonds Owned by the Authority or the Company. In
determining whether Owners of the requisite aggregate principal amount
of the Bonds have concurred in any direction, consent or waiver under
this Indenture, Bonds which are owned by the Authority or the Company
or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company (unless
the Authority, the Company or such person owns all Bonds which are
then Outstanding, determined without regard to this Section 13.05)
shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Bonds which the Trustee knows are
so owned shall be so disregarded. Upon the request of the Trustee, the
Company and the Authority shall furnish to the Trustee a certificate
identifying all Bonds, if any, actually known to either of them to be
owned or held by or for the account of any of the above-described
persons, and the Trustee shall be entitled to rely on such certificate
as conclusive evidence of the facts set forth therein and that all
other Bonds are Outstanding for the purposes of such determination.
Bonds so owned which have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Bonds and
that the pledgee is not the Authority or the Company or any person
directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company. In case of a dispute as to
such right, any decision by the Trustee taken upon the advice of
counsel shall be full protection to the Trustee.
Section 13.06. Counterparts. This Indenture may be executed in
any number of counterparts, each of which, when so executed and
delivered, shall be an original; but such counterparts shall together
constitute but one and the same Indenture.
Section 13.07. Governing Law. The laws of the State of Arizona
shall govern the construction and enforcement of this Indenture and of
all Bonds, except that the laws of the State of New York shall govern
the construction and enforcement of the rights and duties of the
Trustee hereunder and the construction of Section 13.09 hereof and the
computation of any period of grace provided herein.
Section 13.08. Notices. Except as otherwise provided in this
Indenture, all notices, certificates, requests requisitions or other
communications by the Authority, the Company, the Trustee, the Paying
Agent, any Co-Paying Agent or the Registrar pursuant to this Indenture
shall be in writing and shall be sufficiently given and shall be
deemed given when mailed by registered mail, postage prepaid,
addressed as follows: If to the Authority, c/o Russo, Cox & Russo,
P.C., 1820 East River Road, Suite 230, Tucson, Arizona 85718; if to
the Company, at 220 West Sixth Street, Tucson, Arizona 85702,
Attention: Treasurer; if to the Trustee, at 100 Wall Street, Suite
1600, New York, New York 10005, Attention: Vice President; if to the
Paying Agent, any Co-Paying Agent or the Registrar, at the address
designated in the acceptance of appointment or engagement. Any of the
foregoing may, by notice given hereunder to each of the others,
designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be sent
hereunder.
Section 13.09. Holidays. If the date for making any payment or
the last date for performance of any act or the exercising of any
right, as provided in this Indenture, shall be a Saturday, Sunday or a
public holiday in the city in which is located the Principal Office of
the Trustee, such payment may be made or act performed or right
exercised on the next succeeding business day, with the same force and
effect as if done on the nominal date provided in this Indenture, and
no interest shall accrue for the period after such nominal date. If
the last day of any period of grace, as provided in this Indenture,
shall be a Saturday, Sunday or a public holiday in the city in which
is located the Principal Office of the Trustee, the last day of such
period of grace shall be deemed to be the next succeeding business
day.
Section 13.10. Statutory Notice Regarding Cancellation of
Contracts. As required by the provisions of Section 38-511, Arizona
Revised Statutes, as amended, notice is hereby given that political
subdivisions of the State of Arizona or any of their departments or
agencies may, within three (3) years of its execution, cancel any
contract, without penalty or further obligation, made by the political
subdivisions or any of their departments or agencies on or after
September 30, 1988, if any person significantly involved in
initiating, negotiating, securing, drafting or creating the contract
on behalf of the political subdivisions or any of their departments or
agencies is, at any time while the contract or any extension of the
contact is in effect, an employee or agent of any other party to the
contract in any capacity or a consultant to any other party of the
contract with respect to the subject matter of the contract.
The Trustee covenants and agrees not to employ as an employee,
agent or, with respect to the subject matter of this Indenture, a
consultant, any person actually known by the Trustee to be
significantly involved in initiating, negotiating, securing, drafting
or creating such Indenture on behalf of the Authority within three (3)
years from the execution hereof, unless a waiver is provided by the
Authority.
<PAGE>
IN WITNESS WHEREOF, The Industrial Development Authority of the
County of Pima has caused this Indenture to be executed by its
President and First Trust of New York, National Association has caused
this Indenture to be executed on its behalf by its Vice President, all
as of the day and year first above written.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
By: /s/ Stanley Lehman
-----------------------------------
President
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: /s/ P.J. Crowley
-----------------------------------
Vice President
<PAGE>
EXHIBIT A
(FORM OF BOND)
No.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
INDUSTRIAL DEVELOPMENT REVENUE BOND,
1997 SERIES B
(TUCSON ELECTRIC POWER COMPANY PROJECT)
INTEREST RATE (PER ANNUM):
MATURITY DATE: DATED:
CUSIP:
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
The Industrial Development Authority of the County of Pima, an
Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona (the "Authority"), for value
received, hereby promises to pay (but only out of the Receipts and
Revenues of the Authority from the Loan Agreement, as hereinafter
defined, and other moneys pledged therefor) to the Registered Owner
identified above or registered assigns, on the Maturity Date set forth
above, upon the presentation and surrender hereof, the Principal
Amount set forth above and to pay (but only out of the Receipts and
Revenues of the Authority from the Loan Agreement and other moneys
pledged therefor), interest on said Principal Amount until payment of
said Principal Amount has been made or duly provided for, from the
date hereof, at the Interest Rate set forth above, semi-annually on
the first days of March and September in each year, commencing March
1, 1998. Interest will be calculated on the basis of a 360- day year
of twelve 30-day months.
The principal of and premium, if any, on this Bond are payable at
the principal office of First Trust of New York, National Association,
as Paying Agent, or at the principal office of any co-paying agent
appointed in accordance with the Indenture (as hereinafter defined),
at the option of the Registered Owner hereof. Interest on this Bond is
payable by check drawn upon the Paying Agent and mailed to the
Registered Owner of this Bond as of the close of business on the
Record Date (as defined in the Indenture) at the registered address of
such Registered Owner; notwithstanding the foregoing, upon request to
the Paying Agent by a Registered Owner of not less than $1,000,000 in
aggregate principal amount of Bonds, interest on such Bonds and, after
presentation and surrender of such Bonds, the principal thereof shall
be paid to such Registered Owner by wire transfer to the account
maintained within the continental United States specified by such
Registered Owner or, if such Registered Owner maintains an account
with the entity acting as Paying Agent, by deposit into such account.
Payment of the principal of and premium, if any, and interest on, this
Bond shall be in any coin or currency of the United States of America
as, at the respective times of payment, shall be legal tender for the
payment of public and private debts.
This Bond is one of the duly authorized Industrial Development
Revenue Bonds, 1997 Series B (Tucson Electric Power Company Project)
(the "Bonds") of the Authority, aggregating One Hundred Fifty Million
Dollars ($150,000,000) in principal amount, issued under and pursuant
to the Constitution and laws of the State of Arizona, particularly
Title 35, Chapter 5, Arizona Revised Statutes, as amended (the "Act"),
and the Indenture of Trust, dated as of September 15, 1997 (the
"Indenture"), between the Authority and First Trust of New York,
National Association, as trustee (the "Trustee"), for the purpose of
refinancing, by payment or redemption of (a) The Authority's
Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric
Power Company General Project) due June 15, 2022 and (b) The
Authority's Industrial Development Revenue Bonds, 1982 Series A
(Tucson Electric Power Company General Project) due July 1, 2022, or
provision therefor, a portion of the costs of the acquisition,
construction, improvement and equipping of certain facilities for the
furnishing of electric energy (the "Facilities"). Pursuant to the Loan
Agreement, dated as of September 15, 1997 (the "Loan Agreement"),
between the Authority and Tucson Electric Power Company, a corporation
organized and existing under the laws of the State of Arizona (the
"Company"), the proceeds of the Bonds, other than accrued interest, if
any, paid by the initial purchasers thereof, will be loaned to the
Company.
Neither Pima County, Arizona nor the State of Arizona shall in
any event be liable for the payment of the principal of or premium, if
any, or interest on the Bonds, and neither the Bonds, nor the premium,
if any, or the interest thereon, shall be construed to constitute an
indebtedness of Pima County, Arizona or the State of Arizona within
the meaning of any constitutional or statutory provisions whatsoever.
The Bonds and the premium, if any, and the interest thereon are
limited obligations of the Authority payable solely from the Receipts
and Revenues of the Authority from the Loan Agreement and other moneys
pledged therefor under the Indenture.
The Bonds are equally and ratably secured, to the extent provided
in the Indenture, by the pledge thereunder of the "Receipts and
Revenues of the Authority from the Loan Agreement", which term is used
herein as defined in the Indenture and which as therein defined means
all moneys paid or payable to the Trustee for the account of the
Authority by the Company in respect of the loan payments, including
all receipts of the Trustee which, under the provisions of the
Indenture, reduce the amounts of such payments. The Authority has also
pledged and assigned to the Trustee as security for the Bonds all
other rights and interests of the Authority under the Loan Agreement
(other than its rights to indemnification and its administrative
expenses and certain other rights).
The transfer of this Bond shall be registered upon the
registration books kept at the principal office of First Trust of New
York, National Association, as Registrar, at the written request of
the Registered Owner hereof or his attorney duly authorized in
writing, upon surrender of this Bond at said office, together with a
written instrument of transfer satisfactory to the Registrar duly
executed by the Registered Owner or his duly authorized attorney.
In the manner and with the effect provided in the Indenture, each
of the Bonds may be redeemed prior to maturity, as follows:
(a) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, on any date on or
after September 1, 2002 in whole at any time or in part from time
to time, at the applicable redemption price (expressed as a
percentage of principal amount) set forth below, plus accrued
interest to the redemption date:
Redemption Period Redemption Price
----------------- ----------------
September 1, 2002 through August 31, 2003 102%
September 1, 2003 through August 31, 2004 101%
September 1, 2004 and thereafter 100%
(b) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, in whole at any time
at the principal amount thereof plus accrued interest to the
redemption date, if:
(i) the Company shall have determined that the
continued operation of the Facilities is impracticable,
uneconomical or undesirable for any reason;
(ii) all or substantially all of the Facilities shall
have been condemned or taken by eminent domain; or
(iii) the operation of the Facilities shall have been
enjoined or shall have otherwise been prohibited by, or
shall conflict with, any order, decree, rule or regulation
of any court or of any federal, state or local regulatory
body, administrative agency or other governmental body.
(c) The Bonds shall be subject to mandatory redemption by
the Authority, at the principal amount thereof plus accrued
interest to the redemption date, on the 180th day (or such
earlier date as may be designated by the Company) after a final
determination by a court of competent jurisdiction or an
administrative agency, to the effect that, as a result of a
failure by the Company to perform or observe any covenant,
agreement or representation contained in the Loan Agreement, the
interest payable on the Bonds is included for federal income tax
purposes in the gross income of the owners thereof, other than
any owner of a Bond who is a "substantial user" of the Facilities
or a "related person" within the meaning of Section 103(b)(13) of
the Internal Revenue Code of 1954, as amended (the "1954 Code").
No determination by any court or administrative agency shall be
considered final for the purposes of this paragraph (c) unless
the Company shall have been given timely notice of the proceeding
which resulted in such determination and an opportunity to
participate in such proceeding, either directly or through an
owner of a Bond, and until the conclusion of any appellate review
sought by any party to such proceeding or the expiration of the
time for seeking such review. The Bonds shall be redeemed either
in whole or in part in such principal amount that, in the opinion
of Bond Counsel, the interest payable on the Bonds, including the
Bonds remaining outstanding after such redemption, would not be
included in the gross income of any owner thereof, other than an
owner of a Bond who is a "substantial user" of the Facilities or
a "related person" within the meaning of Section 103(b)(13) of
the 1954 Code.
If less than all of the Bonds at the time outstanding are to be
called for redemption, the particular Bonds or portions of Bonds to be
redeemed shall be selected by the Trustee, in such manner as the
Trustee in its discretion may deem proper, in the principal amounts
designated to the Trustee by the Company or otherwise as required by
the Indenture.
In the event any of the Bonds are called for redemption, the
Trustee shall give notice, in the name of the Authority, of the
redemption of such Bonds. Such notice shall be given by mailing a copy
of the redemption notice by first-class mail at least thirty (30) days
prior to the date fixed for redemption to the Registered Owners of the
Bonds to be redeemed at the addresses shown on the registration books;
provided, however, that failure duly to give such notice by mailing,
or any defect therein, shall not affect the validity of any
proceedings for the redemption of the Bonds as to which there shall be
no such failure or defect.
With respect to any notice of redemption of Bonds in accordance
with the redemption provisions lettered (a) or (b) above, unless, upon
the giving of such notice, such Bonds shall be deemed to have been
paid within the meaning of the Indenture, such notice shall state that
such redemption, shall be conditional upon the receipt, by the Trustee
on or prior to the opening of business on the date fixed for such
redemption of moneys sufficient to pay the principal of and premium,
if any, and interest on such Bonds to be redeemed, and that if such
moneys shall not have been so received said notice shall be of no
force and effect and the Authority shall not be required to redeem
such Bonds. In the event that such notice of redemption contains such
a condition and such moneys are not so received, the redemption shall
not be made and the Trustee shall within a reasonable time thereafter
give notice, in the manner in which the notice of redemption was
given, that such moneys were not so received.
If a notice of redemption shall be unconditional, or if the
conditions of a conditional notice of redemption shall have been
satisfied, then upon presentation and surrender of Bonds so called for
redemption at the place or places of payment, such Bonds shall be
redeemed.
Any Bonds and portions of Bonds which have been duly selected for
redemption shall cease to bear interest on the specified redemption
date provided that moneys sufficient to pay the principal of, premium,
if any, and interest on such Bonds shall be on deposit with the
Trustee on the date fixed for redemption so that such Bonds will be
deemed to be paid in accordance with the Indenture and such Bonds
shall thereafter cease to be entitled to any lien, benefit or security
under the Indenture.
The Registered Owner of this Bond shall have no right to enforce
the provisions of the Indenture, or to institute action to enforce the
covenants therein, or to take any action with respect to any default
under the Indenture, or to institute, appear in or defend any suit or
other proceeding with respect thereto, except as provided in the
Indenture.
With certain exceptions as provided therein, the Indenture and
the Loan Agreement may be modified or amended only with the consent of
the Registered Owners of a majority in aggregate principal amount of
all Bonds outstanding under the Indenture which would be adversely
affected thereby.
Reference is hereby made to the Indenture and the Loan Agreement,
copies of which are on file with the Trustee, for the provisions,
among others, with respect to the nature and extent of the rights,
duties and obligations of the Authority, the Company, the Trustee and
the Registered Owners of the Bonds. The Registered Owner of this Bond,
by the acceptance hereof, is deemed to have agreed and consented to
the terms and provisions of the Indenture and the Loan Agreement.
Among other things, as provided in the Indenture and subject to
certain limitations therein set forth, this Bond or any portion of the
principal amount hereof will be deemed to have been paid within the
meaning and with the effect expressed in the Indenture, and the entire
indebtedness of the Authority in respect thereof shall be satisfied
and discharged, if there has been irrevocably deposited with the
Trustee, in trust, money in an amount which will be sufficient and/or
Government Obligations (as defined in the Indenture), the principal of
and interest on which, when due, without regard to any reinvestment
thereof, will provide moneys which, together with moneys deposited
with or held by the Trustee, will be sufficient, to pay when due the
principal of and premium, if any, and interest on this Bond or such
portion of the principal amount hereof when due.
Among other things, the Loan Agreement contains terms, provisions
and conditions relating to the consolidation or merger of the Company
with or into, and the sale, transfer or other disposition of assets
to, another Person (as defined in the Loan Agreement), to the
assumption by such other Person, in certain circumstances, of all of
the obligations of the Company under the Loan Agreement and to the
release and discharge of the Company, in certain circumstances, from
such obligations.
The Authority, the Trustee, the Registrar, the Paying Agent and
any co-paying agent may deem and treat the person in whose name this
Bond is registered as the absolute owner hereof for all purposes,
whether or not this Bond is overdue, and neither the Authority, the
Trustee, the Paying Agent nor any co-paying agent shall be affected by
any notice to the contrary.
It is hereby certified, recited and declared that all acts,
conditions and things required by the Constitution and laws of the
State of Arizona to exist, to have happened and to have been
performed, precedent to and in the execution and delivery of the
Indenture and the issuance of this Bond, do exist, have happened and
have been performed in regular and due form as required by law.
No covenant or agreement contained in this Bond or the Indenture
shall be deemed to be a covenant or agreement of any official,
officer, agent or employee of the Authority in his individual
capacity, and neither the members of the Board of Directors of the
Authority, nor any official executing this Bond, shall be liable
personally on this Bond or be subject to any personal liability or
accountability by reason of the issuance or sale of this Bond.
This Bond shall not be entitled to any right or benefit under the
Indenture, or be valid or become obligatory for any purpose, until
this Bond shall have been authenticated by the execution by the
Trustee, or its successor as Trustee, of the certificate of
authentication inscribed hereon.
<PAGE>
IN WITNESS WHEREOF, The Industrial Development Authority of The
County of Pima has caused this Bond to be executed with the manual or
facsimile signature of its President or Vice President and a facsimile
of its official seal to be imprinted hereon and attested with the
manual or facsimile signature of its Secretary or Assistant Secretary.
THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA
(Seal)
By.....................................
President
ATTEST:
......................................
Secretary
<PAGE>
EXHIBIT B
(FORM FOR ORDINARY REGISTRATION OF TRANSFER)
COMPLETE AND SIGN THIS FORM FOR ORDINARY
REGISTRATION OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Please Insert Social Security Or Other Identifying Number of Assignee
............................................................................
............................................................................
Please print or typewrite name and address including postal zip code
of assignee
............................................................................
this bond and all rights thereunder, hereby irrevocably constituting
and appointing ________________________ attorney to register such
transfer on the registration books in the principal office of the
Registrar, with full power of substitution in the premises.
Dated:................. ..................................................
NOTE: The signature on this assignment must
correspond with the name as written on the face of
this Bond in every particular, without alteration,
enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is to certify that this Bond is one of the Bonds
described in the within-mentioned Indenture.
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION,
as Trustee
By............................................
Authorized Officer
Date of Authentication:......................
Exhibit 4e
=================================================================
LOAN AGREEMENT
(1997 SERIES C)
BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
AND
TUCSON ELECTRIC POWER COMPANY
--------
DATED AS OF SEPTEMBER 15 , 1997
________
RELATING TO
INDUSTRIAL DEVELOPMENT REVENUE BONDS,
1997 SERIES C
(TUCSON ELECTRIC POWER COMPANY PROJECT)
=================================================================
<PAGE>
TABLE OF CONTENTS*
Page
----
LOAN AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation of Certain Definitions by
Reference . . . . . . . . . . . . . . . . . 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Representations and Warranties of the
Authority . . . . . . . . . . . . . . . . . 4
SECTION 2.02. Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . . 4
ARTICLE III
THE FACILITIES
SECTION 3.01. Facilities; Property of the Company . . . . 5
SECTION 3.02. Revision of Plans and Specifications . . . 5
SECTION 3.03. Maintenance of Facilities; Remodeling . . . 5
SECTION 3.04. Insurance . . . . . . . . . . . . . . . . . 6
SECTION 3.05. Condemnation . . . . . . . . . . . . . . . 6
SECTION 3.06. Termination of Construction . . . . . . . . 6
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS OF THE BONDS
SECTION 4.01. Issuance of the Bonds . . . . . . . . . . . 6
SECTION 4.02. Issuance of Other Obligations. . . . . . . 6
SECTION 4.03. The Loan; Disposition of Bond Proceeds. . . 6
SECTION 4.04. Investment of Moneys in Funds and Accounts 6
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01. Loan Payments. . . . . . . . . . . . . . . 6
SECTION 5.02. Payments Assigned; Obligation Absolute . . 7
SECTION 5.03. Payment of Expenses . . . . . . . . . . . . 7
SECTION 5.04. Indemnification . . . . . . . . . . . . . . 7
SECTION 5.05. Payment of Taxes; Discharge of Liens . . . 8
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01. Maintenance of Corporate Existence . . . . 8
SECTION 6.02. Permits or Licenses . . . . . . . . . . . . 9
SECTION 6.03. Authority's Access to Facilities . . . . . 9
SECTION 6.04. Tax-Exempt Status of Interest on Bonds. . . 9
--------------------
* This table of contents is not part of the Loan Agreement, and
is for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part
of the Loan Agreement.
<PAGE>
SECTION 6.05. Use of Facilities . . . . . . . . . . . . 10
SECTION 6.06. Financing Statements . . . . . . . . . . 10
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01. Conditions . . . . . . . . . . . . . . . 10
SECTION 7.02. Instrument Furnished to the Authority and
Trustee . . . . . . . . . . . . . . . . . 12
SECTION 7.03. Limitation . . . . . . . . . . . . . . . 12
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default . . . . . . . . . . . . 12
SECTION 8.02. Force Majeure . . . . . . . . . . . . . . 12
SECTION 8.03. Remedies . . . . . . . . . . . . . . . . 13
SECTION 8.04. No Remedy Exclusive . . . . . . . . . . . 13
SECTION 8.05. Reimbursement of Attorneys' and Agents'
Fees . . . . . . . . . . . . . . . . . . 13
SECTION 8.06. Waiver of Breach . . . . . . . . . . . . 13
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01. Redemption of Bonds . . . . . . . . . . . 14
SECTION 9.02. Compliance with the Indenture . . . . . . 14
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Term of Agreement . . . . . . . . . . . . 14
SECTION 10.02. Notices . . . . . . . . . . . . . . . . . 14
SECTION 10.03. Parties in Interest . . . . . . . . . . . 14
SECTION 10.04. Amendments . . . . . . . . . . . . . . . 15
SECTION 10.05. Counterparts . . . . . . . . . . . . . . 15
SECTION 10.06. Severability . . . . . . . . . . . . . . 15
SECTION 10.07. Governing Law . . . . . . . . . . . . . . 15
SECTION 10.08. Notice Regarding Cancellation of
Contracts. . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibit A - Description of the Facilities . . . . . . . . . . A-1
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (1997 Series C), dated as of September
15, 1997 (this "Agreement"), between THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona (hereinafter called the "Authority"), and TUCSON ELECTRIC
POWER COMPANY, a corporation organized and existing under the
laws of the State of Arizona (hereinafter called the "Company"),
W I T N E S S E T H :
WHEREAS, the Authority is authorized and empowered under
Title 35, Chapter 5, Arizona Revised Statutes, as amended (the
"Act"), to issue its bonds in accordance with the Act and to make
secured or unsecured loans for the purpose of financing or
refinancing the acquisition, construction, improvement or
equipping of projects consisting of land, any building or other
improvement, and all real and personal properties, including but
not limited to machinery and equipment, whether or not now in
existence or under construction, whether located within or
without Pima County, which shall be suitable for, among other
things, facilities for the furnishing of electric energy, gas or
water, air and water pollution control facilities and sewage and
solid waste disposal facilities, and to charge and collect
interest on such loans and pledge the proceeds of loan agreements
as security for the payment of the principal of and interest on
bonds, or designated issues of bonds, issued by the Authority and
any agreements made in connection therewith, whenever the Board
of Directors of the Authority finds such loans to be in
furtherance of the purposes of the Authority or in the public
interest;
WHEREAS, the Authority has heretofore issued and sold
$75,000,000 aggregate principal amount of its Industrial
Development Revenue Bonds, 1983 Series A (Tucson Electric Power
Company General Project), all of which remain outstanding (the
"1983 Bonds"), the proceeds of which were loaned to the Company
to finance a portion of the costs of the acquisition,
construction, improvement and equipping of certain facilities for
the furnishing of electric energy described in Exhibit A hereto
("Facilities");
WHEREAS, the Authority proposes to issue and sell its
revenue bonds for the purpose of refinancing, by the payment or
redemption of the 1983 Bonds, or provisions therefor, the portion
of the cost of the Facilities previously financed from the
proceeds of the 1983 Bonds;
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby and in consideration of the premises, DO HEREBY
AGREE as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this
Article I shall for all purposes of this Agreement have the
meanings herein specified, unless the context clearly requires
otherwise:
Act:
"Act" shall mean Title 35, Chapter 5, Arizona Revised
Statutes, and all acts supplemental thereto or amendatory
thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Authority with respect to this Agreement, the
Indenture and any transaction or event contemplated by this
Agreement or the Indenture, including the compensation and
reimbursement of expenses and advances payable to the Trustee, to
the paying agent, any co-paying agent and the registrar under the
Indenture and a pro rata share of the Authority's annual
operating expenses in accordance with the provisions of paragraph
XII.D. of the Authority's Procedural Pamphlet.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of
September 15, 1997, between the Authority and the Company, and
any and all modifications, alterations, amendments and
supplements hereto.
Authority:
"Authority" shall mean The Industrial Development Authority
of the County of Pima, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona incorporated for and with the approval of Pima County,
Arizona, pursuant to the provisions of the Constitution of the
State of Arizona and the Act, its successors and their assigns.
Authorized Company Representative:
"Authorized Company Representative" shall mean each person
at the time designated to act on behalf of the Company by written
certificate furnished to the Authority and the Trustee containing
the specimen signature of such person and signed on behalf of the
Company by its President, any Vice President or its Treasurer,
together with its Secretary or any Assistant Secretary.
Bond Counsel:
"Bond Counsel" shall mean any firm or firms of nationally
recognized bond counsel experienced in matters pertaining to the
validity of, and exclusion from gross income for federal tax
purposes of interest on bonds issued by states and political
subdivisions, selected by the Company and acceptable to the
Authority.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01 of
the Indenture.
Bonds:
"Bond" or "Bonds" shall mean the Industrial Development
Revenue Bonds, 1997 Series C (Tucson Electric Power Company
Project) of the Authority.
Code:
"Code" shall mean the Internal Revenue Code of 1986 or any
successor statute thereto. Each reference to a section of the
Code herein shall be deemed to include the United States Treasury
Regulations proposed or in effect thereunder and applicable to
the Bonds or the use of the proceeds thereof, unless the context
clearly requires otherwise. Reference to any particular Code
section shall, in the event of a successor Code, be deemed to be
a reference to the successor to such Code section.
Company:
"Company" shall mean Tucson Electric Power Company, a
corporation organized and existing under the laws of the State of
Arizona, its successors and their assigns, including, without
limitation, any successor obligor under Section 6.01 or 7.01 to
the extent of the obligations assumed thereunder.
Completion Date:
"Completion Date" shall be the date on which the Facilities
are completed in their entirety and ready to be placed in service
and operated, all as determined by the Company.
Facilities:
"Facilities" shall mean the real and personal properties,
machinery and equipment currently existing, under construction
and to be constructed which are described in Exhibit A hereto, as
revised from time to time to reflect any changes therein,
additions thereto, substitutions therefor and deletions therefrom
permitted by the terms hereof, subject, however, to the
provisions of Section 7.01 hereof.
Indenture:
"Indenture" shall mean the Indenture of Trust, dated as of
September 15, 1997, between the Authority and the Trustee
relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.
Loan Payments:
"Loan Payments" shall mean the payments required to be made
by the Company pursuant to Section 5.01 hereof.
1954 Code:
"1954 Code" shall mean the Internal Revenue Code of 1954, as
amended.
1983 Bonds:
"1983 Bonds" shall mean the $75,000,000 aggregate principal
amount of the Authority's Industrial Development Revenue Bonds,
1983 Series A (Tucson Electric Power Company General Project).
Outstanding:
"Outstanding", when used in reference to the Bonds, shall
mean, as at any particular date, the aggregate of all Bonds
authenticated and delivered under the Indenture except:
(a) those canceled by the Trustee at or prior to such
date or delivered to or acquired by the Trustee at or prior
to such date for cancellation;
(b) those deemed to be paid in accordance with Article
VIII of the Indenture; and
(c) those in lieu of or in exchange or substitution
for which other Bonds shall have been authenticated and
delivered pursuant to the Indenture, unless proof
satisfactory to the Trustee and the Company is presented
that such Bonds are held by a bona fide holder in due
course.
Person:
"Person" means (i) any corporation, limited liability
company, partnership, joint venture, association, joint-stock
company, business trust, or unincorporated organization, in each
case formed or organized under the laws of the United States of
America, any state thereof or the District of Columbia, or (ii)
the United States of America or any state thereof, or any
political subdivision of either thereof, or any agency, authority
or other instrumentality of any of the foregoing.
Tax Agreement:
"Tax Agreement" shall mean that tax certificate and
agreement, dated the date of the initial authentication and
delivery of the Bonds, between the Authority and the Company,
relating to the requirements of the Code, and any and all
modifications, alterations, amendments and supplements thereto.
Trustee:
"Trustee" shall mean First Trust of New York, National
Association, as trustee under the Indenture, its successors in
trust and their assigns.
SECTION 1.02. Incorporation of Certain Definitions by
Reference. Each capitalized term used herein and not otherwise
defined herein shall have the meaning set forth in the Indenture.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Representations and Warranties of the
Authority. The Authority makes the following representations and
warranties as the basis for the undertakings on the part of the
Company contained herein:
(a) The Authority is an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona created and existing under the Constitution and laws
of the State of Arizona;
(b) The Authority has the power to enter into this
Agreement and the Indenture and to perform and observe the
agreements and covenants on its part contained herein and
therein, including without limitation the power to issue and
sell the Bonds as contemplated herein and in the Indenture,
and by proper action has duly authorized the execution and
delivery hereof and thereof; and
(c) The execution and delivery of this Agreement and
the Indenture by the Authority do not, and consummation of
the transactions contemplated hereby and fulfillment of the
terms hereof and thereof by the Authority will not, result
in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which the
Authority is now a party or by which it is now bound, or, to
the best knowledge of the Authority, any order, rule or
regulation applicable to the Authority of any court or of
any regulatory body or administrative agency or other
governmental body having jurisdiction over the Authority or
over any of its properties, or the Constitution or laws of
the State of Arizona.
SECTION 2.02. Representations and Warranties of the
Company. The Company makes the following representations and
warranties as the basis for the undertakings on the part of the
Authority contained herein:
(a) The Company is a corporation duly organized and
existing in good standing under the laws of the State of
Arizona and duly qualified as a foreign corporation in the
State of New Mexico;
(b) The Company has power to enter into this Agreement
and to perform and observe the agreements and covenants on
its part contained herein and by proper corporate action has
duly authorized the execution and delivery hereof and all
other documents hereby executed by the Company;
(c) The execution and delivery of this Agreement by
the Company do not, and consummation of transactions
contemplated hereby and fulfillment of the terms hereof by
the Company will not, result in a breach of any of the terms
or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party or by which it is
now bound, or the Restated Articles of Incorporation or
by-laws of the Company, or any order, rule or regulation
applicable to the Company of any court or of any regulatory
body or administrative agency or other governmental body
having jurisdiction over the Company or over any of its
properties, or any statute of any jurisdiction applicable to
the Company;
(d) The Arizona Corporation Commission has approved
all matters relating to the Company's participation in the
transactions contemplated by this Agreement which require
said approval, and no other consent, approval, authorization
or other order of any regulatory body or administrative
agency or other governmental body is legally required for
the Company's participation therein, except such as may have
been obtained or may be required under the securities laws
of any jurisdiction;
(e) The Facilities are to be used solely for purposes
contemplated by the Act and are located or are to be located
within the State of Arizona and the State of New Mexico; and
(f) All of the proceeds of the Bonds (exclusive of
accrued interest, if any, paid by the initial purchasers of
such Bonds upon delivery thereof) will be expended to
refinance the Facilities through the payment or redemption
of the 1983 Bonds, or provisions therefor.
ARTICLE III
THE FACILITIES
SECTION 3.01. Facilities; Property of the Company. An
undivided interest in the Facilities shall be the property of the
Company and the Authority shall have no right, title or interest
in the Facilities.
SECTION 3.02. Revision of Plans and Specifications. The
Company may consent to one or more revisions to the plans and
specifications for the Facilities (including without limitation
any changes therein, additions thereto, substitutions therefor
and deletions therefrom), at any time and from time to time prior
to the Completion Date in any respect; provided, however, that,
if any such revision shall render inaccurate the description of
the Facilities contained in Exhibit A hereto, the Company shall
deliver to the Authority and the Trustee (a) a revised Exhibit A
containing a description of the Facilities as revised, the
accuracy of which shall have been certified by an Authorized
Company Representative, and (b) an opinion of Bond Counsel to the
effect that the Facilities as described in the revised Exhibit A
are such that the expenditure of the proceeds of the Bonds
pursuant to this Agreement will not, in and of itself, impair the
validity of the Bonds under the Act or the exclusion from gross
income for federal tax purposes of interest on the Bonds. A
revision of Exhibit A hereto pursuant to this Section 3.02 shall
not constitute an amendment, change or modification of this
Agreement within the meaning of Article XII of the Indenture.
SECTION 3.03. Maintenance of Facilities; Remodeling. The
Company shall at all times cause the Facilities, and every
element and unit thereof, to be maintained, preserved and kept in
thorough repair, working order and condition and cause all
needful and proper repairs and renewals thereto to be made;
provided, however, that the Company may cause the operation of
the Facilities, or any element or unit thereof, to be
discontinued if, in the judgment of the Company, it is no longer
advisable to operate the same, or if the Company intends to sell
or dispose of the same and within a reasonable time shall
endeavor to effectuate such sale or disposition.
After the Completion Date, the Company may, subject to the
provisions of Section 6.05 hereof, at its own expense remodel the
Facilities or make such substitutions, modifications and
improvements to the Facilities from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes,
which remodeling, substitutions, modifications and improvements
shall be included under the terms of this Agreement as part of
the Facilities.
SECTION 3.04. Insurance. The Company shall keep the
Facilities insured against fire and other risks to the extent
usually insured against by companies owning and operating similar
property, by reputable insurance companies or, at the Company's
election, with respect to all or any element or unit of the
Facilities, by means of an adequate insurance fund set aside and
maintained by it out of its own earnings or in conjunction with
other companies through an insurance fund, trust or other
agreement or, by means of unfunded self-insurance as may be
reasonable and customary by companies owning and operating
similar property. All proceeds of such insurance shall be for
the account of the Company.
SECTION 3.05. Condemnation. The Company shall be entitled
to the entire proceeds of any condemnation award or portion
thereof made for damages to or takings of the Facilities or other
property of the Company.
SECTION 3.06. Termination of Construction. Anything in
this Agreement to the contrary notwithstanding, the Company shall
have the right at any time to terminate the construction of the
Facilities, in whole, if the Company shall have determined that
the continued construction or operation of the Facilities, in
whole, is impracticable, uneconomical or undesirable for any
reason.
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01. Issuance of the Bonds. The Authority shall
issue the Bonds under and in accordance with the Indenture,
subject to the provisions of the bond purchase agreement among
the Authority, the initial purchaser or purchasers of the Bonds
and the Company. The Company hereby approves the issuance of the
Bonds and all terms and conditions thereof.
SECTION 4.02. Issuance of Other Obligations. The Authority
and the Company expressly reserve the right to enter into, to the
extent permitted by law, but shall not be obligated to enter
into, an agreement or agreements other than this Agreement with
respect to the issuance by the Authority, under an indenture or
indentures other than the Indenture, of obligations to provide
additional funds to pay the cost of construction of the
Facilities or obligations to refund all or any principal amount
of the Bonds, or any combination thereof.
SECTION 4.03. The Loan; Disposition of Bond Proceeds. The
Authority and the Company shall enter into escrow arrangements
with the trustee for the 1983 Bonds and shall cause the proceeds
of the Bonds, other than accrued interest, if any, paid by the
initial purchaser or purchasers thereof, to be deposited in
escrow with such trustee to be applied to the payment of the 1983
Bonds upon the redemption thereof.
The Authority shall establish the Bond Fund with the Trustee
in accordance with Section 4.01 of the Indenture.
SECTION 4.04. Investment of Moneys in Funds and Accounts.
The Company and the Authority agree that any moneys held in any
fund or account created by the Indenture shall be invested as
provided in the Indenture.
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01. Loan Payments. In consideration of the
issuance of the Bonds and the disposition of the proceeds thereof
as contemplated in Section 4.03 hereof, the Company shall pay, or
cause to be paid, to the Trustee for the account of the Authority
an amount equal to the aggregate principal amount of the Bonds
from time to time Outstanding and, as interest on its obligation
to pay such amount, an amount equal to premium, if any, and
interest on such Bonds, such amounts to be paid in installments
due on the dates, in the amounts and in the manner provided in
the Indenture for the Authority to cause amounts to be deposited
in the Bond Fund for the payment of the principal of and premium,
if any, and interest on the Bonds whether at stated maturity,
upon redemption or acceleration or otherwise; provided, however,
that the obligation of the Company to make any such payment
hereunder shall be reduced by the amount of any reduction under
the Indenture of the amount of the corresponding payment required
to be made by the Authority thereunder.
SECTION 5.02. Payments Assigned; Obligation Absolute. It
is understood and agreed that all Loan Payments are, by the
Indenture, to be pledged by the Authority to the Trustee, and
that all rights and interest of the Authority hereunder (except
for the Authority's rights under Sections 5.03, 5.04, 6.03 and
8.05 hereof and any rights of the Authority to receive notices,
certificates, requests, requisitions and other communications
hereunder) are to be pledged and assigned to the Trustee. The
Company assents to such pledge and assignment and agrees that the
obligation of the Company to make the Loan Payments shall be
absolute, irrevocable and unconditional and shall not be subject
to cancellation, termination or abatement, or to any defense
other than payment or to any right of set-off, counterclaim or
recoupment arising out of any breach by the Authority or the
Trustee or any other party under this Agreement, the Indenture or
otherwise, or out of any obligation or liability at any time
owing to the Company by the Authority, the Trustee or any other
party, and, further, that the Loan Payments and the other
payments due hereunder shall continue to be payable at the times
and in the amounts herein and therein specified, whether or not
the Facilities, or any portion thereof, shall have been completed
or shall have been destroyed by fire or other casualty, or title
thereto, or the use thereof, shall have been taken by the
exercise of the power of eminent domain, and that there shall be
no abatement of or diminution in any such payments by reason
thereof, whether or not the Facilities shall be used or useful,
whether or not any applicable laws, regulations or standards
shall prevent or prohibit the use of the Facilities, or for any
other reason, all of the foregoing being subject, however, to the
provisions of Sections 6.01 and 7.01 hereof.
SECTION 5.03. Payment of Expenses. The Company shall pay
all Administration Expenses, including, without limitation,
Administration Expenses incurred at and subsequent to the time
the Bonds are deemed to have been paid in accordance with Article
VIII of the Indenture. The payment of the compensation and the
reimbursement of expenses and advances of the Trustee, of the
paying agent, any co-paying agent and the registrar under the
Indenture shall be made directly to such entities.
SECTION 5.04. Indemnification. The Company releases the
Authority, the Trustee and their directors, officers, employees
and agents from, agrees that the Authority and the Trustee shall
not be liable for, and agrees to indemnify and hold the
Authority, the Trustee and their directors, officers, employees
and agents free and harmless from, any liability (including,
without limitation, attorneys' and other agents' fees and
expenses) for any loss or damage to property or any injury to or
death of any person that may be occasioned by any cause
whatsoever pertaining to the Facilities, except (i) in the case
of the Trustee, as a result of the negligence or bad faith or
willful misconduct of the Trustee or its directors, officers,
employees and agents; and (ii) in the case of the Authority, as a
result of gross negligence or bad faith of the Authority or its
directors, officers, employees and agents.
The Company will indemnify and hold the Authority and the
Trustee, free and harmless from any loss, claim, damage, tax,
penalty, liability, disbursement, litigation expenses, attorneys'
and other agents' fees and expenses or court costs arising out
of, or in any way relating to, the execution or performance of
this Agreement, the issuance or sale of the Bonds, actions taken
under the Indenture or any other cause whatsoever pertaining to
the Facilities, except (i) in the case the Trustee, as a result
of the negligence or bad faith or willful misconduct of the
Trustee; and (ii) in the case of the Authority, as a result of
the gross negligence or bad faith of the Authority.
The Company will indemnify and hold the Authority and its
directors, officers, employees and agents free and harmless from
any loss, claim, damage, tax, penalty, liability, disbursement,
litigation expenses, attorney's fees and expenses or court costs
arising out of or in any way relating to any untrue statement or
alleged untrue statement of any material fact or omission or
alleged omission to state a material fact necessary to make the
statements made, in light of the circumstances under which they
were made, not misleading in any official statement or other
offering material utilized in connection with the sale of any
Bonds.
SECTION 5.05. Payment of Taxes; Discharge of Liens. The
Company shall: (a) pay, or make provision for payment of, all
lawful taxes and assessments, including income, profits, property
or excise taxes, if any, or other municipal or governmental
charges, levied or assessed by any federal, state or municipal
government or political body upon the Facilities or any part
thereof or upon the Authority with respect to the Loan Payments,
when the same shall become due; and (b) pay or cause to be
satisfied and discharged or make adequate provision to satisfy
and discharge, within sixty (60) days after the same shall
accrue, any lien or charge upon the Loan Payments, and all lawful
claims or demands for labor, materials, supplies or other charges
which, if unpaid, might be or become a lien upon such amounts;
provided, that, if the Company shall first notify the Authority
and the Trustee of its intention so to do, the Company may in
good faith contest any such lien or charge or claims or demands
in appropriate legal proceedings, and in such event may permit
the items so contested and identified as such by the Company to
remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom, unless the Trustee shall notify
the Company in writing that, in the opinion of counsel to the
Trustee, based upon material facts disclosed to the Trustee
without any duty of investigation, by nonpayment of any such
items the lien of the Indenture as to the Loan Payments will be
materially endangered, in which event the Company shall promptly
pay and cause to be satisfied and discharged all such unpaid
items. The Authority shall cooperate fully with the Company in
any such contest.
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01. Maintenance of Corporate Existence. Except
as permitted in this Section 6.01, the Company shall maintain its
corporate existence, shall not sell, transfer or otherwise
dispose of all of its assets, as or substantially as an entirety,
and shall not consolidate with or merge with or into another
corporation. The Company may consolidate with or merge into
another corporation incorporated under the laws of the United
States of America, any state thereof or the District of Columbia,
or sell, transfer or otherwise dispose of all of its assets, as
or substantially as an entirety, to any Person, if the surviving
or resulting corporation (if other than the Company) or the
transferee Person, as the case may be, prior to or simultaneously
with such merger, consolidation, sale, transfer or disposition,
assumes, by delivery to the Trustee and the Authority of an
instrument in writing satisfactory in form to the Trustee, all
the obligations of the Company under this Agreement, including,
without limitation, the obligations of the Company under Section
5.01 hereof. Upon such an assumption following any such sale,
transfer or other disposition of assets, the Company shall be
released and discharged from all liability in respect of all
obligations under this Agreement. Notwithstanding the foregoing,
in the case of any such sale, transfer or other disposition of
assets, which do not include the Facilities, the Company shall
remain liable in respect of all obligations under this Agreement
other than the obligations under Section 5.01 hereof, and the
transferee shall not be required to assume any obligations
hereunder other than the obligations under Section 5.01 hereof;
provided, however, that the transferee shall be required to
assume all such other obligations unless the Company shall have
delivered to the Authority and the Trustee an opinion of Bond
Counsel to the effect that the non-assumption by the transferee
of such other obligations will not impair the validity under the
Act of the Bonds and will not adversely affect the exclusion from
gross income for federal tax purposes of interest on the Bonds.
If consolidation, merger or sale, transfer or other
disposition is made as permitted by this Section 6.01, the
provisions of this Section 6.01 shall continue in full force and
effect and no further consolidation, merger or sale or other
transfer shall be made except in compliance with the provisions
of this Section 6.01.
Anything in this Agreement to the contrary notwithstanding,
the sale, transfer or other disposition by the Company of all of
its facilities (a) for the generation of electric energy, (b) for
the transmission of electric energy or (c) for the distribution
of electric energy, in each case considered alone, or all of its
facilities described in clauses (a) and (b), considered together,
or all of its facilities described in clauses (b) and (c),
considered together, shall in no event be deemed to constitute a
sale, transfer or other disposition of all the properties of the
Company, as or substantially as an entirety, unless, immediately
following such sale, transfer or other disposition, the Company
shall own no properties in the other such categories of property
not so sold, transferred or otherwise disposed of. The character
of particular facilities shall be determined by reference to the
Uniform System of Accounts prescribed for public utilities and
licensees subject to the Federal Power Act, as amended, to the
extent applicable.
SECTION 6.02. Permits or Licenses. In the event that it
may be necessary for the proper performance of this Agreement on
the part of the Company or the Authority that any application or
applications for any permit or license to do or to perform
certain things be made to any governmental or other agency by the
Company or the Authority, the Company and the Authority each
shall, upon the request of either, execute such application or
applications.
SECTION 6.03. Authority's Access to Facilities. The
Authority shall have the right, upon appropriate prior notice to
the Company, to have reasonable access to the Facilities during
normal business hours for the purpose of making examinations and
inspections of the same.
SECTION 6.04. Tax-Exempt Status of Interest on Bonds.
(a) It is the intention of the parties hereto that interest on
the Bonds shall be and remain tax-exempt, and to that end the
covenants and agreements of the Authority and the Company in this
Section 6.04 and the Tax Agreement are for the benefit of the
Owners from time to time of the Bonds.
(b) Each of the Company and the Authority covenants
and agrees for the benefit of the Owners from time to time
of the Bonds that it will not directly or indirectly use or
permit the use of (to the extent within its control) the
proceeds of any of the Bonds or any other funds, or take or
omit to take any action, if and to the extent such use, or
the taking or omission to take such action, would cause any
of the Bonds to be "arbitrage bonds" within the meaning of
Section 148 of the Code or otherwise subject to federal
income taxation by reason of Section 103 and 141 through 150
of the Code or Section 103 of the 1954 Code and Title XIII
of the Tax Reform Act of 1986, as applicable, and any
applicable regulations promulgated thereunder. To such
ends, the Authority and the Company will comply with all
requirements of such Section 148 to the extent applicable to
the Bonds. In the event that at any time the Authority or
the Company is of the opinion that for purposes of this
Section 6.04(b) it is necessary to restrict or limit the
yield on the investment of any moneys held by the Trustee
under the Indenture, the Authority or the Company shall so
notify the Trustee in writing.
Without limiting the generality of the foregoing, the
Company and the Authority agree that there shall be paid
from time to time all amounts required to be rebated to the
United States of America pursuant to Section 148(f) of the
Code and any applicable Treasury Regulations. This covenant
shall survive payment in full or defeasance of the Bonds and
the satisfaction and discharge of the Indenture. The
Company specifically covenants to pay or cause to be paid
the Rebate Requirement as defined and described in the Tax
Agreement.
(c) The Authority certifies and represents that it has
not taken, and the Authority covenants and agrees that it
will not take, any action which results in interest paid on
the Bonds being included in gross income of the Owners of
the Bonds for federal tax purposes pursuant to Sections 103
and 141 of the Code or to Section 103 of the 1954 Code and
Title XIII of the Tax Reform Act of 1986, as applicable, and
any regulations thereunder; and the Company certifies and
represents that it has not taken or (to the extent within
its control) permitted to be taken, and the Company
covenants and agrees that it will not take or (to the extent
within its control) permit to be taken any action which will
cause the interest on the Bonds to become includable in
gross income for federal income tax purposes; provided,
however, that neither the Company nor the Authority shall be
deemed to have violated these covenants if the interest on
any of the Bonds becomes taxable to a person solely because
such person is a "substantial user" of the Facilities or a
"related person" within the meaning of Section 103(b)(13) of
the 1954 Code and provided, further, that none of the
covenants and agreements herein contained shall require
either the Company or the Authority to enter an appearance
or intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable
laws, rules or regulations or in connection with any
decisions of any court or administrative agency or other
governmental body affecting the taxation of interest on the
Bonds. The Company acknowledges having read Section 7.08 of
the Indenture and agrees to perform all duties imposed on it
by such Section 7.08, by this Section and by the Tax
Agreement. Insofar as Section 7.08 of the Indenture and the
Tax Agreement impose duties and responsibilities on the
Company, they are specifically incorporated herein by
reference.
(d) Notwithstanding any provision of this Section 6.04
and Section 7.08 of the Indenture, if the Company shall
provide to the Authority and the Trustee an opinion of Bond
Counsel to the effect that any specified action required
under this Section 6.04 and Section 7.08 of the Indenture is
no longer required or that some further or different action
is required to maintain the tax-exempt status of interest on
the Bonds, the Company, the Trustee and the Authority may
conclusively rely upon such opinion in complying with the
requirements of this Section 6.04, and the covenants
hereunder shall be deemed to be modified to that extent.
SECTION 6.05. Use of Facilities. So long as any Bonds are
Outstanding and the Facilities are operated by or for the benefit
of the Company, the Company shall cause the Facilities to be used
for purposes contemplated by the Act and in the Tax Agreement.
SECTION 6.06. Financing Statements. The Company shall file
and record, or cause to be filed and recorded, all financing
statements and continuation statements referred to in Section
7.07 of the Indenture.
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01. Conditions. The Company's interest in this
Agreement may be assigned as a whole or in part, and its interest
in the Facilities may be leased, sold, transferred or otherwise
disposed of by the Company as a whole or in part (whether an
interest in a specific element or unit or an undivided interest),
to any Person; provided, however, that no such assignment, lease,
sale, transfer or other disposition (a) shall relieve the Company
from its primary liability for its obligations under Section 5.01
hereof or (b) shall be made unless the assignee, lessee,
purchaser or other transferee, as the case may be, prior to or
simultaneously with such assignment, lease, sale, transfer or
other disposition, assumes, by delivery of an instrument in
writing satisfactory in form to the Trustee and the Authority,
all other obligations of the Company hereunder to the extent of
the interest assigned, leased, sold, transferred or otherwise
disposed of, and the Company shall be released of and discharged
from such obligations to the extent so assumed. Notwithstanding
the foregoing, (a) if (i) the Company's interest in this
Agreement shall be assigned as a whole or in undivided part, (ii)
the Company's interest in the Facilities shall be leased as a
whole or in undivided part and the term of such leasehold or the
term of any extension or extensions thereof at the option of the
Company shall extend beyond the maturity date of the Bonds or
(iii) the Company's interest in the Facilities shall be sold,
transferred or otherwise disposed of as a whole or in undivided
part, and (b) in the event that the assignee, lessee, purchaser
or other transferee shall assume the obligations of the Company
under Section 5.01 hereof for the remaining term of this
Agreement, to the extent of such assignment, lease, sale,
transfer or other disposition, the Company shall be released from
and discharged of all liability in respect of such obligations to
the extent so assumed (but only to such extent); provided,
however, that the release and discharge of the Company pursuant
to clause (b) shall be conditioned upon the delivery by the
Company to the Authority and the Trustee of a certificate of an
Independent Expert (as hereinafter defined) describing the
interests so assigned, leased, sold, transferred or otherwise
disposed of, together with all other rights, interests, assets
and/or properties assigned, leased, sold, transferred or
otherwise disposed of by the Company to the same Person in the
same or a related transaction, stating that such rights,
interests, assets and/or properties so described constitute
facilities for the generation, transmission and/or distribution
of electric energy and stating that, in the opinion of such
Independent Expert, the Fair Value (as hereinafter defined) of
such rights, interests, assets and/or properties to the Person
acquiring the same is not less than an amount equal to 10/7 of
the sum of (x) the aggregate principal amount of the Bonds then
Outstanding and (y) the outstanding principal amount of all other
obligations of the Company representing indebtedness for borrowed
money or for the deferred purchase price of property which are
being assumed by such Person; provided, further, that after any
such assumption, release and discharge as aforesaid, the Company
may again assume such obligations under Section 5.01 hereof, in
whole or in part, at any time and from time to time, and, to the
extent of any such assumption by the Company (but only to such
extent), the aforesaid assignee, lessee, purchaser or other
transferee shall be released from and discharged of all liability
in respect of such obligations.
Anything herein to the contrary notwithstanding, the Company
shall not make any assignment, lease or sale as provided in the
immediately preceding paragraph unless it shall have furnished to
the Authority and the Trustee an opinion of Bond Counsel to the
effect that the proposed assignment, lease or sale will not
impair the validity under the Act of the Bonds and will not
adversely affect the exclusion of interest on the Bonds from
gross income for federal tax purposes.
After any lease, sale, transfer or other disposition of any
element or unit of the Facilities, or any interest therein, the
Company may, at its option, cause such element or unit, or
interest therein, to no longer be deemed to be part of the
Facilities for the purposes of this Agreement by delivering to
the Authority and the Trustee the agreements or other documents
required pursuant to Section 7.02 hereof together with an
instrument signed by an Authorized Company Representative stating
that such element or unit, or interest therein, shall no longer
be deemed to be part of the Facilities for the purposes of this
Agreement.
For purposes of this Section 7.01:
(a) "Independent Expert" means a Person which (i) is
an engineer, appraiser or other expert and which, with
respect to any certificate to be delivered pursuant to this
Section, is qualified to pass upon the matter set forth in
such certificate and (ii)(A) is in fact independent, (B)
does not have any direct material financial interest in the
transferee or in any obligor upon the Bonds or under this
Agreement or in any affiliate of the transferee or any such
obligor, (C) is not connected with the transferee or any
such obligor as an officer, employee, promoter, underwriter,
trustee, partner, director or any person performing similar
functions and (D) is approved by the Trustee in the exercise
of reasonable care; for purposes of this definition
"engineer" means a Person engaged in the engineering
profession or otherwise qualified to pass upon engineering
matters (including, but not limited to, a Person licensed as
a professional engineer, whether or not then engaged in the
engineering profession); and for purposes of this definition
"appraiser" means a Person engaged in the business of
appraising property or otherwise qualified to pass upon the
Fair Value or fair market value of property.
(b) "Fair Value" means the fair value of the
interests, rights, assets and/or properties assigned,
leased, sold, transferred or otherwise disposed of (but, in
the case of a lease, only to the extent of such lease) as
may be determined by reference to (i) except in the case of
a lease, the amount which would be likely to be obtained in
an arm's-length transaction with respect to such interests,
rights, assets and/or properties between an informed and
willing buyer and an informed and willing seller, under no
compulsion, respectively, to buy or sell, (ii) in the case
of a lease, the amount (discounted to present value at a
rate not lower than the taxable equivalent of the yield to
maturity of the Bonds based on prevailing market prices
immediately prior to the first public announcement of the
proposed transaction) which would be likely to be obtained
in an arm's-length transaction with respect to such
interests, rights, assets and/or properties between an
informed and willing lessee and an informed and willing
lessor, neither under any compulsion to lease; (iii) the
amount of investment with respect to such interests, rights,
assets and/or properties which, together with a reasonable
return thereon, would be likely to be recovered through
ordinary business operations or otherwise, (iv) the cost,
accumulated depreciation and replacement cost with respect
to such interests, rights, assets and/or properties and/or
(v) any other relevant factors; provided, however, that (x)
Fair Value shall be determined without deduction for any
mortgage, deed of trust, pledge, security interest,
encumbrance, lease, reservation, restriction, servitude,
charge or similar right or any other lien of any kind and
(y) the Fair Value to the transferee of any property shall
not reflect any reduction relating to the fact that such
property may be of less value to a Person which is not the
owner, lessee or operator of the property or any portion
thereof than to a Person which is such owner, lessee or
operator. Fair Value may be determined, without physical
inspection, by the use of accounting and engineering records
and other data maintained by the Company or the transferee
or otherwise available to the Independent Expert certifying
the same.
SECTION 7.02. Instrument Furnished to the Authority and
Trustee. The Company shall, within fifteen (15) days after the
delivery thereof, furnish to the Authority and the Trustee a true
and complete copy of the agreements or other documents
effectuating any such assignment, lease, sale, transfer or other
disposition.
SECTION 7.03. Limitation. This Agreement shall not be
assigned nor shall the Facilities be leased, sold, transferred or
otherwise disposed of, in whole or in part, except as provided in
this Article VII or in Section 6.01 or 5.02 hereof. This Article
VII shall not apply to any sale, transfer or other disposition by
the Company of all of its assets, as or substantially as an
entirety, as contemplated in Section 6.01.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default. Each of the following
events shall constitute and is referred to in this Agreement as
an "Event of Default":
(a) a failure by the Company to make any Loan Payment,
which failure shall have resulted in an "Event of Default"
under clause (a) or (b) of Section 9.01 of the Indenture;
(b) a failure by the Company to pay when due any
amount required to be paid under this Agreement or to
observe and perform any covenant, condition or agreement on
its part to be observed or performed (other than a failure
described in clause (a) above), which failure shall continue
for a period of sixty (60) days after written notice,
specifying such failure and requesting that it be remedied,
shall have been given to the Company by the Authority or the
Trustee, unless the Authority and the Trustee shall agree in
writing to an extension of such period prior to its
expiration; provided, however, that the Authority and the
Trustee shall be deemed to have agreed to an extension of
such period if corrective action is initiated by the Company
within such period and is being diligently pursued; or
(c) the dissolution or liquidation of the Company, or
failure by the Company promptly to lift any execution,
garnishment or attachment of such consequence as will impair
its ability to make any payments under this Agreement, or
the entry of an order for relief by a court of competent
jurisdiction in any proceeding for its liquidation or
reorganization under the provisions of any bankruptcy act or
under any similar act which may be hereafter enacted, or an
assignment by the Company for the benefit of its creditors,
or the entry by the Company into an agreement of composition
with its creditors (the term "dissolution or liquidation of
the Company," as used in this clause, shall not be construed
to include the cessation of the corporate existence of the
Company resulting either from a merger or consolidation of
the Company into or with another corporation or a
dissolution or liquidation of the Company following a
transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions
contained in Section 6.01 hereof).
SECTION 8.02. Force Majeure. The provisions of Section
8.01 hereof are subject to the following limitations: if by
reason of acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders of any kind of the
government of the United States or of the State of Arizona, or
any department, agency, political subdivision, court or official
of any of them, or any civil or military authority;
insurrections; riots; epidemics; landslides; lightning;
earthquakes; volcanoes; fires; hurricanes; tornadoes; storms;
floods; washouts; droughts; arrests; restraint of government and
people; civil disturbances; explosions; breakage or accident to
machinery; partial or entire failure of utilities; or any cause
or event not reasonably within the control of the Company, the
Company is unable in whole or in part to carry out any one or
more of its agreements or obligations contained herein, other
than its obligations under Sections 5.01, 5.03, 5.05, and 6.01
hereof, the Company shall not be deemed in default by reason of
not carrying out said agreement or agreements or performing said
obligation or obligations during the continuance of such
inability. The Company shall make reasonable effort to remedy
with all reasonable dispatch the cause or causes preventing it
from carrying out its agreements; provided, that the settlement
of strikes, lockouts and other industrial disturbances shall be
entirely within the discretion of the Company, and the Company
shall not be required to make settlement of strikes, lockouts and
other industrial disturbances by acceding to the demands of the
opposing party or parties when such course is in the judgment of
the Company unfavorable to the Company.
SECTION 8.03. Remedies. (a) Upon the occurrence and
continuance of any Event of Default described in clause (a) of
Section 8.01 hereof, and further upon the condition that, in
accordance with the terms of the Indenture, the Bonds shall have
been declared to be immediately due and payable pursuant to any
provision of the Indenture, the Loan Payments shall, without
further action, become and be immediately due and payable.
Any waiver of any "Event of Default" under the Indenture and
a rescission and annulment of its consequences shall constitute a
waiver of the corresponding Event or Events of Default under this
Agreement and a rescission and annulment of the consequences
thereof.
(b) Upon the occurrence and continuance of any Event of
Default, the Authority, or the Trustee with respect to the rights
of the Authority assigned to the Trustee by the Indenture, may
take any action at law or in equity to collect any payments then
due and thereafter to become due, or to enforce performance and
observance of any obligation, agreement or covenant of the
Company hereunder.
(c) Any amounts collected by the Trustee from the Company
pursuant to this Section 8.03 shall be applied in accordance with
the Indenture.
SECTION 8.04. No Remedy Exclusive. No remedy conferred
upon or reserved to the Authority hereby is intended to be
exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a
waiver thereof, but any such right or power may be exercised from
time to time and as often as may be deemed expedient. In order
to entitle the Authority to exercise any remedy reserved to it in
this Article VIII, it shall not be necessary to give any notice,
other than such notice as may be herein expressly required.
SECTION 8.05. Reimbursement of Attorneys' and Agents' Fees.
If the Company shall default under any of the provisions hereof
and the Authority or the Trustee shall employ attorneys or agents
or incur other reasonable expenses for the collection of payments
due hereunder or for the enforcement of performance or observance
of any obligation or agreement on the part of the Company
contained herein, the Company will on demand therefor reimburse
the Authority or the Trustee and any predecessor Trustee, as the
case may be, for the reasonable fees of such attorneys and such
other reasonable expenses so incurred.
SECTION 8.06. Waiver of Breach. In the event any
obligation created hereby shall be breached by either of the
parties and such breach shall thereafter be waived by the other
party, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach
hereunder. In view of the assignment of certain of the
Authority's rights and interest hereunder to the Trustee, the
Authority shall have no power to waive any breach hereunder by
the Company in respect of such rights and interest without the
consent of the Trustee, and the Trustee may exercise any of such
rights of the Authority hereunder.
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01. Redemption of Bonds. The Authority shall
take, or cause to be taken, the actions required by the Indenture
to discharge the lien created thereby through the redemption, or
provision for payment or redemption, of all Bonds then
Outstanding, or to effect the redemption, or provision for
payment or redemption, of less than all the Bonds then
Outstanding, upon receipt by the Authority and the Trustee from
the Company of a notice designating the principal amount of the
Bonds to be redeemed, or for the payment or redemption of which
provision is to be made, and, in the case of redemption of Bonds,
or provision therefor, specifying the date of redemption and the
applicable redemption provision of the Indenture. Such
redemption date shall not be less than 45 days from the date such
notice is given (unless a shorter notice is satisfactory to the
Trustee). Unless otherwise stated therein, such notice shall be
revocable by the Company at any time prior to the time at which
the Bonds to be redeemed, or for the payment or redemption of
which provision is to be made, are first deemed to be paid in
accordance with Article VIII of the Indenture. The Company shall
furnish any moneys or Government Obligations (as defined in the
Indenture) required by the Indenture to be deposited with the
Trustee or otherwise paid by the Authority in connection with any
of the foregoing purposes.
SECTION 9.02. Compliance with the Indenture. Anything in
this Agreement to the contrary notwithstanding, the Authority and
the Company shall take all actions required by this Agreement and
the Indenture in order to comply with any provisions of the
Indenture requiring the mandatory redemption of Bonds.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Term of Agreement. This Agreement shall
remain in full force and effect from the date hereof until the
right, title and interest of the Trustee in and to the Trust
Estate (as defined in the Indenture) shall have ceased,
terminated and become void in accordance with Article VIII of the
Indenture and until all payments required under this Agreement
shall have been made. Notwithstanding the foregoing, the
covenants contained in Section 5.03, 5.04, Section 6.04 and 8.05
hereof shall survive the termination of this Agreement.
SECTION 10.02. Notices. Except as otherwise provided in
this Agreement, all notices, certificates, requests, requisitions
and other communications hereunder shall be in writing and shall
be sufficiently given and shall be deemed given when mailed by
registered mail, postage prepaid, addressed as follows: if to the
Authority, c/o Russo, Cox & Russo, P.C., 1820 East River Road,
Suite 230, Tucson, Arizona 85718; if to the Company, at 220 West
Sixth Street, Tucson, Arizona 85702, Attention: Treasurer; and
if to the Trustee, at such address as shall be designated by it
in the Indenture. A copy of each notice, certificate, request or
other communication given hereunder to the Authority, the
Company, or the Trustee shall also be given to the others. The
Authority, the Company, and the Trustee may, by notice given
hereunder, designate any further or different addresses to which
subsequent notices, certificates, requests or other
communications shall be sent.
SECTION 10.03. Parties in Interest. This Agreement shall
inure to the benefit of and shall be binding upon the Authority,
the Company and their respective successors and assigns, and no
other person, firm or corporation shall have any right, remedy or
claim under or by reason of this Agreement; provided, however,
that the rights and remedies granted to the Authority in Article
VIII hereof, shall inure to the benefit of the Trustee, on behalf
of the Owners from time to time of the Bonds, and shall be
enforceable by the Trustee as a third party beneficiary or as
assignee of the Authority; and provided, further, that neither
Pima County, Arizona nor the State of Arizona shall in any event
be liable for the payment of the principal of or premium, if any,
or interest on the Bonds or for the performance of any pledge,
mortgage, obligation or agreement created by or arising out of
this Agreement or the issuance of the Bonds, and further that
neither the Bonds nor any such obligation or agreement of the
Authority shall be construed to constitute an indebtedness of
Pima County, Arizona or the State of Arizona within the meaning
of any constitutional or statutory provisions whatsoever, but
shall be limited obligations of the Authority payable solely out
of the revenues derived from this Agreement, or from the sale of
the Bonds, or from the investment or reinvestment of any of the
foregoing, as provided herein and in the Indenture.
SECTION 10.04. Amendments. This Agreement may be amended
only by written agreement of the parties hereto, subject to the
limitations set forth herein and in the Indenture.
SECTION 10.05. Counterparts. This Agreement may be
executed in any number of counterparts, each of which, when so
executed and delivered, shall be an original; but such
counterparts shall together constitute but one and the same
Agreement.
SECTION 10.06. Severability. If any clause, provision or
section of this Agreement shall, for any reason, be held illegal
or invalid by any court, the illegality or invalidity of such
clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this
Agreement shall be construed and enforced as if such illegal or
invalid clause, provision or section had not been contained
herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement
or obligation shall be deemed to be the agreement or obligation
of the Authority or the Company, as the case may be, to the full
extent permitted by law.
SECTION 10.07. Governing Law. The laws of the State of
Arizona shall govern the construction and enforcement of this
Agreement, except that the provisions of Section 13.09 of the
Indenture, construed as provided in Section 13.07 of the
Indenture, shall apply to this Agreement as if contained herein.
SECTION 10.08. Notice Regarding Cancellation of Contracts.
As required by the provisions of Section 38-511, Arizona Revised
Statutes, as amended, notice is hereby given that political
subdivisions of the State of Arizona or any of their departments
or agencies may, within three (3) years of its execution, cancel
any contract, without penalty or further obligation, made by the
political subdivisions or any of their departments or agencies on
or after September 30, 1988, if any person significantly involved
in initiating, negotiating, securing, drafting or creating the
contract on behalf of the political subdivisions or any of their
departments or agencies is, at any time while the contract or any
extension of the contract is in effect, an employee or agent of
any other party to the contract in any capacity or a consultant
to any other party of the contract with respect to the subject
matter of the contract. The cancellation shall be effective when
written notice from the chief executive officer or governing body
of the political subdivision is received by all other parties to
the contract unless the notice specifies a later time.
The Company covenants and agrees not to employ as an
employee, agent or, with respect to the subject matter of this
Agreement, a consultant, any person significantly involved in
initiating, negotiating, securing, drafting or creating such
Agreement on behalf of the Authority within three (3) years from
the execution hereof, unless a waiver is provided by the
Authority.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed as of the day and year first above
written.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
By: /s/ Stanley Lehman
---------------------------------
President
TUCSON ELECTRIC POWER COMPANY
By: /s/ Kevin Larson
---------------------------------
Vice President
<PAGE>
EXHIBIT A
A portion of the costs of the construction, improvement or
equipping of the following Facilities will be refinanced with the
proceeds of the Industrial Development Revenue Bonds, 1997 Series
C (Tucson Electric Power Company Project) issued by The
Industrial Development Authority of the County of Pima and
referred to in the foregoing Loan Agreement.
____________________
Certain high voltage transmission facilities and related
improvements used to transmit energy from Unit No. 2 of the
Springerville Generating Station located in Apache County,
Arizona to the City of Tucson and environs in Pima County and to
Fort Huachuca in adjacent Cochise County, Arizona and additions
and improvements to the Irvington Generating Station located in
the City of Tucson, more particularly described in the Tax
Certificate and Agreement, dated as of October 1, 1997, between
The Industrial Development Authority of the County of Pima and
Tucson Electric Power Company.
Exhibit 4f
=================================================================
INDENTURE OF TRUST
(1997 SERIES C)
BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
AND
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
--------
DATED AS OF SEPTEMBER 15, 1997
--------
Authorizing
Industrial Development Revenue Bonds,
1997 Series C
(Tucson Electric Power Company Project)
=================================================================
<PAGE>
TABLE OF CONTENTS*
Page
----
Parties . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . 1
Granting Clause . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . 2
ARTICLE II
THE BONDS
Section 2.01. Creation of Bonds . . . . . . . . . . . . . . 8
Section 2.02. Form of Bonds . . . . . . . . . . . . . . . . 8
Section 2.03. Execution of Bonds . . . . . . . . . . . . . 9
Section 2.04. Authentication of Bonds . . . . . . . . . . . 9
Section 2.05. Bonds Not General Obligations . . . . . . . . 9
Section 2.06. Prerequisites to Authentication of Bonds . . 9
Section 2.07. Lost or Destroyed Bonds or Bonds Canceled in
Error . . . . . . . . . . . . . . . . . . . 10
Section 2.08. Transfer, Registration and Exchange of
Bonds . . . . . . . . . . . . . . . . . . . 10
Section 2.09. Other Obligations . . . . . . . . . . . . . 12
Section 2.10. Temporary Bonds . . . . . . . . . . . . . . 12
Section 2.11. Cancellation of Bonds . . . . . . . . . . . 12
Section 2.12. Payment of Principal and Interest . . . . . 13
Section 2.13. Applicability of Book-Entry Provisions . . 13
ARTICLE III
REDEMPTION OF BONDS
Section 3.01. Redemption Provisions . . . . . . . . . . . 13
Section 3.02. Selection of Bonds to be Redeemed . . . . . 14
Section 3.03. Procedure for Redemption . . . . . . . . . 15
Section 3.04. Payment of Redemption Price . . . . . . . . 15
Section 3.05. No Partial Redemption After Default . . . . 15
____________________
* This table of contents is not a part of the Indenture, and is
for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part
of the Indenture.
<PAGE>
ARTICLE IV
THE BOND FUND
Section 4.01. Creation of Bond Fund . . . . . . . . . . . 16
Section 4.02. Liens . . . . . . . . . . . . . . . . . . . 16
Section 4.03. Deposits into Bond Fund . . . . . . . . . . 16
Section 4.04. Use of Moneys in Bond Fund . . . . . . . . 16
Section 4.05. Custody of Bond Fund; Withdrawal of Moneys 16
Section 4.06. Bonds Not Presented for Payment . . . . . . 16
Section 4.07. Moneys Held in Trust . . . . . . . . . . . 17
ARTICLE V
DISPOSITION OF PROCEEDS
Section 5.01. Disposition of Proceeds . . . . . . . . . . 17
ARTICLE VI
INVESTMENTS
Section 6.01. Investments . . . . . . . . . . . . . . . . 17
ARTICLE VII
GENERAL COVENANTS
Section 7.01. No General Obligations . . . . . . . . . . 18
Section 7.02. Performance of Covenants of the Authority;
Representations . . . . . . . . . . . . . . 18
Section 7.03. Maintenance of Rights and Powers; Compliance
with Laws . . . . . . . . . . . . . . . . . 18
Section 7.04. Enforcement of Obligations of the Company;
Amendments . . . . . . . . . . . . . . . . 19
Section 7.05. Further Instruments . . . . . . . . . . . . 19
Section 7.06. No Disposition of Trust Estate . . . . . . 19
Section 7.07. Financing Statements . . . . . . . . . . . 19
Section 7.08. Tax Covenants; Rebate Fund . . . . . . . . 19
Section 7.09. Notices of Trustee . . . . . . . . . . . . 20
ARTICLE VIII
DEFEASANCE
Section 8.01. Defeasance . . . . . . . . . . . . . . . . 20
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Events of Default . . . . . . . . . . . . . 22
Section 9.02. Remedies . . . . . . . . . . . . . . . . . 23
Section 9.03. Restoration to Former Position . . . . . . 23
Section 9.04. Owners' Right to Direct Proceedings . . . . 23
Section 9.05. Limitation on Owners' Right to Institute
Proceedings . . . . . . . . . . . . . . . . 23
Section 9.06. No Impairment of Right to Enforce Payment . 24
Section 9.07. Proceedings by Trustee without Possession of
Bonds . . . . . . . . . . . . . . . . . . . 24
Section 9.08. No Remedy Exclusive . . . . . . . . . . . . 24
Section 9.09. No Waiver of Remedies . . . . . . . . . . . 24
Section 9.10. Application of Moneys . . . . . . . . . . . 24
Section 9.11. Severability of Remedies . . . . . . . . . 25
ARTICLE X
TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
Section 10.01. Acceptance of Trusts . . . . . . . . . . . 25
Section 10.02. No Responsibility for Recitals . . . . . . 25
Section 10.03. Limitations on Liability . . . . . . . . . 26
Section 10.04. Compensation, Expenses and Advances . . . . 26
Section 10.05. Notice of Events of Default . . . . . . . . 27
Section 10.06. Action by Trustee . . . . . . . . . . . . . 27
Section 10.07. Good Faith Reliance . . . . . . . . . . . . 27
Section 10.08. Dealings in Bonds and with the Authority and
the Company . . . . . . . . . . . . . . . . 27
Section 10.09. Allowance of Interest . . . . . . . . . . . 28
Section 10.10. Construction of Indenture . . . . . . . . . 28
Section 10.11. Resignation of Trustee . . . . . . . . . . 28
Section 10.12. Removal of Trustee . . . . . . . . . . . . 28
Section 10.13. Appointment of Successor Trustee . . . . . 28
Section 10.14. Qualifications of Successor Trustee . . . . 29
Section 10.15. Judicial Appointment of Successor Trustee . 29
Section 10.16. Acceptance of Trusts by Successor Trustee . 29
Section 10.17. Successor by Merger or Consolidation . . . 29
Section 10.18. Standard of Care . . . . . . . . . . . . . 30
Section 10.19. Notice to Owners of Bonds of Event of
Default . . . . . . . . . . . . . . . . . . 30
Section 10.20. Intervention in Litigation of the Authority 30
Section 10.21. Paying Agent; Co-Paying Agents . . . . . . 30
Section 10.22. Qualifications of Paying Agent and Co-Paying
Agents; Resignation; Removal . . . . . . . 31
Section 10.23. Registrar . . . . . . . . . . . . . . . . . 31
Section 10.24. Qualifications of Registrar; Resignation;
Removal . . . . . . . . . . . . . . . . . . 32
Section 10.25. Several Capacities . . . . . . . . . . . . 32
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND
PROOF OF OWNERSHIP OF BONDS
Section 11.01. Execution of Instruments;
Proof of Ownership . . . . . . . . . . . . 32
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
Section 12.01. Limitations . . . . . . . . . . . . . . . . 33
Section 12.02. Supplemental Indentures without Owner
Consent . . . . . . . . . . . . . . . . . . 33
Section 12.03. Supplemental Indentures with Consent of
Owners . . . . . . . . . . . . . . . . . . 34
Section 12.04. Effect of Supplemental Indenture . . . . . 35
Section 12.05. Consent of the Company . . . . . . . . . . 35
Section 12.06. Amendment of Loan Agreement without Consent
of Owners . . . . . . . . . . . . . . . . . 35
Section 12.07. Amendment of Loan Agreement with Consent of
Owners . . . . . . . . . . . . . . . . . . 35
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Successors of the Authority . . . . . . . . 36
Section 13.02. Parties in Interest . . . . . . . . . . . . 36
Section 13.03. Severability . . . . . . . . . . . . . . . 36
Section 13.04. No Personal Liability of Authority
Officials . . . . . . . . . . . . . . . . . 36
Section 13.05. Bonds Owned by the Authority or the Company 36
Section 13.06. Counterparts . . . . . . . . . . . . . . . 37
Section 13.07. Governing Law . . . . . . . . . . . . . . . 37
Section 13.08. Notices . . . . . . . . . . . . . . . . . . 37
Section 13.09. Holidays . . . . . . . . . . . . . . . . . 37
Section 13.10. Statutory Notice Regarding Cancellation of
Contracts . . . . . . . . . . . . . . . . . 38
Testimonium . . . . . . . . . . . . . . . . . . . . . . . . 40
Signatures and Seals . . . . . . . . . . . . . . . . . . . 40
Exhibit A - Form of Bond . . . . . . . . . . . . . . . . . . A-1
Exhibit B - Form of Endorsement of Transfer . . . . . . . . . B-1
Exhibit C - Form of Certificate of Authentication . . . . . . C-1
<PAGE>
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (1997 C Series), dated as of
September 15, 1997 (this "Indenture"), between THE INDUSTRIAL
DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit
corporation designated by law as a political subdivision of the
State of Arizona (hereinafter called the "Authority"), and First
Trust of New York, National Association, as trustee (hereinafter
called the "Trustee"),
W I T N E S S E T H :
WHEREAS, the Authority is authorized and empowered under
Title 35, Chapter 5, Arizona Revised Statutes, as amended (the
"Act"), to issue its bonds in accordance with the Act and to make
secured or unsecured loans for the purpose of financing or
refinancing the acquisition, construction, improvement or
equipping of projects consisting of land, any building or other
improvement, and all real and personal properties, including but
not limited to machinery and equipment, whether or not now in
existence or under construction, whether located within or
without Pima County, which shall be suitable for, among other
things, facilities for the furnishing of electric energy, gas or
water, air and water pollution control facilities and sewage and
solid waste disposal facilities, and to charge and collect
interest on such loans and pledge the proceeds of loan agreements
as security for the payment of the principal of and interest on
bonds, or designated issues of bonds, issued by the Authority and
any agreements made in connection therewith, whenever the Board
of Directors of the Authority finds such loans to be in
furtherance of the purposes of the Authority or in the public
interest;
WHEREAS, the Authority has heretofore issued and sold
$75,000,000 aggregate principal amount of its Industrial
Development Revenue Bonds, 1983 Series A (Tucson Electric Power
Company General Project) all of which remain outstanding (the
"1983 Bonds), the proceeds of which were loaned to Tucson
Electric Power Company, an Arizona corporation (the "Company") to
finance a portion of the costs of the acquisition, construction,
improvement and equipping of certain of its facilities for the
furnishing of electric energy (the "Facilities"); and
WHEREAS, the Authority proposes to issue and sell its
revenue bonds as provided herein (the "Bonds") to refinance, by
the payment or redemption of the 1983 Bonds, or provision
therefor, the portion of the costs of the acquisition,
construction, improvement and equipping of the Facilities paid
from the proceeds of the 1983 Bonds, all as described in Exhibit
A to the Loan Agreement, dated as of September 15, 1997 (the
"Loan Agreement"), between the Authority and the Company;
NOW, THEREFORE, for and in consideration of these premises
and the mutual covenants herein contained, of the acceptance by
the Trustee of the trusts hereby created, of the purchase and
acceptance of the Bonds by the Owners (as hereinafter defined)
thereof and of the sum of one dollar lawful money of the United
States of America, to it duly paid by the Trustee at or before
the execution and delivery of these presents, and for other good
and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, in order to secure the payment of the
principal of and premium, if any, and interest on the Bonds at
any time Outstanding (as hereinafter defined) under this
Indenture according to their tenor and effect and the performance
and observance by the Authority of all the covenants and
conditions expressed or implied herein and contained in the
Bonds, the Authority does hereby grant, bargain, sell, convey,
mortgage, pledge and assign, and grant a security interest in,
the Trust Estate (as hereinafter defined) to the Trustee, its
successors in trust and their assigns forever;
TO HAVE AND TO HOLD all the same with all privileges and
appurtenances hereby conveyed and assigned, or agreed or intended
so to be, to the Trustee, its successors in trust and their
assigns forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set
forth, first, for the equal and proportionate benefit and
security of all Owners of the Bonds issued under and secured by
this Indenture without preference, priority or distinction as to
the lien of any Bonds over any other Bonds;
PROVIDED, HOWEVER, that if, after the right, title and
interest of the Trustee in and to the Trust Estate shall have
ceased, terminated and become void in accordance with Article
VIII hereof, the principal of and premium, if any, and interest
on the Bonds shall have been paid to the Owners thereof, or shall
have been paid to the Company pursuant to Section 4.06 hereof,
then and in that case these presents and the estate and rights
hereby granted shall cease, terminate and be void, and thereupon
the Trustee shall cancel and discharge this Indenture and execute
and deliver to the Authority and the Company such instruments in
writing as shall be requisite to evidence the discharge hereof;
otherwise this Indenture is to be and remain in full force and
effect.
THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is
expressly declared, that all Bonds issued and secured hereunder
are to be issued, authenticated and delivered, and the Trust
Estate and the other estate and rights hereby granted are to be
dealt with and disposed of, under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and
purposes as hereinafter expressed, and the Authority has agreed
and covenanted, and does hereby agree and covenant, with the
Trustee and with the respective Owners, from time to time, of the
Bonds, as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The terms defined in this
Article I shall, for all purposes of this Indenture, have the
meanings herein specified, unless the context clearly requires
otherwise:
Act:
"Act" shall mean Title 35, Chapter 5, Arizona Revised
Statutes, and all acts supplemental thereto or amendatory
thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Authority with respect to the Loan Agreement,
this Indenture and any transaction or event contemplated by the
Loan Agreement or this Indenture, including the compensation and
reimbursement of expenses and advances payable to the Trustee, to
the Paying Agent, any Co-Paying Agent and the Registrar and a pro
rata share of the Authority's annual operating expenses in
accordance with the provisions of paragraph XII.D. of the
Authority's Procedural Pamphlet.
Authority:
"Authority" shall mean The Industrial Development Authority
of the County of Pima, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona incorporated for and with the approval of Pima County,
Arizona, pursuant to the provisions of the Constitution of the
State of Arizona and the Act, its successors and their assigns.
Authorized Company Representative:
"Authorized Company Representative" shall mean each person
at the time designated to act on behalf of the Company by written
certificate furnished to the Authority and the Trustee containing
the specimen signature of such person and signed on behalf of the
Company by its President, any Vice President or its Treasurer,
together with its Secretary or any Assistant Secretary.
Bond Counsel:
"Bond Counsel" shall mean any firm or firms of nationally
recognized bond counsel experienced in matters pertaining to the
validity of, and exclusion from gross income for federal tax
purposes of interest on bonds issued by states and political
subdivisions, selected by the Company and acceptable to the
Authority.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01 hereof.
Bonds:
"Bond" or "Bonds" shall mean the bonds authorized to be
issued under this Indenture.
Code:
"Code" shall mean the Internal Revenue Code of 1986 or any
successor statute thereto. Each reference to a section of the
Code herein shall be deemed to include the United States Treasury
Regulations proposed or in effect thereunder and applicable to
the Bonds or the use of proceeds thereof, unless the context
clearly requires otherwise. References to any particular Code
section shall, in the event of a successor Code, be deemed to be
a reference to the successor to such Code section.
Company:
"Company" shall mean Tucson Electric Power Company, a
corporation organized and existing under the laws of the State of
Arizona, its successors and their assigns, including, without
limitation, any successor obligor under Section 6.01 or 7.01 of
the Loan Agreement to the extent of the obligations assumed
thereunder.
Depositary:
"Depositary" shall mean The Depository Trust Company or any
successor thereto as a securities repository for the Bonds.
Facilities:
"Facilities" shall mean the real and personal properties,
machinery and equipment currently existing, under construction
and to be constructed which are described in Exhibit A to the
Loan Agreement, as revised from time to time to reflect any
changes therein, additions thereto, substitutions therefor and
deletions therefrom permitted by the terms of the Loan Agreement,
subject, however, to the provisions of Section 7.01 of the Loan
Agreement.
Government Obligations:
"Government Obligations" shall mean:
(a) direct obligations of, or obligations the principal
of and interest on which are unconditionally guaranteed by,
the United States of America entitled to the benefit of the
full faith and credit thereof; and
(b) certificates, depositary receipts or other
instruments which evidence a direct ownership interest in
obligations described in clause (a) above or in any specific
interest or principal payments due in respect thereof;
provided, however, that the custodian of such obligations or
specific interest or principal payments shall be a bank or
trust company organized under the laws of the United States
of America or of any state or territory thereof or of the
District of Columbia, with a combined capital stock surplus
and undivided profits of at least $50,000,000; and provided,
further, that except as may be otherwise required by law,
such custodian shall be obligated to pay to the holders of
such certificates, depositary receipts or other instruments
the full amount received by such custodian in respect of
such obligations or specific payments and shall not be
permitted to make any deduction therefrom.
Indenture:
"Indenture" shall mean this Indenture of Trust, dated as of
September 15, 1997, between the Authority and the Trustee, and
any and all modifications, alterations, amendments and
supplements thereto.
Investment Securities:
"Investment Securities" shall mean any of the following
obligations or securities on which neither the Company nor any of
its subsidiaries is the obligor: (a) Government Obligations; (b)
interest bearing deposit accounts (which may be represented by
certificates of deposit) in national, state or foreign banks
having a combined capital and surplus of not less than
$10,000,000; (c) bankers' acceptances drawn on and accepted by
commercial banks having a combined capital and surplus of not
less than $10,000,000; (d) (i) direct obligations of, (ii)
obligations the principal of and interest on which are
unconditionally guaranteed by, and (iii) any other obligations
the interest on which is exempt from federal income taxation
issued by, any state of the United States of America, the
District of Columbia or the Commonwealth of Puerto Rico, or any
political subdivision, agency, authority or other instrumentality
of any of the foregoing, which, in any case, are rated by a
nationally recognized rating agency in any of its three highest
rating categories; (e) obligations of any agency or
instrumentality of the United States of America; (f) commercial
or finance company paper which is rated by a nationally
recognized rating agency in any of its three highest rating
categories; (g) corporate debt securities issued by corporations
having debt securities rated by a nationally recognized rating
agency in any of its three highest rating categories; (h)
repurchase agreements with banking or financial institutions
having a combined capital and surplus of not less than
$10,000,000 with respect to any of the foregoing obligations or
securities; (i) shares or interests in registered investment
companies whose assets consist of obligations or securities which
are described in any other clause of this sentence; and (j) any
other obligations which may lawfully be purchased by the Trustee.
The commercial banks and banking institutions referred to above
may include the entities acting as Trustee, Paying Agent,
Co-Paying Agent or Registrar hereunder if such entities shall
otherwise satisfy the requirements set forth above.
Loan Agreement:
"Loan Agreement" shall mean the Loan Agreement, dated as of
September 15, 1997, between the Authority and the Company
relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.
Loan Payments:
"Loan Payments" shall mean the payments required to be made
by the Company pursuant to Section 5.01 of the Loan Agreement.
1954 Code:
"1954 Code" shall mean the Internal Revenue Code of 1954, as
amended.
1983 Bonds:
"1983 Bonds" shall mean the $75,000,000 aggregate principal
amount of the Authority's Industrial Development Revenue Bonds,
1983 Series A (Tucson Electric Power Company General Project).
Notice by Mail:
"Notice by Mail" or "notice" of any action or condition "by
Mail" shall mean a written notice meeting the requirements of
this Indenture mailed by first-class mail to the Owners of
specified registered Bonds at the addresses shown in the
registration books maintained pursuant to Section 2.08 hereof;
provided, however, that if, because of the temporary or permanent
suspension of delivery of first-class mail or for any other
reason, it is impossible or impracticable to give such notice by
first-class mail, then such giving of notice in lieu thereof,
which may include publication, as shall be made with the approval
of the Trustee (or, if there be no trustee hereunder, the
Authority) shall constitute a sufficient giving of such notice.
Notice by Publication:
"Notice by Publication" or "notice" of any action or
condition "by Publication" shall mean publication of a notice
meeting the requirements of this Indenture in a newspaper or
financial journal of general circulation in The City of New York,
New York, which carries financial news, is printed in the English
language and is customarily published on each business day;
provided, however, that any successive weekly publication of
notice required hereunder may be made, unless otherwise expressly
provided herein, on the same or different days of the week and in
the same or different newspapers or financial journals; and
provided, further, that if, because of the temporary or permanent
suspension of the publication or general circulation of any
newspaper or financial journal or for any other reason, it is
impossible or impracticable to publish such notice in the manner
herein described, then such publication in lieu thereof as shall
be made with the approval of the Trustee (or, if there be no
trustee hereunder, the Authority) shall constitute a sufficient
publication of such notice.
Outstanding:
"Outstanding", when used in reference to the Bonds, shall
mean, as at any particular date, the aggregate of all Bonds
authenticated and delivered under this Indenture except:
(a) those canceled by the Trustee at or prior to such
date or delivered to or acquired by the Trustee at or prior
to such date for cancellation;
(b) those deemed to be paid in accordance with Article
VIII hereof; and
(c) those in lieu of or in exchange or substitution for
which other Bonds shall have been authenticated and
delivered pursuant to this Indenture, unless proof
satisfactory to the Trustee and the Company is presented
that such Bonds are held by a bona fide holder in due
course.
Owner:
"Owner" shall mean the person in whose name any Bond is
registered upon the registration books maintained pursuant to
Section 2.08 hereof. The Company may be an Owner.
Paying Agent; Co-Paying Agent; Principal Office thereof:
"Paying Agent" and "Co-Paying Agent" shall mean the paying
agent and any co-paying agent appointed in accordance with
Section 10.21 hereof. "Principal Office" of the Paying Agent or
any Co-Paying Agent shall mean the office thereof designated in
writing to the Trustee.
Rebate Fund:
"Rebate Fund" shall mean the fund created by Section 7.08
hereof.
Receipts and Revenues of the Authority from the Loan Agreement:
"Receipts and Revenues of the Authority from the Loan
Agreement" shall mean all moneys paid or payable to the Trustee
for the account of the Authority by the Company in respect of the
Loan Payments and payments pursuant to Section 9.01 of the Loan
Agreement and all receipts of the Trustee which, under the
provisions of this Indenture, reduce the amount of such payments.
Record Date:
"Record Date" shall mean the close of business on the
fifteenth (15th) day of the calendar month immediately preceding
each regularly scheduled interest payment date.
Registrar; Principal Office thereof:
"Registrar" shall mean the registrar appointed in accordance
with Section 10.23 hereof. "Principal Office" of the Registrar
shall mean the office thereof designated in writing to the
Trustee.
Supplemental Indenture:
"Supplemental Indenture" shall mean any indenture of the
Authority modifying, altering, amending, supplementing or
confirming this Indenture for any purpose, in accordance with the
terms hereof.
Supplemental Loan Agreement:
"Supplemental Loan Agreement" shall mean any agreement
between the Authority and the Company modifying, altering,
amending or supplementing the Loan Agreement, in accordance with
the terms thereof and hereof.
Tax Agreement:
"Tax Agreement" shall mean that tax certificate and
agreement, dated the date of the initial authentication and
delivery of the Bonds, between the Authority and the Company,
relating to the requirements of the Code and the 1954 Code, and
any and all modifications, alterations, amendments and
supplements thereto.
Trust Estate:
"Trust Estate" shall mean at any particular time all right,
title and interest of the Authority in and to the Loan Agreement
(except its rights under Sections 5.03, 5.04, 6.03 and 8.05
thereof and any rights of the Authority to receive notices,
certificates, requests, requisitions and other communications
thereunder), including without limitation, the Receipts and
Revenues of the Authority from the Loan Agreement, the Bond Fund
and all moneys and Investment Securities from time to time on
deposit therein (excluding, however, any moneys or Investment
Securities held in the Rebate Fund), any and all other moneys and
obligations (other than Bonds) which at such time are deposited
or are required to be deposited with, or are held or are required
to be held by or on behalf of, the Trustee, the Paying Agent or
any Co-Paying Agent in trust under any of the provisions of this
Indenture and all other rights, titles and interests which at
such time are subject to the lien of this Indenture; provided,
however, that in no event shall there be included in the Trust
Estate (a) moneys or obligations deposited with or held by the
Trustee in the Rebate Fund pursuant to Section 7.08 hereof or (b)
moneys or obligations deposited with or paid to the Trustee for
the redemption or payment of Bonds which are deemed to have been
paid in accordance with Article VIII hereof or moneys held
pursuant to Section 4.06 hereof.
Trustee; Principal Office thereof:
"Trustee" shall mean First Trust of New York, National
Association, as trustee under this Indenture, its successors in
trust and their assigns. "Principal Office" of the Trustee shall
mean the principal corporate trust office of the Trustee, which
office at the date of acceptance by the Trustee of the duties and
obligations imposed on the Trustee by this Indenture is located
at the address specified in Section 13.08 hereof.
ARTICLE II
THE BONDS
Section 2.01. Creation of Bonds. There is hereby
authorized and created under this Indenture, for the purpose of
providing moneys to pay, or redeem, or provide for the redemption
therefor, of the 1983 Bonds, an issue of Bonds, entitled to the
benefit, protection and security of this Indenture, in the
aggregate principal amount of Seventy-Five Million Dollars
($75,000,000). Each of the Bonds shall be designated by the
title "The Industrial Development Authority of the County of Pima
Industrial Development Revenue Bond, 1997 Series C (Tucson
Electric Power Company Project)". The Bonds shall mature,
subject to prior redemption upon the terms and conditions
hereinafter set forth, on September 1, 2029 and shall bear
interest from the date thereof until payment of the principal or
redemption price thereof shall have been made or provided for in
accordance with the provisions hereof, whether at maturity, upon
redemption or otherwise, at the rate of six per centum (6%) per
annum, with interest thereon payable semi-annually on each March
1 and September 1, commencing March 1, 1998. Interest shall be
calculated on the basis of a 360-day year consisting of twelve
30-day months.
Section 2.02. Form of Bonds. Bonds shall be authenticated
and delivered hereunder solely as fully registered bonds without
coupons in the denomination of $5,000 or integral multiples
thereof. Bonds shall be numbered as determined by the Trustee.
Bonds authenticated prior to the first interest payment date
shall be dated September 15, 1997. Bonds authenticated on or
subsequent to the first interest payment date shall be dated the
interest payment date next preceding the date of authentication
thereof, unless such date of authentication shall be an interest
payment date to which interest on the Bonds has been paid in full
or duly provided for, in which case they shall be dated such date
of authentication; provided, however, that if, as shown by the
records of the Trustee, interest on the Bonds shall be in
default, Bonds issued in exchange for Bonds surrendered for
transfer or exchange shall be dated the date to which interest
has been paid in full on the Bonds surrendered.
Principal of and premium, if any, on Bonds shall be payable
to the Owners of such Bonds upon presentation and surrender of
such Bonds at the Principal Office of the Paying Agent or any
Co-Paying Agent. Interest on the Bonds shall be paid by check
drawn upon the Paying Agent and mailed to the Owners of such
Bonds as of the close of business on the Record Date with respect
to each interest payment date at the registered addresses of such
Owners as they shall appear as of the close of business on such
Record Date on the registration books maintained pursuant to
Section 2.08 hereof notwithstanding the cancellation of any such
Bond upon any exchange or registration of transfer subsequent to
such Record Date, except that if and to the extent that there
should be a default on the payment of interest on any Bond, such
defaulted interest shall be paid to the Owners in whose name such
Bond (or any Bond or Bonds issued upon any exchange or
registration of transfer thereof) is registered as of the close
of business on a date selected by the Trustee in its discretion,
but not more than 15 days or less than 10 days prior to the date
of payment of such defaulted interest; notwithstanding the
foregoing, upon request to the Paying Agent by an Owner of not
less than $1,000,000 in aggregate principal amount of Bonds,
interest on such Bonds and, after presentation and surrender of
such Bonds, the principal thereof shall be paid to such Owner by
wire transfer to the account maintained within the continental
United States specified by such Owner or, if such Owner maintains
an account with the entity acting as Paying Agent, by deposit
into such account. Payment as aforesaid shall be made in such
coin or currency of the United States of America as, at the
respective times of payment, shall be legal tender for the
payment of public and private debts.
The Bonds and the form for registration of transfer and the
form of certificate of authentication to be printed on the Bonds
are to be in substantially the forms thereof set forth in
Exhibits A, B and C hereto, respectively, with necessary or
appropriate variations, omissions and insertions as permitted or
required by this Indenture.
Section 2.03. Execution of Bonds. The Bonds shall be
executed on behalf of the Authority by the President or a Vice
President of the Authority and shall have affixed, impressed or
reproduced thereon the official seal of the Authority which shall
be attested by the Secretary or an Assistant Secretary of the
Authority. Each of the foregoing officers may execute or cause
to be executed with a facsimile signature in lieu of his manual
signature the Bonds, provided the signature of either the
President or a Vice President of the Authority or the Secretary
or Assistant Secretary of the Authority shall, if required by
applicable laws, be manually subscribed.
In case any officer of the Authority whose signature or a
facsimile of whose signature shall appear on the Bonds shall
cease to be such officer before the authentication by the Trustee
and delivery of such Bonds, such signature or such facsimile
shall nevertheless be valid and sufficient for all purposes, the
same as if such officer had remained in office until delivery;
and any Bond may be signed on behalf of the Authority by such
persons as, at the time of execution of such Bond, shall be the
proper officers of the Authority, even though at the date of such
Bond or of the execution and delivery of this Indenture any such
person was not such officer.
Section 2.04. Authentication of Bonds. Only such Bonds as
shall have endorsed thereon a certificate of authentication
substantially in the form set forth in Exhibit C hereto duly
executed by the Trustee shall be entitled to any right or benefit
under this Indenture. No Bond shall be valid or obligatory for
any purpose unless and until such certificate of authentication
shall have been duly executed by the Trustee, and such executed
certificate of authentication of the Trustee upon any such Bonds
shall be conclusive evidence that such Bond has been
authenticated and delivered under this Indenture. The Trustee's
certificate of authentication on any Bond shall be deemed to have
been executed by it if signed with an authorized signature of the
Trustee, but it shall not be necessary that the same person sign
the certificate of authentication on all of the Bonds issued
hereunder. This Section 2.04 is subject to the provisions of
Section 10.17 hereof.
Section 2.05. Bonds Not General Obligations. Neither Pima
County, Arizona nor the State of Arizona shall in any event be
liable for the payment of the principal of or premium, if any, or
interest on the Bonds, and neither the Bonds nor the premium, if
any, or the interest thereon, shall be construed to constitute an
indebtedness of Pima County, Arizona or the State of Arizona
within the meaning of any constitutional or statutory provisions
whatsoever. The Bonds and the premium, if any, and the interest
thereon shall be limited obligations of the Authority payable
solely from the Receipts and Revenues of the Authority from the
Loan Agreement and the other moneys pledged therefor under this
Indenture, and such fact shall be plainly stated on the face of
each Bond.
Section 2.06. Prerequisites to Authentication of Bonds.
The Authority shall execute and deliver to the Trustee and the
Trustee shall authenticate the Bonds and deliver said Bonds to
the initial purchasers thereof as may be directed hereinafter in
this Section 2.06.
Prior to the delivery on original issuance by the Trustee of
any authenticated Bonds there shall be or have been delivered to
the Trustee:
(a) a duly certified copy of a resolution of the Board
of Directors of the Authority authorizing the execution and
delivery of this Indenture and the Loan Agreement and the
issuance of the Bonds;
(b) an original duly executed counterpart or a duly
certified copy of the Loan Agreement;
(c) a request and authorization to the Trustee on
behalf of the Authority, signed by its President or a Vice
President, to authenticate and deliver the Bonds in the
aggregate principal amount determined by this Indenture to
the purchaser or purchasers therein identified upon payment
to the Trustee, but for the account of the Authority, of a
sum specified in such request and authorization plus any
accrued interest on such Bonds to the date of delivery; and
(d) a written statement on behalf of the Company,
executed by the President, any Vice President or the
Treasurer, (i) approving the issuance and delivery of the
Bonds and (ii) consenting to each and every provision of
this Indenture.
Section 2.07. Lost or Destroyed Bonds or Bonds Canceled in
Error. If any Bond, whether in temporary or definitive form, is
lost (whether by reason of theft or otherwise), destroyed
(whether by mutilation, damage, in whole or in part, or
otherwise) or canceled in error, the Authority may execute and
the Trustee may authenticate a new Bond of like date and
denomination and bearing a number not contemporaneously
outstanding; provided that (a) in the case of any mutilated Bond,
such mutilated Bond shall first be surrendered to the Trustee and
(b) in the case of any lost Bond or Bond destroyed in whole,
there shall be first furnished to the Authority, the Trustee and
the Company evidence of such loss or destruction. In every case,
the applicant for a substitute Bond shall furnish the Authority,
the Trustee and the Company such security or indemnity as may be
required by any of them. In the event any lost or destroyed Bond
or a Bond canceled in error shall have matured or is about to
mature, or has been called for redemption, instead of issuing a
substitute Bond the Trustee may, in its discretion, pay the same
without surrender thereof if there shall be first furnished to
the Authority, the Trustee and the Company evidence of such loss,
destruction or cancellation, together with indemnity,
satisfactory to them. Upon the issuance of any substitute Bond,
the Authority and the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may
be imposed in relation thereto. The Trustee may charge the Owner
of any such Bond with the Trustee's reasonable fees and expenses
in connection with any transaction described in this Section
2.07.
Every substitute Bond issued pursuant to the provisions of
this Section 2.07 by virtue of the fact that any Bond is lost,
destroyed or canceled in error shall constitute an additional
contractual obligation of the Authority, whether or not the Bond
so lost, destroyed or canceled shall be at any time enforceable,
and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Bonds duly
issued hereunder. All Bonds shall be held and owned upon the
express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the
replacement or payment of lost, destroyed or improperly canceled
Bonds, notwithstanding any law or statute now existing or
hereafter enacted.
Section 2.08. Transfer, Registration and Exchange of Bonds.
The Registrar shall maintain and keep, at its Principal Office,
books for the registration and registration of transfer of Bonds,
which, at all reasonable times, shall be open for inspection by
the Authority, the Trustee and the Company; and, upon
presentation for such purpose of any Bond entitled to
registration or registration of transfer at the Principal Office
of the Registrar, the Registrar shall register or register the
transfer in such books, under such reasonable regulations as the
Registrar may prescribe. The Registrar shall make all necessary
provisions to permit the exchange or registration of transfer of
Bonds at its Principal Office.
The transfer of any Bond shall be registered upon the
registration books of the Registrar at the written request of the
Owner thereof or his attorney duly authorized in writing, upon
surrender thereof at the Principal Office of the Registrar,
together with a written instrument of transfer satisfactory to
the Registrar duly executed by the Owner or his duly authorized
attorney. Upon the registration of transfer of any such Bond or
Bonds, the Authority shall issue in the name of the transferee,
in authorized denominations, a new Bond or Bonds in the same
aggregate principal amount as the surrendered Bond or Bonds.
The Authority, the Trustee, the Paying Agent, any Co-Paying
Agent and the Registrar may deem and treat the Owner of any Bond
as the absolute owner of such Bond, whether such Bond shall be
overdue or not, for the purpose of receiving payment of, or on
account of, the principal of and premium, if any, and, except as
provided in Section 2.02 hereof, interest on, such Bond and for
all other purposes, and neither the Authority, the Trustee, the
Paying Agent, any Co-Paying Agent nor the Registrar shall be
affected by any notice to the contrary. All such payments so
made to any such Owner or upon his order shall be valid and
effective to satisfy and discharge the liability upon such Bond
to the extent of the sum or sums so paid.
Bonds, upon surrender thereof at the Principal Office of the
Registrar may, at the option of the Owner thereof, be exchanged
for an equal aggregate principal amount of Bonds of any
authorized denomination.
In all cases in which the privilege of exchanging Bonds or
registering the transfer of Bonds is exercised, the Authority
shall execute and the Trustee shall authenticate and deliver
Bonds in accordance with the provisions of this Indenture. For
every such exchange or registration of transfer of Bonds, whether
temporary or definitive, the Authority, the Registrar, or the
Trustee may make a charge sufficient to reimburse it for any tax
or other governmental charge required to be paid with respect to
such exchange or registration of transfer, which sum or sums
shall be paid by the person requesting such exchange or
registration of transfer as a condition precedent to the exercise
of the privilege of making such exchange or registration of
transfer. The Registrar shall not be obligated (a) to make any
such exchange or registration of transfer of Bonds during the
fifteen (15) days next preceding the date on which notice of any
proposed redemption of Bonds is given or (b) to make any exchange
or registration of transfer of any Bonds called for redemption.
The Bonds are to be initially registered in the name of Cede
& Co., as nominee for the Depositary. Such Bonds shall not be
transferable or exchangeable, nor shall any purported transfer be
registered, except as follows:
(a) such Bonds may be transferred in whole, and
appropriate registration of transfer effected, if such
transfer is by such nominee to the Depositary, or by the
Depositary to another nominee thereof, or by any nominee of
the Depositary to any other nominee thereof, or by the
Depositary or any nominee thereof to any successor
securities depositary or any nominee thereof; and
(b) such Bond may be exchanged for definitive Bonds
registered in the respective names of the beneficial holders
thereof, and thereafter shall be transferable without
restriction, if:
(i) the Depositary shall have notified the Company and
the Trustee that it is unwilling or unable to continue to
act as securities depositary with respect to such Bonds and
the Trustee shall not have been notified by the Company
within ninety (90) days of the identity of a successor
securities depositary with respect to such Bonds;
(ii) the Company shall have delivered to the Trustee a
written instrument to the effect that such Bonds shall be so
exchangeable on and after a date specified therein; or
(iii) (1) an Event of Default shall have occurred and
be continuing, (2) the Trustee shall have given notice of
such Event of Default pursuant to Section 10.19 hereof and
(3) there shall have been delivered to the Authority, the
Company and the Trustee an opinion of counsel to the effect
that the interests of the beneficial owners of such Bonds in
respect thereof will be materially impaired unless such
owners become owners of definitive Bonds.
The Bonds delivered to the Depositary may contain a legend
reflecting the foregoing restrictions on registration of transfer
and exchange.
Section 2.09. Other Obligations. The Authority expressly
reserves the right to issue, to the extent permitted by law, but
shall not be obligated to issue, obligations under another
indenture or indentures to provide additional funds to pay the
cost of construction of the Facilities or to refund all or any
principal amount of the Bonds, or any combination thereof.
Section 2.10 Temporary Bonds. Pending the preparation of
definitive Bonds, the Authority may execute and the Trustee shall
authenticate and deliver temporary Bonds. Temporary Bonds shall
be issuable as registered Bonds without coupons, of any
authorized denomination, and substantially in the form of the
definitive Bonds but with such omissions, insertions and
variations as may be appropriate for temporary Bonds, all as may
be determined by the Authority. Temporary Bonds may contain such
reference to any provisions of this Indenture as may be
appropriate. Every temporary Bond shall be executed by the
Authority and be authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with like
effect, as the definitive Bonds. As promptly as practicable the
Authority shall execute and shall furnish definitive Bonds and
thereupon temporary Bonds may be surrendered in exchange therefor
without charge at the Principal Office of the Trustee, and the
Trustee shall authenticate and deliver in exchange for such
temporary Bonds a like aggregate principal amount of definitive
Bonds of authorized denominations. Until so exchanged the
temporary Bonds shall be entitled to the same benefits under this
Indenture as definitive Bonds.
Section 2.11. Cancellation of Bonds. All Bonds which shall
have been surrendered to the Paying Agent or any Co-Paying Agent
for payment or redemption, and all Bonds which shall have been
surrendered to the Registrar for exchange or registration of
transfer, shall be delivered to the Trustee for cancellation.
All Bonds delivered to or acquired by the Trustee for
cancellation shall be canceled and destroyed by the Trustee. The
Trustee shall furnish to the Authority, the Paying Agent, the
Registrar and the Company counterparts of certificates evidencing
such cancellation and destruction and specifying such Bonds by
number.
Section 2.12. Payment of Principal and Interest. For the
payment of interest on the Bonds, the Authority shall cause to be
deposited in the Bond Fund, on each interest payment date, solely
out of the Receipts and Revenues of the Authority from the Loan
Agreement and other moneys pledged therefor, an amount sufficient
to pay the interest to become due on such interest payment date.
The obligation of the Authority to cause any such deposit to be
made hereunder shall be reduced by the amount of moneys in the
Bond Fund available on such interest payment date for the payment
of interest on the Bonds.
For the payment of the principal of the Bonds upon maturity,
the Authority shall cause to be deposited in the Bond Fund, on
the stated or accelerated date of maturity, solely out of the
Receipts and Revenues of the Authority from the Loan Agreement
and other moneys pledged therefor, an amount sufficient to pay
the principal of the Bonds. The obligation of the Authority to
cause any such deposit to be made hereunder shall be reduced by
the amount of moneys in the Bond Fund available on the maturity
date for the payment of the principal of the Bonds.
Section 2.13. Applicability of Book-Entry Provisions.
Anything in this Indenture to the contrary notwithstanding, (a)
the provisions of the Blanket Issuer Letter of Representations,
dated February 26, 1996, between the Authority and The Depository
Trust Company relating to the manner of and procedures for
payment and redemption of Bonds and related matters shall apply
so long as such Depositary shall be the Owner of all Outstanding
Bonds and (b) the Authority, the Trustee or the Paying Agent, as
applicable, may enter into a similar agreement, on terms
satisfactory to the Company, with any subsequent Depositary and
the provisions thereof shall apply so long as such Depositary
shall be the Owner of all Outstanding Bonds.
ARTICLE III
REDEMPTION OF BONDS
Section 3.01. Redemption Provisions. (a) The Bonds shall
be subject to redemption by the Authority, at the direction of
the Company, on any date on or after September 1, 2002 in whole
at any time or in part from time to time, at the applicable
redemption price (expressed as a percentage of principal amount)
set forth below, plus accrued interest to the redemption date:
Redemption Period Redemption Price
----------------- ----------------
September 1, 2002 through August 31, 2003 102%
September 1, 2003 through August 31, 2004 101%
September 1, 2004 and thereafter 100%
(b) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, in whole at any time
at the principal amount thereof plus accrued interest to the
redemption date, if:
(i) the Company shall have determined that the
continued operation of the Facilities is impracticable,
uneconomical or undesirable for any reason;
(ii) all or substantially all of the Facilities shall
have been condemned or taken by eminent domain; or
(iii) the operation of the Facilities shall have been
enjoined or shall have otherwise been prohibited by, or
shall conflict with, any order, decree, rule or regulation
of any court or of any federal, state or local regulatory
body, administrative agency or other governmental body.
(c) The Bonds shall be subject to mandatory redemption by
the Authority, at the principal amount thereof plus accrued
interest to the redemption date, on the 180th day (or such
earlier date as may be designated by the Company) after a final
determination by a court of competent jurisdiction or an
administrative agency, to the effect that, as a result of a
failure by the Company to perform or observe any covenant,
agreement or representation contained in the Loan Agreement, the
interest payable on the Bonds is included for federal income tax
purposes in the gross income of the owners thereof, other than
any owner of a Bond who is a "substantial user" of the Facilities
or a "related person" within the meaning of Section 103(b)(13) of
the 1954 Code. No determination by any court or administrative
agency shall be considered final for the purposes of this Section
3.01 (c) unless the Company shall have been given timely notice
of the proceeding which resulted in such determination and an
opportunity to participate in such proceeding, either directly or
through an owner of a Bond, and until the conclusion of any
appellate review sought by any party to such proceeding or the
expiration of the time for seeking such review. The Bonds shall
be redeemed either in whole or in part in such principal amount
that, in the opinion of Bond Counsel, the interest payable on the
Bonds, including the Bonds remaining outstanding after such
redemption, would not be included in the gross income of any
owner thereof, other than an owner of a Bond who is a
"substantial user" of the Facilities or a "related person" within
the meaning of Section 103(b)(13) of the 1954 Code.
Section 3.02. Selection of Bonds to be Redeemed. If less
than all the Bonds shall be called for redemption under any
provision of this Indenture permitting such partial redemption,
the particular Bonds or portions of Bonds to be redeemed shall be
selected by the Trustee, in such manner as the Trustee in its
discretion may deem proper, in the aggregate principal amount
designated to the Trustee by the Company or otherwise as required
by this Indenture; provided, however, that if, as indicated in a
certificate of an Authorized Company Representative delivered to
the Trustee, the Company shall have offered to purchase all Bonds
then Outstanding and less than all such Bonds have been tendered
to the Company for such purchase, the Trustee, at the direction
of an Authorized Company Representative, shall select for
redemption all such Bonds which shall not have been so tendered;
and provided, further, that the portion of any Bond to be
redeemed shall be in the principal amount of $5,000 or some
integral multiple thereof and that, in selecting Bonds for
redemption, the Trustee shall treat each Bond as representing
that number of Bonds which is obtained by dividing the principal
amount of such Bond by $5,000. If it is determined that one or
more, but not all, of the $5,000 units of principal amount
represented by any such Bond is to be called for redemption,
then, upon notice of intention to redeem such $5,000 unit or
units, the Owner of such Bond shall forthwith surrender such Bond
to the Paying Agent or any Co-Paying Agent for (y) payment to
such Owner of the redemption price (including the redemption
premium, if any, and accrued interest to the date fixed for
redemption) of the $5,000 unit or units of principal amount
called for redemption and (z) delivery to such Owner of a new
Bond or Bonds in the aggregate principal amount of the unredeemed
balance of the principal amount of any such Bond. Bonds
representing the unredeemed balance of the principal amount of
any such Bond shall be delivered to the Owner thereof, without
charge therefor. If the Owner of any such Bond of a denomination
greater than $5,000 shall fail to present such Bond to the Paying
Agent or any Co-Paying Agent for payment and exchange as
aforesaid, such Bond shall, nevertheless, become due and payable
on the date fixed for redemption to the extent of the $5,000 unit
or units of principal amount called for redemption (and to that
extent only).
Section 3.03. Procedure for Redemption. (a) In the event
any of the Bonds are called for redemption, the Trustee shall
give notice, in the name of the Authority, of the redemption of
such Bonds, which notice shall (i) specify the Bonds to be
redeemed, the redemption date, the redemption price, and the
place or places where amounts due upon such redemption will be
payable (which shall be the Principal Office of the Paying Agent
or any Co-Paying Agent) and, if less than all of the Bonds are to
be redeemed, the numbers of the Bonds to be redeemed, and the
portion of the principal amount of any Bond to be redeemed in
part, (ii) state any condition to such redemption and (iii) state
that on the redemption date, and upon the satisfaction of any
such condition, the Bonds or portions thereof to be redeemed
shall cease to bear interest. Such notice may set forth any
additional information relating to such redemption. Such notice
shall be given by Mail at least thirty (30) days prior to the
date fixed for redemption to the Owners of the Bonds to be
redeemed; provided, however, that failure duly to give such
Notice by Mail, or any defect therein, shall not affect the
validity of any proceedings for the redemption of Bonds as to
which there shall have been no such failure or defect. If a
notice of redemption shall be unconditional, or if the conditions
of a conditional notice or redemption shall have been satisfied,
then upon presentation and surrender of Bonds so called for
redemption at the place or places of payment, such Bonds shall be
redeemed. The Trustee shall promptly deliver to the Company a
copy of each such notice of redemption.
(b) With respect to any notice of redemption of Bonds in
accordance with subsection (a) or (b) of Section 3.01 hereof,
unless, upon the giving of such notice, such Bonds shall be
deemed to have been paid within the meaning of Article VIII
hereof, such notice shall state that such redemption shall be
conditional upon the receipt, by the Trustee at or prior to the
opening of business on the date fixed for such redemption, of
moneys sufficient to pay the principal of and premium, if any,
and interest on such Bonds to be redeemed, and that if such
moneys shall not have been so received said notice shall be of no
force and effect and the Authority shall not be required to
redeem such Bonds. In the event that such notice of redemption
contains such a condition and such moneys are not so received,
the redemption shall not be made and the Trustee shall within a
reasonable time thereafter give notice, in the manner in which
the notice of redemption was given, that such moneys were not so
received.
(c) Any Bonds and portions of Bonds which have been duly
selected for redemption shall cease to bear interest on the
specified redemption date provided that moneys sufficient to pay
the principal of, premium, if any, and interest on such Bonds
shall be on deposit with the Trustee on the date fixed for
redemption so that such Bonds will be deemed to be paid in
accordance with Article VIII hereof.
Section 3.04. Payment of Redemption Price. For the
redemption of any of the Bonds, the Authority shall cause to be
deposited in the Bond Fund, on the redemption date, solely out of
the Receipts and Revenues of the Authority from the Loan
Agreement, an amount sufficient to pay the principal of and
premium, if any, and interest to become due on such redemption
date. The obligation of the Authority to cause any such deposit
to be made hereunder shall be reduced by the amount of moneys in
the Bond Fund available on such redemption date for payment of
the principal of and premium, if any, and accrued interest on the
Bonds to be redeemed.
Section 3.05. No Partial Redemption After Default.
Anything in this Indenture to the contrary notwithstanding, if
there shall have occurred and be continuing an Event of Default
defined in clause (a) or (b) of the first paragraph of Section
9.01 hereof, there shall be no redemption of less than all of the
Bonds at the time Outstanding other than a partial redemption in
connection with an offer by the Company to purchase all Bonds
Outstanding as contemplated in the first proviso to the first
sentence of Section 3.02 hereof.
ARTICLE IV
THE BOND FUND
Section 4.01. Creation of Bond Fund. There is hereby
created and established with the Trustee a trust fund in the name
of the Authority to be designated "The Industrial Development
Authority of The County of Pima Industrial Development Revenue
Bonds, 1997 Series C (Tucson Electric Power Company Project) Bond
Fund". The Trustee shall establish and maintain within the Bond
Fund such segregated subaccounts as may be requested by an
Authorized Company Representative. The Bond Fund, and all moneys
and certificated securities therein, shall be kept in the
possession of the Trustee.
Section 4.02. Liens. The Authority shall not create any
lien upon the Bond Fund or upon the Receipts and Revenues of the
Authority from the Loan Agreement other than the lien hereby
created.
Section 4.03. Deposits into Bond Fund. (a) There shall be
deposited into the Bond Fund:
(i) the accrued interest, if any, on the Bonds accrued
to the date of delivery thereof and paid by the initial
purchasers thereof;
(ii) all Loan Payments; and
(iii) all other moneys received by the Trustee under
and pursuant to any provision of the Loan Agreement, other
than Sections 5.03, 5.04 and 8.05 thereof, or from any other
source when accompanied by directions by the Company that
such moneys are to be paid into the Bond Fund.
(b) All income or other gain from the investment of moneys
in the Bond Fund shall be deposited into the Bond Fund.
Section 4.04. Use of Moneys in Bond Fund. Moneys, if any,
paid into the Bond Fund pursuant to clause (i) of Section 4.03(a)
hereof shall be applied to the payment of interest on the Bonds.
Except as otherwise provided in Sections 4.06, 9.01 and 10.04
hereof, all other moneys in the Bond Fund constituting part of
the Trust Estate shall be used solely for the payment of the
principal of and premium, if any, and interest on the Bonds as
the same shall become due and payable at maturity, upon
redemption or otherwise.
Section 4.05. Custody of Bond Fund; Withdrawal of Moneys.
The Bond Fund shall be in the custody of the Trustee but in the
name of the Authority and the Authority hereby authorizes and
directs the Trustee to withdraw from the Bond Fund and furnish to
the Paying Agent funds constituting part of the Trust Estate
sufficient to pay the principal of and premium, if any, and
interest on the Bonds as the same shall become due and payable,
and to withdraw from the Bond Fund funds sufficient to pay any
other amounts payable therefrom as the same shall become due and
payable.
Section 4.06. Bonds Not Presented for Payment. In the
event any Bonds shall not be presented for payment when the
principal thereof and premium, if any, thereon become due, either
at maturity or at the date fixed for redemption thereof or
otherwise, if moneys sufficient to pay such Bonds are held by the
Paying Agent or any Co-Paying Agent for the benefit of the Owners
thereof, the Paying Agent shall segregate and hold such moneys in
trust, without liability for interest thereon, for the benefit of
the Owners of such Bonds, who shall, except as provided in the
following paragraph, thereafter be restricted exclusively to such
fund or funds for the satisfaction of any claim of whatever
nature on their part under this Indenture or relating to said
Bonds.
Any moneys which the Paying Agent shall segregate and hold
in trust for the payment of the principal of and premium, if any,
or interest on any Bond and remaining unclaimed for one year
after such principal, premium, if any, or interest has become due
and payable shall, upon the Company's written request to the
Paying Agent, be paid to the Company, with notice to the Trustee
of such action; provided, however, that before the Paying Agent
shall be required to make any such repayment, the Paying Agent
shall, at the expense of the Company cause notice to be given
once by Publication to the effect that such money remains
unclaimed and that, after a date specified therein, which shall
not be less than thirty (30) days from the date of such notice by
Publication, any unclaimed balance of such moneys then remaining
will be paid to the Company. After the payment of such unclaimed
moneys to the Company, the Owner of such Bond shall thereafter
look only to the Company for the payment thereof, and all
liability of the Authority, the Trustee and the Paying Agent with
respect to such moneys shall thereupon cease.
Section 4.07. Moneys Held in Trust. All moneys and
Investment Securities held by the Trustee in the Bond Fund, and
all moneys required to be deposited with or paid to the Trustee
for deposit into the Bond Fund, and all moneys withdrawn from the
Bond Fund and held by the Trustee, the Paying Agent, any
Co-Paying Agent, shall be held by the Trustee, the Paying Agent
or any Co-Paying Agent, as the case may be, in trust, and such
moneys and Investment Securities (other than moneys held pursuant
to Section 4.06 hereof and moneys or Investment Securities held
in the Rebate Fund established in furtherance of the obligations
of the Company under clause (b) of Section 6.04 of the Loan
Agreement), while so held or so required to be deposited or paid,
shall constitute part of the Trust Estate and be subject to the
lien and security interest created hereby in favor of the
Trustee, for the benefit of the Owners from time to time of the
Bonds. The Company shall have no right, title or interest in the
Bond Fund, except such rights as may arise after the right, title
and interest of the Trustee in and to the Trust Estate and all
covenants, agreements and other obligations of the Authority
under this Indenture shall have ceased, terminated and become
void and shall have been satisfied and discharged in accordance
with Article VIII hereof.
ARTICLE V
DISPOSITION OF PROCEEDS
Section 5.01. Disposition of Proceeds. The proceeds from
the issuance and sale of the Bonds shall be applied as provided
in Section 4.03 of the Loan Agreement.
ARTICLE VI
INVESTMENTS
Section 6.01. Investments. The moneys in the Bond Fund
shall, at the direction of the Company, be invested and
reinvested in Investment Securities. Any Investment Securities
may be purchased subject to options or other rights in third
parties to acquire the same. Subject to the further provisions
of this Section 6.01, such investments shall be made by the
Trustee as directed and designated by the Company in a
certificate of, or telephonic advice promptly confirmed by a
certificate of, an Authorized Company Representative. As and
when any amounts thus invested may be needed for disbursements
from the Bond Fund, the Trustee shall request the Company to
designate such investments to be sold or otherwise converted into
cash to the credit of the Bond Fund as shall be sufficient to
meet such disbursement requirements and shall then follow any
directions in respect thereto of an Authorized Company
Representative. As long as no Event of Default (as defined in
Section 9.01 hereof) shall have occurred and be continuing, the
Company shall have the right to designate the investments to be
sold and to otherwise direct the Trustee in the sale or
conversion to cash of the investments made with the moneys in the
Bond Fund, provided that the Trustee shall be entitled to
conclusively assume the absence of any such Event of Default
unless it has notice thereof within the meaning of Section 10.05
hereof.
ARTICLE VII
GENERAL COVENANTS
Section 7.01. No General Obligations. Each and every
covenant herein made, including all covenants made in the various
sections of this Article VII, is predicated upon the condition
that neither Pima County, Arizona nor the State of Arizona shall
in any event be liable for the payment of the principal of, or
premium, if any, or interest on the Bonds or for the performance
of any pledge, mortgage, obligation or agreement created by or
arising out of this Indenture or the issuance of the Bonds, and
further that neither the Bonds, nor the premium, if any, or
interest thereon, nor any such obligation or agreement of the
Authority shall be construed to constitute an indebtedness of
Pima County, Arizona or the State of Arizona within the meaning
of any constitutional or statutory provisions whatsoever. The
Bonds and the interest and premium, if any, thereon shall be
limited obligations of the Authority payable solely from the
Receipts and Revenues of the Authority from the Loan Agreement
and the other moneys pledged therefor.
The Authority shall promptly cause to be paid, solely from
the sources stated herein, the principal of and premium, if any,
and interest on every Bond issued under this Indenture at the
place, on the dates and in the manner provided herein and in said
Bonds according to the true intent and meaning thereof.
Section 7.02. Performance of Covenants of the Authority;
Representations. The Authority shall faithfully perform at all
times any and all covenants, undertakings, stipulations and
provisions contained in this Indenture, in any and every Bond
executed, authenticated and delivered hereunder, and in all
proceedings pertaining thereto. The Authority represents that it
is duly authorized under the Constitution and laws of the State
of Arizona to issue the Bonds authorized hereby, to enter into
the Loan Agreement and this Indenture, and to pledge and assign
to the Trustee the Trust Estate, and that the Bonds in the hands
of the Owners thereof are and will be valid and binding limited
obligations of the Authority.
Section 7.03. Maintenance of Rights and Powers; Compliance
with Laws. The Authority shall at all times use its best efforts
to maintain its corporate existence or assure the assumption of
its obligations under this Indenture by any public body
succeeding to its powers under the Act; and it shall at all times
use its best efforts to comply with all valid acts, rules,
regulations, orders and directions of any legislative, executive,
administrative or judicial body known to it to be applicable to
the Loan Agreement and this Indenture.
Section 7.04. Enforcement of Obligations of the Company;
Amendments. Upon receipt of written notification from the
Trustee, the Authority shall cooperate with the Trustee in
enforcing the obligation of the Company to pay or cause to be
paid all the payments and other costs and charges payable by the
Company under the Loan Agreement. The Authority shall not enter
into any agreement with the Company amending the Loan Agreement
without the prior written consent of the Trustee and compliance
with Sections 12.06 and 12.07 of this Indenture (a revision to
Exhibit A to the Loan Agreement not being deemed an amendment for
purposes of this Section).
Section 7.05. Further Instruments. The Authority shall,
upon the reasonable request of the Trustee, from time to time
execute and deliver such further instruments and take such
further action as may be reasonable and as may be required to
carry out the purposes of this Indenture; provided, however, that
no such instruments or actions shall pledge the credit or taxing
power of the State of Arizona, Pima County, the Authority or any
other political subdivision of said State.
Section 7.06. No Disposition of Trust Estate. Except as
permitted by this Indenture, the Authority shall not sell, lease,
pledge, assign or otherwise dispose of or encumber its interest
in the Trust Estate and will promptly pay or cause to be
discharged or make adequate provision to discharge any lien or
charge on any part thereof not permitted hereby.
Section 7.07. Financing Statements. The Authority and the
Trustee shall cooperate with the Company in causing appropriate
financing statements naming, the Trustee as pledgee of the
Receipts and Revenues of the Authority from the Loan Agreement
and of the other moneys pledged under the Indenture for the
payment of the principal of and premium, if any, and interest on
the Bonds, and as pledgee and assignee of the balance of the
Trust Estate, and the Authority shall cooperate with the Trustee
and the Company in causing appropriate continuation statements to
be duly filed and recorded in the appropriate state and county
offices as required by the provisions of the Uniform Commercial
Code or other similar law as adopted in the State of Arizona and
any other applicable jurisdiction, as from time to time amended,
in order to perfect and maintain the security interests created
by this Indenture.
Section 7.08. Tax Covenants; Rebate Fund. (a) The
Authority covenants for the benefit of all Owners from time to
time of the Bonds that it will not directly or indirectly use or
(to the extent within its control), permit the use of, the
proceeds of any of the Bonds or any other funds of the Authority,
or take or omit to take any other action, if and to the extent
that such use, or the taking or omission to take such action,
would cause any of the Bonds to be "arbitrage bonds" within the
meaning of Section 148 of the Code or otherwise subject to
federal income taxation by reason of Sections 103 and 141 through
150 of the Code or Section 103 of the 1954 Code, as applicable,
and any applicable regulations promulgated thereunder. To that
end the Authority covenants to comply with all covenants set
forth in the Tax Agreement, which is hereby incorporated herein
by reference as though fully set forth herein.
(b) The Trustee shall establish and maintain a fund
separate from any other fund established and maintained hereunder
designated "The Industrial Development Authority of the County of
Pima Industrial Development Revenue Bonds, 1997 Series C (Tucson
Electric Power Company Project) Rebate Fund" (herein called the
"Rebate Fund") in accordance with the provisions of the Tax
Agreement. Within the Rebate Fund, the Trustee shall maintain
such accounts as shall be directed by the Company in order for
the Authority and the Company to comply with the provisions of
the Tax Agreement. Subject to the transfer provisions provided
in paragraph (c) below, all money at any time deposited in the
Rebate Fund shall be held by the Trustee in trust, to the extent
required to satisfy the Rebate Requirement (as defined in the Tax
Agreement), for payment to the United States of America, and
neither the Company, the Authority or the Owners shall have any
rights in or claim to such moneys. All amounts deposited into or
on deposit in the Rebate Fund shall be governed by this Section
7.08, by Section 6.04 of the Loan Agreement and by the Tax
Agreement. The Trustee shall conclusively be deemed to have
complied with such provisions if it follows the directions of the
Company, including supplying all necessary information in the
manner set forth in the Tax Agreement, and shall not be required
to take any actions thereunder in the absence of written
directions from the Company.
(c) Upon receipt of the Company's written instructions, the
Trustee shall remit part or all of the balances in the Rebate
Fund to the United States of America, as so directed. In
addition, if the Company so directs, the Trustee shall deposit
moneys into or transfer moneys out of the Rebate Fund from or
into such accounts or funds as directed by the Company's written
directions. Any funds remaining in the Rebate Fund after all of
the Bonds shall have been paid and any Rebate Requirement shall
have been satisfied, or provision therefor reasonably
satisfactory to the Trustee shall have been made, shall be
withdrawn and remitted to the Company.
(d) Notwithstanding any provision of this Indenture, the
obligation to remit the Rebate Requirement to the United States
of America and to comply with all other requirements of this
Section 7.08, Section 6.04 of the Loan Agreement and the Tax
Agreement shall survive the payment of the Bonds and the
satisfaction and discharge of this Indenture.
Section 7.09. Notices of Trustee. The Trustee shall give
notice to both the Authority and the Company whenever it is
required hereby to give notice to either and, additionally, shall
furnish to the Authority and the Company copies of any Notice by
Mail or Publication given by it pursuant to any provision hereof.
ARTICLE VIII
DEFEASANCE
Section 8.01. Defeasance. If the Authority shall pay or
cause to be paid to the Owner of any Bond secured hereby the
principal of and premium, if any, and interest due and payable,
and thereafter to become due and payable, upon such Bond or any
portion of such Bond in the principal amount of $5,000 or any
integral multiple thereof, such Bond or portion thereof shall
cease to be entitled to any lien, benefit or security under this
Indenture. If the Authority shall pay or cause to be paid to the
Owners of all the Bonds secured hereby the principal of and
premium, if any, and interest due and payable, and thereafter to
become due and payable, thereon, and shall pay or cause to be
paid all other sums payable hereunder including, without
limitation, amounts payable pursuant to Section 10.04 hereof,
then, and in that case, the right, title and interest of the
Trustee in and to the Trust Estate shall thereupon cease,
terminate and become void. In such event, the Trustee shall
assign, transfer and turn over to the Company the Trust Estate,
including, without limitation, any surplus in the Bond Fund and
any balance remaining in any other fund created under this
Indenture.
All or any portion of Outstanding Bonds or portions of Bonds
in principal amounts of $5,000 or any integral multiple thereof,
shall prior to the maturity or redemption date thereof be deemed
to have been paid within the meaning and with the effect
expressed in this Article VIII, and the entire indebtedness of
the Authority with respect thereof shall be satisfied and
discharged, when
(a) in the event said Bonds or portions thereof have
been selected for redemption in accordance with Section 3.02
hereof, the Trustee shall have given, or the Company shall
have given to the Trustee in form satisfactory to it
irrevocable instructions to give, on a date in accordance
with the provisions of Section 3.03 hereof, notice of
redemption of such Bonds or portions thereof,
(b) there shall have been deposited with the Trustee
either moneys in an amount which shall be sufficient, or
Government Obligations which shall not contain provisions
permitting the redemption thereof at the option of the
issuer, the principal of and the interest on which, when
due, and without regard to any reinvestment thereof, will
provide moneys which, together with the moneys, if any,
deposited with or held by the Trustee, shall be sufficient,
to pay when due the principal of and premium, if any, and
interest due and to become due on said Bonds or portions
thereof on and prior to the redemption date or maturity date
thereof, as the case may be, and
(c) in the event said Bonds or portions thereof do not
mature and are not to be redeemed within the next succeeding
sixty (60) days, the Company shall have given the Trustee in
form satisfactory to it irrevocable instructions to give, as
soon as practicable in the same manner as a notice of
redemption is given pursuant to Section 3.03 hereof, a
notice to the Owners of said Bonds or portions thereof that
the deposit required by clause (b) above has been made with
the Trustee and that said Bonds or portions thereof are
deemed to have been paid in accordance with this Article
VIII and stating the maturity or redemption date upon which
moneys are to be available for the payment of the principal
of and premium, if any, and interest on said Bonds or
portions thereof.
Neither the Government Obligations nor moneys deposited with
the Trustee pursuant to this Article VIII nor principal or
interest payments on any such Government Obligations shall be
withdrawn or used for any purpose other than, and such Government
Obligations, moneys and principal or interest payments shall be
held in trust for, the payment of the principal of and premium,
if any, and interest on said Bonds or portions thereof; provided,
that any cash received from such principal or interest payments
on such Government Obligations deposited with the Trustee, if not
then needed for such purposes, shall, to the extent practicable,
be invested in Government Obligations of the type described in
clause (b) of the preceding paragraph maturing at times and in
amounts sufficient to pay when due the principal of and premium,
if any, and interest to become due on said Bonds or portions
thereof on and prior to such redemption date or maturity date
thereof, as the case may be, and interest earned from such
reinvestments shall be paid over to the Company, as received by
the Trustee, free and clear of any trust, lien or pledge
hereunder. If payment of less than all the Bonds is to be
provided for in the manner and with the effect provided in this
Article VIII, the Trustee shall select such Bonds or portions of
Bonds in the manner specified by Section 3.02 hereof for
selection for redemption of less than all Bonds in the principal
amount designated to the Trustee by the Company. At or prior to
the time of the deposit of any Government Obligations with the
Trustee pursuant to this Section 8.01, the Company shall provide
the Trustee with a certificate of an accountant or an accounting
firm as to the sufficiency of such Government Obligations to pay
when due the principal of and premium, if any, and interest due
and to become due as set forth in clause (b) of the preceding
paragraph.
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Events of Default. Each of the following
events shall constitute and is referred to in this Indenture as
an "Event of Default":
(a) a failure to pay the principal of or premium, if
any, on any of the Bonds when the same shall become due and
payable at maturity, upon redemption or otherwise;
(b) a failure to pay an installment of interest on any
of the Bonds after such interest shall have become due and
payable for a period of thirty (30) days;
(c) a failure by the Authority to observe and perform
any covenant, condition, agreement or provision (other than
as specified in clauses (a) and (b) of this Section 9.01)
contained in the Bonds or in this Indenture on the part of
the Authority to be observed or performed, which failure
shall continue for a period of sixty (60) days after written
notice, specifying such failure and requesting that it be
remedied, shall have been given to the Authority and the
Company by the Trustee, which may give such notice in its
discretion and which shall give such notice at the written
request of Owners of not less than 33% in principal amount
of the Bonds then Outstanding, unless the Trustee, or the
Trustee and Owners of a principal amount of Bonds not less
than the principal amount of Bonds the Owners of which
requested that such notice be given, as the case may be,
shall agree in writing to an extension of such period prior
to its expiration; provided, however, that the Trustee, or
the Trustee and the Owners of such principal amount of
Bonds, as the case may be, shall be deemed to have agreed to
an extension of such period if corrective action is
initiated by the Authority, or the Company on behalf of the
Authority, within such period and is being diligently
pursued.
Upon the occurrence and continuance of any Event of Default
described in clause (a) or (b) of the preceding paragraph, the
Trustee may, and at the written request of Owners of not less
than 33% in principal amount of Bonds then Outstanding shall, by
written notice to the Authority and the Company, declare the
Bonds to be immediately due and payable, whereupon they shall,
without further action, become and be immediately due and
payable, anything in this Indenture or in the Bonds to the
contrary notwithstanding, and the Trustee shall give notice
thereof by Mail to all Owners of Outstanding Bonds.
The provisions of the preceding paragraph, however, are
subject to the condition that if, after the principal of the
Bonds shall have been so declared to be due and payable, and
before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the
Authority shall cause to be deposited with the Trustee a sum
sufficient to pay all matured installments of interest upon all
Bonds and the principal of any and all Bonds which shall have
become due otherwise than by reason of such declaration (with
interest upon such principal and, to the extent permissible by
law, on overdue installments of interest, at the rate per annum
borne by the Bonds) and such amounts as shall be sufficient to
cover reasonable compensation and reimbursement of expenses
payable to the Trustee and any predecessor Trustee, and all
Events of Default hereunder other than nonpayment of the
principal of Bonds which shall have become due by said
declaration shall have been remedied, then, in every such case,
such Event of Default shall be deemed waived and such declaration
and its consequences rescinded and annulled, and the Trustee
shall promptly give written notice of such waiver, rescission and
annulment to the Authority and the Company, and, if notice of the
acceleration of the Bonds shall have been given to the Owners of
the Bonds, shall give notice thereof by Mail to all Owners of
Outstanding Bonds; but no such waiver, rescission and annulment
shall extend to or affect any subsequent Event of Default or
impair any right or remedy consequent thereon.
Section 9.02. Remedies. Upon the occurrence and
continuance of any Event of Default, then and in every such case
the Trustee in its discretion may, and upon the written request
of Owners of not less than a majority in principal amount of the
Bonds then Outstanding and receipt of indemnity to its
satisfaction shall, in its own name and as the Trustee of an
express trust:
(a) by mandamus, or other suit, action or proceeding at
law or in equity, enforce all rights of the Owners of the
Bonds, and require the Authority or the Company to carry out
any agreements with or for the benefit of such Owners and to
perform its or their duties under the Act, the Loan
Agreement and this Indenture;
(b) bring suit upon the Bonds; or
(c) by action or suit in equity enjoin any acts or
things which may be unlawful or in violation of the rights
of the Owners of the Bonds.
Section 9.03. Restoration to Former Position. In the event
that any proceeding taken by the Trustee to enforce any right
under this Indenture shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the
Trustee, then the Authority, the Trustee and the Owners shall be
restored, subject to any determination in such proceeding, to
their former positions and rights hereunder, respectively, and
all rights, remedies and powers of the Trustee shall continue as
though no such proceeding had been taken.
Section 9.04. Owners' Right to Direct Proceedings.
Anything in this Indenture to the contrary notwithstanding, the
Owners of a majority in principal amount of the Bonds then
Outstanding hereunder shall have the right, by an instrument in
writing executed and delivered to the Trustee, to direct the
time, method and place of conducting all remedial proceedings
available to the Trustee under this Indenture or exercising any
trust or power conferred on the Trustee by this Indenture;
provided, however, that such direction shall not be otherwise
than in accordance with law and the provisions of this Indenture
and that the Trustee shall have the right (but not the
obligation) to decline to follow any such direction if the
Trustee, being advised by counsel, shall determine that the
action or proceeding so directed may not lawfully be taken, or if
the Trustee in good faith shall determine that the action or
proceedings so directed would involve the Trustee in personal
liability or if the Trustee in good faith shall so determine that
the actions or forbearances specified in or pursuant to such
direction would be unduly prejudicial to the interests of Owners
not joining in the giving of said direction, it being understood
that the Trustee shall have no duty to ascertain whether or not
such actions or forbearances are unduly prejudicial to such
Owners.
Section 9.05. Limitation on Owners' Right to Institute
Proceedings. No Owner of Bonds shall have any right to institute
any suit, action or proceeding in equity or at law for the
execution of any trust or power hereunder, or any other remedy
hereunder or on said Bonds, unless such Owner previously shall
have given to the Trustee written notice of an Event of Default
as hereinabove provided and unless the Owners of not less than a
majority in principal amount of the Bonds then Outstanding shall
have made written request of the Trustee so to do, after the
right to institute said suit, action or proceeding shall have
accrued, and shall have afforded the Trustee a reasonable
opportunity to proceed to institute the same in either its or
their name, and unless there also shall have been offered to the
Trustee security and indemnity satisfactory to it against the
costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee shall not have complied with such
request within a reasonable time; and such notification, request
and offer of indemnity are hereby declared in every such case, at
the option of the Trustee, to be conditions precedent to the
institution of said suit, action or proceeding; it being
understood and intended that no one or more of the Owners of the
Bonds shall have any right in any manner whatever by his or their
action to affect, disturb or prejudice the security of this
Indenture, or to enforce any right hereunder or under the Bonds,
except in the manner herein provided, and that all suits, actions
and proceedings at law or in equity shall be instituted, had and
maintained in the manner herein provided and for the equal
benefit of all Owners of the Bonds.
Section 9.06. No Impairment of Right to Enforce Payment.
Notwithstanding any other provision in this Indenture, the right
of any Owner of a Bond to receive payment of the principal of and
premium, if any, and interest on such Bond, on or after the
respective due dates expressed therein, or to institute suit for
the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
such Owner.
Section 9.07. Proceedings by Trustee without Possession of
Bonds. All rights of action under this Indenture or under any of
the Bonds secured hereby which are enforceable by the Trustee may
be enforced by it without the possession of any of the Bonds, or
the production thereof on the trial or other proceedings relative
thereto, and any such suit, action or proceeding instituted by
the Trustee shall be brought in its name for the equal and
ratable benefit of the Owners of the Bonds, subject to the
provisions of this Indenture.
Section 9.08. No Remedy Exclusive. No remedy herein
conferred upon or reserved to the Trustee or to the Owners of the
Bonds is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative, and
shall be in addition to every other remedy given hereunder or
under the Loan Agreement, now or hereafter existing at law or in
equity or by statute.
Section 9.09. No Waiver of Remedies. No delay or omission
of the Trustee or of any Owner of a Bond to exercise any right or
power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver of any such default,
or an acquiescence therein; and every power and remedy given by
this Article IX to the Trustee and to the Owners of the Bonds,
respectively, may be exercised from time to time and as often as
may be deemed expedient.
Section 9.10. Application of Moneys. Any moneys received
by the Trustee, by any receiver or by any Owner of a Bond
pursuant to any right given or action taken under the provisions
of this Article IX, after payment of the costs and expenses of
the proceedings resulting in the collection of such moneys and of
all amounts due to the Trustee and any predecessor Trustee under
Section 10.04 hereof, shall be deposited in the Bond Fund and all
moneys so deposited in the Bond Fund during the continuance of an
Event of Default (other than moneys for the payment of Bonds
which had matured or otherwise become payable prior to such Event
of Default or for the payment of interest due prior to such Event
of Default) shall be applied as follows:
(a) Unless the principal of all the Bonds shall have
become due and payable, all such moneys shall be applied (i)
first, to the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, with
interest on overdue installments, if lawful, at the rate per
annum borne by the Bonds, in the order of maturity of the
installments of such interest and, if the amount available
shall not be sufficient to pay in full any particular
installment of interest, then to the payment ratably,
according to the amounts due on such installment, and (ii)
second, to the payment to the persons entitled thereto of
the unpaid principal of any of the Bonds which shall have
become due (other than Bonds called for redemption for the
payment of which money is held pursuant to the provisions of
this Indenture), with interest on such Bonds at their rate
from the respective dates upon which they became due and, if
the amount available shall not be sufficient to pay in full
Bonds due on any particular date, together with such
interest, then to the payment ratably, according to the
amount of principal and interest due on such date, in each
case to the persons entitled thereto, without any
discrimination or privilege.
(b) If the principal of all the Bonds shall have become
due and payable, all such moneys shall be applied to the
payment of the principal and interest then due and unpaid
upon the Bonds, with interest on overdue interest and
principal, as aforesaid, without preference or priority of
principal over interest or of interest over principal, or of
any installment of interest over any other installment of
interest, or of any Bond over any other Bond, ratably,
according to the amounts due respectively for principal and
interest, to the persons entitled thereto without any
discrimination or privilege.
(c) If the principal of all the Bonds shall have become
due and payable, and if acceleration of the maturity of the
Bonds by reason of such Event of Default shall thereafter
have been rescinded and annulled under the provisions of
this Article IX, then, subject to the provisions of clause
(b) of this Section 9.10 which shall be applicable in the
event that the principal of all the Bonds shall later become
due and payable, the moneys shall be applied in accordance
with the provisions of clause (a) of this Section 9.10.
Section 9.11. Severability of Remedies. It is the purpose
and intention of this Article IX to provide rights and remedies
to the Trustee and the Owners which may be lawfully granted under
the provisions of the Act, but should any right or remedy herein
granted be held to be unlawful, the Trustee and the Owners shall
be entitled, as above set forth, to every other right and remedy
provided in this Indenture and by law.
ARTICLE X
TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
Section 10.01. Acceptance of Trusts. The Trustee hereby
accepts and agrees to execute the trusts hereby created, but only
upon the additional terms set forth in this Article X, to all of
which the Authority agrees and the respective Owners agree by
their acceptance of delivery of any of the Bonds.
Section 10.02. No Responsibility for Recitals. The
recitals, statements and representations contained in this
Indenture or in the Bonds, save only the Trustee's authentication
upon the Bonds, are not made by the Trustee, and the Trustee does
not assume, and shall not have, any responsibility or obligation
for the correctness of any thereof. The Trustee makes no
representation as to the validity or sufficiency of this
Indenture or the Bonds.
Section 10.03. Limitations on Liability. The Trustee may
execute any of the trusts or powers hereof and perform the duties
required of it hereunder by or through attorneys, agents,
receivers, or employees, and shall be entitled to advice of
counsel concerning all matters of trust and its duty hereunder,
and the Trustee shall not be answerable for the default or
misconduct of any such attorney, agent, receiver, or employee
selected by it with reasonable care. The Trustee shall not be
answerable for the exercise of any discretion or power under this
Indenture or for anything whatsoever in connection with the trust
created hereby, except only for its own negligence or bad faith.
Anything in this Indenture to the contrary notwithstanding,
the Trustee shall in no event be required to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if there shall be reasonable grounds for
believing that the repayment of such funds or adequate indemnity
against such liability is not reasonably assured to it.
Section 10.04. Compensation, Expenses and Advances. The
Trustee, the Paying Agent and any Co-Paying Agent, and the
Registrar under this Indenture shall be entitled to reasonable
compensation for their services rendered hereunder (not limited
by any provision of law regarding the compensation of the trustee
of an express trust) and to reimbursement for their actual
out-of-pocket expenses (including counsel fees) reasonably
incurred in connection therewith except as a result of their
negligence or bad faith, including, without limitation,
compensation for any services rendered, and reimbursement for any
expenses incurred, at and subsequent to the time the Bonds are
deemed to have been paid in accordance with Article VIII hereof.
If the Authority shall fail to perform any of the covenants or
agreements contained in this Indenture, other than the covenants
or agreements in respect of the payment of the principal of and
premium, if any, and interest on the Bonds, the Trustee may, in
its uncontrolled discretion and without notice to the Owners of
the Bonds, at any time and from time to time, make advances to
effect performance of the same on behalf of the Authority, but
the Trustee shall be under no obligation so to do; and any and
all such advances may bear interest at a rate per annum not
exceeding the base rate then in effect for 90-day commercial
loans by the Trustee or a commercial banking affiliate of the
Trustee designated as such by the Trustee in the city in which is
located the Principal Office of the Trustee (or such affiliate,
as the case may be) to borrowers of the highest credit standing;
but no such advance shall operate to relieve the Authority from
any default hereunder. In Section 5.03 of the Loan Agreement,
the Company has agreed that it will pay to the Trustee (including
any predecessor Trustee), the Paying Agent and any Co-Paying
Agent and the Registrar, such compensation and reimbursement of
expenses and advances, but the Company may, without creating a
default hereunder, contest in good faith the reasonableness of
any such services, expenses and advances. If the Company shall
have failed to make any payment to the Trustee or any predecessor
Trustee under Section 5.03 of the Loan Agreement and such failure
shall have resulted in an Event of Default under the Loan
Agreement, the Trustee, and any predecessor Trustee, shall have,
in addition to any other rights hereunder, a claim, prior to the
claim of the Owners, for the payment of its compensation and the
reimbursement of its expenses and any advances made by it, as
provided in this Section 10.04, upon the moneys and obligations
in the Bond Fund; provided, however, that neither the Trustee nor
any predecessor Trustee shall have any such claim upon moneys or
obligations deposited with or paid to the Trustee for the
redemption or payment of Bonds which are deemed to have been paid
in accordance with Article VIII hereof.
In Section 5.04 of the Loan Agreement, the Company has
agreed to indemnify the Trustee and any predecessor Trustee to
the extent provided therein.
Section 10.05. Notice of Events of Default. The Trustee
shall not be required to take notice, or be deemed to have
notice, of any default or Event of Default under this Indenture
other than an Event of Default under clause (a) or (b) of the
first paragraph of Section 9.01 hereof, unless an officer
assigned by the Trustee to administer its corporate trust
business has been specifically notified in writing of such
default or Event of Default by Owners of at least 33% in
principal amount of the Bonds then Outstanding. The Trustee may,
however, at any time, in its discretion, require of the Authority
and the Company full information and advice as to the performance
of any of the covenants, conditions and agreements contained
herein.
Section 10.06. Action by Trustee. The Trustee shall be
under no obligation to take any action in respect of any default
or Event of Default hereunder or toward the execution or
enforcement of any of the trusts hereby created, or to institute,
appear in or defend any suit or other proceeding in connection
therewith, unless requested in writing so to do by Owners of at
least a majority in principal amount of the Bonds then
Outstanding, and, if in its opinion such action may tend to
involve it in expense or liability, unless furnished, from time
to time as often as it may require, with security and indemnity
satisfactory to it. The foregoing provisions are intended only
for the protection of the Trustee, and shall not affect any
discretion or power given by any provisions of this Indenture to
the Trustee to take action in respect of any default or Event of
Default without such notice or request from the Owners of the
Bonds, or without such security or indemnity.
Section 10.07. Good Faith Reliance. The Trustee shall be
protected and shall incur no liability in acting or proceeding in
good faith upon any resolution, notice, telegram, telex,
facsimile transmission, request, consent, waiver, certificate,
statement, affidavit, voucher, bond, requisition or other paper
or document which it shall in good faith believe to be genuine
and to have been passed or signed by the proper board, body or
person or to have been prepared and furnished pursuant to any of
the provisions of this Indenture or the Loan Agreement, or upon
the written opinion of any attorney, engineer, accountant or
other expert believed by the Trustee to be qualified in relation
to the subject matter, and the Trustee shall be under no duty to
make any investigation or inquiry as to any statements contained
or matters referred to in any such instrument, but may accept and
rely upon the same as conclusive evidence of the truth and
accuracy of such statements. Neither the Trustee, the Paying
Agent, any Co-Paying Agent nor the Registrar shall be bound to
recognize any person as an Owner of a Bond or to take any action
at his request unless the ownership of such Bond is proved as
contemplated in Section 11.01 hereof.
Section 10.08. Dealings in Bonds and with the Authority and
the Company. The Trustee, the Paying Agent, any Co-Paying Agent
or the Registrar, in its individual or any other capacity, may in
good faith buy, sell, own, hold and deal in any of the Bonds
issued hereunder, and may join in any action which any Owner of a
Bond may be entitled to take with like effect as if it did not
act in any capacity hereunder. The Trustee, the Paying Agent,
any Co-Paying Agent or the Registrar, in its individual or any
other capacity, either as principal or agent, may also engage in
or be interested in any financial or other transaction with the
Authority or the Company, and may act as depositary, trustee, or
agent for any committee or body of Owners of Bonds secured hereby
or other obligations of the Authority as freely as if it did not
act in any capacity hereunder.
Section 10.09. Allowance of Interest. The Trustee may, but
shall not be obligated to, allow and credit interest upon any
moneys which it may at any time receive under any of the
provisions of this Indenture, at such rate, if any, as it
customarily allows upon similar funds of similar size and under
similar conditions. All interest allowed on any such moneys
shall be credited as provided in Article IV with respect to
interest on investments.
Section 10.10. Construction of Indenture. The Trustee may
construe any of the provisions of this Indenture insofar as the
same may appear to be ambiguous or inconsistent with any other
provision hereof, and any construction of any such provisions
hereof by the Trustee in good faith shall be binding upon the
Owners of the Bonds.
Section 10.11. Resignation of Trustee. The Trustee may
resign and be discharged of the trusts created by this Indenture
by executing an instrument in writing resigning such trust and
specifying the date when such resignation shall take effect, and
filing the same with the President of the Authority and with the
Company, not less than forty-five (45) days before the date
specified in such instrument when such resignation shall take
effect, and by giving notice of such resignation by Mail to all
Owners of Bonds. Such resignation shall take effect on the later
to occur of (i) the day specified in such instrument and notice,
unless previously a successor Trustee shall have been appointed
as hereinafter provided, in which event such resignation shall
take effect immediately upon the appointment of such successor
Trustee and (ii) the appointment of a successor Trustee.
So long as no event which is, or after notice or lapse of
time, or both, would become, an Event of Default shall have
occurred and be continuing, if the Authority shall have delivered
to the Trustee (i) an instrument appointing a successor Trustee,
effective as of a date specified therein and (ii) an instrument
of acceptance of such appointment, effective as of such date, by
such successor Trustee in accordance with Section 10.16, the
Trustee shall be deemed to have resigned as contemplated in this
Section, the successor Trustee shall be deemed to have been
appointed pursuant to subsection (b) of Section 10.13 and such
appointment shall be deemed to have been accepted as contemplated
in Section 10.16, all as of such date, and all other provisions
of this Article X shall be applicable to such resignation,
appointment and acceptance except to the extent inconsistent with
this paragraph. The Authority shall deliver any such instrument
of appointment at the direction of the Company.
Section 10.12. Removal of Trustee. The Trustee may be
removed at any time by filing with the Trustee so removed, and
with the Authority and the Company, an instrument or instruments
in writing, appointing a successor, or an instrument or
instruments in writing, consenting to the appointment by the
Authority (at the direction of the Company) of a successor and
accompanied by an instrument of appointment by the Authority (at
the direction of the Company) of such successor, and in any event
executed by Owners of not less than a majority in principal
amount of the Bonds then Outstanding, such filing to be made by
any Owner of a Bond or his duly authorized attorney.
Section 10.13. Appointment of Successor Trustee. (a) In
case at any time the Trustee shall be removed, or be dissolved,
or if its property or affairs shall be taken under the control of
any state or federal court or administrative body because of
insolvency or bankruptcy, or for any other reason, then a vacancy
shall forthwith and ipso facto exist and a successor may be
appointed, and in case at any time the Trustee shall resign or be
deemed to have resigned, then a successor may be appointed, by
filing with the Authority and the Company an instrument in
writing appointing such successor Trustee executed by Owners of
not less than a majority in principal amount of Bonds then
Outstanding. Copies of such instrument shall be promptly
delivered by the Authority to the predecessor Trustee, to the
Trustee so appointed and the Company.
(b) Until a successor Trustee shall be appointed by the
Owners of the Bonds as herein authorized, the Authority, shall
appoint a successor Trustee as directed by the Company. After
any appointment by the Authority, it shall cause notice of such
appointment to be given by Mail to all Owners of Bonds. Any new
Trustee so appointed by the Authority shall immediately and
without further act be superseded by a Trustee appointed by the
Owners of the Bonds in the manner above provided.
(c) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee.
Section 10.14. Qualifications of Successor Trustee. Every
successor Trustee (a) shall be a bank or trust company duly
organized under the laws of the United States or any state or
territory thereof authorized by law to perform all the duties
imposed upon it by this Indenture and (b) shall have (or the
parent holding company of which shall have) a combined capital
stock, surplus and undivided profits of at least $100,000,000 if
there can be located, with reasonable effort, such an institution
willing and able to accept the trust on reasonable and customary
terms.
Section 10.15. Judicial Appointment of Successor Trustee.
In case at any time the Trustee shall resign and no appointment
of a successor Trustee shall be made pursuant to the foregoing
provisions of this Article X prior to the date specified in the
notice of resignation as the date when such resignation is to
take effect, the retiring Trustee may forthwith apply to a court
of competent jurisdiction for the appointment of a successor
Trustee. If no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this Article X within six
months after a vacancy shall have occurred in the office of
Trustee, any Owner of a Bond may apply to any court of competent
jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
Section 10.16. Acceptance of Trusts by Successor Trustee.
Any successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Authority an instrument accepting
such appointment hereunder, and thereupon such successor Trustee,
without any further act, deed or conveyance, shall become duly
vested with all the estates, property, rights, powers, trusts,
duties and obligations of its predecessor in the trust hereunder,
with like effect as if originally named Trustee herein. Upon
request of such Trustee, such predecessor Trustee and the
Authority shall execute and deliver an instrument transferring to
such successor Trustee all the estates, property, rights, powers
and trusts hereunder of such predecessor Trustee and, subject to
the provisions of Section 10.04 hereof, such predecessor Trustee
shall pay over to the successor Trustee all moneys and other
assets at the time held by it hereunder.
Section 10.17. Successor by Merger or Consolidation. Any
corporation or association into which any Trustee hereunder may
be merged or converted or with which it may be consolidated, or
any corporation or association resulting from any merger or
consolidation to which any Trustee hereunder shall be a party or
any corporation or association succeeding to the corporate trust
business of the Trustee, shall be the successor Trustee under
this Indenture, without the execution or filing of any paper or
any further act on the part of the parties hereto, anything in
this Indenture to the contrary notwithstanding.
If, at the time any such successor to the Trustee shall
succeed to the trusts created by this Indenture, any of the Bonds
shall have been authenticated but not delivered, such successor
Trustee may adopt the certificate of authentication of any
predecessor Trustee and deliver such Bonds so authenticated; and
if at that time, any of the Bonds shall not have been
authenticated, such successor Trustee may authenticate such Bonds
either in the name of any such predecessor hereunder or in the
name of such successor; and, in all such cases, such certificate
of authentication shall have the full force which it is anywhere
in the Bonds or in this Indenture provided that the certificate
of authentication of the Trustee shall have; provided, however,
that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Bonds in the name of any
predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
Section 10.18. Standard of Care. Notwithstanding any other
provisions of this Article X, the Trustee shall, during the
existence of an Event of Default of which the Trustee has actual
notice, exercise such of the rights and powers vested in it by
this Indenture and use the same degree of skill and care in their
exercise as a prudent man would use and exercise under the
circumstances in the conduct of his own affairs.
Section 10.19. Notice to Owners of Bonds of Event of
Default. If an Event of Default occurs of which the Trustee by
Section 10.05 hereof is required to take notice and deemed to
have notice, or any other Event of Default occurs of which the
Trustee has been specifically notified in accordance with Section
10.05 hereof, and any such Event of Default shall continue for at
least two days after the Trustee acquires actual notice thereof,
unless the Trustee shall have theretofore given a notice of
acceleration pursuant to Section 9.01 hereof, the Trustee shall
give Notice by Mail to all Owners of Outstanding Bonds.
Section 10.20. Intervention in Litigation of the Authority.
In any judicial proceeding to which the Authority is a party and
which in the opinion of the Trustee and its counsel has a
substantial bearing on the interests of the Owners of Bonds, the
Trustee may intervene on behalf of the Owners of the Bonds and
shall, upon receipt of indemnity satisfactory to it, do so if
requested in writing by Owners of at least a majority in
principal amount of the Bonds then Outstanding if permitted by
the court having jurisdiction in the premises.
Section 10.21. Paying Agent; Co-Paying Agents. The
Authority shall, with the approval of the Company, appoint the
Paying Agent for the Bonds and may at any time or from time to
time, with the approval of the Company, appoint one or more
Co-Paying Agents for the Bonds, subject to the conditions set
forth in Section 10.22 hereof. The Paying Agent and each
Co-Paying Agent shall designate to the Trustee its Principal
Office and signify its acceptance of the duties and obligations
imposed upon it hereunder by a written instrument of acceptance
delivered to the Authority and the Trustee in which such Paying
Agent or Co-Paying Agent will agree, particularly:
(a) to hold all sums held by it for the payment of the
principal of and premium, if any, or interest on Bonds in
trust for the benefit of the Owners of the Bonds until such
sums shall be paid to such Owners or otherwise disposed of
as herein provided;
(b) to keep such books and records as shall be
consistent with prudent industry practice, to make such
books and records available for inspection by the Authority,
the Trustee and the Company at all reasonable times and, in
the case of a Co-Paying Agent, to promptly furnish copies of
such books and records to the Paying Agent; and
(c) in the case of a Co-Paying Agent, upon the request
of the Paying Agent, to forthwith deliver to the Paying
Agent all sums so held in trust by such Co-Paying Agent.
The Authority shall cooperate with the Trustee and the
Company to cause the necessary arrangements to be made and to be
thereafter continued whereby funds derived from the sources
specified in Sections 4.03 and 4.04 hereof will be made available
to the Paying Agent and each Co-Paying Agent for the payment when
due of the principal of, premium, if any, and interest on the
Bonds.
Section 10.22. Qualifications of Paying Agent and Co-Paying
Agents; Resignation; Removal. The Paying Agent and any Co-Paying
Agent shall be a corporation or association duly organized under
the laws of the United States of America or any state or
territory thereof, having a combined capital stock, surplus and
undivided profits of at least $15,000,000 and authorized by law
to perform all the duties imposed upon it by this Indenture. The
Paying Agent and any Co-Paying Agent may at any time resign and
be discharged of the duties and obligations created by this
Indenture by giving at least sixty (60) days' notice to the
Authority, the Company and the Trustee. The Paying Agent and any
Co-Paying Agent may be removed at any time, at the direction of
the Company, by an instrument, signed by the Authority, filed
with the Paying Agent or such Co-Paying Agent, as the case may
be, and with the Trustee.
In the event of the resignation or removal of the Paying
Agent or any Co-Paying Agent, the Paying Agent or such Co-Paying
Agent, as the case may be, shall pay over, assign and deliver any
moneys held by it in such capacity to its successor or, if there
be no successor, to the Trustee.
In the event that the Authority shall fail to appoint a
Paying Agent hereunder, or in the event that the Paying Agent
shall resign or be removed, or be dissolved, or if the property
or affairs of the Paying Agent shall be taken under the control
of any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and the
Authority shall not have appointed its successor as Paying Agent,
the Trustee shall ipso facto be deemed to be the Paying Agent for
all purposes of this Indenture until the appointment by the
Authority of the Paying Agent or successor Paying Agent, as the
case may be.
Upon the appointment of a successor Paying Agent, the
Trustee shall give notice thereof by Mail to all Owners of Bonds.
Section 10.23. Registrar. The Authority shall, with the
approval of the Company, appoint the Registrar for the Bonds,
subject to the conditions set forth in Section 10.24 hereof. The
Registrar shall designate to the Trustee its Principal Office and
signify its acceptance of the duties imposed upon it hereunder by
a written instrument of acceptance delivered to the Authority and
the Trustee in which such Registrar will agree, particularly, to
keep such books and records as shall be consistent with prudent
industry practice and to make such books and records available
for inspection by the Authority, the Trustee and the Company at
all reasonable times.
The Authority shall cooperate with the Trustee and the
Company to cause the necessary arrangements to be made and to be
thereafter continued whereby Bonds, executed by the Authority and
authenticated by the Trustee, shall be made available for
exchange, registration and registration of transfer at the
Principal Office of the Registrar. The Authority shall cooperate
with the Trustee, the Registrar and the Company to cause the
necessary arrangements to be made and thereafter continued
whereby the Paying Agent and any Co-Paying Agent shall be
furnished such records and other information, at such times, as
shall be required to enable the Paying Agent and such Co-Paying
Agent to perform the duties and obligations imposed upon them
hereunder.
Section 10.24. Qualifications of Registrar; Resignation;
Removal. The Registrar shall be a corporation or association
duly organized under the laws of the United States of America or
any state or territory thereof, having a combined capital stock,
surplus and undivided profits of at least $15,000,000 and
authorized by law to perform all the duties imposed upon it by
this Indenture. The Registrar may at any time resign and be
discharged of the duties and obligations created by this
Indenture by giving at least sixty (60) days' notice to the
Authority, the Trustee and the Company. The Registrar may be
removed at any time, at the direction of the Company, by an
instrument signed by the Authority filed with the Registrar and
the Trustee.
In the event of the resignation or removal of the Registrar,
the Registrar shall deliver any Bonds held by it in such capacity
to its successor or, if there be no successor, to the Trustee.
In the event that the Authority shall fail to appoint a
Registrar hereunder, or in the event that the Registrar shall
resign or be removed, or be dissolved, or if the property or
affairs of the Registrar shall be taken under the control of any
state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and the
Authority shall not have appointed its successor as Registrar,
the Trustee shall ipso facto be deemed to be the Registrar for
all purposes of this Indenture until the appointment by the
Authority of the Registrar or successor Registrar, as the case
may be.
Upon the appointment of a successor Registrar, the Trustee
shall give notice thereof by Mail to all Owners of Bonds.
Section 10.25. Several Capacities. Anything herein to the
contrary notwithstanding, the same entity may serve hereunder as
the Trustee, the Paying Agent or a Co-Paying Agent and the
Registrar and in any combination of such capacities to the extent
permitted by law.
ARTICLE XI
EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND
PROOF OF OWNERSHIP OF BONDS
Section 11.01. Execution of Instruments; Proof of
Ownership. Any request, direction, consent or other instrument
in writing, whether or not required or permitted by this
Indenture to be signed or executed by Owners of the Bonds, may be
in any number of concurrent instruments of similar tenor and may
be signed or executed by Owners of the Bonds or by an agent
appointed by an instrument in writing. Proof of the execution of
any such instrument and of the ownership of Bonds shall be
sufficient for any purpose of this Indenture and shall be
conclusive in favor of the Trustee with regard to any action
taken by it under such instrument if made in the following
manner:
(a) The fact and date of the execution by any person of
any such instrument may be proved by the certificate of any
officer in any jurisdiction who, by the laws thereof, has
power to take acknowledgments within such jurisdiction, to
the effect that the person signing such instrument
acknowledged before him the execution thereof, or by an
affidavit of a witness to such execution.
(b) The ownership or former ownership of Bonds shall be
proved by the registration books kept under the provisions
of Section 2.08 hereof.
Nothing contained in this Article XI shall be construed as
limiting the Trustee to such proof, it being intended that the
Trustee may accept any other evidence of matters herein stated
which it may deem sufficient. Any request or consent of any
Owner of a Bond shall bind every future Owner of the same Bond or
any Bond or Bonds issued in lieu thereof in respect of anything
done by the Trustee or the Authority in pursuance of such request
or consent.
ARTICLE XII
MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
Section 12.01. Limitations. Neither this Indenture nor the
Loan Agreement shall be modified or amended in any respect
subsequent to the original issuance of the Bonds except as
provided in and in accordance with and subject to the provisions
of this Article XII and Section 7.04 hereof.
The Trustee may, but shall not be obligated to, enter into
any Supplemental Indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
Section 12.02. Supplemental Indentures without Owner
Consent. The Authority and the Trustee may, from time to time
and at any time, without the consent of or notice to the Owners
of the Bonds, enter into Supplemental Indentures as follows:
(a) to cure any formal defect, omission, inconsistency
or ambiguity in this Indenture, provided, however, that such
cure shall not materially and adversely affect the interests
of the Owners of the Bonds;
(b) to grant to or confer or impose upon the Trustee
for the benefit of the Owners of the Bonds any additional
rights, remedies, powers, authority, security, liabilities
or duties which may lawfully be granted, conferred or
imposed;
(c) to add to the covenants and agreements of, and
limitations and restrictions upon, the Authority in this
Indenture other covenants, agreements, limitations and
restrictions to be observed by the Authority;
(d) to confirm, as further assurance, any pledge under,
and the subjection to any claim, lien or pledge created or
to be created by, this Indenture, of the Receipts and
Revenues of the Authority from the Loan Agreement or of any
other moneys, securities or funds;
(e) to authorize a different denomination or
denominations of the Bonds and to make correlative
amendments and modifications to this Indenture regarding
exchange ability of Bonds of different denominations,
redemptions of portions of Bonds of particular denominations
and similar amendments and modifications of a technical
nature;
(f) to modify, alter, supplement or amend this
Indenture in such manner as shall permit the qualification
hereof under the Trust Indenture Act of 1939, as from time
to time amended;
(g) to modify, alter, supplement or amend this
Indenture in such manner as shall be necessary, desirable or
appropriate in order to provide for or eliminate the
registration and registration of transfer of the Bonds
through a book-entry or similar method, whether or not the
Bonds are evidenced by certificates;
(h) to modify, alter, amend or supplement this
Indenture in any other respect which is not materially
adverse to the Owners and which does not involve a change
described in clause (i), (ii), (iii) or (iv) of Section
12.03(a) hereof; and
(i) to provide any additional procedures, covenants or
agreements necessary or desirable to maintain the tax-exempt
status of interest on the Bonds.
Before the Authority and the Trustee shall enter into any
Supplemental Indenture pursuant to this Section 12.02, there
shall have been delivered to the Trustee an opinion of Bond
Counsel stating that such Supplemental Indenture is authorized or
permitted by this Indenture and the Act, complies with their
respective terms, will, upon the execution and delivery thereof,
be valid and binding upon the Authority in accordance with its
terms and will not, in and of itself, adversely affect the
exclusion from gross income for federal tax purposes of the
interest on the Bonds.
Section 12.03. Supplemental Indentures with Consent of
Owners. (a) Except for any Supplemental Indenture entered into
pursuant to Section 12.02 hereof, subject to the terms and
provisions contained in this Section 12.03 and Section 12.05 and
not otherwise, Owners of not less than a majority in aggregate
principal amount of the Bonds then Outstanding which would be
adversely affected thereby shall have the right from time to time
to consent to and approve the execution and delivery by the
Authority and the Trustee of any Supplemental Indenture deemed
necessary or desirable by the Authority for the purposes of
modifying, altering, amending, supplementing or rescinding, in
any particular, any of the terms or provisions contained in this
Indenture; provided, however, that, unless approved in writing by
the Owners of all the Bonds then Outstanding which would be
adversely affected thereby, nothing herein contained shall
permit, or be construed as permitting, (i) a change in the times,
amounts or currency of payment of the principal of or premium, if
any, or interest on any Outstanding Bond, a reduction in the
principal amount or redemption price of any Outstanding Bond or a
change in the rate of interest thereon, or any impairment of the
right of any Owner to institute suit for the payment of any Bond
owned by it, or (ii) the creation of a claim or lien upon, or a
pledge of, the Receipts and Revenues of the Authority from the
Loan Agreement ranking prior to or on a parity with the claim,
lien or pledge created by this Indenture (except as referred to
in Section 10.04 hereof), or (iii) a preference or priority of
any Bond or Bonds over any other Bond or Bonds, or (iv) a
reduction in the aggregate principal amount of Bonds the consent
of the Owners of which is required for any such Supplemental
Indenture or which is required, under Section 12.07 hereof, for
any modification, alteration, amendment or supplement to the Loan
Agreement.
(b) If at any time the Authority shall request the Trustee
to enter into any Supplemental Indenture for any of the purposes
of this Section 12.03, the Trustee shall cause notice of the
proposed Supplemental Indenture to be given by Mail to all Owners
of Outstanding Bonds. Such notice shall briefly set forth the
nature of the proposed Supplemental Indenture and shall state
that a copy thereof is on file at the Principal Office of the
Trustee for inspection by all Owners of Bonds.
(c) Within two years after the date of the first mailing of
such notice, the Authority and the Trustee may enter into such
Supplemental Indenture in substantially the form described in
such notice only if there shall have first been delivered to the
Trustee (i) the required consents, in writing, of Owners of Bonds
and (ii) an opinion of Bond Counsel stating that such
Supplemental Indenture is authorized or permitted by this
Indenture and the Act, complies with their respective terms and,
upon the execution and delivery thereof, will be valid and
binding upon the Authority in accordance with its terms and will
not, in and of itself, adversely affect the exclusion from gross
income for federal tax purposes of the interest on the Bonds.
(d) If Owners of not less than the percentage of Bonds
required by this Section 12.03 shall have consented to and
approved the execution and delivery thereof as herein provided,
no Owner shall have any right to object to the execution and
delivery of such Supplemental Indenture, or to object to any of
the terms and provisions contained therein or the operation
thereof, or in any manner to question the propriety of the
execution and delivery thereof, or to enjoin or restrain the
Authority or the Trustee from executing and delivering the same
or from taking any action pursuant to the provisions thereof.
Section 12.04. Effect of Supplemental Indenture. Upon the
execution and delivery of any Supplemental Indenture pursuant to
the provisions of this Article XII, this Indenture shall be, and
be deemed to be, modified, altered, amended or supplemented in
accordance therewith, and the respective rights, duties and
obligations under this Indenture of the Authority, the Trustee
and Owners of all Bonds then Outstanding shall thereafter be
determined, exercised and enforced under this Indenture subject
in all respects to such modifications, alterations, amendments
and supplements.
Section 12.05. Consent of the Company. Anything herein to
the contrary notwithstanding, any Supplemental Indenture under
this Article XII which affects any rights, powers, agreements or
obligations of the Company under the Loan Agreement, or requires
a revision of the Loan Agreement, shall not become effective
unless and until the Company shall have consented to such
Supplemental Indenture.
Section 12.06. Amendment of Loan Agreement without Consent
of Owners. Without the consent of or notice to the Owners of the
Bonds, the Authority may enter into any Supplemental Loan
Agreement, and the Trustee may consent thereto, as may be
required (a) by the provisions of the Loan Agreement and this
Indenture, (b) for the purpose of curing any formal defect,
omission, inconsistency or ambiguity therein, (c) to provide any
additional procedures, covenants or agreements necessary or
desirable to maintain the tax-exempt status of interest on the
Bonds, or (d) in connection with any other change therein which
is not materially adverse to the Owners of the Bonds. A revision
of Exhibit A to the Loan Agreement pursuant to Section 3.03
thereof shall not be deemed a Supplemental Loan Agreement for
purposes of this Indenture.
Before the Authority shall enter into, and the Trustee shall
consent to, any Supplemental Loan Agreement pursuant to this
Section 12.06, there shall have been delivered to the Trustee an
opinion of Bond Counsel stating that such Supplemental Loan
Agreement is authorized or permitted by this Indenture and the
Act, complies with their respective terms, will, upon the
execution and delivery thereof, be valid and binding upon the
Authority and the Company in accordance with its terms and will
not, in and of itself, adversely affect the exclusion from gross
income for federal tax purposes of interest on the Bonds.
Section 12.07. Amendment of Loan Agreement with Consent of
Owners. Except in the case of Supplemental Loan Agreements
referred to in Section 12.06 hereof, the Authority shall not
enter into, and the Trustee shall not consent to, any
Supplemental Loan Agreement without the written approval or
consent of the Owners of not less than a majority in aggregate
principal amount of the Bonds then Outstanding which would be
adversely affected thereby, given and procured as provided in
Section 12.03 hereof; provided, however, that, unless approved in
writing by the Owners of all Bonds then Outstanding which would
be adversely affected thereby, nothing herein contained shall
permit, or be construed as permitting, a change in the
obligations of the Company under Section 5.01 of the Loan
Agreement. If at any time the Authority or the Company shall
request the consent of the Trustee to any such proposed
Supplemental Loan Agreement, the Trustee shall cause notice of
such proposed Supplemental Loan Agreement to be given in the same
manner as provided by Section 12.03 hereof with respect to
Supplemental Indentures. Such notice shall briefly set forth the
nature of such proposed Supplemental Loan Agreement and shall
state that copies of the instrument embodying the same are on
file at the Principal Office of the Trustee for inspection by all
Owners of the Bonds. The Authority may enter into, and the
Trustee may consent to, any such proposed Supplemental Loan
Agreement subject to the same conditions, and with the same
effect, as provided by Section 12.03 hereof with respect to
Supplemental Indentures.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Successors of the Authority. In the event
of the dissolution of the Authority, all the covenants,
stipulations, promises and agreements in this Indenture
contained, by or on behalf of, or for the benefit of, the
Authority, shall bind or inure to the benefit of the successors
of the Authority from time to time and any entity, officer,
board, commission, agency or instrumentality to whom or to which
any power or duty of the Authority shall be transferred.
Section 13.02. Parties in Interest. Except as herein
otherwise specifically provided, nothing in this Indenture
expressed or implied is intended or shall be construed to confer
upon any person, firm or corporation other than the Authority,
the Company and the Trustee and their successors and assigns and
the Owners of the Bonds any right, remedy or claim under or by
reason of this Indenture, this Indenture being intended to be for
the sole and exclusive benefit of the Authority, the Company and
the Trustee and their successors and assigns and the Owners of
the Bonds.
Section 13.03. Severability. In case any one or more of
the provisions of this Indenture or of the Loan Agreement or of
the Bonds shall, for any reason, be held to be illegal or
invalid, such illegality or invalidity shall not affect any other
provisions of this Indenture or of the Loan Agreement or of such
Bonds, and this Indenture and the Loan Agreement and such Bonds
shall be construed and enforced as if such illegal or invalid
provisions had not been contained herein or therein.
Section 13.04. No Personal Liability of Authority
Officials. No covenant or agreement contained in the Bonds or in
this Indenture shall be deemed to be the covenant or agreement of
any director, official, officer, agent, or employee of the
Authority in his individual capacity, and neither the members of
the Board of Directors of the Authority nor any official
executing the Bonds shall be liable personally on the Bonds or be
subject to any personal liability or accountability by reason of
the issuance thereof.
Section 13.05. Bonds Owned by the Authority or the Company.
In determining whether Owners of the requisite aggregate
principal amount of the Bonds have concurred in any direction,
consent or waiver under this Indenture, Bonds which are owned by
the Authority or the Company or by any person directly or
indirectly controlling or controlled by or under direct or
indirect common control with the Company (unless the Authority,
the Company or such person owns all Bonds which are then
Outstanding, determined without regard to this Section 13.05)
shall be disregarded and deemed not to be Outstanding for the
purpose of any such determination, except that, for the purpose
of determining whether the Trustee shall be protected in relying
on any such direction, consent or waiver, only Bonds which the
Trustee knows are so owned shall be so disregarded. Upon the
request of the Trustee, the Company and the Authority shall
furnish to the Trustee a certificate identifying all Bonds, if
any, actually known to either of them to be owned or held by or
for the account of any of the above-described persons, and the
Trustee shall be entitled to rely on such certificate as
conclusive evidence of the facts set forth therein and that all
other Bonds are Outstanding for the purposes of such
determination. Bonds so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Bonds and that the pledgee is not the
Authority or the Company or any person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the Company. In case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
Section 13.06. Counterparts. This Indenture may be
executed in any number of counterparts, each of which, when so
executed and delivered, shall be an original; but such
counterparts shall together constitute but one and the same
Indenture.
Section 13.07. Governing Law. The laws of the State of
Arizona shall govern the construction and enforcement of this
Indenture and of all Bonds, except that the laws of the State of
New York shall govern the construction and enforcement of the
rights and duties of the Trustee hereunder and the construction
of Section 13.09 hereof and the computation of any period of
grace provided herein.
Section 13.08. Notices. Except as otherwise provided in
this Indenture, all notices, certificates, requests requisitions
or other communications by the Authority, the Company, the
Trustee, the Paying Agent, any Co-Paying Agent or the Registrar
pursuant to this Indenture shall be in writing and shall be
sufficiently given and shall be deemed given when mailed by
registered mail, postage prepaid, addressed as follows: If to the
Authority, c/o Russo, Cox & Russo, P.C., 1820 East River Road,
Suite 230, Tucson, Arizona 85718; if to the Company, at 220 West
Sixth Street, Tucson, Arizona 85702, Attention: Treasurer; if to
the Trustee, at 100 Wall Street, Suite 1600, New York, New York
10005, Attention: Vice President; if to the Paying Agent, any
Co-Paying Agent or the Registrar, at the address designated in
the acceptance of appointment or engagement. Any of the
foregoing may, by notice given hereunder to each of the others,
designate any further or different addresses to which subsequent
notices, certificates, requests or other communications shall be
sent hereunder.
Section 13.09. Holidays. If the date for making any
payment or the last date for performance of any act or the
exercising of any right, as provided in this Indenture, shall be
a Saturday, Sunday or a public holiday in the city in which is
located the Principal Office of the Trustee, such payment may be
made or act performed or right exercised on the next succeeding
business day, with the same force and effect as if done on the
nominal date provided in this Indenture, and no interest shall
accrue for the period after such nominal date. If the last day
of any period of grace, as provided in this Indenture, shall be a
Saturday, Sunday or a public holiday in the city in which is
located the Principal Office of the Trustee, the last day of such
period of grace shall be deemed to be the next succeeding
business day.
Section 13.10. Statutory Notice Regarding Cancellation of
Contracts. As required by the provisions of Section 38-511,
Arizona Revised Statutes, as amended, notice is hereby given that
political subdivisions of the State of Arizona or any of their
departments or agencies may, within three (3) years of its
execution, cancel any contract, without penalty or further
obligation, made by the political subdivisions or any of their
departments or agencies on or after September 30, 1988, if any
person significantly involved in initiating, negotiating,
securing, drafting or creating the contract on behalf of the
political subdivisions or any of their departments or agencies
is, at any time while the contract or any extension of the
contact is in effect, an employee or agent of any other party to
the contract in any capacity or a consultant to any other party
of the contract with respect to the subject matter of the
contract.
The Trustee covenants and agrees not to employ as an
employee, agent or, with respect to the subject matter of this
Indenture, a consultant, any person actually known by the Trustee
to be significantly involved in initiating, negotiating,
securing, drafting or creating such Indenture on behalf of the
Authority within three (3) years from the execution hereof,
unless a waiver is provided by the Authority.
<PAGE>
IN WITNESS WHEREOF, The Industrial Development Authority of
the County of Pima has caused this Indenture to be executed by
its President and First Trust of New York, National Association
has caused this Indenture to be executed on its behalf by its
Vice President, all as of the day and year first above written.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
By: /s/Stanley Lehman
---------------------------------
President
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By: /s/ P.J. Crowley
---------------------------------
Vice President
<PAGE>
EXHIBIT A
(FORM OF BOND)
No.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
INDUSTRIAL DEVELOPMENT REVENUE BOND,
1997 SERIES C
(TUCSON ELECTRIC POWER COMPANY PROJECT)
INTEREST RATE (PER ANNUM):
MATURITY DATE: DATED:
CUSIP:
REGISTERED OWNER:
PRINCIPAL AMOUNT: DOLLARS
The Industrial Development Authority of the County of Pima,
an Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona (the "Authority"), for value
received, hereby promises to pay (but only out of the Receipts
and Revenues of the Authority from the Loan Agreement, as
hereinafter defined, and other moneys pledged therefor) to the
Registered Owner identified above or registered assigns, on the
Maturity Date set forth above, upon the presentation and
surrender hereof, the Principal Amount set forth above and to pay
(but only out of the Receipts and Revenues of the Authority from
the Loan Agreement and other moneys pledged therefor), interest
on said Principal Amount until payment of said Principal Amount
has been made or duly provided for, from the date hereof, at the
Interest Rate set forth above, semi-annually on the first days of
March and September in each year, commencing March 1, 1998.
Interest will be calculated on the basis of a 360-day year of
twelve 30-day months.
The principal of and premium, if any, on this Bond are
payable at the principal office of First Trust of New York,
National Association, as Paying Agent, or at the principal office
of any co-paying agent appointed in accordance with the Indenture
(as hereinafter defined), at the option of the Registered Owner
hereof. Interest on this Bond is payable by check drawn upon the
Paying Agent and mailed to the Registered Owner of this Bond as
of the close of business on the Record Date (as defined in the
Indenture) at the registered address of such Registered Owner;
notwithstanding the foregoing, upon request to the Paying Agent
by a Registered Owner of not less than $1,000,000 in aggregate
principal amount of Bonds, interest on such Bonds and, after
presentation and surrender of such Bonds, the principal thereof
shall be paid to such Registered Owner by wire transfer to the
account maintained within the continental United States specified
by such Registered Owner or, if such Registered Owner maintains
an account with the entity acting as Paying Agent, by deposit
into such account. Payment of the principal of and premium, if
any, and interest on, this Bond shall be in any coin or currency
of the United States of America as, at the respective times of
payment, shall be legal tender for the payment of public and
private debts.
This Bond is one of the duly authorized Industrial
Development Revenue Bonds, 1997 Series C (Tucson Electric Power
Company Project) (the "Bonds") of the Authority, aggregating
Seventy-Five Million Dollars ($75,000,000) in principal amount,
issued under and pursuant to the Constitution and laws of the
State of Arizona, particularly Title 35, Chapter 5, Arizona
Revised Statutes, as amended (the "Act"), and the Indenture of
Trust, dated as of September 15, 1997 (the "Indenture"), between
the Authority and First Trust of New York, National Association,
as trustee (the "Trustee"), for the purpose of refinancing, by
payment or redemption of the Authority's Industrial Development
Revenue Bonds, 1983 Series A (Tucson Electric Power Company
General Project), or provision therefor, a portion of the costs
of the acquisition, construction, improvement and equipping of
certain facilities for the furnishing of electric energy (the
"Facilities"). Pursuant to the Loan Agreement, dated as of
September 15, 1997 (the "Loan Agreement"), between the Authority
and Tucson Electric Power Company, a corporation organized and
existing under the laws of the State of Arizona (the "Company"),
the proceeds of the Bonds, other than accrued interest, if any,
paid by the initial purchasers thereof, will be loaned to the
Company.
Neither Pima County, Arizona nor the State of Arizona shall
in any event be liable for the payment of the principal of or
premium, if any, or interest on the Bonds, and neither the Bonds,
nor the premium, if any, or the interest thereon, shall be
construed to constitute an indebtedness of Pima County, Arizona
or the State of Arizona within the meaning of any constitutional
or statutory provisions whatsoever. The Bonds and the premium,
if any, and the interest thereon are limited obligations of the
Authority payable solely from the Receipts and Revenues of the
Authority from the Loan Agreement and other moneys pledged
therefor under the Indenture.
The Bonds are equally and ratably secured, to the extent
provided in the Indenture, by the pledge thereunder of the
"Receipts and Revenues of the Authority from the Loan Agreement",
which term is used herein as defined in the Indenture and which
as therein defined means all moneys paid or payable to the
Trustee for the account of the Authority by the Company in
respect of the loan payments, including all receipts of the
Trustee which, under the provisions of the Indenture, reduce the
amounts of such payments. The Authority has also pledged and
assigned to the Trustee as security for the Bonds all other
rights and interests of the Authority under the Loan Agreement
(other than its rights to indemnification and its administrative
expenses and certain other rights).
The transfer of this Bond shall be registered upon the
registration books kept at the principal office of First Trust of
New York, National Association, as Registrar, at the written
request of the Registered Owner hereof or his attorney duly
authorized in writing, upon surrender of this Bond at said
office, together with a written instrument of transfer
satisfactory to the Registrar duly executed by the Registered
Owner or his duly authorized attorney.
In the manner and with the effect provided in the Indenture,
each of the Bonds may be redeemed prior to maturity, as follows:
(a) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, on any date on
or after September 1, 2002 in whole at any time or in part
from time to time, at the applicable redemption price
(expressed as a percentage of principal amount) set forth
below, plus accrued interest to the redemption date:
Redemption Period Redemption Price
----------------- ----------------
September 1, 2002 through August 31, 2003 102%
September 1, 2003 through August 31, 2004 101%
September 1, 2004 and thereafter 100%
(b) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, in whole at any
time at the principal amount thereof plus accrued interest
to the redemption date, if:
(i) the Company shall have determined that the
continued operation of the Facilities is impracticable,
uneconomical or undesirable for any reason;
(ii) all or substantially all of the Facilities
shall have been condemned or taken by eminent domain;
or
(iii) the operation of the Facilities shall have
been enjoined or shall have otherwise been prohibited
by, or shall conflict with, any order, decree, rule or
regulation of any court or of any federal, state or
local regulatory body, administrative agency or other
governmental body.
(c) The Bonds shall be subject to mandatory redemption
by the Authority, at the principal amount thereof plus
accrued interest to the redemption date, on the 180th day
(or such earlier date as may be designated by the Company)
after a final determination by a court of competent
jurisdiction or an administrative agency, to the effect
that, as a result of a failure by the Company to perform or
observe any covenant, agreement or representation contained
in the Loan Agreement, the interest payable on the Bonds is
included for federal income tax purposes in the gross income
of the owners thereof, other than any owner of a Bond who is
a "substantial user" of the Facilities or a "related person"
within the meaning of Section 103(b)(13) of the Internal
Revenue Code of 1954, as amended (the "1954 Code"). No
determination by any court or administrative agency shall be
considered final for the purposes of this paragraph (c)
unless the Company shall have been given timely notice of
the proceeding which resulted in such determination and an
opportunity to participate in such proceeding, either
directly or through an owner of a Bond, and until the
conclusion of any appellate review sought by any party to
such proceeding or the expiration of the time for seeking
such review. The Bonds shall be redeemed either in whole or
in part in such principal amount that, in the opinion of
Bond Counsel, the interest payable on the Bonds, including
the Bonds remaining outstanding after such redemption, would
not be included in the gross income of any owner thereof,
other than an owner of a Bond who is a "substantial user" of
the Facilities or a "related person" within the meaning of
Section 103(b)(13) of the 1954 Code.
If less than all of the Bonds at the time outstanding are to
be called for redemption, the particular Bonds or portions of
Bonds to be redeemed shall be selected by the Trustee, in such
manner as the Trustee in its discretion may deem proper, in the
principal amounts designated to the Trustee by the Company or
otherwise as required by the Indenture.
In the event any of the Bonds are called for redemption, the
Trustee shall give notice, in the name of the Authority, of the
redemption of such Bonds. Such notice shall be given by mailing
a copy of the redemption notice by first-class mail at least
thirty (30) days prior to the date fixed for redemption to the
Registered Owners of the Bonds to be redeemed at the addresses
shown on the registration books; provided, however, that failure
duly to give such notice by mailing, or any defect therein, shall
not affect the validity of any proceedings for the redemption of
the Bonds as to which there shall be no such failure or defect.
With respect to any notice of redemption of Bonds in
accordance with the redemption provisions lettered (a) or (b)
above, unless, upon the giving of such notice, such Bonds shall
be deemed to have been paid within the meaning of the Indenture,
such notice shall state that such redemption, shall be
conditional upon the receipt, by the Trustee on or prior to the
opening of business on the date fixed for such redemption of
moneys sufficient to pay the principal of and premium, if any,
and interest on such Bonds to be redeemed, and that if such
moneys shall not have been so received said notice shall be of no
force and effect and the Authority shall not be required to
redeem such Bonds. In the event that such notice of redemption
contains such a condition and such moneys are not so received,
the redemption shall not be made and the Trustee shall within a
reasonable time thereafter give notice, in the manner in which
the notice of redemption was given, that such moneys were not so
received.
If a notice of redemption shall be unconditional, or if the
conditions of a conditional notice of redemption shall have been
satisfied, then upon presentation and surrender of Bonds so
called for redemption at the place or places of payment, such
Bonds shall be redeemed.
Any Bonds and portions of Bonds which have been duly
selected for redemption shall cease to bear interest on the
specified redemption date provided that moneys sufficient to pay
the principal of, premium, if any, and interest on such Bonds
shall be on deposit with the Trustee on the date fixed for
redemption so that such Bonds will be deemed to be paid in
accordance with the Indenture and such Bonds shall thereafter
cease to be entitled to any lien, benefit or security under the
Indenture.
The Registered Owner of this Bond shall have no right to
enforce the provisions of the Indenture, or to institute action
to enforce the covenants therein, or to take any action with
respect to any default under the Indenture, or to institute,
appear in or defend any suit or other proceeding with respect
thereto, except as provided in the Indenture.
With certain exceptions as provided therein, the Indenture
and the Loan Agreement may be modified or amended only with the
consent of the Registered Owners of a majority in aggregate
principal amount of all Bonds outstanding under the Indenture
which would be adversely affected thereby.
Reference is hereby made to the Indenture and the Loan
Agreement, copies of which are on file with the Trustee, for the
provisions, among others, with respect to the nature and extent
of the rights, duties and obligations of the Authority, the
Company, the Trustee and the Registered Owners of the Bonds. The
Registered Owner of this Bond, by the acceptance hereof, is
deemed to have agreed and consented to the terms and provisions
of the Indenture and the Loan Agreement.
Among other things, as provided in the Indenture and subject
to certain limitations therein set forth, this Bond or any
portion of the principal amount hereof will be deemed to have
been paid within the meaning and with the effect expressed in the
Indenture, and the entire indebtedness of the Authority in
respect thereof shall be satisfied and discharged, if there has
been irrevocably deposited with the Trustee, in trust, money in
an amount which will be sufficient and/or Government Obligations
(as defined in the Indenture), the principal of and interest on
which, when due, without regard to any reinvestment thereof, will
provide moneys which, together with moneys deposited with or held
by the Trustee, will be sufficient, to pay when due the principal
of and premium, if any, and interest on this Bond or such portion
of the principal amount hereof when due.
Among other things, the Loan Agreement contains terms,
provisions and conditions relating to the consolidation or merger
of the Company with or into, and the sale, transfer or other
disposition of assets to, another Person (as defined in the Loan
Agreement), to the assumption by such other Person, in certain
circumstances, of all of the obligations of the Company under the
Loan Agreement and to the release and discharge of the Company,
in certain circumstances, from such obligations.
The Authority, the Trustee, the Registrar, the Paying Agent
and any co-paying agent may deem and treat the person in whose
name this Bond is registered as the absolute owner hereof for all
purposes, whether or not this Bond is overdue, and neither the
Authority, the Trustee, the Paying Agent nor any co-paying agent
shall be affected by any notice to the contrary.
It is hereby certified, recited and declared that all acts,
conditions and things required by the Constitution and laws of
the State of Arizona to exist, to have happened and to have been
performed, precedent to and in the execution and delivery of the
Indenture and the issuance of this Bond, do exist, have happened
and have been performed in regular and due form as required by
law.
No covenant or agreement contained in this Bond or the
Indenture shall be deemed to be a covenant or agreement of any
official, officer, agent or employee of the Authority in his
individual capacity, and neither the members of the Board of
Directors of the Authority, nor any official executing this Bond,
shall be liable personally on this Bond or be subject to any
personal liability or accountability by reason of the issuance or
sale of this Bond.
This Bond shall not be entitled to any right or benefit
under the Indenture, or be valid or become obligatory for any
purpose, until this Bond shall have been authenticated by the
execution by the Trustee, or its successor as Trustee, of the
certificate of authentication inscribed hereon.
<PAGE>
IN WITNESS WHEREOF, The Industrial Development Authority of
The County of Pima has caused this Bond to be executed with the
manual or facsimile signature of its President or Vice President
and a facsimile of its official seal to be imprinted hereon and
attested with the manual or facsimile signature of its Secretary
or Assistant Secretary.
THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA
(Seal)
By.............................
President
ATTEST:
.........................
Secretary
<PAGE>
EXHIBIT B
(FORM FOR ORDINARY REGISTRATION OF TRANSFER)
COMPLETE AND SIGN THIS FORM FOR ORDINARY
REGISTRATION OF TRANSFER
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
Please Insert Social Security Or Other Identifying Number of
Assignee
..................................................................
..................................................................
Please print or typewrite name and address including postal zip
code of assignee
..................................................................
this bond and all rights thereunder, hereby irrevocably
constituting and appointing ________________________ attorney to
register such transfer on the registration books in the principal
office of the Registrar, with full power of substitution in the
premises.
Dated:.............. .........................................
NOTE: The signature on this assignment
must correspond with the name as written
on the face of this Bond in every
particular, without alteration,
enlargement or any change whatsoever.
<PAGE>
EXHIBIT C
(FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is to certify that this Bond is one of the Bonds
described in the within-mentioned Indenture.
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION,
as Trustee
By .......................................
Authorized Officer
Date of Authentication:................
