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 March 31, 1998
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
----- ------
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification Number
- ----------- ----------------------------- ---------------------
1-13739 UNISOURCE ENERGY CORPORATION 86-0786732
(An Arizona Corporation)
220 West Sixth Street
Tucson, AZ 85701
(520) 571-4000
1-5924 TUCSON ELECTRIC POWER COMPANY 86-0062700
(An Arizona Corporation)
220 West Sixth Street
Tucson, AZ 85701
(520) 571-4000
Indicate by check mark whether each 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 May 6, 1998, 32,137,409 shares of UniSource Energy Corporation's
Common Stock, no par value (the only class of Common Stock), were
outstanding.
UniSource Energy Corporation is the sole holder of the 32,162,167
shares of the outstanding Common Stock of Tucson Electric Power Company.
This combined Form 10-Q is separately filed by UniSource Energy Corporation
and Tucson Electric Power Company. Information contained herein relating to
Tucson Electric Power Company is filed by UniSource Energy Corporation and
separately by Tucson Electric Power Company on its own behalf. Tucson
Electric Power Company makes no representation as to information relating to
UniSource Energy Corporation or its subsidiaries, except as it may relate to
Tucson Electric Power Company.
TABLE OF CONTENTS
Page
----
Definitions.................................................................. iv
Report of Independent Accountants..............................................1
Independent Accountants' Review Report.........................................2
PART I - FINANCIAL INFORMATION
Item 1. -- Financial Statements
UniSource Energy Corporation
Comparative Condensed Consolidated Statements of Income (Loss)........3
Comparative Condensed Consolidated Statements of Cash Flows...........4
Comparative Condensed Consolidated Balance Sheets.....................5
Tucson Electric Power Company
Comparative Condensed Consolidated Statements of Income (Loss)........6
Comparative Condensed Consolidated Statements of Cash Flows...........7
Comparative Condensed Consolidated Balance Sheets.....................8
Notes to Condensed Consolidated Financial Statements
Note 1. Accounting for the Effects of Regulation.........................9
Note 2. Tax Assessments.................................................10
Note 3. Transfer of MEH from TEP to UniSource Energy....................11
Note 4. Loans and Guarantees for NEV....................................11
Note 5. Long-Term Debt..................................................11
Note 6. Rate Matters....................................................12
Note 7. Income Taxes....................................................13
Note 8. Reclassifications...............................................13
Note 9. Review by Independent Public Accountants........................13
Item 2. -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview.................................................................14
Competition
Wholesale............................................................15
Retail...............................................................16
Shared Savings Proposal Before ACC.......................................18
Accounting for the Effects of Regulation
Accounting Implications..............................................18
Recent Events That May Impact TEP's Application of FAS 71............19
Investments in Energy Related Ventures...................................19
Dividends on Common Stock
UniSource Energy.....................................................20
TEP..................................................................20
Earnings.................................................................21
Results of Operations
Utility Sales and Revenues..........................................21
Operating Expenses.................................................22
Other Income (Deductions)...........................................22
Interest Expense...................................................22
Events Affecting Future Results of Utility Operations
TEP Generating Resources...........................................22
Liquidity and Capital Resources
Cash Flows
UniSource Energy...................................................23
TEP................................................................23
Financing Developments
TEP Sale of Bonds..................................................23
TEP Credit Agreement...............................................24
TEP First Mortgage Bonds...........................................24
UniSource Energy...................................................24
UniSource Energy--Loans and Guarantees.............................25
Impact of Year 2000 on Computer Systems and Applications.................25
Safe Harbor for Forward-Looking Statements...............................25
PART II - OTHER INFORMATION
Item 1. -- Legal Proceedings
Tax Assessments..........................................................27
Item 5. - Other Information
Additional Financial Data................................................27
Item 6. -- Exhibits and Reports on Form 8-K..................................27
Signature Page................................................................28
Exhibit Index.................................................................29
DEFINITIONS
The abbreviations and acronyms used in the 1998 First Quarter Form 10-Q are
defined below:
- --------------------------------------------------------------------------------
ACC............... Arizona Corporation Commission.
ADOR.............. Arizona Department of Revenue.
AET............... Advanced Energy Technologies, Inc., a wholly-owned
subsidiary of MEH Corporation.
Banks............. The financial institutions party to the Credit
Agreement dated as of December 30, 1997.
Common Stock...... The Company's common stock, without par value.
Company or UniSource
Energy........... UniSource Energy Corporation.
Credit Agreement.. Credit Agreement between TEP and the Banks, dated as of
December 30, 1997.
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.
General Second
Mortgage......... The Indenture, dated as of December 1, 1992,
of Tucson Electric Power Company to Bank of Montreal
Trust Company of the City of New York, as trustee, as
supplemented.
Global Solar...... Global Solar Energy, L.L.C., a corporation in which a
50% interest is owned by AET.
Holding Company
Order............. ACC Order issued November 25, 1997 granting TEP the
authority to organize a public utility holding
company.
IDBs.............. Industrial development revenue or pollution control
bonds.
IRS............... Internal Revenue Service.
Irvington......... Irvington Generating Station.
Irvington Lease... The leveraged lease arrangement relating to Irvington
Unit 4.
ISO............... Independent System Operator.
ITC............... Investment Tax Credit.
kWh............... Kilowatt-hour(s).
LOC............... Letter of Credit.
MEH............... MEH Corporation, a wholly-owned subsidiary of UniSource
Energy.
Millennium........ Millennium Energy Holdings, Inc., a wholly-owned
subsidiary of MEH.
MRA............... Master restructuring agreement between TEP and certain
banks which included the Renewable Term Loan,
Revolving Credit and certain replacement reimbursement
agreements, which was terminated on December 30, 1997.
MSR............... Modesto, Santa Clara and Redding Public Power Agency.
MW................ Megawatt(s).
NEV............... New Energy Ventures, L.L.C., a company in which a 50%
interest is owned by Millennium.
NEV California.... NEV California, L.L.C., a wholly-owned subsidiary of
NEV.
1994 Rate Order... ACC Rate Order concerning an increase in TEP's retail
base rates and certain regulatory write-offs, issued
January 11, 1994.
1996 Rate Order... ACC Rate Order concerning an
increase in TEP's retail base rates and the recovery
of Springerville Unit 2 costs, issued March 29, 1996.
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, and which was
terminated December 30, 1997.
Revolving Credit.. $100 million revolving credit facility entered into
under the Credit Agreement between a syndicate of
certain of the Banks and TEP.
SEC............... Securities and Exchange Commission.
Second Mortgage
Bonds............ TEP's second mortgage bonds issued under the General
Second Mortgage.
SES............... Southwest Energy Solutions, Inc., a wholly-owned
subsidiary of MEH.
Shareholders...... Holders of UniSource Energy 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....... Facilities at Springerville used in
common with Springerville Unit 1 and Springerville
Unit 2.
Springerville
Common Facilities
Leases........... Leveraged lease arrangements relating to an undivided
one-half interest in certain Springerville Common
Facilities.
Springerville
Unit 1 Leases..... Leveraged lease arrangements relating to
Springerville Unit 1, and an undivided one-half
interest in certain Springerville Common Facilities
and which has been assumed by TEP.
SSP............... Shared Savings Proposal filed by TEP with the ACC July
9, 1997 requesting a 1.1% annual retail rate
reduction.
SWPP.............. SWPP Investment Company, a wholly-owned subsidiary of
SES.
SWPPI............. SWPP International, a wholly-owned subsidiary of SES.
TEP............... Tucson Electric Power Company, the principal subsidiary
of UniSource Energy.
UniSource Energy.. UniSource Energy Corporation.
Valencia.......... Valencia Energy Company, previously a wholly owned
subsidiary of TEP, merged into TEP on May 31, 1996.
VSP............... Voluntary Severance Plan offered to TEP employees and
implemented in May 1996.
WSCC.............. Western Systems Coordinating Council.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
UniSource Energy Corporation and
to the Board of Directors of
Tucson Electric Power Company
We have reviewed the accompanying condensed consolidated balance sheet and
the related condensed consolidated statements of income and of cash flows of
UniSource Energy Corporation and its subsidiaries (the Company) and of
Tucson Electric Power Company and its subsidiaries (TEP) as of and for the
three-month period ended March 31, 1998. This financial information is the
responsibility of the Company's and TEP's management. The financial
statements as of March 31, 1997 were reviewed by other independent
accountants whose report dated February 23, 1998 stated that they were not
aware of any material modifications that should be made to such financial
information for it to be in conformity with generally accepted accounting
principles.
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 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 the accompanying financial information as of and for the
three-month period ended March 31, 1998 for it to be in conformity with
generally accepted accounting principles.
The financial statements of the Company and of TEP for the year ended
December 31, 1997 were audited by other independent accountants whose report
dated February 23, 1998 expressed an unqualified opinion on those
statements.
Price Waterhouse LLP
Phoenix, Arizona
May 5, 1998
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
UniSource Energy Corporation and its Stockholders
Tucson Electric Power Company
220 West Sixth Street
Tucson, Arizona 85701
We have reviewed the condensed consolidated statements of income and cash
flows of UniSource Energy Corporation and its subsidiaries (the Company) and
Tucson Electric Power Company (TEP) for the three-month period ended March
31, 1997. These financial statements are the responsibility of the
Company's and TEP'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 sheets and statements of capitalization
of the Company and TEP as of December 31, 1997 and the related statements of
income, cash flows, and changes in stockholders' equity (deficit) for the
year then ended (not presented herein); and in our report dated February 23,
1998, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheets as of December 31, 1997 is fairly
stated, in all material respects, in relation to the consolidated balance
sheet from which they have been derived.
DELOITTE & TOUCHE LLP
Tucson, Arizona
February 23, 1998
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
The weather causes seasonal fluctuations in UniSource Energy's sales. As a
result, quarterly results are not indicative of annual operating results. The
quarterly financial statements that follow are unaudited but reflect all normal
recurring accruals and other adjustments which we believe are necessary for a
fair presentation of the results for the interim periods presented. 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 1997 Form 10-K.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended
March 31,
1998 1997
-Thousands of Dollars-
Operating Revenues
Retail Customers $138,087 $129,937
Amortization of MSR Option Gain Regulatory Liability - 5,013
Sales for Resale 22,854 19,331
--------- ---------
Total Operating Revenues 160,941 154,281
--------- ---------
Operating Expenses
Fuel and Purchased Power 48,400 45,646
Capital Lease Expense 25,778 26,276
Amortization of Springerville Unit 1 Allowance (7,631) (7,009)
Other Operations 26,298 23,363
Maintenance and Repairs 10,724 10,231
Depreciation and Amortization 22,563 21,774
Taxes Other Than Income Taxes 12,926 12,625
Employee Severance Plan Expense - Net - 2,933
Income Taxes (1,937) (2,348)
--------- ---------
Total Operating Expenses 137,121 133,491
--------- ---------
Operating Income 23,820 20,790
--------- ---------
Other Income (Deductions)
Income Taxes (631) 14,558
Interest Income 1,716 1,709
Unregulated Energy Businesses - Net (4,036) (932)
Other 810 (31)
--------- ---------
Total Other Income (Deductions) (2,141) 15,304
--------- ---------
Interest Expense
Long-Term Debt 17,111 14,117
Interest Imputed on Losses Recorded at Present Value 8,545 8,279
Other 3,058 2,206
--------- ---------
Total Interest Expense 28,714 24,602
--------- ---------
Net Income (Loss) $ (7,035) $ 11,492
========= =========
Average Shares of Common Stock Outstanding (000) 32,139 32,139
========= =========
Basic and Diluted Earnings per Share $ (0.22) $ 0.36
========= =========
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1998 1997
-Thousands of Dollars-
Cash Flows from Operating Activities
Cash Receipts from Retail Customers $146,532 $142,918
Cash Receipts from Sales for Resale 25,549 22,402
Fuel and Purchased Power Costs Paid (41,527) (39,847)
Wages Paid, Net of Amounts Capitalized (23,257) (20,259)
Payment of Other Operations and Maintenance Costs (23,690) (18,876)
Capital Lease Interest Paid (41,319) (37,512)
Interest Paid, Net of Amounts Capitalized (17,198) (13,400)
Taxes Paid, Net of Amounts Capitalized (11,519) (11,121)
Interest Received 2,361 2,262
Contract Termination Fee Paid (10,000) -
Other 1,982 410
--------- ---------
Net Cash Flows - Operating Activities 7,914 26,977
--------- ---------
Cash Flows from Investing Activities
Construction Expenditures (16,957) (15,602)
Investments in Joint Ventures (6,000) (1,338)
Other (35) 988
--------- ---------
Net Cash Flows - Investing Activities (22,992) (15,952)
--------- ---------
Cash Flows from Financing Activities
Proceeds from Issuance of Long-Term Debt 1,105 -
Payments on Renewable Term Loan - (31,000)
Payments to Retire Capital Lease Obligations (8,737) (4,061)
Other (1,751) 383
--------- ---------
Net Cash Flows - Financing Activities (9,383) (34,678)
--------- ---------
Net Decrease in Cash and Cash Equivalents (24,461) (23,653)
Cash and Cash Equivalents, Beginning of Year 146,256 130,291
--------- ---------
Cash and Cash Equivalents, End of Period $121,795 $106,638
========= =========
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION
Three Months Ended
March 31,
1998 1997
-Thousands of Dollars-
Net Income (Loss) $ (7,035) $ 11,492
Adjustments to Reconcile Net Income (Loss)
to Net Operating Cash Flows
Depreciation and Amortization Expense 22,563 21,774
Deferred Income Taxes and Investment Tax Credits-Net (4,117) (16,907)
Lease Payments Deferred (12,616) (8,306)
Amortization of Regulatory Assets & Liabilities,
Net of Interest Imputed on Losses Recorded at
Present Value 914 (3,743)
Deferred Contract Termination Fee (9,038) -
Loss (Unremitted Earnings) of Unconsolidated
Subsidiaries 6,591 (538)
Other (174) (1,416)
Changes in Assets and Liabilities which Provided
(Used) Cash Exclusive of Changes Shown Separately
Accounts Receivable 987 7,534
Materials and Fuel 251 153
Accounts Payable 508 2,369
Taxes Accrued 11,961 11,826
Other Current Assets and Liabilities (3,260) (436)
Other Deferred Assets and Liabilities 379 3,175
--------- ---------
Net Cash Flows - Operating Activities $ 7,914 $ 26,977
========= =========
Non-Cash Financing Activities (these activities do not affect the statements of
cash flows):
The proceeds from the issuance of $200 million of Pollution Control Revenue
Bonds in March 1998 are held in trust and will be released by the trustee in May
1998 to redeem $200 million of previously issued bonds. See Note 5.
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
- Thousands of Dollars -
Utility Plant
Plant in Service $2,211,650 $2,194,150
Utility Plant Under Capital Leases 893,064 893,064
Construction Work in Progress 70,692 72,404
----------- -----------
Total Utility Plant 3,175,406 3,159,618
Less Accumulated Depreciation and Amortization (1,001,685) (982,621)
Less Accumulated Amortization of Capital Leases (78,435) (73,728)
Less Springerville Unit 1 Allowance (168,670) (167,756)
----------- -----------
Total Utility Plant - Net 1,926,616 1,935,513
----------- -----------
Investments and Other Property 78,855 78,772
----------- -----------
Current Assets
Cash and Cash Equivalents 121,795 146,256
Accounts Receivable 70,238 71,225
Materials and Fuel 33,754 34,005
Deferred Income Taxes - Current 7,777 14,910
Long-Term Debt Proceeds Held by Trustee 205,721 6,960
Other 16,079 16,693
----------- -----------
Total Current Assets 455,364 290,049
----------- -----------
Deferred Debits - Regulatory Assets
Income Taxes Recoverable Through Future Rates 169,212 170,034
Deferred Springerville Common Facility Costs 57,587 58,222
Deferred Springerville Contract Termination Fee 47,115 48,077
Deferred Springerville Unit 2 Costs 9,267 11,590
Deferred Lease Expense 10,982 11,571
Other Deferred Regulatory Assets 10,858 11,089
Deferred Debits - Other 21,005 19,492
----------- -----------
Total Deferred Debits 326,026 330,075
----------- -----------
Total Assets $2,786,861 $2,634,409
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND OTHER LIABILITIES
March 31, December 31,
1998 1997
- Thousands of Dollars -
Capitalization
Common Stock $ 638,873 $ 638,904
Accumulated Deficit (429,061) (422,026)
----------- -----------
Common Stock Equity 209,812 216,878
Capital Lease Obligations 883,607 890,257
Long-Term Debt 1,215,120 1,215,120
----------- -----------
Total Capitalization 2,308,539 2,322,255
----------- -----------
Current Liabilities
Current Obligations Under Capital Leases 15,238 14,552
Current Maturities of Long-Term Debt 200,500 500
Accounts Payable 35,417 34,909
Interest Accrued 47,004 64,812
Taxes Accrued 36,358 24,397
Contract Termination Fee Payable - 10,000
Other 12,412 19,051
----------- -----------
Total Current Liabilities 346,929 168,221
----------- -----------
Deferred Credits and Other Liabilities
Deferred Income Taxes - Noncurrent 66,107 77,606
Accumulated Deferred Investment Tax Credits
Regulatory Liability 11,332 11,905
Emission Allowance Gain Regulatory Liability 17,609 17,591
Other 36,345 36,831
----------- -----------
Total Deferred Credits and Other Liabilities 131,393 143,933
----------- -----------
Total Capitalization and Other Liabilities $2,786,861 $2,634,409
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
The weather causes seasonal fluctuations in TEP's sales. As a result, quarterly
results are not indicative of annual operating results. The quarterly financial
statements that follow are unaudited but reflect all normal recurring accruals
and other adjustments which we believe are necessary for a fair presentation of
the results for the interim periods presented. 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 TEP's 1997 Form 10-
K.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Three Months Ended
March 31,
1998 1997
-Thousands of Dollars-
Operating Revenues
Retail Customers $138,149 $129,937
Amortization of MSR Option Gain Regulatory Liability - 5,013
Sales for Resale 22,854 19,331
--------- ---------
Total Operating Revenues 161,003 154,281
--------- ---------
Operating Expenses
Fuel and Purchased Power 48,400 45,646
Capital Lease Expense 25,778 26,276
Amortization of Springerville Unit 1 Allowance (7,631) (7,009)
Other Operations 26,298 23,363
Maintenance and Repairs 10,724 10,231
Depreciation and Amortization 22,563 21,774
Taxes Other Than Income Taxes 12,926 12,625
Employee Severance Plan Expense- Net - 2,933
Income Taxes (1,937) (2,348)
--------- ---------
Total Operating Expenses 137,121 133,491
--------- ---------
Operating Income 23,882 20,790
--------- ---------
Other Income (Deductions)
Income Taxes (1,560) 14,558
Interest Income 1,716 1,756
Interest Income-Note Receivable from UniSource Energy 2,300 -
Other 769 (1,010)
--------- ---------
Total Other Income (Deductions) 3,225 15,304
--------- ---------
Interest Expense
Long-Term Debt 17,111 14,117
Interest Imputed on Losses Recorded at Present Value 8,545 8,279
Other 3,058 2,206
--------- ---------
Total Interest Expense 28,714 24,602
--------- ---------
Net Income (Loss) $ (1,607) $ 11,492
========= =========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1998 1997
-Thousands of Dollars-
Cash Flows from Operating Activities
Cash Receipts from Retail Customers $146,532 $142,918
Cash Receipts from Sales for Resale 25,549 22,402
Fuel and Purchased Power Costs Paid (41,527) (39,847)
Wages Paid, Net of Amounts Capitalized (22,428) (20,259)
Payment of Other Operations and Maintenance Costs (22,106) (18,876)
Capital Lease Interest Paid (41,319) (37,512)
Interest Paid, Net of Amounts Capitalized (17,198) (13,400)
Taxes Paid, Net of Amounts Capitalized (11,477) (11,121)
Interest Received 1,828 2,262
Contract Termination Fee Paid (10,000) -
Other 937 410
--------- ---------
Net Cash Flows - Operating Activities 8,791 26,977
--------- ---------
Cash Flows from Investing Activities
Construction Expenditures (16,957) (15,602)
Transfer of MEH (45,412) -
Investments in Joint Ventures - (1,338)
Other (6) 988
--------- ---------
Net Cash Flows - Investing Activities (62,375) (15,952)
--------- ---------
Cash Flows from Financing Activities
Proceeds from Issuance of Long-Term Debt 1,105 -
Payments on Renewable Term Loan - (31,000)
Payments to Retire Capital Lease Obligations (8,737) (4,061)
Other (1,884) 383
--------- ---------
Net Cash Flows - Financing Activities (9,516) (34,678)
--------- ---------
Net Decrease in Cash and Cash Equivalents (63,100) (23,653)
Cash and Cash Equivalents, Beginning of Year 146,256 130,291
--------- ---------
Cash and Cash Equivalents, End of Period $ 83,156 $106,638
========= =========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION
Three Months Ended
March 31,
1998 1997
-Thousands of Dollars-
Net Income (Loss) $ (1,607) $ 11,492
Adjustments to Reconcile Net Income (Loss) to Net
Operating Cash Flows
Depreciation and Amortization Expense 22,563 21,774
Deferred Income Taxes and
Investment Tax Credits - Net (377) (16,907)
Lease Payments Deferred (12,616) (8,306)
Amortization of Regulatory Assets & Liabilities, Net
of Interest Imputed on Losses Recorded at
Present Value 914 (3,743)
Deferred Contract Termination Fee (9,038) -
Unremitted Earnings of Unconsolidated Subsidiaries (213) (538)
Other (1,911) (1,416)
Changes in Assets and Liabilities which Provided
(Used) Cash Exclusive of Changes Shown Separately
Accounts Receivable (74) 7,534
Materials and Fuel 250 153
Accounts Payable 1,561 2,369
Taxes Accrued 11,962 11,826
Other Current Assets and Liabilities (3,002) (436)
Other Deferred Assets and Liabilities 379 3,175
--------- ---------
Net Cash Flows - Operating Activities $ 8,791 $ 26,977
========= =========
Non-Cash Financing Activities (these activities do not affect the statements of
cash flows):
The proceeds from the issuance of $200 million of Pollution Control Revenue
Bonds in March 1998 are held in trust and will be released by the trustee in May
1998 to redeem $200 million of previously issued bonds. See Note 5.
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1998 1997
- Thousands of Dollars -
Utility Plant
Plant in Service $2,211,650 $2,194,150
Utility Plant Under Capital Leases 893,064 893,064
Construction Work in Progress 70,692 72,404
----------- -----------
Total Utility Plant 3,175,406 3,159,618
Less Accumulated Depreciation and Amortization (1,001,685) (982,621)
Less Accumulated Amortization of Capital Leases (78,435) (73,728)
Less Springerville Unit 1 Allowance (168,670) (167,756)
----------- -----------
Total Utility Plant - Net 1,926,616 1,935,513
----------- -----------
Investments and Other Property 58,029 78,772
----------- -----------
Note Receivable from UniSource Energy 71,640 -
---------- -----------
Current Assets
Cash and Cash Equivalents 83,156 146,256
Accounts Receivable 71,155 71,225
Materials and Fuel 33,715 34,005
Deferred Income Taxes - Current 7,777 14,910
Long-Term Debt Proceeds Held by Trustee 205,721 6,960
Other 14,904 16,693
----------- -----------
Total Current Assets 416,428 290,049
----------- -----------
Deferred Debits - Regulatory Assets
Income Taxes Recoverable Through Future Rates 169,212 170,034
Deferred Springerville Common Facility Costs 57,587 58,222
Deferred Springerville Contract Termination Fee 47,115 48,077
Deferred Springerville Unit 2 Costs 9,267 11,590
Deferred Lease Expense 10,982 11,571
Other Deferred Regulatory Assets 10,858 11,089
Deferred Debits - Other 21,005 19,492
----------- -----------
Total Deferred Debits 326,026 330,075
----------- -----------
Total Assets $2,798,739 $2,634,409
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND OTHER LIABILITIES
March 31, December 31,
1998 1997
- Thousands of Dollars -
Capitalization
Common Stock $ 645,261 $ 645,261
Capital Stock Expense (6,357) (6,357)
Accumulated Deficit (423,633) (422,026)
----------- -----------
Common Stock Equity 215,271 216,878
Capital Lease Obligations 883,607 890,257
Long-Term Debt 1,215,120 1,215,120
----------- -----------
Total Capitalization 2,313,998 2,322,255
----------- -----------
Current Liabilities
Current Obligations Under Capital Leases 15,238 14,552
Current Maturities of Long-Term Debt 200,500 500
Accounts Payable 35,642 34,909
Interest Accrued 47,004 64,812
Taxes Accrued 36,327 24,397
Contract Termination Fee Payable - 10,000
Other 12,442 19,051
----------- -----------
Total Current Liabilities 347,153 168,221
----------- -----------
Deferred Credits and Other Liabilities
Deferred Income Taxes - Noncurrent 72,381 77,606
Accumulated Deferred Investment Tax Credits
Regulatory Liability 11,332 11,905
Emission Allowance Gain Regulatory Liability 17,609 17,591
Other 36,266 36,831
----------- -----------
Total Deferred Credits and Other Liabilities 137,588 143,933
----------- -----------
Total Capitalization and Other Liabilities $2,798,739 $2,634,409
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING FOR THE EFFECTS OF REGULATION
- -------------------------------------------------
Accounting Implications
The ACC regulates TEP's utility business. TEP generally uses the same
accounting policies and practices used by nonregulated companies for financial
reporting under generally accepted accounting principles. However, sometimes
these principles, such as FAS 71, require special accounting treatment for
regulated companies to show the effect of regulation. For example, in setting
TEP's retail rates, the ACC may not currently allow TEP to charge its customers
to recover certain expenses but; instead, require that these charges be charged
to customers in the future. In this situation, FAS 71 requires TEP not to show
these expenses on its current income statements but to "defer" these items and
show them as "regulatory assets" on the balance sheet until TEP is allowed to
charge its customers. TEP then amortizes these items to the income statement as
charges are billed to customers. Similarly, certain items of revenue may be
deferred as regulatory liabilities which also are eventually amortized to the
income statement.
We have recorded regulatory assets and liabilities in our balance sheets in
accordance with FAS 71. A regulated company must satisfy certain conditions to
apply the accounting policies and practices of FAS 71. These conditions
include:
- an independent regulator sets rates;
- the regulator sets the rates to cover specific costs of delivering service;
and
- the service territory lacks competitive pressures to reduce rates below the
rates set by the regulator.
We periodically assess whether we continue to meet these conditions. If we were
required to stop applying FAS 71 to all or a portion of TEP's regulated utility
operations, we would write off the related balances of TEP's regulatory assets
and liabilities as a charge in our income statement. This means our earnings
would be reduced by the net amount of regulatory assets and liabilities, after
applicable deferred income taxes. Based on the balances of TEP's regulatory
assets and liabilities at March 31, 1998, if we stopped applying FAS 71 to all
of TEP's regulated operations, we would record an extraordinary loss of
approximately $178 million, net of the related deferred income tax benefit of
$99 million. While our cash flows may be affected by regulatory orders and
market conditions, our cash flows would not be affected if we stopped applying
FAS 71.
If we stop applying FAS 71, we would need to evaluate the likelihood that
we could recover the cost of TEP's electric plant in the marketplace using the
criteria in FAS 121. If undiscounted cash flows are less than the carrying
value of those assets, then we would need to write off as an expense a portion
of those plant assets to reflect their current market value. We cannot predict
if we would write off any plant assets as a result of applying FAS 121.
Recent Events That May Impact TEP's Application of FAS 71
Legislative and other regulatory measures are being developed in various
states to deregulate the electric generation business. The SEC and the EITF
have been reviewing whether electric utilities should stop applying FAS 71 to
the business transactions in states where deregulation is occurring. In
general, the EITF consensus states that utilities must stop accounting for the
electric generation portion of their business under FAS 71 when a deregulation
plan is in place and its terms are known. The EITF also concludes that
utilities do not need to write off regulatory assets(including those related to
generation) if the cash flow stream from regulated rates includes recovery of
the regulatory assets. We are uncertain how the EITF consensus will impact TEP
as deregulation activities develop in Arizona. In the future, we may need to
stop applying FAS 71 to the electric generation portion of TEP's business, even
if we believe that we will recover the full amount of our costs under the ACC
competition phase-in plan. Approximately 55% of TEP's net regulatory assets on
the balance sheet relate to electric generation.
In December 1996, the ACC adopted rules which would introduce retail
electric competition in Arizona. If implemented as adopted, the rules would
require each "Affected Utility" (TEP, Arizona Public Service Company, Citizens
Utilities Company and several cooperatives) to open its retail service area to
competing electric service providers on a phased-in basis over the period 1999
to 2003. However, the ACC has not adopted specific guidelines for
identification and recovery of stranded costs. Stranded costs represent costs
incurred by a utility in a regulated market that would not likely be recovered
through the prices charged for electricity and other services in a competitive
market.
Hearings were held in February 1998 to resolve issues relating to stranded
cost recovery. TEP, other Affected Utilities, the Residential Utility Consumer
Office, the ACC staff, and various intervenors participated in the hearings.
On May 6, 1998, the Hearing Officer issued a Proposed Order. The Proposed
Order indicates that the Affected Utilities should have a reasonable
opportunity to recover 100% of their stranded costs and gives the Affected
Utilities three options for stranded cost recovery. However, it is unclear
whether Affected Utilities would be able to recover 100% of their stranded
costs. The Proposed Order also specifies that some form of rate cap will be in
place for customers on standard offer during the transition period.
TEP is currently evaluating the financial implications if the Proposed
Order is adopted, including whether we would be able to apply FAS 71 to the
generation portion of TEP's business. TEP anticipates filing exceptions to the
Proposed Order. We cannot determine when the ACC will hold an open meeting to
consider the Proposed Order or whether the ACC will approve, modify or reject
the Proposed Order. If the Proposed Order is adopted,TEP would have 30 days to
file its choice of one of the three options for stranded cost recovery. At the
same time, TEP would file an implementation plan, including its estimate of
stranded costs related to generation and regulatory assets. Until such time, we
believe that any estimate of unrecoverable amounts of stranded costs would be
highly speculative.
Also in January 1998, the Arizona Legislature proposed legislation
introducing retail electric competition in Arizona. We cannot predict the
outcome of the proposed legislation or whether the ACC and the Arizona
Legislature will propose other initiatives on electric utility industry
restructuring. We believe, based on previous rate orders, that it is likely
that we will recover the full costs of our investments in electric utility
plant and regulatory assets. The ACC's final order may require us to stop
applying FAS 71 to the electric generation portion of TEP's utility
operations. If the order provides less than full recovery of stranded costs,
significant write-offs of assets may occur as discussed above.
Based on the activities that have occurred to date, TEP believes it
continues to meet the criteria to apply FAS 71 to its regulated activities.
However, we cannot predict the outcome of the deregulation efforts in Arizona
described above.
NOTE 2. TAX ASSESSMENTS
- ------------------------
Ruling on Arizona Sales Tax Assessments - Coal Sales
We have received sales tax assessments from the ADOR alleging that Valencia
is liable for sales tax on gross income from coal sales, transportation and
coal-handling services provided to TEP from November 1985 through May 1996. We
have protested these assessments. In September 1996, the Arizona Court of
Appeals upheld the validity of the assessment issued for the period November
1985 through March 1990. In July 1997, the Arizona Supreme Court granted a
Petition for Review, and oral arguments were held during December 1997. We
expect the Arizona Supreme Court to render its opinion in the second quarter of
1998. We are also protesting the assessments for the period April 1990 through
May 1996.
We have previously recorded an expense and a related liability for the
sales taxes and interest that we believe are probable of incurrence for the
period November 1985 through May 1996. Arizona law generally requires payment
of an assessment prior to pursuing the appellate process. We previously paid,
under protest, a total of $23 million of the disputed sales tax assessments.
These payments will be refunded if we are successful in the appeals process.
On May 31, 1996, Valencia was merged into TEP. Because TEP now acquires
coal directly from other companies, we do not believe we are liable for sales
tax computed on a basis similar to the assessments described above after May
31, 1996. For periods prior to May 31, 1996, we continue to record an
estimated interest expense on the disputed assessments.
Arizona Sales Tax Assessments - Leases
The ADOR has issued sales tax assessments to some of TEP's lessors of
generation-related facilities and equipment. The assessments allege sales tax
liability on a component of rents we paid on the Springerville Unit 1 Leases,
the Springerville Common Facilities Leases, the Irvington Lease and the
Springerville Coal Handling Facilities Lease from August 1, 1988 to September
30, 1993. Due to indemnification provisions in the lease agreements, if the
ADOR prevails, we would be required to reimburse the lessors for the sales
taxes that they pay.
We have recorded a liability for the probable amount of sales taxes and
interest due as of March 31, 1998. If the ADOR prevails, we would need to
record an additional expense and related liability. Even though it is
reasonably possible that the resolution of this issue could result in
approximately $22 million of additional sales tax expense, we do not believe
this outcome is likely. We do not expect that the resolution of this assessment
will have a material negative impact on the financial statements. We believe
that the ultimate resolution of this issue will occur over a period of two to
four years.
Income Tax Assessments
In February 1998, the IRS issued an income tax assessment for the 1992 and
1993 tax years. The IRS is challenging our treatment for income tax purposes of
various items relating to the 1992 Financial Restructuring, including the amount
of NOL and ITC generated before December 1991 that may be used to reduce taxes
in future periods.
Due to the Financial Restructuring, a change in ownership of TEP occurred
for tax purposes in December 1991. As a result, the use of the NOL and ITC
generated before December 1991 may be limited under the tax code. The IRS is
challenging our calculation of this limitation. At March 31, 1998, pre-change
federal NOL and ITC carryforwards were approximately $281 million and $26
million, respectively. In addition to the pre-change NOL and ITC which are
subject to the limitation, $180 million of federal NOL at March 31, 1998,is not
subject to the limitation.
Resolution of this matter is not expected to have a material adverse impact
on the financial statements.
NOTE 3. TRANSFER OF MEH FROM TEP TO UNISOURCE ENERGY
- -----------------------------------------------------
On January 1, 1998, TEP became a subsidiary of UniSource Energy. At the
same time,TEP transferred MEH to UniSource Energy and received as consideration
from UniSource Energy a $95 million 10-year promissory note with a yearly
interest rate of 9.78%. Approximately $25 million of this note represents a
gain to TEP. TEP has not recorded this gain. Instead, this gain will be
reflected as an increase in TEP's common equity when UniSource Energy pays the
principal portion of the note. The note receivable appears on TEP's
consolidated balance sheet but does not appear on UniSource Energy's
consolidated balance sheet because intercompany balances and transactions are
eliminated when financial statements are consolidated.
MEH owns Advanced Energy Technologies, Inc., Millennium Energy Holdings,
Inc., Nations Energy Corporation and Southwest Energy Solutions, Inc.
The transfer of MEH's cash balance of $45.4 million as part of the transfer
of MEH to UniSource Energy is included in the Cash Flows from Investing
Activities in TEP's cash flow statement for the three months ended March 31,
1998.
NOTE 4. LOANS AND GUARANTEES FOR NEV
- -------------------------------------
In December 1997, Millennium committed to provide NEV with $20 million of
funding. At NEV's option, the funding can be in the form of additional equity,
preferred equity, guarantees or it can be partially satisfied with $10 million
in loans from Millennium, or a combination of these alternatives. At April 30,
1998, NEV had received the following under the $20 million commitment:
- Millennium provided $7 million in loans to NEV.
- UniSource Energy issued guarantees in the aggregate amount of $5 million to
secure the obligations of NEV to counterparties to energy purchase and sale
agreements.
- UniSource Energy also issued a $1 million guarantee to secure the
obligations of NEV under its Agreement for Services with LG&E Energy
Marketing, Inc.
As a result of these loans and guarantees, the remaining commitment amount
available was $7 million at April 30, 1998.
UniSource Energy is the guarantor of $16.65 million of performance bonds
that secure the amounts NEV California owes to the California utility
distribution companies (UDCs) for services provided by the UDCs in connection
with NEV California's sales in the California retail electric market. NEV
California bills its customers for these UDC charges.
NOTE 5. LONG-TERM DEBT
- -----------------------
In March 1998, the Apache County, Arizona Industrial Development Authority
issued $200 million of Pollution Control Revenue Bonds and loaned the proceeds
to TEP. These bonds are included in Long-Term Debt on our balance sheet. The
new bonds, which are unsecured, were sold in three series: Series A ($83.7
million) bears interest at 5.85% and matures in 2028; Series B ($99.8 million)
bears interest at 5.875% and matures in 2033;and Series C ($16.5 million) bears
interest at 5.85% and matures in 2026.
The proceeds from the issuance of the new bonds will be used in May 1998 to
redeem $200 million of previously issued variable interest rate bonds that would
have matured in 2020 and 2021. The previously issued bonds are included in
Current Maturities of Long-Term Debt in our balance sheet at March 31, 1998.
Until the previously issued bonds are redeemed, the proceeds from issuance of
the new bonds will be recorded in the balance sheets under Current Assets as
Long-Term Debt Proceeds Held by Trustee.
NOTE 6. RATE MATTERS
- ---------------------
Shared Savings Proposal
On July 9, 1997, TEP 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 includes a sharing of cost
containment benefits with customers and a reduction of potentially stranded
costs associated with the introduction of retail electric competition in
Arizona. The SSP identifies $20.8 million in savings allocable to ACC
jurisdictional operations. The cost containment savings were realized primarily
from renegotiated fuel contracts and a 15% reduction in our workforce from the
1996 Voluntary Severance Program. The ACC has not set a date to decide on this
matter.
The proposed $6.8 million rate reduction represents a 50/50 sharing between
TEP and its customers of $13.6 million of the cost savings. The SSP would allow
TEP to use the remaining $7.2 million of cost savings to reduce (mitigate)
potentially stranded costs by accelerating the amortization of Retail Excess
Capacity Deferrals. Retail Excess Capacity Deferrals represent operating and
capital costs associated with Springerville Unit 2 capacity which the ACC did
not allow TEP to recover in rates until the 1994 and 1996 Rate Orders. These
Retail Excess Capacity Deferrals totaled $87.5 million and $88.7 million at
March 31, 1998 and December 31, 1997, respectively. These deferrals are only
reflected in our regulatory calculations. The accompanying balance sheets do
not include these deferrals as the costs were expensed when incurred for
financial reporting purposes. The proposed $7.2 million (after tax) increase in
annual amortization expense for those excess capacity deferrals would decrease
the amortization period from 20 years to 5.6 years as of December 1996. The
proposed increase in amortization expense would be reflected in TEP's
regulatory accounting records but would have no impact on the expenses
included in the financial statements.
Springerville Coal Contract Termination Fee
On June 27, 1997, TEP signed an agreement with the coal supplier for the
Springerville Generating Station to terminate the then-existing coal supply
contract and enter into a new, more cost effective contract with the same
supplier. TEP paid a $50 million termination fee in three installments: $30
million paid on June 30, 1997; $10 million paid on September 30, 1997; and $10
million paid on March 31, 1998.
TEP asked the ACC, as part of the SSP, to allow the termination fee to be
recorded as a regulatory asset and to be 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 TEP to defer the $50 million termination fee as a
regulatory asset in the balance sheet until the ACC decides whether the $50
million termination fee should be recovered through retail rates. The interim
accounting order also allowed TEP 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 be expensed immediately. The ACC has
not set a date to decide on this matter.
NOTE 7. INCOME TAXES
- ---------------------
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:
UniSource Energy TEP
---------------- ------------
Three Months Ended Three Months Ended
March 31, March 31,
1998 1997 1998 1997
---------------------------------------
- Thousands of Dollars -
Federal Income Tax Benefit
at Statutory Rate $(3,903) $ (1,895) $ (694) $ (1,895)
State Income Tax Benefit,
Net of Federal Deduction (601) (291) (107) (291)
Depreciation Differences
(Flow Through Basis) 1,040 - 1,040 -
Investment Tax Credit
Amortization (573) (976) (573) (976)
Reduction in Valuation
Allowance - (14,318) - (14,318)
Other (80) 574 (43) 574
-------- --------- ------- ---------
Total Benefit for Federal
and State Income Taxes $(4,117) $(16,906) $ (377) $(16,906)
======== ========= ======= =========
Income taxes are included in the income statements as follows:
UniSource Energy TEP
---------------- ------------
Three Months Ended Three Months Ended
March 31, March 31,
1998 1997 1998 1997
---------------------------------------
- Thousands of Dollars -
Operating Expenses $(1,937) $ (2,348) $(1,937) $ (2,348)
Other Income (Deductions) 631 (14,558) 1,560 (14,558)
Unregulated Energy
Businesses - Net (2,811) - - -
-------- --------- -------- ---------
Total Income Tax Benefit $(4,117) $(16,906) $ (377) $(16,906)
======== ========= ======== =========
The reduction in the valuation allowance and corresponding NOL benefit in
1997 are primarily due to revisions in the estimated amount of NOLs that we
expect to offset future taxable income. As of December 31, 1997, both UniSource
Energy and TEP had recorded the amount of prior period NOL benefit that we
expect to utilize on future income tax returns. At the present time, we are not
able to estimate future additional amounts of NOL benefit that we may recognize
in the income statements of either UniSource Energy or TEP. This is because
there are still open tax years for which there may be additional assessments
and because federal and state NOL carryforwards have varying expiration dates.
We do not expect to recognize additional amounts of NOL benefit until such
items are resolved.
NOTE 8. RECLASSIFICATIONS
- --------------------------
Minor reclassifications have been made to the prior year financial
statements to conform to the current year's presentation.
NOTE 9. REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------
With respect to the unaudited consolidated financial information of
UniSource Energy and TEP for the three-month periods ended March 31,1998, Price
Waterhouse LLP reported that they have applied limited procedures in accordance
with professional standards for a review of such information. However, their
separate report dated May 5, 1998 appearing herein, states that they did not
audit and they do not express an opinion on that unaudited consolidated
financial information. Price Waterhouse LLP has not carried out any significant
or additional audit tests beyond those which would have been necessary if their
report had not been included. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. Price Waterhouse LLP is not subject to the
liability provisions of section 11 of the Securities Act of 1933 for their
report on the unaudited consolidated financial information because that report
is not a "report" or a "part" of a registration statement prepared or certified
by Price Waterhouse LLP within the meaning of sections 7 and 11 of the Act.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------------
UniSource Energy is a holding company which owns all of the outstanding
common stock of TEP and MEH. TEP is an operating public utility engaged in
the generation, purchase, transmission, distribution and sale of electricity
for customers in the greater Tucson, Arizona area and to wholesale
customers. MEH owns all of the outstanding common stock of four
subsidiaries established for the purpose of operating or investing in
various unregulated energy-related businesses.
TEP is the principal subsidiary of UniSource Energy and accounts for
substantially all of its assets, revenues and net income. The financial
condition and results of operations of TEP are currently the principal
factors affecting the financial condition and results of operations of
UniSource Energy on an annual basis.
Management's Discussion and Analysis explains the general financial
condition and the results of operations for UniSource Energy and its
business subsidiaries including:
-operating results during the first quarter compared with the same period
in the prior year,
-the outlook for dividends on common stock,
-changes in liquidity and capital resources during the first quarter of
1998, and
-expectations of identifiable material trends which may affect our
business in the future.
Management's Discussion and Analysis should be read along with the
Company's Condensed Consolidated Financial Statements, beginning on page 2,
which present the results of operations for the quarters ended March 31,
1998 and 1997. Management's Discussion and Analysis analyzes and explains
the differences between periods for specific line items of the Condensed
Consolidated Financial Statements.
OVERVIEW
- --------
UniSource Energy recorded a net loss of $7.0 million for the first
quarter of 1998, compared with net income of $11.5 million in the first
quarter of 1997. The results in the first quarter of 1997 included the
effect of non-recurring tax benefits, which was partially offset by non-
recurring expenses, as set forth below:
-$14.3 million net operating loss carryforward tax benefits,
-$2.9 million in pre-tax VSP expense, and
-$1.1 million in pre-tax consulting fees paid to new business ventures.
Excluding these one-time adjustments, we would have recorded a net loss of
$0.3 million in the first quarter of 1997. Our results in the first quarter
of 1998 were affected primarily by the following factors: losses from
unregulated energy-related subsidiaries ($4.0 million after-tax), lower non-
cash regulatory revenues ($5.0 pre-tax), and higher interest expense ($4.1
million pre-tax). These factors are discussed in more detail in Results of
Operations and Investments in Energy-Related Ventures, below.
Utility operating revenues grew by 4% while operating income grew by
15% in the first quarter of 1998 compared with the first quarter of 1997.
Growth in the number of customers in TEP's retail service area, increased
kilowatt-hour sales to both retail and wholesale customers due to cooler
weather, and a moderate 3% overall increase in operating expenses
contributed to this improvement in the first quarter of 1998.
The Company's and TEP's financial prospects continue to be subject to
regulatory, economic, and other uncertainties. These uncertainties include
the extent to which TEP can alter operations and reduce costs in response to
industry changes or unanticipated economic downturns, which may be limited
by continued high financial and operating leverage. Our future success will
depend, in part, on our ability to contain and/or reduce the costs of
serving retail customers and the level of sales to those customers. Until
the uncertainties surrounding the introduction of retail competition in
Arizona are resolved, predicting the level of TEP's future energy sales and
the composition of its future revenues is difficult. However, we expect
retail competition will exist in our local market within the next five
years. See Competition, Retail below. In a deregulated environment,
revenues from energy sales will be less certain, although revenues from
transmission and distribution services, which we expect to remain regulated,
would likely continue to grow. Even in a deregulated environment, TEP
expects to continue to benefit from population and economic growth in the
Tucson area through increased revenues from its regulated distribution
services.
The Company is addressing the uncertainties discussed above and is
positioning itself to benefit from the changing regulatory environment. We
are improving cost measurement and management techniques and are re-
engineering various functions at TEP. We have also extended contracts,
where appropriate, for large wholesale and retail customers, and are
developing new affiliates to provide energy services to markets beyond TEP's
retail service territory. See Results of Operations; Competition, Retail;
Shared Savings Proposal Before the ACC; and Investments in Energy-Related
Ventures, below.
Since April 1997, we have made significant progress in our financial
strategy to reduce refinancing risk by extending maturities of long-term
debt and letters of credit and to reduce exposure to variable interest rates
by refinancing with fixed interest rates. TEP refinanced variable rate debt
obligations at fixed rates and entered into a new bank Credit Agreement to
replace the MRA. Long-term debt obligations totaling $192 million currently
mature between 1999 and 2003. TEP plans to refinance a substantial portion
of these obligations during 1998. See Financing Developments, TEP First
Mortgage Bonds, below.
Despite these improvements, TEP's and UniSource Energy's consolidated
capital structures remain highly leveraged. Although TEP refinanced and
extended the maturities of certain debt obligations at favorable rates and
terms in 1997 and during the first quarter of 1998, the Company might not
have continued access to the capital markets at similar rates and terms.
Despite the reduction in variable rate debt obligations, changes in interest
rates on its remaining variable rate debt will continue to affect TEP's
earnings and cash flow. Following the redemption of certain pollution
control revenue bonds on May 15, 1998, TEP will have $329 million aggregate
principal amount of variable debt obligations. On March 31, 1997, variable
rate debt totaled $805 million. See Financing Developments, TEP Sale of
Bonds, below.
TEP is currently unable to pay dividends to UniSource Energy because it
fails to meet certain requirements contained in some of its First Mortgage
Bond obligations. As a result, cash flow from TEP to UniSource Energy is
limited. This, in turn, limits UniSource Energy's ability to pay dividends.
See Dividends on Common Stock below.
During the next twelve months, TEP expects to fund its operating
activities and construction expenditures with internal cash flows, existing
cash balances, and, if necessary, borrowings under the Revolving Credit. As
of May 6, 1998, cash balances, including cash equivalents for UniSource
Energy, were approximately $104 million, of which $65 million was held by
TEP and its consolidated subsidiaries.
COMPETITION
- -----------
WHOLESALE
TEP competes with other utilities, marketers and independent power
producers in the sale of electric capacity and energy in the wholesale
market. FERC generally does not permit TEP's prices for wholesale sales of
capacity and energy to exceed rates determined on a cost of service basis.
However, in the fall of 1997, FERC granted TEP a tariff to sell at market-
based rates. In the current market, wholesale prices are substantially
below total cost of service, but in all instances, we make wholesale sales
at prices which exceed fuel and other variable costs. In addition, we
expect competition to sell capacity to remain vigorous. Prices may remain
depressed 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 the following factors:
-availability of capacity in the southwestern United States,
-the availability and prices of natural gas and oil,
-spot energy prices, and
-transmission access.
The FERC issued two orders pertaining to transmission access in April
1996. FERC Order No. 888 requires all public utilities that own, control,
or operate interstate transmission facilities to offer transmission service
to others under a single tariff. This tariff must incorporate certain
minimum terms and conditions of transmission service established by the FERC
and 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. 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 to prevent
employees of a public utility engaged in marketing functions from obtaining
preferential access to OASIS-related information or from engaging in
discriminatory business practices. TEP is in compliance with the
requirements of FERC Orders 888 and 889.
TEP, along with other transmission owners and users located in the
southwestern United States, is investigating the feasibility of forming an
independent system operator (ISO) for the region. An ISO would be
responsible for ensuring transmission reliability and nondiscriminatory
access to the regional transmission grid. The working group held three sets
of public meetings to obtain input to the study and completed the initial
feasibility study in September 1997. The participants have begun detailed
developmental work. The formation of an ISO 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 TEP's future results of operations, will be examined as part of
the development work.
RETAIL
Under current law, TEP does not compete with other companies for
electric service in TEP's retail service territory. However, TEP competes
against gas service suppliers and others who provide energy services. TEP
actively markets energy and customized energy-related services. We have not
lost any customers to self-generation partly because of these efforts. For
example, in recent years, TEP executed new contracts with two principal
customers that provide approximately 9% of TEP's total annual retail
revenues. Both customers are in the copper mining business. The new
contracts include price reductions, term extensions, and a provision for
interruptible service. These contracts expire in March 2001 and January
2003. These mining customers cannot terminate the contracts early without
giving us at least one and up to two years prior notice. We have not
received any such notices.
In December 1996, the ACC adopted rules that, if implemented as
adopted, would require a phase-in of retail electric competition in Arizona
over a four-year period beginning January 1, 1999. The adopted rules are a
framework to implement competition. The ACC rules, if implemented as
adopted, would require each "Affected Utility" (TEP, APS, Citizens Utilities
Company, and several electric cooperatives) to open its retail service area
to competing electric service providers over the period 1999 to 2003 and
would permit Affected Utilities to sell power at unregulated market prices.
Beginning January 1, 1999, 20% of retail customers would be eligible to
choose their electric service provider from companies certificated by the
ACC. This percentage increases to 50% beginning January 1, 2001 and to 100%
by January 1, 2003. Under the adopted rules, it is unclear which customers
would be eligible to choose during the transition years. Electric 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. Other
electric utilities not regulated by the ACC, such as the Salt River Project
and certain municipal utilities, would be granted certificates to compete
under the ACC's rules if these utilities would allow their service
territories to be similarly open to competing service providers.
Under the rules, Affected Utilities would be required to provide
distribution wheeling services (i.e., retail wheeling) at rates approved by
the ACC. Retail wheeling involves a utility transmitting energy produced by
other entities over its transmission and distribution system to consumers
located in its present retail service area. The availability of wheeling
services will make it easier for entities to provide services outside their
traditional service territory. This exposes TEP to the risk that TEP's
distribution customers may choose to purchase their energy from competitors.
However, TEP would have the opportunity to sell power at market prices to
retail customers outside of TEP's current service area. Until retail
competition has been substantially implemented, each Affected Utility would
be required to offer services to all consumers located in their present
retail service areas.
The rules, as adopted by the ACC, specify that the ACC would allow
recovery of unmitigated stranded costs by Affected Utilities. Stranded
costs represent costs incurred by a utility in a regulated market that
likely would not be recovered through the prices charged for electricity and
other services in a competitive market. According to the adopted rules, to
recover stranded costs, utilities will need to demonstrate to the ACC that
they have taken every feasible, cost-effective measure to mitigate or offset
stranded costs. Also, Affected Utilities would have to seek ACC approval of
distribution charges or other means of recovering stranded costs from
current customers who elect to use another electricity provider.
In January 1998, TEP filed its position regarding stranded cost
recovery with the ACC. We believe that TEP and other Affected Utilities
should have the opportunity to recover all of their stranded costs and that
stranded costs should be calculated as the difference between future
revenues under traditional regulation and future revenues in a competitive
market.
Hearings were held in February 1998 to resolve issues relating to
stranded cost recovery. TEP, other Affected Utilities, the Residential
Utility Consumer Office, the ACC staff, and various intervenors participated
in the hearings. On May 6, 1998, the Hearing Officer issued a Proposed
Order. The Proposed Order indicates that the Affected Utilities should have
a reasonable opportunity to recover 100% of their stranded costs and gives
the Affected Utilities three options for stranded cost recovery.
(1) Net Revenues Lost Methodology--This option would provide for recovery
of stranded costs through a Competitive Transition Charge (CTC) using a
net revenues lost approach for a five-year period beginning in 1999. A
net revenues lost approach would compare estimates of generation
revenues under competition to generation revenues under continued
regulation. The difference, if any, would represent stranded costs.
Under this option, customers remaining on standard offer service would
pay 100% of their proportionate share of stranded costs each year.
Customers who elect to purchase energy from competitors would pay 100%
of their proportionate share of stranded costs in the first year
through the CTC, and during each successive year, this percentage would
decrease by 20%. The Proposed Order indicates that through customer
growth and other mitigation efforts, Affected Utilities should still be
able to collect 100% of their stranded costs despite the annual
reduction in the CTC.
(2) Divestiture/Auction Methodology--This option would provide for an
auction and divestiture of generation assets where the difference
between market and book value would represent stranded costs. The
Affected Utility would be permitted to collect 100% of stranded costs
through a CTC over a 10-year period. However, no return would be
provided on the unamortized balance of stranded costs during this 10-
year period.
(3) Financial Integrity Methodology--This option would provide for stranded
cost recovery through a CTC which would be calculated to provide
sufficient revenues for the Affected Utility to maintain its financial
integrity and to meet minimum financial ratios (not specified in the
Proposed Order) for a 10-year period.
The Proposed Order also specifies that some form of rate cap would be in
place for customers on standard offer during the transition period.
TEP is currently evaluating the Proposed Order to determine the
potential financial implications to the Company if it is adopted. TEP
anticipates filing exceptions to the Proposed Order. We cannot determine
when the ACC will hold an open meeting to consider the Proposed Order or
whether the ACC will approve, modify or reject the Proposed Order. If the
Proposed Order is adopted, TEP would have 30 days to file its choice of one
of the three options for stranded cost recovery. At the same time, TEP
would need to file an implementation plan, including its estimate of
stranded costs related to generation and regulatory assets. Until such
time, we believe that any estimate of unrecoverable amounts of stranded
costs would be highly speculative.
In February 1997, TEP filed an appeal of the ACC order adopting retail
electric competition rules in the Arizona Superior Court. The Company filed
a motion for summary judgment, claiming, among other things that the
Competition Rules: (a) violated the Regulatory Compact between TEP and the
State of Arizona; (b) confiscated TEP's property; and (c) violated due
process. The Court did not grant summary judgment but ruled that the
Commission must hold hearings before it can modify TEP's Certificate of
Convenience and Necessity (CC&N). No trial date has been set in the case
and no final order has been issued. We are unable to predict the outcome
of the appeal or the effects such rules would have on future results of
operations.
A legislative study committee established by the Arizona Legislature
issued a report on retail electric competition in December 1997. The report
identified tax and other issues for the legislature to address. In January
1998, Arizona legislators introduced HB 2663 regarding the implementation of
retail electric competition in Arizona. This bill is currently under
consideration in the Arizona State Legislature, and would require the
introduction of customer choice to 20% of each utility's retail load by
December 31, 1998 and to all utility retail customers by December 31, 2000.
This legislation only relates directly to government-owned utility companies
such as SRP; however, the bill encourages broader application of the
legislation's principles by the ACC to the state's investor-owned utilities
and cooperatives, including TEP.
We cannot predict the outcome of the proposed legislation or the ACC's
retail competition rules. However, we believe that certain matters in the
ACC's current retail competition rules may require legislative changes,
while others may require amendments to the Arizona state constitution.
Additionally, federal legislators introduced several retail competition
initiatives in Congress which, if passed, could modify or override the
actions taken by the ACC or the Arizona Legislature. We will continue to
assess the likely impact on TEP of the ACC's retail competition rules,
proposed legislation, and other potential market reforms. We are unable to
predict the ultimate impact of increased retail competition on future
results of our 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.
SHARED SAVINGS PROPOSAL BEFORE THE ACC
- --------------------------------------
On July 9, 1997, TEP 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 includes a sharing of cost
containment benefits with customers and a reduction of potentially stranded
costs associated with the introduction of retail electric competition in
Arizona. The SSP identifies $20.8 million in savings allocable to ACC
jurisdictional operations. The cost containment savings were realized
primarily from renegotiated fuel contracts and a 15% reduction in our
workforce from the 1996 Voluntary Severance Program. The ACC has not set a
date to decide on this matter.
The proposed $6.8 million rate reduction represents a 50/50 sharing
between TEP and its customers of $13.6 million of the cost savings. The SSP
would allow TEP to use the remaining $7.2 million of cost savings to reduce
(mitigate) potentially stranded costs by accelerating the amortization of
Retail Excess Capacity Deferrals. Retail Excess Capacity Deferrals
represent operating and capital costs associated with Springerville Unit 2
capacity which the ACC did not allow TEP to recover in rates until the 1994
and 1996 Rate Orders. Those Retail Excess Capacity Deferrals totaled $87.5
million and $88.7 million at March 31, 1998 and December 31, 1997,
respectively. Those deferrals are only reflected in our regulatory
calculations. The accompanying balance sheets do not include these
deferrals as the costs were expensed when incurred for financial reporting
purposes. The proposed $7.2 million increase in annual amortization expense
for those excess capacity deferrals would decrease the amortization period
from 20 years to 5.6 years as of December 1996. The proposed increase in
amortization expense would be reflected in TEP's regulatory accounting
records but would have no impact on the expenses included in the financial
statements.
ACCOUNTING FOR THE EFFECTS OF REGULATION
- ----------------------------------------
Accounting Implications
The ACC regulates TEP's utility business. TEP generally uses the same
accounting policies and practices used by nonregulated companies for
financial reporting under generally accepted accounting principles.
However, sometimes these principles, such as FAS 71, require special
accounting treatment for regulated companies to show the effects of
regulation. For example, in setting TEP's retail rates, the ACC may not
currently allow TEP to charge its customers to recover certain expenses but,
instead, require that these charges be charged to customers in the future.
In this situation, FAS 71 requires TEP not to show these expenses on its
current income statements but to "defer" these items and show them as
"regulatory assets" on the balance sheet until TEP is allowed to charge its
customers. TEP then amortizes these items to the income statement as
charges are billed to customers. Similarly, certain items of revenue may
be deferred as regulatory liabilities which are also eventually amortized
to the income statement.
We have recorded regulatory assets and liabilities in our balance
sheets in accordance with FAS 71. A regulated company must satisfy certain
conditions to apply the accounting policies and practices of FAS 71. These
conditions include:
- an independent regulator sets rates;
- the regulator sets the rates to cover specific costs of delivering
service; and
- the service territory lacks competitive pressures to reduce rates
below the rates set by the regulator.
We periodically assess whether we continue to meet these conditions. If we
were required to stop applying FAS 71 to all or a portion of TEP's regulated
utility operations, we would write off the related balances of TEP's
regulatory assets and liabilities as a charge in our income statement. This
means our earnings would be reduced by the net amount of regulatory assets
and liabilities, after applicable deferred income taxes. Based on the
balances of TEP's regulatory assets and liabilities at March 31, 1998, if we
stopped applying FAS 71 to all of TEP's regulated operations, we would
record an extraordinary loss of approximately $178 million, net of the
related deferred income tax benefit of $99 million. While our cash flows
may be affected by regulatory orders and market conditions, our cash flows
would not be affected if we stopped applying FAS 71.
If we stop applying FAS 71, we would need to evaluate the likelihood
that we could recover the cost of TEP's electric plant in the marketplace
using the criteria in FAS 121. If undiscounted cash flows are less than the
carrying value of those assets, then we would need to write-off as an
expense a portion of those plant assets to reflect their current market
value. We cannot predict if we would write-off any plant assets as a result
of applying FAS 121.
Recent Events That May Impact TEP's Application of FAS 71
Legislative and other regulatory measures are being developed in
various states to deregulate the electric generation business. The SEC and
the EITF have been reviewing whether electric utilities should stop applying
FAS 71 to the business transactions in states where deregulation is
occurring. In general, the EITF consensus states that utilities must stop
accounting for the electric generation portion of their business under FAS
71 when a deregulation plan is in place and its terms are known. The EITF
also concludes that utilities do not need to write off regulatory assets
(including those related to generation) if the cash flow stream from
regulated rates includes recovery of the regulatory assets. We are uncertain
how the EITF consensus will impact TEP as deregulation activities develop in
Arizona. In the future, we may need to stop applying FAS 71 to the electric
generation portion of TEP's business, even if we believe that we will
recover the full amount of our costs under the ACC competition phase-in
plan. Approximately 55% of TEP's net regulatory assets on the balance sheet
relate to electric generation.
In December 1996, the ACC adopted rules that, if implemented as
adopted, would introduce retail electric competition in Arizona. See
Competition, Retail for a discussion of the ACC competition rules. Hearings
were held in February 1998 to resolve issues relating to stranded cost
recovery. On May 6, 1998, the Hearing Officer issued a Proposed Order. The
Proposed Order indicates that the Affected Utilities should have a
reasonable opportunity to recover 100% of their stranded costs and gives
the Affected Utilities three options for stranded cost recovery.
However, it is unclear whether Affected Utilities would be able to recover
100% of their stranded costs. See Competition, Retail for a discussion of
the Proposed Order.
TEP is currently evaluating the financial implications if the Proposed
Order is adopted, including whether we would be able to continue to apply
FAS 71 to the generation portion of TEP's business. TEP anticipates filing
exceptions to the Proposed Order. We cannot determine when the ACC will
hold an open meeting to consider the Proposed Order or whether the ACC will
approve, modify or reject the Proposed Order. If the Proposed Order is
adopted, TEP would have 30 days to file its choice of one of the three
options for stranded cost recovery. At the same time, TEP would need to
file an implementation plan, including its estimate of stranded costs
related to generation and regulatory assets. Until such time, we believe
that any estimate of unrecoverable amounts of stranded costs would be highly
speculative.
Also in January 1998, the Arizona Legislature proposed legislation
introducing retail electric competition in Arizona. We cannot predict the
outcome of the proposed legislation or whether the ACC and the Arizona
Legislature will propose other initiatives on electric utility industry
restructuring. We believe, based on previous rate orders, that it is likely
that we will recover the full costs of our investments in electric utility
plant and regulatory assets. The ACC's final order may require us to stop
applying FAS 71 to the electric generation portion of TEP's utility
operations. If the order provides less than full recovery of stranded
costs, significant write-offs of assets may occur as discussed above.
Based on the activities that have occurred to date, TEP believes it
continues to meet the criteria to apply FAS 71 to its regulated activities.
However, we cannot predict the outcome of the deregulation efforts in
Arizona described above.
INVESTMENTS IN ENERGY-RELATED VENTURES
- --------------------------------------
MEH Corporation (MEH), a wholly-owned subsidiary of UniSource Energy,
owns 100% of the stock of four subsidiaries. We established these
subsidiaries to pursue various unregulated energy-related investment
opportunities:
1) Nations Energy Corporation (Nations Energy) develops independent
power projects worldwide.
2) Millennium Energy Holdings, Inc. (Millennium) holds a 50% interest
in New Energy Ventures, L.L.C. (NEV). NEV, a buyer's agent, provides
electric load aggregation and advisory services to retail purchasers of
electric energy. As of March 31, 1998, NEV had contracts to purchase
energy for and sell energy to customers principally in California with
a combined electrical demand of more that 1,000 MW. NEV began serving
its California customers on March 31, 1998 when the California retail
electricity market opened to competition.
3) Advanced Energy Technologies, Inc. (AET) holds a 50% interest in
Global Solar Energy, L.L.C. (Global Solar), a manufacturer of thin-film
photovoltaic cells.
4) Southwest Energy Solutions, Inc. (SES) provides ancillary energy
services to electric consumers. SES owns 100% of the stock of SWPP
Investment Company (SWPP) and SWPP International, Ltd. (SWPPI), which
hold ownership interests in businesses engaged in the manufacture and
sale of concrete power poles.
Our investments in the energy-related ventures described above
(included in Investments and Other Property in UniSource Energy's
consolidated balance sheet) comprise less than 1% of total assets. However,
the net loss related to these start-up operations totaled $4.0 million for
the first quarter of 1998. This loss is included in the Other Income
(Deductions) section on UniSource Energy's income statement. Almost all of
MEH's loss in the first quarter of 1998 occurred at NEV. The California
electricity market was originally scheduled to open to competitors such as
NEV on January 1, 1998. However, technical matters related to the
California Independent System Operator and the California Power Exchange
delayed the opening of the electricity market until March 31, 1998.
Therefore, NEV could not make retail power sales in California in the first
quarter. Although the delays in establishment of the competitive market
caused losses at NEV in the first quarter, and may continue to cause losses
in the second quarter, NEV expects losses to decline as more customers are
added throughout the year.
Depending on the nature of future investment opportunities, we expect
to make additional investments in these subsidiaries and in other energy-
related ventures. Over time, investments in unregulated energy-related
ventures may have a material impact on our profitability and cash flows.
The ACC Holding Company Order requires that the capitalization (debt and
equity) of TEP's sister companies not exceed 30% of TEP's capitalization
unless otherwise approved by the ACC.
DIVIDENDS ON COMMON STOCK
- -------------------------
UniSource Energy
UniSource Energy's ability to pay dividends depends upon cash flow
from TEP and MEH. TEP comprises substantially all of UniSource Energy's
assets. As described below, TEP is currently unable to declare or pay
dividends. TEP has not declared or paid a dividend on common stock since
1989. Until TEP is able to pay dividends to UniSource Energy, UniSource
Energy will probably be unable to declare or pay dividends on its Common
Stock.
TEP
Five outstanding issues of First Mortgage Bonds (aggregating $184
million in principal amount) prevent TEP from paying dividends until
specific cash flow coverage and retained earnings tests are met. As of
March 31, 1998, TEP met the cash flow coverage test, but did not meet the
retained earnings test, which requires positive retained earnings. These
covenants will apply until these First Mortgage Bonds have been paid or
redeemed or the applicable mortgage indentures have been amended. The
latest maturity of these First Mortgage Bonds is in 2003. To amend these
bonds would require approval by 75% of all First Mortgage Bonds holders.
During 1998, TEP plans to refinance or retire all of the First Mortgage
Bonds that prohibit the payment of dividends. See Financing Developments,
TEP First Mortgage Bonds, below.
TEP's Credit Agreement allows TEP to pay dividends if it maintains
compliance with the agreement and meets certain financial covenants,
including a covenant that requires TEP to maintain a minimum level of net
worth. As of March 31, 1998, the required minimum net worth was $166.4
million. See Financing Developments, TEP Credit Agreement, below. As of
March 31, 1998, TEP is in compliance with the terms of the Credit Agreement.
The ACC Holding Company Order states that TEP may not pay dividends to
UniSource Energy in excess of 75% of its earnings until TEP's equity ratio
equals 37.5% of total capital (excluding capital lease obligations). As of
March 31, 1998, TEP's equity ratio was 15%.
In addition to these restrictive covenants, the Federal Power Act
states that dividends shall not be paid out of funds properly included in
the capital account. Although the terms of the Federal Power Act provisions
are unclear, we believe that there is a reasonable basis to pay dividends
from current year earnings. We are continuing to evaluate this situation.
EARNINGS
- --------
UniSource Energy recorded a net loss of $7.0 million in the first
quarter of 1998 compared with net income of $11.5 million in the first
quarter of 1997. The net loss per average share of Common Stock was $0.22
for the first quarter of 1998 compared with net income per average share of
Common Stock of $0.36 for the first quarter of 1997. We would have recorded
a net loss of $0.3 million or $0.01 per share in the first quarter of 1997
excluding the recognition of tax benefits and other one-time adjustments.
The major reasons for the variance between the results for the first quarter
of 1998 and the adjusted results for the first quarter of 1997 were:
-higher losses from investments in unregulated energy-related businesses,
-lower non-cash regulatory revenues, and
-higher interest expense.
RESULTS OF OPERATIONS
- ---------------------
Currently, TEP's financial condition and results of operations are the
primary factors affecting the financial condition and results of operations
of UniSource Energy on an annual basis. We note any fluctuations that are
not primarily due to TEP activities. All nonutility operating transactions
are reflected in Other Income (Deductions) on the UniSource Energy
Consolidated Statement of Income.
Utility Sales and Revenues
Comparisons of TEP's kilowatt-hour sales and electric revenues are
shown below:
<TABLE>
<CAPTION>
Increase/(Decrease)
-------------------
Three Months Ended March 31 1998 1997 Amount Percent
- --------------------------- --------- ----------- ------- --------
<S> <C> <C> <C> <C>
Electric kWh Sales (000):
Retail Customers 1,790,309 1,622,441 167,868 10.3%
Sales for Resale 850,132 715,187 134,945 18.9
--------- --------- -------
Total 2,640,441 2,337,628 302,813 13.0
Electric Revenues (000):
Retail Customers $138,149 $129,937 $8,212 6.3%
Amortization of MSR Option
Gain Regulatory Liability 0 5,013 (5,013) (100.0)
Sales for Resale 22,854 19,331 3,523 18.2
-------- -------- -------
Total $161,003 $154,281 $6,722 4.4
</TABLE>
TEP's kWh sales to retail customers increased by 10.3% during the first
quarter of 1998 compared to the first quarter of 1997. This increase is
because: 1) our average number of retail customers increased 1.8%; 2) the
weather was cooler in February and March of 1998 than in 1997, which
increased the electric heating load; 3) sales to our mining customers
increased after contract amendments went into effect in mid-1997; and 4)
reported sales in 1998 were impacted by various billing adjustments.
Revenues from sales to retail customers increased by 6.3% in the first
quarter of 1998 compared to the same period in 1997 because of the higher
kWh sales. This increase in retail revenues did not correspond exactly to
the increase in kWh sales as a result of new long-term contracts with large
commercial, industrial and mining customers. These contracts went into
effect after the first quarter of 1997 and have lower rates than the prior
contracts.
Our kWh sales for resale increased by 18.9% and the related revenues
grew by 18.2% in the first quarter of 1998 relative to the same period in
1997. There were higher economy energy sales in 1998 because cooler weather
in the southwestern United States during the first quarter resulted in
increased use of electricity for heat.
TEP's non-cash revenue from the Amortization of the MSR Option Gain
Regulatory Liability was $5.0 million lower in the first quarter of 1998
compared to the same period in 1997. This regulatory liability was fully
amortized in May 1997. If we exclude the revenue from the MSR Option Gain
amortization, total operating revenues were 7.9% higher in the first quarter
of 1998 than the first quarter of 1997.
Operating Expenses
Fuel and Purchased Power expense increased by 6% in the first quarter
of 1998 compared with the same period in 1997 because of the increased sales
we discussed above. Savings from the new Springerville coal contract helped
reduce the cost per kWh sold to 1.83 cents in the first quarter of 1998 from
1.95 cents in the same period in 1997.
If we exclude the growth in Fuel and Purchased Power expense, other
operating expenses increased in total by only 1% in the first quarter of
1998 over the same period in 1997. Other Operations expense was $2.9
million higher in the first quarter of 1998 than during the first quarter of
1997. This change was mainly due to increases in salaries, pension and
benefit expense. Employee Severance Plan Expense of $2.9 million in 1997
represents VSP costs for non-pension post-retirement benefits that we
recognized in the first quarter.
Other Income (Deductions)
Compared with the first quarter of 1997, 1998 income tax benefits
included in Other Income (Deductions) decreased by $15.2 million and $16.1
million for UniSource Energy and TEP, respectively. This change is due
mainly to lower recognition of Net Operating Loss (NOL) benefit. UniSource
Energy and TEP recognized $14.3 million of NOL benefit in the first quarter
of 1997 and none in the first quarter of 1998. As of December 31, 1997,
both UniSource Energy and TEP had recorded the amount of prior period NOL
benefit that we expect to use on future income tax returns. At the present
time, we are not able to estimate future additional amounts of NOL benefit
that we may recognize in the income statements of either UniSource Energy or
TEP. This is because there are still open tax years for which there may be
additional assessments and because federal and state NOL carryforwards have
varying expiration dates. We do not expect to recognize additional amounts
of NOL benefit until such items are resolved.
The unregulated energy subsidiaries owned by MEH reported a net loss of
$4.0 million for the first quarter of 1998, compared with a net loss of $0.9
million for the first quarter of 1997. The delayed implementation of
California's competitive electricity market until March 31, 1998 and other
subsidiary development activities affected the financial results for these
businesses. See Investments in Energy-Related Ventures.
Interest Expense
Interest expense increased by $4.1 million in the first quarter of 1998
relative to the same period in 1997. We had higher letter of credit fees in
TEP's new Credit Agreement, as well as higher interest rates from the
refinancing of certain variable rate debt obligations with fixed rate debt
obligations. (See Financing Developments, TEP Sale of Bonds, below). These
refinancings benefited TEP by extending debt maturities and reducing the
risk from changes in variable interest rates.
EVENTS AFFECTING FUTURE RESULTS OF UTILITY OPERATIONS
TEP Generating Resources
On May 1, 1998, TEP allowed a lease to expire on three internal
combustion turbine generating units having a combined generating capacity of
96 MW. As a result, TEP may need to purchase firm capacity during the
summer months to meet operating reserve requirements. TEP will re-evaluate
the need for additional peaking generation resources. Firm capacity
purchases needed to replace the expired leased capacity are not expected to
have a material negative impact on UniSource Energy or TEP financial
results.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
CASH FLOWS
UniSource Energy
Cash and cash equivalents increased by $15.2 million, or 14%, from the
March 31, 1997 ending balance of $106.6 million to the March 31, 1998 ending
balance of $121.8 million. For the twelve-month period ended March 31,
1998, net cash flows from operating activities exceeded the cash needed for
investing and financing activities.
Net cash flows from operating activities decreased in aggregate by
$19.1 million in the first three months of 1998 compared with the same
period in 1997. This decrease was due mainly to the payment of $10.0
million in contract termination fees to the Springerville coal supplier in
the first quarter of 1998 (see Note 6 of Notes to Condensed Consolidated
Financial Statements--Rate Matters). In addition to the contract
termination fees, we had higher cash outflows for the following: 1) Other
Operations and Maintenance Costs increased $4.8 million; 2) Interest Paid
increased $3.8 million; 3) Capital Lease Interest Paid increased $3.8
million; and 4) Wages Paid increased $3.0 million. These increases in cash
outflows were partially offset by a $6.8 million increase in cash receipts
from retail and wholesale customers.
Total net cash outflows from investing activities increased by $7.0
million during the first quarter of 1998 compared with the same period in
1997. A $4.7 million increase in Loans and Investments to Joint Ventures
and a $1.4 million increase in Construction Expenditures were the primary
reasons for this change.
Total net cash outflows from financing activities decreased by $25.3
million in the first quarter of 1998 compared with the same period in 1997.
In the first quarter of 1997, TEP repaid the $31 million balance outstanding
on its Renewable Term Loan. The new bond issuance activity described below
in Financing Developments, TEP Sale of Bonds had no impact on net cash flow
in the first quarter of 1998. This is because the cash from the bonds
issued is being held in trust until the 1981 Apache Series A and Series B
bonds are redeemed on May 15, 1998.
Our consolidated cash balance, including cash equivalents, at May 6,
1998 was approximately $104 million. Of this amount, $65 million was held
by TEP and its wholly-owned subsidiaries. We invest cash balances in high-
grade money market securities with an emphasis on preserving the principal
amounts invested.
During 1998 and beyond, our sources of cash will be primarily dividends
from TEP (when allowed) and proceeds from sales of securities. Potential
cash needs may include funds for subsidiaries, funds to meet debt
obligations and funds to pay dividends to shareholders. See Dividends on
Common Stock and Financing Developments, UniSource Energy for details on
these sources and uses of funds.
TEP
Cash and cash equivalents decreased by $23.5 million, or 22%, from the
March 31, 1997 ending balance of $106.6 million to the March 31, 1998 ending
balance of $83.2 million. This decrease is due to the transfer of MEH's
cash balance of $45.4 million, included in Cash Flows from Investing
Activities in TEP's Statement of Cash Flows for the quarter ended March 31,
1998. See Note 3 of Notes to the Condensed Consolidated Financial
Statements--Transfer of MEH from TEP to UniSource Energy.
TEP expects to generate enough cash flow during 1998 to fund continuing
operating activities and construction expenditures. Actual cash flows may
vary from projections if there are changes in wholesale revenues, changes in
short-term interest rates or other factors. If cash flows were to fall
short of our expectations, TEP would use existing cash balances and, if
necessary, borrow from the Revolving Credit Facility. At May 6, 1998, there
was no outstanding balance due under the Revolving Credit Facility.
FINANCING DEVELOPMENTS
TEP Sale of Bonds
On March 17, 1998, the Apache County, Arizona Industrial Development
Authority issued $200 million of new bonds for the benefit of TEP. These
bonds are included in Long-Term Debt on TEP's balance sheet. The proceeds
will be used on May 15, 1998 to redeem the 1981 Series A Apache County
Pollution Control Revenue Bonds due 2020 ($100 million) and the 1981 Series
B Apache County Pollution Control Revenue Bonds due 2021 ($100 million).
Until the previously issued bonds are redeemed, they are included in the
balance sheet as Current Maturities of Long-Term Debt. The proceeds from
the issuance of the new bonds are recorded in the balance sheet under
Current Assets as Long-Term Debt Proceeds Held by Trustee. The new bonds,
which are unsecured, were issued in three series: Series A Pollution Control
Revenue Bonds ($83.7 million) bears interest at 5.85% and matures in 2028;
Series B Pollution Control Revenue Bonds ($99.8 million) bears interest at
5.875% and matures in 2033; and Series C Industrial Development Revenue
Bonds ($16.5 million) bears interest at 5.85% and matures in 2026.
The 1981 Series A Apache Bonds are supported by a letter of credit.
This LOC is collateralized by Second Mortgage Bonds under the terms of TEP's
Credit Agreement. When TEP redeems these bonds, the Letter of Credit
Facility will decrease from $444 million to $341 million and the Second
Mortgage Bonds collateralizing those LOCs will decrease by $103 million.
The 1981 Series B Apache Bonds are supported by a letter of credit outside
of the Credit Agreement. This LOC is collateralized by First Mortgage
Bonds. When TEP redeems these bonds, this will eliminate the supporting LOC
and retire $103 million of First Mortgage Bonds collateralizing the LOC.
TEP Credit Agreement
As of March 31, 1998 and as of May 6, 1998, TEP had no borrowings
outstanding under its $100 million Revolving Credit Facility.
As described above in TEP Sale of Bonds, after TEP redeems the 1981
Series A Apache County Pollution Control Revenue Bonds on May 15, 1998, the
amount of its Letter of Credit Facility will be $341 million and the amount
of its total facilities under the Credit Agreement, which includes the
Revolving Credit Facility discussed above, will be $441 million.
TEP is required by its Credit Agreement to maintain certain financial
covenants including (a) a minimum Consolidated Tangible Net Worth equal to
the sum of $133 million plus 40% of cumulative Consolidated Net Income since
January 1, 1997, (b) a minimum Cash Coverage Ratio ranging from 1.30 in 1998
and gradually increasing to 1.55 in 2002, and (c) a maximum Leverage Ratio
ranging from 7.00 in 1998 and gradually decreasing to 6.20 in 2002. For the
quarter ended March 31, 1998, TEP was in compliance with each of these
covenants.
TEP First Mortgage Bonds
In 1997 the ACC granted authority to TEP to refinance up to $184
million of its First Mortgage Bonds scheduled to mature between 1999 and
2003, as well as any redemption premiums, by issuing new debt and/or equity
securities. As described below, TEP plans to negotiate and complete these
transactions during 1998. TEP's objective is to extend maturities and
eliminate certain restrictive covenants contained in the existing First
Mortgage Bonds.
On April 29, 1998, TEP sent an offering memorandum to registered
holders of its 12.22% First Mortgage Bonds due 2000. TEP is offering to
exchange existing 12.22% First Mortgage Bonds for an identical amount of new
12.22% Exchange Series First Mortgage Bonds due 2000. With the exception of
a covenant pertaining to the payment of dividends, the new bonds would have
substantially the same terms and conditions as the existing bonds. The
Exchange Series Bonds are structured to allow TEP to pay dividends. This
exchange offer expires May 15, 1998 and may be extended or withdrawn by TEP
prior to that time at its discretion.
During the second quarter of 1998, TEP intends to issue up to $195
million of Second Mortgage Bonds and use the proceeds to redeem all of its
First Mortgage Bonds due in 1999, 2001, 2002, and 2003, as well as any of
the 12.22% First Mortgage Bonds not tendered for exchange as described
above. If TEP redeems the bonds as described above, TEP would eliminate
covenants that currently prohibit it from paying common stock dividends so
long as it has an accumulated earnings deficit (see Dividends on Common
Stock).
There is no assurance that any of the transactions described above will
be completed.
UniSource Energy
UniSource Energy plans to establish a direct stock purchase plan in
1998. Under this plan, we may issue up to 1,000,000 shares of common stock.
The ACC Holding Company Order states that 60% of the proceeds of any
public equity issuance undertaken by the Company in its first five years of
operations must be used to reduce TEP's debt or add to TEP's equity account.
UniSource Energy--Loans and Guarantees
In December 1997, Millennium committed to provide NEV with $20 million
of funding. At NEV's option, the funding can be in the form of additional
equity, preferred equity, guarantees or it can be partially satisfied with
$10 million in loans from Millennium, or a combination of these
alternatives. At April 30, 1998, NEV had received the following under the
$20 million commitment:
-Millennium provided $7 million in loans to NEV.
-UniSource Energy issued guarantees in the aggregate amount of $5 million
to secure the obligations of NEV to counterparties to energy purchase and
sale agreements.
-UniSource Energy also issued a $1 million guarantee to secure the
obligations of NEV under its Agreement for Services with LG&E Energy
Marketing, Inc.
As a result of these loans and guarantees, the remaining commitment amount
available was $7 million at April 30, 1998.
UniSource Energy is the guarantor of $16.65 million of performance
bonds that secure the amounts NEV California owes to the California utility
distribution companies (UDCs) for services provided by the UDCs in
connection with NEV California's sales in the California retail electric
market. NEV California bills its customers for these UDC charges.
IMPACT OF YEAR 2000 ON COMPUTER SYSTEMS AND APPLICATIONS
- --------------------------------------------------------
The Company continues to review, test and make modifications to its
computer systems and applications to ensure that its generation,
transmission and distribution facilities will provide uninterrupted service
and that year 2000 transactions can be processed. We are reviewing our
information systems, the control and embedded systems of TEP's utility plant
(including the units that TEP owns part of but does not operate), as well as
whether major vendors are addressing the problem. The Company has
identified the major vendors from whom we purchase products or services. We
are contacting those vendors to determine their plans to correct any
problems they may face with year 2000 compliance and investigate any
potential impact on TEP. TEP and other electric service providers in the
WSCC are evaluating potential year 2000 risks resulting from interconnected
electric and informational systems.
At this time we believe that all identified modifications to systems
which the Company operates will be made within the required time frames.
We currently estimate that the year 2000 project costs are not material to
the Company's operating results. We cannot assure the year 2000 compliance
status of systems or parties that the Company does not control. We cannot
assess the effect on the Company of non-compliance by systems or parties
that the Company does not control.
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.
UniSource Energy and TEP include the following cautionary statements to take
advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 for any forward-looking statements made by, or for,
UniSource Energy or TEP 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. They
include statements which are not statements of historical fact. Such
forward-looking statements may be identified by the use of words such as
"anticipates," "estimates," "expects," "intends," "plans," "predicts,"
"projects," and similar expressions. UniSource Energy and TEP may
occasionally publish or make available forward-looking statements of this
nature. These cautionary statements and any other cautionary statements
which may accompany the forward-looking statements expressly qualify all
such forward-looking statements, whether written or oral, and whether made
by or for UniSource Energy or TEP. In addition, UniSource Energy and TEP
disclaim any obligation to update any forward-looking statements to reflect
events or circumstances after the date we make forward-looking statements.
Forward-looking statements involve risks and uncertainties which could
cause actual results or outcomes to differ materially from those we express
in the forward-looking statements. We express in good faith the
expectations, beliefs and projections contained in this document. We
believe we have a reasonable basis to make such statements based on our
examination of historical operating trends, data contained in our records
and other data available from third parties. However, we cannot assure that
we will achieve our expectations, beliefs or projections. In addition to
other factors and matters discussed in this document, we believe some of the
important factors that could cause actual results to differ materially from
those we discuss 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 TEP's retail service area.
3. Changes affecting TEP's cost of providing electrical service including
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
UniSource Energy, TEP, or any subsidiary.
PART II - OTHER INFORMATION
ITEM 1. -- LEGAL PROCEEDINGS
- ------------------------------------------------------------------------------
TAX ASSESSMENTS
See Note 2 of Notes to Condensed Consolidated Financial Statements, Tax
Assessments.
ITEM 5. - OTHER INFORMATION
- ------------------------------------------------------------------------------
ADDITIONAL FINANCIAL DATA
The following table reflects the ratio of earnings to fixed charges for TEP:
12 Months Ended
----------------
March 31, December 31,
1998 1997
---- ----
Ratio of Earnings to Fixed 1.41 1.39
Charges
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------------
(a) Exhibits.
-- See Exhibit Index.
(b) Reports on Form 8-K.
-- The Company and TEP have not filed any Current Reports on Form 8-K
since filing the Form 10-K for 1997.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized. The signature for each
undersigned company shall be deemed to relate only to matters having
reference to such company or its subsidiary.
UNISOURCE ENERGY CORPORATION
-----------------------------
(Registrant)
Date: May 13, 1998 Ira R. Adler
----------------------------------
Ira R. Adler
Senior Vice President and
Principal Financial Officer
TUCSON ELECTRIC POWER COMPANY
-----------------------------
(Registrant)
Date: May 13, 1998 Ira R. Adler
----------------------------------
Ira R. Adler
Executive Vice President and
Principal Financial Officer
EXHIBIT INDEX
4a - Loan Agreement, dated as of March 1, 1998, between The Industrial
Development Authority of the County of Apache and TEP relating to
Pollution Control Revenue Bonds, 1998 Series A (Tucson Electric
Power Company Project).
4b - Indenture of Trust, dated as of March 1, 1998, between The
Industrial Development Authority of the County of Apache and First
Trust of New York, National Association, authorizing Pollution
Control Revenue Bonds, 1998 Series A (Tucson Electric Power Company
Project).
4c - Loan Agreement, dated as of March 1, 1998, between The Industrial
Development Authority of the County of Apache and TEP relating to
Pollution Control Revenue Bonds, 1998 Series B (Tucson Electric
Power Company Project).
4d - Indenture of Trust, dated as of March 1, 1998, between The
Industrial Development Authority of the County of Apache and First
Trust of New York, National Association, authorizing Pollution
Control Revenue Bonds, 1998 Series B (Tucson Electric Power Company
Project).
4e - Loan Agreement, dated as of March 1, 1998, between The Industrial
Development Authority of the County of Apache and TEP relating to
Industrial Development Revenue Bonds, 1998 Series C (Tucson
Electric Power Company Project).
4f - Indenture of Trust, dated as of March 1, 1998, between The
Industrial Development Authority of the County of Apache and First
Trust of New York, National Association, authorizing Industrial
Development Revenue Bonds, 1998 Series C (Tucson Electric Power
Company Project).
11 - Statement re computation of per share earnings - UniSource Energy.
12 - Computation of Ratio of Earnings to Fixed Charges - TEP.
15a - Letter regarding unaudited interim financial information (Price
Waterhouse LLP).
15b - Letter regarding unaudited interim financial information
(Deloitte &Touche LLP).
27a - Financial Data Schedule - UniSource Energy.
27b - Financial Data Schedule - TEP.
Exhibit 15(a)
May 8, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that our report dated May 5, 1998 (issued pursuant
to the provisions of Statement on Auditing Standards No. 71) has
been incorporated by reference by UniSource Energy Corporation in
the Prospectuses constituting part of its Registration Statements
on Form S-8 (Nos. 333-43765, 333-43767 and 333-43769) and by
Tucson Electric Power Company in the Prospectus constituting part
of its Registration Statement on Form S-3 (No, 33-55732).
We are also aware of our responsibilities under the Securities Act
of 1933.
Yours very truly,
Price Waterhouse LLP
Phoenix, Arizona
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<NAME> UNISOURCE ENERGY CORPORATION
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,926,616
<OTHER-PROPERTY-AND-INVEST> 78,855
<TOTAL-CURRENT-ASSETS> 455,364
<TOTAL-DEFERRED-CHARGES> 326,026
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,786,861
<COMMON> 638,873
<CAPITAL-SURPLUS-PAID-IN> 0
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<OTHER-OPERATING-EXPENSES> 139,058
<TOTAL-OPERATING-EXPENSES> 137,121
<OPERATING-INCOME-LOSS> 23,820
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EXHIBIT 4(a)
LOAN AGREEMENT
(1998 Series A)
between
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF APACHE
and
TUCSON ELECTRIC POWER COMPANY
Dated as of March 1, 1998
Relating To
Pollution Control Revenue Bonds,
1998 Series A
(Tucson Electric Power Company Project)
TABLE OF CONTENTS*
* 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
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. Facilities; Property of the Lessors....... 6
SECTION 3.02. Revision of Plans and Specifications...... 6
SECTION 3.03. Maintenance of Facilities; Remodeling..... 6
SECTION 3.04. Insurance................................. 7
SECTION 3.05. Condemnation.............................. 7
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01. Issuance of the Bonds..................... 7
SECTION 4.02. Issuance of Other Obligations............. 7
SECTION 4.03. The Loan; Disposition of Bond Proceeds.... 7
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.... 8
SECTION 5.03. Payment of Expenses....................... 8
SECTION 5.04. Indemnification........................... 8
SECTION 5.05. Payment of Taxes; Discharge of Liens...... 9
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01. Maintenance of Corporate Existence........ 9
SECTION 6.02. Permits or Licenses....................... 10
SECTION 6.03. Authority's Access to Facilities.......... 10
SECTION 6.04. Tax-Exempt Status of Interest on Bonds.... 10
SECTION 6.05. Use of Facilities......................... 11
SECTION 6.06. Financing Statements...................... 11
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01. Conditions................................ 11
SECTION 7.02. Instrument Furnished to the Authority and
Trustee................................. 13
SECTION 7.03. Limitation................................ 13
SECTION 7.04. Certain Matters Relating to the Leases.... 13
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default......................... 13
SECTION 8.02. Force Majeure............................. 14
SECTION 8.03. Remedies.................................. 14
SECTION 8.04. No Remedy Exclusive....................... 14
SECTION 8.05. Reimbursement of Attorneys' and Agents'
Fees..................................... 14
SECTION 8.06. Waiver of Breach.......................... 15
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01. Redemption of Bonds....................... 15
SECTION 9.02. Compliance with the Indenture............. 15
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Term of Agreement........................ 15
SECTION 10.02. Notices.................................. 15
SECTION 10.03. Parties in Interest...................... 15
SECTION 10.04. Amendments............................... 16
SECTION 10.05. Counterparts............................. 16
SECTION 10.06. Severability............................. 16
SECTION 10.07. Governing Law............................ 16
SECTION 10.08. Notice Regarding Cancellation of
Contracts............................... 16
Signatures.....................................................18
Exhibit A - Description of the Facilities......................A-1
LOAN AGREEMENT
THIS LOAN AGREEMENT (1998 Series A), dated as of March 1, 1998 (this
"Agreement"), between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF
APACHE, 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 Apache 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 any 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 (a) $100,000,000
aggregate principal amount of its Pollution Control Revenue Bonds, 1981
Series A (Tucson Electric Power Company Project), all of which remain
outstanding (the "1981 Series A 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 air and water pollution
control facilities and sewage and solid waste disposal facilities at Unit
No. 1 and Unit No. 2 of the Springerville Generating Station (collectively,
the "Pollution Control Facilities") and (b) $100,000,000 aggregate principal
amount of its Pollution Control Revenue Bonds, 1981 Series B (Tucson
Electric Power Company Project), all of which remain outstanding (the "1981
Series B Bonds"), the proceeds of which were loaned to the Company to
finance a portion of the costs of acquisition, construction and equipping of
the Pollution Control Facilities and certain facilities for furnishing
electric energy; and
WHEREAS, the Authority proposes to issue and sell its Pollution Control
Revenue Bonds, 1998 Series A (Tucson Electric Power Company Project) (the
"Bonds") for the purpose of refinancing, by the payment or redemption of (a)
$58,600,000 aggregate principal amount of the 1981 Series A Bonds, or
provision therefor, which represents the extent to which the 1981 Series A
Bonds financed a portion of the costs of the Pollution Control Facilities at
Unit No. 1 and (b) $25,100,000 aggregate principal amount of the 1981 Series
B Bonds, or provision therefor, which represents the extent to which the
1981 Series B Bonds financed a portion of the costs of the Pollution Control
Facilities at Unit No. 1, all as described in Exhibit A hereto;
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 I.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.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of March 1, 1998,
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 Apache, an Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona incorporated for and with the approval
of Apache 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 Pollution Control Revenue Bonds, 1998
Series A (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 air and water pollution control and sewage and
solid waste disposal systems and facilities as well as other real and
personal properties, facilities, 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 March 1, 1998,
between the Authority and the Trustee relating to the Bonds, and any and all
modifications, alterations, amendments and supplements thereto.
Lease:
"Lease" shall mean each Amended and Restated Lease Agreement, dated as of
December 15, 1986, as amended and restated as of December 15, 1992, between
Wilmington Trust Company and William J. Wade, not in their respective
individual capacities, but as Owner Trustee and Co-trustee, respectively,
under and pursuant to a related Trust Agreement, dated as of December 15,
1986, as amended, as lessor, and the Company, as lessee, relating to an
undivided interest in, among other things, the Plant and the Facilities.
Lessor:
"Lessor" shall mean the lessor under each Lease.
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.
1981 Series A Bonds:
"1981 Series A Bonds" shall mean the $100,000,000 aggregate principal
amount of the Authority's Pollution Control Revenue Bonds, 1981 Series A
(Tucson Electric Power Company Project).
1981 Series B Bonds:
"1981 Series B Bonds" shall mean the $100,000,000 aggregate principal
amount of the Authority's Pollution Control Revenue Bonds, 1981 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.
Plant:
"Plant" shall mean Unit No. 1 of the Springerville Generating Station, an
electric power generating plant located near Springerville, Arizona, in
Apache County, Arizona, and any additions or improvements thereto or
replacements thereof.
Plant Agreements:
"Plant Agreements" shall mean all contracts relating to the ownership,
construction, operation and lease of the Plant, including the Facilities, as
from time to time amended or supplemented. "Plant Agreements" shall include,
without limitation, the Leases.
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.
Trustee:
"Trustee" shall mean First Trust of New York, National Association, as
trustee under the Indenture, its successors in trust and their assigns.
SECTION I.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 II.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;
(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;
(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; and
(d) No consent, approval, authorization or other order of any regulatory
body or administrative agency or other governmental body is legally
required for the Authority's participation in the transactions
contemplated by this Agreement, except such as may have been obtained or
as may be required under the securities laws of any jurisdiction.
SECTION II.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 the purposes contemplated
by the Act and 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 a portion of the Facilities through the
payment or redemption of the $58,600,000 aggregate principal amount of the
1981 Series A Bonds and $25,100,000 aggregate principal amount of the 1981
Series B Bonds, or provisions therefor.
ARTICLE III
THE FACILITIES
SECTION III.01. Facilities; Property of the Lessors. The Facilities
are the property of the respective Lessors in undivided interests, subject
to the rights of the Company to reacquire the same pursuant to the terms of
the respective Leases; or the Company, as the case may be, and the Authority
shall have no right, title or interest in the Facilities.
SECTION III.02. Revision of Plans and Specifications. The Company may
make, or exercise its rights, powers, elections and options under the Plant
Agreements to cause to be made, 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 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 III.03. Maintenance of Facilities; Remodeling. The Company
shall at all times exercise all of its rights, powers, elections and options
under the Plant Agreements to cause the Facilities, and every element and
unit thereof, to be maintained, preserved and kept in thorough repair,
working order and condition and to cause all needful and proper repairs and
renewals thereto to be made; provided, however, that the Company may
exercise all of its rights, powers, elections and options under the Plant
Agreements to 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 its interests in the same and within a reasonable time shall
endeavor to effectuate such sale or disposition.
The Company may, subject to the provisions of Section 6.05 hereof, at its
own expense consent to the remodeling of the Facilities or to the making
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 III.04. Insurance. The Company shall exercise all of its rights,
powers, elections and options under the Plant Agreements to 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 III.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.
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION IV.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 IV.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 IV.03. The Loan; Disposition of Bond Proceeds. The Authority
and the Company shall enter into escrow arrangements with the trustee for
the 1981 Series A Bonds and with the trustee for the 1981 Series B 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 trustees, $58,600,000 of such proceeds to be applied to the
payment of the 1981 Series A Bonds and $25,100,000 of such proceeds to be
applied to the payment of the 1981 Series B 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 IV.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 V.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 V.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 V.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 V.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 or the
Plant, 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 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 or the Plant, 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 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 V.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 VI.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 Person. The Company may consolidate with or
merge into another Person organized 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 Person (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 Authority and 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 all of the Company's interests in the
Facilities, the Company shall remain liable in respect of all obligations
under this Agreement to the extent of the interests retained other than the
obligations under Section 5.01 hereof, and the transferee shall not be
required to assume any obligations hereunder to such extent 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 VI.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 VI.03. Authority's Access to Facilities. The Company shall
exercise all of its rights, powers, elections and options under the Plant
Agreements to provide to the Authority, upon appropriate prior notice to the
Company, reasonable access to the Facilities during normal business hours
for the purpose of making examinations and inspections of the same.
SECTION VI.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 VI.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 exercise all of its rights, powers, elections and options
under the Plant Agreements to cause the Facilities to be used for purposes
contemplated by the Act and in the Tax Agreement.
SECTION VI.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 VII.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 assigned, leased, subleased, sold, transferred or otherwise disposed
of 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, sublease, 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,
sublessee, purchaser or other transferee, as the case may be, prior to or
simultaneously with such assignment, lease, sublease, 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, subleased,
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 or subleased, as a whole
or in undivided part and the term of such leasehold or subleasehold 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 assigned, sold, transferred or otherwise
disposed of as a whole or in undivided part, and (b) in the event that the
assignee, lessee, sublessee, 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, sublease, 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, subleased, sold, transferred or otherwise disposed of,
together with all other rights, interests, assets and/or properties assigned,
leased, subleased, 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, sublease, sale, transfer or other disposition 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 transaction 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 assignment, lease, sublease, 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 or 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, subleased, sold, transferred or
otherwise disposed of (but, in the case of a lease or sublease, only to
the extent of such lease) as may be determined by reference to (i) except
in the case of a lease or sublease, 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 or sublease, 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, sublessee 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 VII.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, sublease, sale, transfer or other disposition.
SECTION VII.03. Limitation. This Agreement shall not be assigned nor
shall the Company's interest in the Facilities be assigned, leased,
subleased, 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.
SECTION VII.04. Certain Matters Relating to the Leases. (a) It is
understood that, as of the date of this Agreement, the Company's interest in
the Facilities is that of the lessee under the Leases. The primary term of
each Lease is scheduled to expire on January 1, 2015 subject to various
options in the Company, as lessee, for renewal or purchase, and each Lease
is subject to termination by the Lessor thereunder prior to the expiration
of the primary or any renewal term in certain circumstances. Nothing in
this Agreement shall be construed (i) to require or limit the exercise by
the Company of any such renewal or purchase options under any one or more of
the respective Leases, (ii) to prevent the expiration or termination of any
Lease in accordance with its terms or (iii) to require the Company to remain
a party to any of the other Plant Agreements after any such expiration or
termination.
(b) The expiration or termination of any one or more of the Leases
in accordance with their respective terms shall not relieve the Company from
its primary liability for its obligations under Section 5.01. After any
such expiration or termination, if and to the extent that the Company shall
remain a party to any of the other Plant Agreements, the Company shall
exercise all of its rights, powers, elections and options under such other
Plant Agreements to cause the other obligations of the Company under this
Agreement to be satisfied.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION VIII.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 Person 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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 IX.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 X.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 X.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 Platt & Lee, P.C., 185 South Second West Street, St. Johns,
Arizona 85936; 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 X.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 Apache 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 Apache 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 X.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 X.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 X.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 X.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 X.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.
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 APACHE
By:
President
TUCSON ELECTRIC POWER COMPANY
By:
Vice President
EXHIBIT A
(1998 Series A Loan Agreement)
The following facilities located at the Springerville Generating
Station comprise the Facilities being refinanced:
1. Dry SO2 and Particulate Removal System
This System is designed to remove and dispose of SO2 and
particulate matter from the flue gas stream prior to exiting from the stack.
Basically, flue gas from the boiler air heater exit is divided among the
various spray dryer absorbers. Lime is moved from a storage facility to the
slaking tanks, and the slaked lime is pumped to the individual rotary
atomizers. One atomizer is provided in each spray dryer. As the flue gas
passes through the absorber chamber, it contacts a cloud of fine particles
of lime slurry and, while drying them, the SO2 reacts to form calcium
sulfate and calcium sulfite powder, a portion of which exits from the bottom
of the absorber chamber. The flue gas (which still contains particulate
matter) leaves the spray dryer and enters the baghouse where the particulate
matter is removed before exiting the stack.
2. Ash Handling and Disposal System
(a) Bottom Ash Handling System - This System removes bottom ash
from the bottom ash hopper, crushes the ash, and then pumps the ash as a
slurry to dewatering bins on site where the ash is dewatered and stored for
loading onto trucks. The major equipment components of the System are
hoppers, hopper jet, conveyer recirculation, bottom ash pumps, dewatering
bins, settling and surge tanks, grinders and associated ancillary equipment.
(b) Economizer Ash Handling System - This System removes fly ash
from the economizer hoppers, then transfers the ash pneumatically to the
pyrites transfer tank. From the pyrites transfer tank the ash is
transferred hydraulically to dewatering bins.
(c) Fly Ash Handling System - This System removes the mixture of
fly ash and dry SO2 scrubber product from the baghouse hoppers, duct hoppers
and spray dryer recycle bin hopper through a pressurized pneumatic system to
fly ash storage silos located adjacent to the bottom ash dewatering bins.
In the fly ash silo, entrained air is vented off through a baghouse filter
system. The major equipment components of this System are air conveyor
flowers, a fly ash silo, bag filters, hopper feeders, fluidizing blowers,
exhaust fans, and other associated piping and miscellaneous equipment and
controls.
(d) Burial Area and Retention Dams - Bottom ash and the mixture
of fly ash and dry SO2 scrubber product are trucked to an ash burial area,
having a potential storage capacity of 10,000 acre-feet. The ash burial
area includes an embankment will be constructed downstream of the ash burial
area to retain surface runoff.
3. Waste Water Treatment Systems
These Systems include facilities constructed to sort and collect
liquid waste from all station sources, excluding sanitary sewage, to provide
water suitable for use as make up for the cooling tower, flue gas
desulfurization and/or ash handling. In addition, this System consists of
an estimated 181 acres of solar evaporation ponds for storing excess liquid
wastes, two construction runoff and plant-site retention ponds and a coal
pile area runoff pond.
4. Dust Collection and Suppression System
The equipment comprising the collection system includes enclosures
for the coal conveyors and transfer towers, a shedlike enclosure for the
rotary car dumper and track hopper, nine vacuum dust collectors with
baghouses and rotary screw conveyors, and six vacuum cleaning systems
located at the tripper conveyor deck above the coal silos and in both sample
and crusher buildings. The dust suppression system consists of water and
wetting agent jet sprays which suppress dust in the rotary dumper building
and at all conveyor transfer points. There is also a partitioning wall to
separate the boiler building from the turbine building thus restricting the
infiltration of dust into normally clean areas.
5. Stack Monitoring System
This System consists of chimney equipment common to both SO2 and
particulate removal systems and NOx removal systems, and includes the
instrumentation and connections necessary to continuously monitor and record
emissions from the chimneys and a personnel hoist and catwalk to permit
performance testing and maintenance of the monitoring equipment.
6. Stack Differential
An additional chimney stack height is required, based on
environmental regulations, for atmospheric dispersion of emissions.
The above-described items shall be deemed to comprehend and
include all facilities and costs functionally related and subordinate to
such facilities and to the acquisition, construction or reconstruction
thereof, including engineering and environmental studies, the costs of
regulatory proceedings, land and land rights hereafter acquired for the
purpose of constructing the project, necessary excavations, dredging,
foundations, structures, landscaping, walls, monitoring equipment,
instrumentation, mechanical and electrical controls, wiring, cables, towers,
valves, piping, meters, other associated electrical and mechanical equipment
and facilities, fuel handling, preparation and storage facilities, pollution
control, waste disposal and other environmental facilities, and all other
improvements and appurtenances necessary or useful for the operation thereof
or required by reason of the installation or operation thereof, including
the cost of any necessary modification to or relocations or replacements of
existing equipment or facilities.
EXHIBIT 4(b)
INDENTURE OF TRUST
(1998 Series A)
between
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF APACHE
and
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
Dated as of March 1, 1998
Authorizing
Pollution Control Revenue Bonds,
1998 Series A
(Tucson Electric Power Company Project)
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 10
Section 2.07.Lost or Destroyed Bonds or Bonds Canceled in Error 10
Section 2.08. .....Transfer, Registration and Exchange of Bonds 11
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
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 17
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 18
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 19
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
<PAGE>
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
* 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.
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (1998 Series A), dated as of March 1, 1998 (this
"Indenture"), between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF
APACHE, 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 Apache 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 any 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 (a) $100,000,000
aggregate principal amount of its Pollution Control Revenue Bonds, 1981
Series A (Tucson Electric Power Company Project) all of which remain
outstanding (the "1981 Series A 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 air and water pollution control facilities and
sewage and solid waste disposal facilities at Unit No. 1 and Unit No. 2 of
the Springerville Generating Station (collectively, the "Pollution Control
Facilities") and (b) $100,000,000 aggregate principal amount of its
Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric Power
Company Project) all of which remain outstanding (the "1981 Series B Bonds")
to finance a portion of costs of the acquisition, construction and equipping
of the Pollution Control Facilities and certain facilities for furnishing
electric energy;
WHEREAS, the Authority proposes to issue and sell its revenue bonds as
provided herein (the "Bonds") to refinance, by the payment or redemption of
(a) $58,600,000 aggregate principal amount of the 1981 Series A Bonds, or
provision therefor, which represents the extent to which the Series A Bonds
financed the portion of the costs of the acquisition, construction,
improvement and equipping of the Pollution Control Facilities at Unit No. 1
and (b) $25,100,000 aggregate principal amount of the 1981 Series B Bonds,
or provision therefor, which represents the extent to which the 1981 Series
B Bonds financed the portion of the costs of the Pollution Control
Facilities at Unit No. 1, all as described in Exhibit A to the Loan
Agreement, dated as of March 1, 1998 (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 I.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.
"Authority" shall mean The Industrial Development Authority of the County
of Apache, an Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona incorporated for and with the approval
of Apache 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 air and water pollution control facilities and
sewage and solid waste disposal facilities as well as other real and
personal properties, facilities, machinery and equipment currently existing,
under construction and to be constructed at the Plant 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 March 1, 1998,
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 March 1, 1998,
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.
1981 Series A Bonds:
"1981 Series A Bonds" shall mean the $100,000,000 aggregate principal
amount of the Authority's Pollution Control Revenue Bonds, 1981 Series A
(Tucson Electric Power Company Project).
1981 Series B Bonds:
"1981 Series B Bonds" shall mean the $100,000,000 aggregate principal
amount of the Authority's Pollution Control Revenue Bonds, 1981 Series B
(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.
Plant:
"Plant" shall mean Unit No. 1 of the Springerville Generating Station, an
electric power generating plant located near Springerville, Arizona, in
Apache County, Arizona, and any additions or improvements thereto or
replacements thereof.
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 II.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 $58,600,000 aggregate principal
amount of the 1981 Series A Bonds and $25,100,000 aggregate principal amount
of the 1981 Series B Bonds, an issue of Bonds, entitled to the benefit,
protection and security of this Indenture, in the aggregate principal amount
of Eighty Three Million Seven Hundred Thousand Dollars ($83,700,000). Each
of the Bonds shall be designated by the title "The Industrial Development
Authority of the County of Apache Pollution Control Revenue Bond, 1998 Series
A (Tucson Electric Power Company Project)". The Bonds shall mature, subject
to prior redemption upon the terms and conditions hereinafter set forth, on
March 1, 2028 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 five and eighty-five one-hundredths
per centum (5.85%) per annum, with interest thereon payable semi-annually on
each March 1 and September 1 commencing September 1, 1998. Interest shall
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
Section II.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 March 1, 1998. 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 II.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 II.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 II.05. Bonds Not General Obligations. Neither Apache 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 Apache 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 II.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 a duly authorized officer of the Authority, 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 II.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 II.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 II.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 II.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 II.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 II.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 II.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 17, 1998, 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 III.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 March 1, 2003 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
March 1, 2003 through February 29, 2004 102%
March 1, 2004 through February 28, 2005 101%
March 1, 2005 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 or the Plant is impracticable, uneconomical or undesirable
for any reason;
(ii) all or substantially all of the Facilities or the Plant shall have
been condemned or taken by eminent domain; or
(iii) the operation of the Facilities or the Plant 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 III.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 III.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 III.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 III.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 IV.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 Apache
Pollution Control Revenue Bonds, 1998 Series A (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 IV.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 IV.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 IV.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 IV.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 IV.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 IV.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 V.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 VI.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 VII.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 Apache 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 Apache 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 VII.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 VII.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 VII.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 VII.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, Apache County, the Authority or any
other political subdivision of said State.
Section VII.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 VII.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 VII.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 Apache Pollution Control Revenue
Bonds, 1998 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 VII.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 VIII.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XI.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 XII.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 XII.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 XII.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
<PAGE>
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 XII.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 XII.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 XII.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 3.02 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 XII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 Platt & Lee,
P.C., 185 South Second West Street, St. Johns, Arizona 85936; 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 XIII.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 XIII.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.
IN WITNESS WHEREOF, The Industrial Development Authority of the County
of Apache 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 APACHE
By:
President
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By:
Vice President
EXHIBIT A
(FORM OF BOND)
No.
The Industrial Development Authority
of the County of Apache
Pollution Control Revenue Bond,
1998 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 Apache, 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 September 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 Pollution Control Revenue Bonds,
1998 Series A (Tucson Electric Power Company Project) (the "Bonds") of the
Authority, aggregating Eighty Three Million Seven Hundred Thousand Dollars
($83,700,000) 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 March 1, 1998 (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)
$58,600,000 aggregate principal amount the Authority's Pollution Control
Revenue Bonds, 1981 Series A (Tucson Electric Power Company Project) (the
"1981 Series A Bonds"), or provision therefor, which represents the extent
to which the 1981 Series A Bonds financed a portion of the costs of the
acquisition, construction, improvement and equipping of certain air and
water pollution control facilities and sewage and solid waste disposal
facilities (the "Facilities") at Unit No. 1 of the Springerville Generating
Station (the "Plant") and (b) $25,100,000 aggregate principal amount of the
Authority's Pollution Control Revenue Bonds, 1981 Series B (Tucson Electric
Power Company Project) (the "1981 Series B Bonds"), or provision therefor,
which represents the extent to which the 1981 Series B Bonds financed a
portion of the costs of the acquisition, construction, improvement and
equipping of the Facilities. Pursuant to the Loan Agreement, dated as of
March 1, 1998 (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 Apache 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
Apache 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 March 1, 2003 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
March 1, 2003 through February 29, 2004 102%
March 1, 2004 through February 28, 2005 101%
March 1, 2005 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 or the Plant is impracticable, uneconomical or
undesirable for any reason;
(ii) all or substantially all of the Facilities or the Plant shall
have been condemned or taken by eminent domain; or
(iii) the operation of the Facilities or the Plant 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.
IN WITNESS WHEREOF, The Industrial Development Authority of The County of
Apache 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 APACHE
(Seal)
By.......................................................
President
ATTEST:
...........................................
Secretary
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.
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 4(c)
LOAN AGREEMENT
(1998 SERIES B)
BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF APACHE
AND
TUCSON ELECTRIC POWER COMPANY
DATED AS OF MARCH 1, 1998
RELATING TO
POLLUTION CONTROL REVENUE BONDS,
1998 SERIES B
(TUCSON ELECTRIC POWER COMPANY PROJECT)
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. Facilities; Property of the Company....... 6
SECTION 3.02. Revision of Plans and Specifications...... 6
SECTION 3.03. Maintenance of Facilities; Remodeling..... 6
SECTION 3.04. Insurance................................. 6
SECTION 3.05. Condemnation.............................. 7
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01. Issuance of the Bonds..................... 7
SECTION 4.02. Issuance of Other Obligations............. 7
SECTION 4.03. The Loan; Disposition of Bond Proceeds.... 7
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.... 8
SECTION 5.03. Payment of Expenses....................... 8
SECTION 5.04. Indemnification........................... 8
SECTION 5.05. Payment of Taxes; Discharge of Liens...... 8
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01. Maintenance of Corporate Existence........ 9
SECTION 6.02. Permits or Licenses....................... 10
SECTION 6.03. Authority's Access to Facilities.......... 10
SECTION 6.04. Tax-Exempt Status of Interest on Bonds.... 10
SECTION 6.05. Use of Facilities......................... 11
SECTION 6.06. Financing Statements...................... 11
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01. Conditions................................ 11
SECTION 7.02. Instrument Furnished to the Authority and
Trustee.................................. 13
SECTION 7.03. Limitation................................ 13
SECTION 7.04. Certain Matters Relating to the Leases.... 13
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default......................... 13
SECTION 8.02. Force Majeure............................. 14
SECTION 8.03. Remedies.................................. 14
SECTION 8.04. No Remedy Exclusive....................... 14
SECTION 8.05. Reimbursement of Attorneys' and Agents'
Fees..................................... 15
SECTION 8.06. Waiver of Breach.......................... 15
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01. Redemption of Bonds....................... 15
SECTION 9.02. Compliance with the Indenture............. 15
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Term of Agreement........................ 15
SECTION 10.02. Notices.................................. 16
SECTION 10.03. Parties in Interest...................... 16
SECTION 10.04. Amendments............................... 16
SECTION 10.05. Counterparts............................. 16
SECTION 10.06. Severability............................. 16
SECTION 10.07. Governing Law............................ 16
SECTION 10.08. Notice Regarding Cancellation of
Contracts............................... 16
Signatures.....................................................18
Exhibit A - Description of the Facilities......................A-1
* 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.
LOAN AGREEMENT
THIS LOAN AGREEMENT (1998 Series B), dated as of March 1, 1998 (this
"Agreement"), between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF
APACHE, 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 Apache 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 any 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 (a) $100,000,000
aggregate principal amount of its Pollution Control Revenue Bonds, 1981
Series A (Tucson Electric Power Company Project), all of which remain
outstanding (the "1981 Series A 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 air and water pollution
control facilities and sewage and solid waste disposal facilities at Unit
No. 1 and Unit No. 2 the Springerville Generating Station (collectively, the
"Pollution Control Facilities") and (b) $100,000,000 aggregate principal
amount of its Pollution Control Revenue Bonds, 1981 Series B (Tucson
Electric Power Company Project), all of which remain outstanding (the "1981
Series B 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 the Pollution Control Facilities and certain facilities for
furnishing electric energy; and
WHEREAS, the Authority proposes to issue and sell its Pollution Control
Revenue Bonds, 1998 Series B (Tucson Electric Power Company Project) (the
"Bonds") for the purpose of refinancing, by the payment or redemption of (a)
$41,100,000 aggregate principal amount of the 1981 Series A Bonds, or
provision therefor, which represents the extent to which the 1981 Series A
Bonds financed a portion of the costs of the Pollution Control Facilities
and certain facilities for furnishing electric energy at Unit No. 2; (b)
$58,400,000 aggregate principal amount of the 1981 Series B Bonds, or
provision therefor, which represents the extent to which the 1981 Series B
Bonds financed a portion of the costs of the Pollution Control Facilities
and certain facilities for furnishing electric energy at Unit No. 2, all as
described in Exhibit A hereto;
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 I.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.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of March 1, 1998,
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 Apache, an Arizona nonprofit corporation designed by law as a political
subdivision of the State of Arizona incorporated for and with the approval
of Apache 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 Pollution Control Revenue Bonds, 1998
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 air and water pollution control and sewage and
solid waste disposal systems and facilities as well as other real and
personal properties, facilities, machinery and equipment and the facilities
for electric production, transmission and/or distribution 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 March 1, 1998,
between the Authority and the Trustee relating to the Bonds, and any and all
modifications, alterations, amendments and supplements thereto.
Lease:
"Lease" shall mean each Lease Agreement, dated as of December 1, 1985, as
amended as of December 15, 1992, between Wilmington Trust Company and
William J. Wade, not in their respective individual capacities but solely as
Owner Trustee and Co-trustee, respectively, under and pursuant to a related
Trust Agreement, dated as of December 1, 1985, as lessor, and the Company
and San Carlos, jointly and severally, as lessee relating to an undivided
interest in those Facilities which are used, or designed to be used, in
common with Unit No. 1 and Unit No. 2 of the Springerville Generating
Station.
Lessor:
"Lessor" shall mean the lessor under each Lease.
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.
1981 Series A Bonds:
"1981 Series A Bonds" shall mean the $100,000,000 aggregate principal
amount of the Authority's Pollution Control Revenue Bonds, 1981 Series A
(Tucson Electric Power Company Project).
1981 Series B Bonds:
"1981 Series B Bonds" shall mean the $100,000,000 aggregate principal
amount of the Authority's Pollution Control Revenue Bonds, 1981 Series B
(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.
Plant:
"Plant" shall mean Unit No. 2 of the Springerville Generating Station, an
electric power generating plant located near Springerville, Arizona, in
Apache County, Arizona, and any additions or improvements thereto or
replacements thereof.
Plant Agreements:
"Plant Agreements" shall mean all contracts relating to the ownership,
construction and operation of the Plant, including the Facilities, as from
time to time amended or supplemented. Plant Agreements shall include,
without limitation, the Leases.
San Carlos:
"San Carlos" shall mean San Carlos Resources Inc., an Arizona corporation
which is, as of the date of this Agreement, a wholly-owned subsidiary of the
Company.
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.
Trustee:
"Trustee" shall mean First Trust of New York, National Association, as
trustee under the Indenture, its successors in trust and their assigns.
SECTION I.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 II.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;
(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;
(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; and
(d) No consent, approval, authorization or other order of any regulatory
body or administrative agency or other governmental body is legally
required for the Authority's participation in the transactions
contemplated by this Agreement, except such as may have been obtained or
as may be required under the securities laws of any jurisdiction.
SECTION II.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 the purposes contemplated
by the Act and are located or 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 a portion of the Facilities through the
payment or redemption of $41,400,000 aggregate principal amount of the
1981 Series A Bonds and of $58,400,000 the 1981 Series B Bonds, or
provisions therefor.
ARTICLE III
THE FACILITIES
SECTION III.01. Facilities; Property of the Company. The Facilities
subject to the Leases are the property of the respective Lessors in
undivided interests, subject to the rights of the Company and/or San Carlos
to reacquire the same pursuant to the terms of the respective Leases, and
the balance of the Facilities are the property of San Carlos; and the
Authority shall have no right, title or interest in the Facilities.
SECTION III.02. Revision of Plans and Specifications. The Company may
make or exercise its rights, powers, elections and options under the Plant
Agreements to cause to be made, 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 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 III.03. Maintenance of Facilities; Remodeling. The Company
shall at all times exercise all of its rights, powers, elections and options
under the Plant Agreements to cause the Facilities, and every element and
unit thereof, to be maintained, preserved and kept in thorough repair,
working order and condition and to cause all needful and proper repairs and
renewals thereto to be made; provided, however, that the Company may
exercise all of its rights, powers, elections and options under the Plant
Agreements to 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 sell or
dispose of its interest in the same, or cause San Carlos to sell or dispose
of the same, and within a reasonable time shall endeavor to effectuate such
sale or disposition.
The Company may, subject to the provisions of Section 6.05 hereof, at its
own expense cause San Carlos to 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 III.04. Insurance.
The Company shall exercise all of its rights, powers,
elections and options under the Plant Agreements to 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 III.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.
{ ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION IV.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 IV.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 IV.03. The Loan; Disposition of Bond Proceeds. The Authority
and the Company shall enter into escrow arrangements with the trustee for
the 1981 Series A Bonds and with the trustee for the 1981 Series B 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 trustees $41,400,000 of such proceeds to be applied to the
payment of the 1981 Series A Bonds and $58,400,000 of such proceeds to be
applied to the payment of the 1981 Series B 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 IV.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 V.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 V.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 V.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 V.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 or the
Plant, 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 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 or the Plant, 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 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 V.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 VI.01. Maintenance of Corporate Existence. Except as
permitted in this Section 6.01, each of the Company and San Carlos 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 Person. The Company may
consolidate with or merge into another Person organized 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
Person (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 Authority
and 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 Company's investment
in San Carlos or its interest in 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.
The Company may cause San Carlos to consolidate with or merge with or
into another Person organized under the laws of the United States of
America, any state thereof or the District of Columbia, or to sell, transfer
or otherwise dispose of all of its assets, as or substantially as an
entirety, to any Person; provided, however, that (a) if, in connection with
any such transaction, the Company shall engage in any transaction
contemplated in Section 7.01, all the conditions set forth in said Section
7.01 shall have been satisfied; or (b) if otherwise, the surviving or
resulting Person (if other than San Carlos or the Company) or the transferee
Person (if other than the Company), as the case may be, prior to or
simultaneously with such merger, consolidation, sale, transfer or other
disposition, assumes all obligations of San Carlos under the Plant
Agreements.
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 VI.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 VI.03. Authority's Access to Facilities. The Company shall
exercise all of its rights, powers, elections and options under the Plant
Agreements to provide to the Authority, upon appropriate prior notice to the
Company, reasonable access to the Facilities during normal business hours
for the purpose of making examinations and inspections of the same.
SECTION VI.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 VI.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
exercise all of its rights, powers, elections and options under the Plant
Agreements to cause the Facilities to be used for purposes contemplated by
the Act and in the Tax Agreement.
SECTION VI.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 VII.01. Conditions. The Company's interest in this Agreement
may be assigned as a whole or in part, the Company's investment in San Carlos
may be sold, transferred or otherwise disposed of as a whole or in part and
the interest of either San Carlos or (to the extent that the Facilities shall
have become property of the Company) the Company in the Facilities may be
assigned, leased, subleased, sold, transferred or otherwise disposed of 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, sublease, 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, sublessee, purchaser
or other transferee, as the case may be, prior to or simultaneously with such
assignment, lease, sublease, 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, subleased, 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 investment in
San Carlos shall be sold, transferred or otherwise disposed of as a whole or
in part or (iii)(A) the Company's interest in the Facilities shall be leased
or subleased, as a whole or in undivided part and the term of such leasehold
or subleasehold 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
(B) the Company's interest in the Facilities shall be assigned, sold,
transferred or otherwise disposed of as a whole or in undivided part, and
(b) in the event that the assignee, lessee, sublessee, 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, sublease, 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,
subleased, sold, transferred or otherwise disposed of, together with all
other rights, interests, assets and/or properties assigned, leased,
subleased, 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, sublessee, 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, sublease, sale, transfer or other disposition 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 transaction 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 assignment, lease, sublease, 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, subleased, sold, transferred or
otherwise disposed of (but, in the case of a lease or sublease, only to
the extent of such lease) as may be determined by reference to (i) except
in the case of a lease or sublease, 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 or sublease, 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, sublessee 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 VII.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, sublease, sale, transfer or other disposition.
SECTION VII.03. Limitation.
This Agreement shall not be assigned nor shall the Company's
interest in the Facilities be assigned, leased, subleased, 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.
SECTION VII.04. Certain Matters Relating to the Leases. (a) It is
understood that, as of the date of this Agreement, the Company's interest in
those Facilities which are used, or are designed to be used, in common with
Unit No. 1 and Unit No. 2 of the Springerville Generating Station is that of
a co-lessee under the Leases. The primary term of each Lease is scheduled
to expire on January 1, 2021 subject to various options in the Company and
San Carlos, as lessee, for renewal or purchase, and each Lease is subject to
termination by the Lessor thereunder prior to the expiration of the primary
or any renewal term in certain circumstances. Nothing in this Agreement
shall be construed (i) to require or limit the exercise by the Company or
San Carlos of any such renewal or purchase options under any one or more of
the respective Leases, (ii) to prevent the expiration or termination of any
Lease in accordance with its terms or (iii) to require the Company or San
Carlos to remain a party to any of the other Plant Agreements after any such
expiration or termination.
(b) The expiration or termination of any one or more of the Leases
in accordance with their respective terms shall not relieve the Company from
its primary liability for its obligations under Section 5.01. After any
such expiration or termination, if and to the extent that the Company shall
remain a party to any of the other Plant Agreements, the Company shall
exercise all of its rights, powers, elections and options under such other
Plant Agreements to cause the other obligations of the Company under this
Agreement to be satisfied.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION VIII.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 Person 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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 IX.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 X.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 X.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 Platt & Lee, P.C., 185 South Second West Street, St. Johns,
Arizona 85936; 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 X.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 Apache 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 Apache 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 X.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 X.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 X.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 X.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 X.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.
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 APACHE
By:
President
TUCSON ELECTRIC POWER COMPANY
By:
Vice President
EXHIBIT A
(1998 Series B Loan Agreement)
The following facilities located at the Springerville Generating
Station comprise the Facilities being refinanced:
1. Dry SO2 and Particulate Removal System
This System is designed to remove and dispose of SO2 and
particulate matter from the flue gas stream prior to exiting from the stack.
Basically, flue gas from the boiler air heater exit is divided among the
various spray dryer absorbers. Lime is moved from a storage facility to the
slaking tanks, and the slaked lime is pumped to the individual rotary
atomizers. One atomizer is provided in each spray dryer. As the flue gas
passes through the absorber chamber, it contacts a cloud of fine particles
of lime slurry and, while drying them, the SO2 reacts to form calcium
sulfate and calcium sulfite powder, a portion of which exits from the bottom
of the absorber chamber. The flue gas (which still contains particulate
matter) leaves the spray dryer and enters the baghouse where the particulate
matter is removed before exiting the stack.
2. Ash Handling and Disposal System
(a) Bottom Ash Handling System - This System removes bottom ash
from the bottom ash hopper, crushes the ash, and then pumps the ash as a
slurry to dewatering bins on site where the ash is dewatered and stored for
loading onto trucks. The major equipment components of the System are
hoppers, hopper jet, conveyer recirculation, bottom ash pumps, dewatering
bins, settling and surge tanks, grinders and associated ancillary equipment.
(b) Economizer Ash Handling System - This System removes fly ash
from the economizer hoppers, then transfers the ash pneumatically to the
pyrites transfer tank. From the pyrites transfer tank the ash is
transferred hydraulically to dewatering bins.
(c) Fly Ash Handling System - This System removes the mixture of
fly ash and dry SO2 scrubber product from the baghouse hoppers, duct hoppers
and spray dryer recycle bin hopper through a pressurized pneumatic system to
fly ash storage silos located adjacent to the bottom ash dewatering bins.
In the fly ash silo, entrained air is vented off through a baghouse filter
system. The major equipment components of this System are air conveyor
flowers, a fly ash silo, bag filters, hopper feeders, fluidizing blowers,
exhaust fans, and other associated piping and miscellaneous equipment and
controls.
(d) Burial Area and Retention Dams - Bottom ash and the mixture
of fly ash and dry SO2 scrubber product are trucked to an ash burial area,
having a potential storage capacity of 10,000 acre-feet. The ash burial
area includes an embankment will be constructed downstream of the ash burial
area to retain surface runoff.
3. Waste Water Treatment Systems
These Systems include facilities constructed to sort and collect
liquid waste from all station sources, excluding sanitary sewage, to provide
water suitable for use as make up for the cooling tower, flue gas
desulfurization and/or ash handling. In addition, this System consists of
an estimated 181 acres of solar evaporation ponds for storing excess liquid
wastes, two construction runoff and plant-site retention ponds and a coal
pile area runoff pond.
4. Dust Collection and Suppression System
The equipment comprising the collection system includes enclosures
for the coal conveyors and transfer towers, a shedlike enclosure for the
rotary car dumper and track hopper, nine vacuum dust collectors with
baghouses and rotary screw conveyors, and six vacuum cleaning systems
located at the tripper conveyor deck above the coal silos and in both sample
and crusher buildings. The dust suppression system consists of water and
wetting agent jet sprays which suppress dust in the rotary dumper building
and at all conveyor transfer points. There is also a partitioning wall to
separate the boiler building from the turbine building thus restricting the
infiltration of dust into normally clean areas.
5. Stack Monitoring System
This System consists of chimney equipment common to both SO2 and
particulate removal systems and NOx removal systems, and includes the
instrumentation and connections necessary to continuously monitor and record
emissions from the chimneys and a personnel hoist and catwalk to permit
performance testing and maintenance of the monitoring equipment.
6. Stack Differential
An additional chimney stack height is required, based on
environmental regulations, for atmospheric dispersion of emissions.
7. Local Furnishing Facilities
Electric generating and related facilities consisting of a 350
megawatt coal-fired steam electric generating unit, known as Springerville
Unit No. 2, and other facilities, equipment and improvements related thereto
or for use in connection therewith by Tucson Electric Power Company in
connection with the local furnishing of electric energy, as well as the
acquisition, construction or reconstruction of certain transmission and
related properties, and additions and improvements thereto, which are
necessary or appropriate in connection with Tucson Electric Power Company's
transmission of electric energy produced at such generating facilities; but
the same shall not include any common fuel handling or other facilities,
equipment or improvements (or any common pollution control, waste disposal
or other environmental facilities) required for use in connection with
either Unit No. 2 or Unit No. 1 of the Springerville Generating Station.
The above-described items shall be deemed to comprehend and
include all facilities and costs functionally related and subordinate to
such facilities and to the acquisition, construction or reconstruction
thereof, including engineering and environmental studies, the costs of
regulatory proceedings, land and land rights hereafter acquired for the
purpose of constructing the project, necessary excavations, dredging,
foundations, structures, landscaping, walls, monitoring equipment,
instrumentation, mechanical and electrical controls, wiring, cables, towers,
valves, piping, meters, other associated electrical and mechanical equipment
and facilities, fuel handling, preparation and storage facilities, pollution
control, waste disposal and other environmental facilities, and all other
improvements and appurtenances necessary or useful for the operation thereof
or required by reason of the installation or operation thereof, including
the cost of any necessary modification to or relocations or replacements of
existing equipment or facilities.
EXHIBIT 4(d)
INDENTURE OF TRUST
(1998 Series B)
between
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF APACHE
and
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
Dated as of March 1, 1998
Authorizing
Pollution Control Revenue Bonds,
1998 Series B
(Tucson Electric Power Company Project)
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 10
Section 2.07.Lost or Destroyed Bonds or Bonds Canceled in Error 10
Section 2.08. .....Transfer, Registration and Exchange of Bonds 11
Section 2.09. ................................Other Obligations 12
Section 2.10 ...................................Temporary Bonds 12
Section 2.11. ............................Cancellation of Bonds 13
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 16
ARTICLE IV
THE BOND FUND
Section 4.01. ............................Creation of Bond Fund 16
Section 4.02. ............................................Liens 16
(iii)
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 17
Section 4.07. .............................Moneys Held in Trust 17
ARTICLE V
DISPOSITION OF PROCEEDS
Section 5.01. ..........................Disposition of Proceeds 18
ARTICLE VI
INVESTMENTS
Section 6.01. ......................................Investments 18
ARTICLE VII
GENERAL COVENANTS
Section 7.01. ...........................No General Obligations 18
Section 7.02. Performance of Covenants of the Authority;
Representations 19
Section 7.03. Maintenance of Rights and Powers; Compliance with
Laws 19
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 21
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 24
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 25
Section 9.11. .........................Severability of Remedies 25
ARTICLE X
TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
Section 10.01. ............................Acceptance of Trusts 26
Section 10.02. ..................No Responsibility for Recitals 26
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 28
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 29
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 30
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 32
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 33
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 36
Section 12.07.Amendment of Loan Agreement with Consent of Owners 36
ARTICLE XIII
MISCELLANEOUS
Section 13.01. .....................Successors of the Authority 36
Section 13.02. .............................Parties in Interest 37
Section 13.03. ....................................Severability 37
Section 13.04. ....No Personal Liability of Authority Officials 37
Section 13.05. .....Bonds Owned by the Authority or the Company 37
Section 13.06. ....................................Counterparts 37
Section 13.07. ...................................Governing Law 37
Section 13.08. .........................................Notices 38
Section 13.09. ........................................Holidays 38
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
* 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.
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (1998 Series B), dated as of
(this "Indenture"), between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY
OF APACHE, 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 Apache 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 any 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 (a) $100,000,000
aggregate principal amount of its Pollution Control Revenue Bonds,1981 Series A
(Tucson Electric Power Company Project) all of which remain outstanding (the
"1981 Series A 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
air and water pollution control and sewage and solid waste disposal facilities
at Unit No. 1 and Unit No. 2 of the Springerville Generating Station
(collectively, the "Pollution Control Facilities") and (b) $100,000,000
aggregate principal amount of its Pollution Control Revenue Bonds,1981 Series B
(Tucson Electric Power Company Project) all of which remain outstanding (the
"1981 Series B 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 the Pollution Control Facilities and certain facilities for
furnishing electric energy;
WHEREAS, the Authority proposes to issue and sell its revenue bonds, as
provided herein (the "Bonds") to refinance, by the payment or redemption of (a)
$41,400,000 aggregate principal amount of the 1981 Series A Bonds, or provision
therefor, which represents the extent to which the 1981 Series A Bonds financed
a portion of the costs of the acquisition, construction, improvement and
equipping of the Pollution Control Facilities at Unit No. 2; (b) $58,400,000
aggregate principal amount of the 1981 Series B Bonds, or provision therefor,
which represents the extent to which the 1981 Series B Bonds financed the
portion of the costs of the acquisition,construction, improvement and equipping
of the Pollution Control Facilities and certain facilities for furnishing
electric energy at Unit No. 2, all as described in Exhibit A to the Loan
Agreement, dated as of March 1, 1998 (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:
DEFINITIONS
Section I.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.
Authority:
"Authority" shall mean The Industrial Development Authority of the County of
Apache, an Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona incorporated for and with the approval of
Apache 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 air and water pollution control facilities and
sewage and solid waste disposal systems and facilities as well as other real
and personal properties, facilities,machinery and equipment currently existing,
under construction and to be constructed at the Plant 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 March 1, 1998,
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 March 1, 1998,
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.
1981 Series A Bonds:
"1981 Series A Bonds" shall mean the $100,000,000 aggregate principal amount
of the Authority's Pollution Control Revenue Bonds, 1981 Series A (Tucson
Electric Power Company Project).
1981 Series B Bonds:
"1981 Series B Bonds" shall mean the $100,000,000 aggregate principal amount
of the Authority's Pollution
Control Revenue Bonds, 1981 Series B (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.
Plant:
"Plant" shall mean Unit No. 2 of the Springerville Generating Station, an
electric power generating plant located near Springerville, Arizona, in Apache
County, Arizona, and any additions or improvements thereto or replacements
thereof.
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 II.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 $41,400,000 aggregate principal
amount of the 1981 Series A Bonds and $58,400,000 aggregate principal amount
of the 1981 Series B Bonds, an issue of Bonds, entitled to the benefit,
protection and security of this Indenture, in the aggregate principal amount of
Ninety Nine Million Eight Hundred Thousand Dollars ($99,800,000). Each of the
Bonds shall be designated by the title "The Industrial Development Authority of
the County of Apache Pollution Control Revenue Bond, 1998 Series B (Tucson
Electric Power Company Project)". The Bonds shall mature, subject to prior
redemption upon the terms and conditions hereinafter set forth, on March 1,
2033 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 five and seven eighths per centum (5_%) per annum,
with interest thereon payable semi-annually on each March 1 and September 1
commencing September 1, 1998. Interest shall be calculated on the basis of
a 360-day year consisting of twelve 30-day months.
Section II.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 March 1,
1998. 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 II.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 II.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 II.05. Bonds Not General Obligations.
Neither Apache 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 Apache 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 II.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 a duly authorized officer of the Authority, 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 II.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 II.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 II.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 II.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 II.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 II.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 II.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 17,1998, 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 III.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 March 1, 2003 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
March 1, 2003 through February 29, 2004 102%
March 1, 2004 through February 28, 2005 101%
March 1, 2005 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 or the Plant is impracticable, uneconomical or undesirable for any
reason;
(ii) all or substantially all of the Facilities or the Plant shall have been
condemned or taken by eminent domain; or
(iii) the operation of the Facilities or the Plant 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 III.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 III.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 III.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 III.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 IV.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 Apache Pollution Control Revenue Bonds, 1998 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 IV.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 IV.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 IV.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 IV.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 IV.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 IV.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 V.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 VI.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 VII.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
Apache 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 Apache 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 VII.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 VII.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 VII.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 Sections12.06 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 VII.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,
Apache County, the Authority or any other political subdivision of said State.
Section VII.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 VII.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 VII.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 Apache Pollution Control Revenue Bonds,1998 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 VII.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 VIII.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 X.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 X.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 X.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 X.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 5.03of 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 X.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 X.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 X.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 X.08. Dealings in Bonds and with the Authority and theCompany.
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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.19. Notice to Owners of Bonds of Event of Default. If an
Event of Default occurs of which the Trustee by Section10.05 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 X.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 X.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 4.03and 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 X.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 X.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 X.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 X.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 XI.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 XII.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 XII.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 XII.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 XII.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 XII.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 XII.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 3.02 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 XII.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 XIII.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
nd any entity, officer, board, commission, agency or instrumentality to
whom or to which any power or duty of the Authority shall be transferred.
Section XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 Platt & Lee, P.C., 185 South Second West
Street, St. Johns, Arizona 85936; 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 XIII.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 XIII.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.
IN WITNESS WHEREOF, The Industrial Development Authority of the County of
Apache 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 APACHE
By:
President
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By:
Vice President
EXHIBIT A
(FORM OF BOND)
No.
The Industrial Development Authority
of the County of Apache
Pollution Control Revenue Bond,
1998 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 Apache, 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 September 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 Pollution Control Revenue Bonds, 1998
Series B (Tucson Electric Power Company Project)(the "Bonds") of the Authority,
aggregating Ninety Nine Million Eight Hundred Thousand Dollars ($99,800,000) 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 March 1, 1998 (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) $41,400,000 aggregate principal
amount of the Authority's Pollution Control Revenue Bonds, 1981 Series A(Tucson
Electric Power Company Project) (the "1981 Series A Bonds"), or provision
therefor, which represents the extent to which the 1981 Series A Bonds financed
a portion of the costs of the acquisition, construction, improvement and
equipping of certain air and water pollution control and sewage and solid waste
disposal facilities (the "Pollution Control Facilities") at Unit No. 2 of the
Springerville Generating Station (the "Plant"); (b) $58,400,000 aggregate
principal amount of the Authority's Pollution Control Revenue Bonds, 1981
Series B (Tucson Electric Power Company Project) (the "1981 Series B Bonds"),or
provision therefor,which represents the extent to which the 1981 Series B Bonds
financed a portion of the costs of the acquisition, construction, improvement
and equipping of the Pollution Control Facilities and a portion of costs of the
acquisition, construction and equipping of facilities for furnishing electric
energy at Unit No. 2. Pursuant to the Loan Agreement, dated as of March 1,1998
(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 Apache 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 Apache 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 March 1, 2003 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
March 1, 2003 through February 29, 2004 102%
March 1, 2004 through February 28, 2005 101%
March 1, 2005 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 or the Plant is impracticable, uneconomical or undesirable
for any reason;
(ii) all or substantially all of the Facilities or the Plant shall have
been condemned or taken by eminent domain; or
(iii) the operation of the Facilities or the Plant 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.
IN WITNESS WHEREOF, The Industrial Development Authority of The County of
Apache 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 APACHE
(Seal)
By.......................................................
President
ATTEST:
...........................................
Secretary
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.
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 4(e)
LOAN AGREEMENT
(1998 Series C)
between
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF APACHE
and
TUCSON ELECTRIC POWER COMPANY
Dated as of March 1, 1998
Relating To
Industrial Development Revenue Bonds,
1998 Series C
(Tucson Electric Power Company Project)
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
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...... 7
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
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.................................. 11
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....................... 13
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............................... 14
SECTION 10.05. Counterparts............................. 14
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
* 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.
LOAN AGREEMENT
THIS LOAN AGREEMENT (1998 Series C), dated as of March 1, 1998 (this
"Agreement"), between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF
APACHE, 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 Apache 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 any 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 $100,000,000
aggregate principal amount of its Pollution Control Revenue Bonds, 1981
Series B (Tucson Electric Power Company Project), all of which remain
outstanding (the "1981 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 the air and water pollution control facilities,
sewage and solid waste disposal facilities and the facilities for furnishing
electric energy (the "Facilities");
WHEREAS, the Authority proposes to issue and sell its Industrial
Development Revenue Bonds, 1998 Series C (Tucson Electric Power Company
Project) (the "Bonds") for the purpose of refinancing, by the payment or
redemption of $16,500,000 principal amount of the 1981 Bonds, or provision
therefor, which represents the extent to which the 1981 Bonds financed the
portion of the costs of the Facilities, as described in Exhibit A hereto;
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 I.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.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of March 1, 1998,
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 Apache, an Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona incorporated for and with the approval
of Apache 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,
1998 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 facilities for electric transmission and/or
distribution 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 March 1, 1998,
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.
1981 Bonds:
"1981 Bonds" shall mean the $100,000,000 aggregate principal amount of the
Authority's Pollution Control Revenue Bonds, 1981 Series B (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 the
1954 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 I.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 II.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;
(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;
(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; and
(d) No consent, approval, authorization or other order of any regulatory
body or administrative agency or other governmental body is legally
required for the Authority's participation in the transactions
contemplated by this Agreement, except such as may have been obtained or
as may be required under the securities laws of any jurisdiction.
SECTION II.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 as 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 a portion of the Facilities through the
payment or redemption of $16,500,000 aggregate principal amount of the
1981 Bonds, or provisions therefor.
ARTICLE III
THE FACILITIES
SECTION III.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 III.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 III.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 III.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 III.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.
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION IV.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 IV.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 IV.03. The Loan; Disposition of Bond Proceeds. The Authority
and the Company shall enter into escrow arrangements with the trustee for
the 1981 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
1981 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 IV.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 V.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 V.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 V.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 V.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 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 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 V.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 VI.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 Person. The Company may consolidate with or
merge into another Person organized 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 Person (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 Authority and 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 VI.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 VI.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 VI.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 VI.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 VI.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 VII.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 assigned,
leased, subleased, 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, sublease, 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,
sublessee, purchaser or other transferee, as the case may be, prior to or
simultaneously with such assignment, lease, sublease, 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,
subleased, 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 or subleased 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 assigned, sold, transferred or otherwise disposed of as
a whole or in undivided part, and (b) in the event that the assignee,
lessee, sublessee, 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, sublease, 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, subleased, sold, assigned, transferred or
otherwise disposed of, together with all other rights, interests, assets
and/or properties assigned, leased, subleased, 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, sublessee, 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, sublease, sale, transfer or other disposition 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 transaction 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 assignment, lease, sublease, 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, subleased, sold, transferred or
otherwise disposed of (but, in the case of a lease or sublease, only to
the extent of such lease) as may be determined by reference to (i) except
in the case of a lease or sublease, 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 or sublease, 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, sublease 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 VII.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, sublease, sale, transfer or other disposition.
SECTION VII.03. Limitation.
This Agreement shall not be assigned nor shall the Facilities
be assigned, leased, subleased, 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 VIII.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 Person 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 VIII.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 VIII.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 VIII.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 VIII.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 VIII.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 IX.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 IX.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 X.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 X.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 Platt & Lee, P.C., 185 South Second West Street, St. Johns,
Arizona 85936; 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 X.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 Apache 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 Apache 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 X.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 X.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 X.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 X.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 X.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.
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 APACHE
By:
President
TUCSON ELECTRIC POWER COMPANY
By:
Vice President
EXHIBIT A
(1998 Series C Loan Agreement)
The following facilities located in Pima and Cochise Counties, Arizona
comprise the Facilities being refinanced:
Certain transmission and distribution facilities, and related
properties, and additions and improvements thereto, which are necessary or
appropriate in connection with Tucson Electric Power Company's transmission and
distribution of electric energy produced at the 350 megawatt coal-fixed steam
electric generating unit, known as Springerville Unit No. 2, including all
facilities and costs functionally related and subordinate to such facilities and
to the acquisition, construction or reconstruction thereof, including
engineering and environmental studies, the costs of regulatory proceedings, land
and land rights hereafter acquired for the purpose of constructing such
facilities, necessary excavations, dredging, foundations, structures,
landscaping, walls, monitoring equipment, instrumentation, mechanical and
electrical controls, wiring, cables, towers, valves, piping, meters, other
associated electrical and mechanical equipment and facilities, and all other
improvements and appurtenances necessary or useful for the operation thereof or
required by reason of the installation or operation thereof, including the cost
of any necessary modification to or relocations or replacements of existing
equipment or facilities.
<PAGE>
EXHIBIT 4(f)
INDENTURE OF TRUST
(1998 Series C)
between
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF APACHE
and
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION
Dated as of March 1, 1998
Authorizing
Industrial Development Revenue Bonds,
1998 Series C
(Tucson Electric Power Company Project)
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
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
* 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.
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (1998 Series C), dated as of March 1, 1998 (this
"Indenture"), between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF
APACHE, 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 Apache 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 any 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 $100,000,000
aggregate principal amount of its Pollution Control Revenue Bonds, 1981
Series B (Tucson Electric Power Company Project) all of which remain
outstanding (the "1981 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 the air and water pollution control facilities and sewage and
solid waste disposal facilities and facilities for the furnishing of
electric energy (the "Facilities") ;
WHEREAS, the Authority proposes to issue and sell its revenue bonds as
provided herein (the "Bonds") to refinance, by the payment or redemption of
$16,500,000 principal amount of the 1981 Bonds, or provision therefor, which
represents the extent to which the 1981 Bonds financed, the portion of the
costs of the acquisition, construction, improvement and equipping of the
Facilities, all as described in Exhibit A to the Loan Agreement, dated as of
March 1, 1998 (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 I.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.
"Authority" shall mean The Industrial Development Authority of the County
of Apache, an Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona incorporated for and with the approval
of Apache 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 facilities for electric transmission and/or
distribution 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 March 1,
1998, 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 March 1,
1998, 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.
1981 Bonds:
"1981 Bonds" shall mean the $100,000,000 aggregate principal amount of
the Authority's Pollution Control Revenue Bonds, 1981 Series B (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 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 II.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 1981 Bonds, an issue of Bonds,
entitled to the benefit, protection and security of this Indenture, in the
aggregate principal amount of Sixteen Million Five Hundred Thousand Dollars
($16,500,000). Each of the Bonds shall be designated by the title "The
Industrial Development Authority of the County of Apache Industrial
Development Revenue Bond, 1998 Series C (Tucson Electric Power Company
Project)". The Bonds shall mature, subject to prior redemption upon the
terms and conditions hereinafter set forth, on March 1, 2026 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 five and eighty-five one-hundredths per centum (5.85%) per annum,
with interest thereon payable semi-annually on each March 1 and September 1
commencing September 1, 1998. Interest shall be calculated on the basis of
a 360-day year consisting of twelve 30-day months.
Section II.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 March 1, 1998. 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 II.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 II.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 II.05. Bonds Not General Obligations. Neither Apache 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 Apache 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 II.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 a duly authorized officer of the Authority, 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 II.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 II.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 II.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 II.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 II.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 II.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 II.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 17, 1998 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 III.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 March 1, 2003 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
March 1, 2003 through February 29, 2004 102%
March 1, 2004 through February 28, 2005 101%
March 1, 2005 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 III.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 III.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 III.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 III.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 IV.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 Apache
Industrial Development Revenue Bonds, 1998 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 IV.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 IV.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 IV.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 IV.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 IV.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 IV.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 V.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 VI.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 VII.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 Apache 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 Apache 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 VII.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 VII.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 VII.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 VII.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, Apache County, the Authority or any
other political subdivision of said State.
Section VII.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 VII.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 VII.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 Apache Industrial Development Revenue
Bonds, 1998 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 VII.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 VIII.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 IX.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 X.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 XI.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 XII.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 XII.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 XII.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 XII.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 XII.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 XII.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 3.02 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 XII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 XIII.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 Platt & Lee, P.C., 185 South Second West Street, St. Johns, Arizona
85936; 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 XIII.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 XIII.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.
IN WITNESS WHEREOF, The Industrial Development Authority of the County
of Apache 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 APACHE
By:
President
FIRST TRUST OF NEW YORK,
NATIONAL ASSOCIATION
By:
Vice President
EXHIBIT A
(FORM OF BOND)
No.
The Industrial Development Authority
of the County of Apache
Industrial Development Revenue Bond,
1998 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 Apache, 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 September 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, 1998 Series C (Tucson Electric Power Company Project) (the "Bonds")
of the Authority, aggregating Sixteen Million Five Hundred Thousand Dollars
($16,500,000) 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 March 1, 1998 (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
$16,500,000 aggregate principal amount of the Authority's Pollution Control
Revenue Bonds, 1981 Series B (Tucson Electric Power Company 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 March 1, 1998 (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 Apache 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
Apache 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 March 1, 2003 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
March 1, 2003 through February 29, 2004 102%
March 1, 2004 through February 28, 2005 101%
March 1, 2005 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.
IN WITNESS WHEREOF, The Industrial Development Authority of The County
of Apache 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 APACHE
(Seal)
By.......................................................
President
ATTEST:
...........................................
Secretary
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.
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:......................
UNISOURCE ENERGY CORPORATION
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
March 31,
1998 1997
------ ------
- Thousands of Dollars -
(except per share data)
BASIC EARNINGS PER SHARE:
Net Income $(7,035) $11,492
Average Shares of Common Stock Outstanding 32,139 32,139
--------- --------
Basic Earnings Per Share $ (0.22) $ 0.36
========= ========
DILUTED EARNINGS PER SHARE:
Net Income $(7,035) $11,492
Average Shares of Common Stock Outstanding 32,139 32,139
Effect of Dilutive Securities:
Warrants* 189 -
Options 158 32
--------- --------
Total Shares 32,486 32,171
--------- --------
Diluted Earnings Per Share $ (0.22) $ 0.36
========= ========
*The Warrants are for TEP common stock. However, the dilutive effect is the
same as it would be if the Warrants were for UniSource Energy's Common Stock.
Exhibit 12
<TABLE>
<CAPTION>
Tucson Electric Power Company
Computation of Ratio of Earnings to Fixed Charges
(In Thousands of Dollars)
12 Months Ending
-------------------------------------------------------------------------------------
March 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1996 1995 1994 1993
-------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest on Long-Term Debt 66,567 63,573 59,647 69,174 69,353 68,053
Other Interest* 10,560 9,640 11,721 9,113 7,591 9,175
Interest on Capital Lease
Obligations** 86,826 83,019 84,383 83,986 82,511 81,932
------- ------ ------- ------- ------- -------
Total Fixed Charges 163,953 15,232 155,751 162,273 159,455 159,160
Net Income 70,472 83,572 120,852 54,905 20,740 (25,816)
Add (Deduct):
Income Taxes - Operating
Expense 19,709 19,297 9,795 8,920 (91) (91)
Income Taxes - Other (22,443) (41,401) (91,950) (29,356) (4,820) (5,186)
Total Fixed Charges 163,953 156,232 155,751 162,273 159,455 159,160
-------- -------- -------- -------- -------- --------
Total Earnings before Taxes and
Fixed Charges 231,691 217,700 194,448 196,742 175,284 128,067
Ratio of Earnings to Fixed 1.413 1.393 1.248 1.212 1.099 0.805
Charges
<FN>
* Excludes recognition of Allowance for Borrowed Funds Used During Construction.
** Capital Lease Interest Paid from Statement of Cash Flows.
</TABLE>
Exhibit 15(b)
UniSource Energy Corporation
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 UniSource Energy
Corporation and subsidiaries (the Company) and Tucson Electric
Power Company and subsidiaries (TEP) for the period ended March 31,
1997 as indicated in our report dated February 23, 1998;
because we did not perform an audit, we expressed no opinion on
that information.
We are aware that our report referred to above, which was
included in your Quarterly Reports on Form 10-Q for the
quarter ended March 31, 1998 is incorporated by reference in
Post-Effective Amendment No. 1 to Registration Statement No. 33-
55732 of TEP on Form S-3, Registration Statement No. 333-
43765, No. 333-43767 and No. 333-43769 of the Company on
Form S-8.
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
May 12, 1998
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000100122
<NAME> TUCSON ELECTRIC POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,926,616
<OTHER-PROPERTY-AND-INVEST> 58,029
<TOTAL-CURRENT-ASSETS> 416,428
<TOTAL-DEFERRED-CHARGES> 326,026
<OTHER-ASSETS> 71,640
<TOTAL-ASSETS> 2,798,739
<COMMON> 638,904
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (423,633)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 215,271
0
0
<LONG-TERM-DEBT-NET> 1,215,120
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 200,500
0
<CAPITAL-LEASE-OBLIGATIONS> 883,607
<LEASES-CURRENT> 15,238
<OTHER-ITEMS-CAPITAL-AND-LIAB> 269,003
<TOT-CAPITALIZATION-AND-LIAB> 2,798,739
<GROSS-OPERATING-REVENUE> 161,003
<INCOME-TAX-EXPENSE> (1,937)
<OTHER-OPERATING-EXPENSES> 139,058
<TOTAL-OPERATING-EXPENSES> 137,121
<OPERATING-INCOME-LOSS> 23,882
<OTHER-INCOME-NET> 3,225
<INCOME-BEFORE-INTEREST-EXPEN> 27,107
<TOTAL-INTEREST-EXPENSE> 28,714
<NET-INCOME> (1,607)
0
<EARNINGS-AVAILABLE-FOR-COMM> (1,607)
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 8,791
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
