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 June 30, 1998
OR
[ ] 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
(An Arizona Corporation)
220 West Sixth Street
Tucson, AZ 85701 86-0062700
(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 August 7, 1998, 32,147,080 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 .............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........................................... .....12
Note 6. Rate Matters...................................................12
Note 7. Income Taxes...................................................13
Note 8. New Accounting Standard........................................14
Note 9. Reclassifications..............................................14
Note 10. Review by Independent Public Accountants......................14
Item 2. -- Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview................................................................15
Competition
Retail..............................................................16
Wholesale...........................................................19
Shared Savings Proposal.................................................20
Accounting for the Effects of Regulation................................20
Investments in Energy Related Affiliates................................21
Dividends on Common Stock
UniSource Energy....................................................22
TEP.................................................................22
Earnings................................................................22
Results of Operations
Utility Sales and Revenues.........................................23
Operating Expenses................................................24
Other Income (Deductions)..........................................24
Interest Expense..................................................25
Events Affecting Future Results of Utility Operations
TEP Generating Resources..........................................25
Liquidity and Capital Resources
Cash Flows
UniSource Energy..................................................25
TEP...............................................................26
Financing Developments
TEP Sale of Bonds.................................................26
TEP Credit Agreement..............................................26
TEP First Mortgage Bonds..........................................27
UniSource Energy--Loans and Guarantees............................27
Impact of Year 2000 on Computer Systems and Applications................28
Safe Harbor for Forward-Looking Statements..............................28
PART II - OTHER INFORMATION
Item 1. -- Legal Proceedings
Tax Assessments.........................................................30
Item 4. - Submission of Matters to a Vote of Security Holders................30
Item 5. - Other Information
Directors and Executive Officers of the Registrants.....................30
Shareholder Proposal Deadline for 1999 Annual Meeting...................31
Additional Financial Data...............................................31
Item 6. -- Exhibits and Reports on Form 8-K.................................31
Signature Page...............................................................32
Exhibit Index................................................................33
DEFINITIONS
The abbreviations and acronyms used in the 1998 Second 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.
Affected Utilities Electric utilities regulated by the ACC, including TEP,
Arizona Public Service, Citizens Utilities Company, and
several electric cooperatives.
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 Collateral Trust
Bonds............ Bonds issued under the First Collateral Trust
Indenture.
First Collateral Trust
Indenture........ The Indenture, dated as of August 1,
1998, of Tucson Electric Power Company to Bank of
Montreal Trust Company of the City of New York, as
trustee.
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.
Standard Offer.... Bundled service offered to all consumers in a designated
service territory at regulated rates.
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
and six-month periods ended June 30, 1998. This financial information is the
responsibility of the Company's and TEP's management. The financial statements
as of June 30, 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
and six-month periods ended June 30, 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.
PricewaterhouseCoopers LLP
Phoenix, Arizona
August 4, 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 of UniSource
Energy Corporation and its subsidiaries (the Company) and Tucson Electric Power
Company (TEP) for the three-month and six-month periods ended June 30, 1997 and
cash flows for the six-month period ended June 30, 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 sheets 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
June 30,
1998 1997
-Thousands of Dollars-
Operating Revenues
Retail Customers $150,652 $159,249
Amortization of MSR Option Gain Regulatory Liability - 3,092
Sales for Resale 28,951 20,629
--------- ---------
Total Operating Revenues 179,603 182,970
--------- ---------
Operating Expenses
Fuel and Purchased Power 56,693 51,493
Capital Lease Expense 26,558 26,388
Amortization of Springerville Unit 1 Allowance (7,630) (7,010)
Other Operations 27,130 28,087
Maintenance and Repairs 8,431 11,384
Depreciation and Amortization 22,883 21,445
Taxes Other Than Income Taxes 12,634 13,093
Income Taxes 3,038 4,260
--------- ---------
Total Operating Expenses 149,737 149,140
--------- ---------
Operating Income 29,866 33,830
--------- ---------
Other Income (Deductions)
Income Taxes 3,016 11,385
Reversal of Loss Provision - 10,154
Interest Income 3,524 2,778
Unregulated Energy Businesses - Net (5,649) 488
Other 1,134 (1,341)
--------- ---------
Total Other Income (Deductions) 2,025 23,464
--------- ---------
Interest Expense
Long-Term Debt 19,792 16,660
Interest Imputed on Losses Recorded at Present Value 8,545 8,175
Other 2,496 2,558
--------- ---------
Total Interest Expense 30,833 27,393
--------- ---------
Net Income (Loss) $ 1,058 $ 29,901
========= =========
Average Shares of Common Stock Outstanding (000) 32,138 32,138
========= =========
Basic and Diluted Earnings per Share $ 0.03 $ 0.93
========= =========
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Six Months Ended
June 30,
1998 1997
-Thousands of Dollars-
Operating Revenues
Retail Customers $288,739 $289,186
Amortization of MSR Option Gain Regulatory Liability - 8,105
Sales for Resale 51,805 39,960
--------- ---------
Total Operating Revenues 340,544 337,251
--------- ---------
Operating Expenses
Fuel and Purchased Power 105,093 97,139
Capital Lease Expense 52,336 52,664
Amortization of Springerville Unit 1 Allowance (15,261) (14,019)
Other Operations 53,428 54,383
Maintenance and Repairs 19,155 21,615
Depreciation and Amortization 45,446 43,219
Taxes Other Than Income Taxes 25,560 25,718
Income Taxes 1,101 1,912
--------- ---------
Total Operating Expenses 286,858 282,631
--------- ---------
Operating Income 53,686 54,620
--------- ---------
Other Income (Deductions)
Income Taxes 2,385 25,943
Reversal of Loss Provision - 10,154
Interest Income 5,240 4,487
Unregulated Energy Businesses - Net (9,685) (444)
Other 1,944 (1,372)
--------- ---------
Total Other Income (Deductions) (116) 38,768
--------- ---------
Interest Expense
Long-Term Debt 36,903 30,777
Interest Imputed on Losses Recorded at Present Value 17,090 16,454
Other 5,554 4,764
--------- ---------
Total Interest Expense 59,547 51,995
--------- ---------
Net Income (Loss) $ (5,977) $ 41,393
========= =========
Average Shares of Common Stock Outstanding (000) 32,138 32,138
========= =========
Basic and Diluted Earnings per Share $ (0.19) $ 1.29
========= =========
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1998 1997
-Thousands of Dollars-
Cash Flows from Operating Activities
Cash Receipts from Retail Customers $293,242 $293,113
Cash Receipts from Sales for Resale 51,935 42,635
Fuel and Purchased Power Costs Paid (93,168) (90,574)
Wages Paid, Net of Amounts Capitalized (36,389) (32,899)
Payment of Other Operations and Maintenance Costs (46,763) (45,359)
Capital Lease Interest Paid (44,594) (40,774)
Interest Paid, Net of Amounts Capitalized (35,157) (34,777)
Taxes Paid, Net of Amounts Capitalized (48,752) (48,559)
Interest Received 3,959 3,958
Emission Allowance Inventory Sales 11,368 -
Contract Termination Fee Paid (10,000) (30,000)
Other (789) 660
--------- ---------
Net Cash Flows - Operating Activities 44,892 17,424
--------- ---------
Cash Flows from Investing Activities
Construction Expenditures (38,220) (33,870)
Investments in Joint Ventures (11,066) (2,117)
Other 1,731 980
--------- ---------
Net Cash Flows - Investing Activities (47,555) (35,007)
--------- ---------
Cash Flows from Financing Activities
Proceeds from Issuance of Long-Term Debt 2,328 12,312
Payments on Renewable Term Loan - (31,000)
Payments to Retire Long-Term Debt (2,600) (500)
Payments to Retire Capital Lease Obligations (9,676) (4,751)
Other (1,547) (568)
--------- ---------
Net Cash Flows - Financing Activities (11,495) (24,507)
--------- ---------
Net Decrease in Cash and Cash Equivalents (14,158) (42,090)
Cash and Cash Equivalents, Beginning of Year 146,256 130,291
--------- ---------
Cash and Cash Equivalents, End of Period $132,098 $ 88,201
========= =========
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION
Six Months Ended
June 30,
1998 1997
-Thousands of Dollars-
Net Income (Loss) $ (5,977) $ 41,393
Adjustments to Reconcile Net Income (Loss)
to Net Operating Cash Flows
Depreciation and Amortization Expense 45,446 43,219
Deferred Income Taxes and Investment Tax Credits-Net (7,816) (24,280)
Lease Payments Deferred 12,350 17,750
Amortization of Regulatory Assets & Liabilities,
Net of Interest Imputed on Losses Recorded at
Present Value 1,828 (5,669)
Deferred Contract Termination Fee (8,077) (30,000)
Loss (Unremitted Earnings) of Unconsolidated
Subsidiaries 15,689 (909)
Emission Allowances 11,368 -
Other (3,214) (10,490)
Changes in Assets and Liabilities which Provided
(Used) Cash Exclusive of Changes Shown Separately
Accounts Receivable (16,850) (16,314)
Materials and Fuel (577) (7,342)
Accounts Payable 1,189 9,113
Other Current Assets and Liabilities (2,629) (2,989)
Other Deferred Assets and Liabilities 2,162 3,942
--------- ---------
Net Cash Flows - Operating Activities $ 44,892 $ 17,424
========= =========
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 were held in trust and used in May 1998 to redeem $200
million of previously issued bonds. In May 1998, TEP exchanged $46.9 million
of its existing 12.22% First Mortgage Bonds due 2000 for an identical amount
of new 12.22% Exchange Series First Mortgage Bonds. See Note 5. Also, the
proceeds from the issuance of $111.8 million of Pollution Control Revenue
Bonds in April 1997 were held in trust and used in June 1997 to redeem $111.8
million of previously issued bonds.
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1998 1997
- Thousands of Dollars -
Utility Plant
Plant in Service $2,227,912 $2,194,150
Utility Plant Under Capital Leases 893,064 893,064
Construction Work in Progress 74,786 72,404
----------- -----------
Total Utility Plant 3,195,762 3,159,618
Less Accumulated Depreciation and Amortization (1,020,317) (982,621)
Less Accumulated Amortization of Capital Leases (82,937) (73,728)
Less Springerville Unit 1 Allowance (169,584) (167,756)
----------- -----------
Total Utility Plant - Net 1,922,924 1,935,513
----------- -----------
Investments and Other Property 76,694 78,772
----------- -----------
Current Assets
Cash and Cash Equivalents 132,098 146,256
Accounts Receivable 88,075 71,225
Materials and Fuel 34,954 34,005
Deferred Income Taxes - Current 15,268 14,910
Other 26,455 23,653
----------- -----------
Total Current Assets 296,850 290,049
----------- -----------
Deferred Debits - Regulatory Assets
Income Taxes Recoverable Through Future Rates 165,633 170,034
Deferred Springerville Common Facility Costs 56,952 58,222
Deferred Springerville Contract Termination Fee 46,154 48,077
Deferred Springerville Unit 2 Costs 6,944 11,590
Deferred Lease Expense 10,382 11,571
Other Regulatory Assets 11,672 11,089
Deferred Debits - Other 19,690 19,492
----------- -----------
Total Deferred Debits 317,427 330,075
----------- -----------
Total Assets $2,613,895 $2,634,409
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
UNISOURCE ENERGY CORPORATION
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND OTHER LIABILITIES
June 30, December 31,
1998 1997
- Thousands of Dollars -
Capitalization
Common Stock $ 638,847 $ 638,904
Accumulated Deficit (428,003) (422,026)
----------- -----------
Common Stock Equity 210,844 216,878
Capital Lease Obligations 884,720 890,257
Long-Term Debt 1,211,795 1,215,120
----------- -----------
Total Capitalization 2,307,359 2,322,255
----------- -----------
Current Liabilities
Current Obligations Under Capital Leases 13,578 14,552
Current Maturities of Long-Term Debt 1,225 500
Accounts Payable 36,098 34,909
Interest Accrued 69,284 64,812
Taxes Accrued 24,161 24,397
Contract Termination Fee Payable - 10,000
Other 15,707 19,051
----------- -----------
Total Current Liabilities 160,053 168,221
----------- -----------
Deferred Credits and Other Liabilities
Deferred Income Taxes - Noncurrent 66,892 77,606
Accumulated Deferred Investment Tax Credits
Regulatory Liability 10,760 11,905
Emission Allowance Gain Regulatory Liability 31,357 17,591
Other 37,474 36,831
----------- -----------
Total Deferred Credits and Other Liabilities 146,483 143,933
----------- -----------
Total Capitalization and Other Liabilities $2,613,895 $2,634,409
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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
Three Months Ended
June 30,
1998 1997
-Thousands of Dollars-
Operating Revenues
Retail Customers $150,735 $159,249
Amortization of MSR Option Gain Regulatory Liability - 3,092
Sales for Resale 28,951 20,629
--------- ---------
Total Operating Revenues 179,686 182,970
--------- ---------
Operating Expenses
Fuel and Purchased Power 56,693 51,493
Capital Lease Expense 26,558 26,388
Amortization of Springerville Unit 1 Allowance (7,630) (7,010)
Other Operations 27,130 28,087
Maintenance and Repairs 8,431 11,384
Depreciation and Amortization 22,883 21,445
Taxes Other Than Income Taxes 12,634 13,093
Income Taxes 3,038 4,260
--------- ---------
Total Operating Expenses 149,737 149,140
--------- ---------
Operating Income 29,949 33,830
--------- ---------
Other Income (Deductions)
Income Taxes 2,076 11,385
Reversal of Loss Provision - 10,154
Interest Income 3,526 2,850
Interest Income-Note Receivable from UniSource Energy 2,326 -
Other 1,029 (925)
--------- ---------
Total Other Income (Deductions) 8,957 23,464
--------- ---------
Interest Expense
Long-Term Debt 19,792 16,660
Interest Imputed on Losses Recorded at Present Value 8,545 8,175
Other 2,496 2,558
--------- ---------
Total Interest Expense 30,833 27,393
--------- ---------
Net Income $ 8,073 $ 29,901
========= =========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
June 30,
1998 1997
-Thousands of Dollars-
Operating Revenues
Retail Customers $288,884 $289,186
Amortization of MSR Option Gain Regulatory Liability - 8,105
Sales for Resale 51,805 39,960
--------- ---------
Total Operating Revenues 340,689 337,251
--------- ---------
Operating Expenses
Fuel and Purchased Power 105,093 97,139
Capital Lease Expense 52,336 52,664
Amortization of Springerville Unit 1 Allowance (15,261) (14,019)
Other Operations 53,428 54,383
Maintenance and Repairs 19,155 21,615
Depreciation and Amortization 45,446 43,219
Taxes Other Than Income Taxes 25,560 25,718
Income Taxes 1,101 1,912
--------- ---------
Total Operating Expenses 286,858 282,631
--------- ---------
Operating Income 53,831 54,620
--------- ---------
Other Income (Deductions)
Income Taxes 516 25,943
Reversal of Loss Provision - 10,154
Interest Income 5,242 4,606
Interest Income-Note Receivable from UniSource Energy 4,626 -
Other 1,798 (1,935)
--------- ---------
Total Other Income (Deductions) 12,182 38,768
--------- ---------
Interest Expense
Long-Term Debt 36,903 30,777
Interest Imputed on Losses Recorded at Present Value 17,090 16,454
Other 5,554 4,764
--------- ---------
Total Interest Expense 59,547 51,995
--------- ---------
Net Income $ 6,466 $ 41,393
========= =========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1998 1997
-Thousands of Dollars-
Cash Flows from Operating Activities
Cash Receipts from Retail Customers $293,242 $293,113
Cash Receipts from Sales for Resale 51,935 42,635
Fuel and Purchased Power Costs Paid (93,168) (90,574)
Wages Paid, Net of Amounts Capitalized (34,765) (32,899)
Payment of Other Operations and Maintenance Costs (43,632) (45,359)
Capital Lease Interest Paid (44,594) (40,774)
Interest Paid, Net of Amounts Capitalized (35,157) (34,777)
Taxes Paid, Net of Amounts Capitalized (48,690) (48,559)
Emission Allowance Inventory Sales 11,368 -
Interest Received 2,963 3,958
Contract Termination Fee Paid (10,000) (30,000)
Other 869 660
--------- ---------
Net Cash Flows - Operating Activities 50,371 17,424
--------- ---------
Cash Flows from Investing Activities
Construction Expenditures (38,220) (33,870)
Transfer of MEH (45,412) -
Investments in Joint Ventures - (2,117)
Other 1,841 980
--------- ---------
Net Cash Flows - Investing Activities (81,791) (35,007)
--------- ---------
Cash Flows from Financing Activities
Proceeds from Issuance of Long-Term Debt 2,328 12,312
Payments to Retire Long-Term Debt (2,600) (500)
Payments on Renewable Term Loan - (31,000)
Payments to Retire Capital Lease Obligations (9,676) (4,751)
Other (1,686) (568)
--------- ---------
Net Cash Flows - Financing Activities (11,634) (24,507)
--------- ---------
Net Decrease in Cash and Cash Equivalents (43,054) (42,090)
Cash and Cash Equivalents, Beginning of Year 146,256 130,291
--------- ---------
Cash and Cash Equivalents, End of Period $103,202 $ 88,201
========= =========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION
Six Months Ended
June 30,
1998 1997
-Thousands of Dollars-
Net Income (Loss) $ 6,466 $ 41,393
Adjustments to Reconcile Net Income (Loss) to Net
Operating Cash Flows
Depreciation and Amortization Expense 45,446 43,219
Deferred Income Taxes and
Investment Tax Credits - Net 745 (24,280)
Lease Payments Deferred 12,350 17,750
Amortization of Regulatory Assets & Liabilities, Net
of Interest Imputed on Losses Recorded at
Present Value 1,828 (5,669)
Deferred Contract Termination Fee (8,077) (30,000)
Unremitted Earnings of Unconsolidated Subsidiaries (528) (909)
Emission Allowances 11,368 -
Interest Income-Note Receivable from UniSource
Energy (4,626) -
Other (1,404) (10,490)
Changes in Assets and Liabilities which Provided
(Used) Cash Exclusive of Changes Shown Separately
Accounts Receivable (18,327) (16,314)
Materials and Fuel (577) (7,342)
Accounts Payable 2,223 9,113
Other Current Assets and Liabilities 1,377 (2,989)
Other Deferred Assets and Liabilities 2,107 3,942
--------- ---------
Net Cash Flows - Operating Activities $ 50,371 $ 17,424
========= =========
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 were held in trust and used in May 1998 to redeem $200
million of previously issued bonds. In May 1998, TEP exchanged $46.9 million
of its existing 12.22% First Mortgage Bonds due 2000 for an identical amount
of new 12.22% Exchange Series First Mortgage Bonds. See Note 5. Also, the
proceeds from the issuance of $111.8 million of Pollution Control Revenue
Bonds in April 1997 were held in trust and used in June 1997 to redeem $111.8
million of previously issued bonds.
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1998 1997
- Thousands of Dollars -
Utility Plant
Plant in Service $2,227,912 $2,194,150
Utility Plant Under Capital Leases 893,064 893,064
Construction Work in Progress 74,786 72,404
----------- -----------
Total Utility Plant 3,195,762 3,159,618
Less Accumulated Depreciation and Amortization (1,020,317) (982,621)
Less Accumulated Amortization of Capital Leases (82,937) (73,728)
Less Springerville Unit 1 Allowance (169,584) (167,756)
----------- -----------
Total Utility Plant - Net 1,922,924 1,935,513
----------- -----------
Investments and Other Property 59,422 78,772
----------- -----------
Note Receivable from UniSource Energy 74,759 -
---------- -----------
Current Assets
Cash and Cash Equivalents 103,202 146,256
Accounts Receivable 88,642 71,225
Materials and Fuel 34,914 34,005
Deferred Income Taxes - Current 15,268 14,910
Other 21,527 23,653
----------- -----------
Total Current Assets 263,553 290,049
----------- -----------
Deferred Debits - Regulatory Assets
Income Taxes Recoverable Through Future Rates 165,633 170,034
Deferred Springerville Common Facility Costs 56,952 58,222
Deferred Springerville Contract Termination Fee 46,154 48,077
Deferred Springerville Unit 2 Costs 6,944 11,590
Deferred Lease Expense 10,382 11,571
Other Regulatory Assets 11,672 11,089
Deferred Debits - Other 19,690 19,492
----------- -----------
Total Deferred Debits 317,427 330,075
----------- -----------
Total Assets $2,638,085 $2,634,409
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
TUCSON ELECTRIC POWER COMPANY
COMPARATIVE CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND OTHER LIABILITIES
June 30, December 31,
1998 1997
- Thousands of Dollars -
Capitalization
Common Stock $ 645,660 $ 645,261
Capital Stock Expense (6,357) (6,357)
Accumulated Deficit (415,560) (422,026)
----------- -----------
Common Stock Equity 223,743 216,878
Capital Lease Obligations 884,720 890,257
Long-Term Debt 1,211,795 1,215,120
----------- -----------
Total Capitalization 2,320,258 2,322,255
----------- -----------
Current Liabilities
Current Obligations Under Capital Leases 13,578 14,552
Current Maturities of Long-Term Debt 1,225 500
Accounts Payable 36,414 34,909
Interest Accrued 69,284 64,812
Taxes Accrued 24,141 24,397
Contract Termination Fee Payable - 10,000
Other 15,693 19,051
----------- -----------
Total Current Liabilities 160,335 168,221
----------- -----------
Deferred Credits and Other Liabilities
Deferred Income Taxes - Noncurrent 77,985 77,606
Accumulated Deferred Investment Tax Credits
Regulatory Liability 10,760 11,905
Emission Allowance Gain Regulatory Liability 31,357 17,591
Other 37,390 36,831
----------- -----------
Total Deferred Credits and Other Liabilities 157,492 143,933
----------- -----------
Total Capitalization and Other Liabilities $2,638,085 $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 expenses be charged to
customers in the future. In this situation, FAS 71 requires that TEP
not show these expenses on its current income statements but "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. In that event, 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 June 30, 1998, if we ceased
applying FAS 71 to all of TEP's regulated operations, we would record
an extraordinary loss of approximately $152 million, net of the related
deferred income tax benefit of $103 million. While our cash flows may
be affected by regulatory orders and market conditions, our cash flows
would not be affected if we ceased to apply 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 concluded 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. On August 5, 1998, the
ACC adopted amendments to the rules which, in part, provide a two-year
phase-in schedule in which all retail customers will have access to
competitive generation by January 1, 2001.
On June 22, 1998, the ACC adopted an order which outlines its
policy for stranded cost recovery by Arizona utilities in a competitive
energy market. Stranded costs represent costs recoverable 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. The order allows the Affected Utilities to choose one of the
following two methods for stranded cost recovery:
(1) Divestiture/Auction Methodology
- This method requires the sale of all electric generation assets
through an auction by January 1, 2001;
- Stranded costs are calculated as the difference between book value
of generation assets (including related regulatory assets) and the
proceeds from the sale;
- 100% of the stranded costs will be recovered over a 10-year period,
including a return on the unamortized balance;
- All customers of Affected Utilities will pay for the stranded
costs; and
- Affected Utilities that choose this option must file a divestiture
plan for ACC approval no later than October 1, 1998.
(2) Transition Revenues Methodology
- The ACC would determine the revenues necessary to maintain
financial integrity (such as avoiding default under currently existing
financial instruments); and
- Affected Utilities would recover the determined amount of stranded
costs over a period of ten years.
The order encourages, but does not require, full divestiture of
generating assets through an auction. The order states that only those
Affected Utilities choosing divestiture through the Divestiture/Auction
Methodology shall have the opportunity to recover 100% of unmitigated
stranded costs. TEP must elect one of the two stranded cost recovery
options and file an implementation plan, including its estimate of
stranded costs related to generation and regulatory assets, by August
21, 1998. The order also specifies that some form of rate cap will be
in place for customers on standard offer electric service during the
transition period.
TEP will cease to account for its generation operations using FAS
71 at the time the ACC approves a cost recovery plan specific to TEP,
including the specific amount of stranded costs that TEP can recover
and a cost recovery method. The amount and method of recovery that the
ACC approves for TEP will determine whether write-offs will be incurred
at that time. The ACC is not expected to approve a final stranded cost
recovery plan for TEP until at least the fourth quarter of 1998. We
are unable to predict the amount of write-offs, if any, that may be
incurred at that time.
In May 1998 the Arizona State Legislature approved and the
Governor signed a bill regarding retail electric competition. The
legislation requires 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 public power entities such as SRP; however, the bill encourages
broader application of the legislation's principles by the ACC to the
state's investor-owned utilities, including TEP, and cooperatives.
We cannot predict the outcome of the legislation or the ACC's
retail competition rules. 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.
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
May 1998, the Arizona Supreme Court remanded the case back to the
Arizona Tax Court to be reheard. 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 June 30, 1997. 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 filed an appeal of the assessments in the
Arizona Tax Court in February 1998. In July 1998, the Arizona Tax
Court ruled against us on the Irvington lease. We plan to appeal the
Tax Court's decision.
We have recorded a liability for the probable amount of sales
taxes and interest due as of June 30, 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 June 30, 1998, pre-change federal NOL and ITC carryforwards were
approximately $267 million and $26 million, respectively. In addition
to the pre-change NOL and ITC which are subject to the limitation, $166
million of federal NOL at June 30, 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 six months
ended June 30, 1998.
NOTE 4. LOANS AND GUARANTEES FOR NEV
- -------------------------------------
In December 1997, Millennium committed to provide NEV with $20
million of funding. At July 31, 1998, NEV had received the following
under the $20 million commitment:
- Millennium provided $10 million in loans to NEV.
- Millennium provided $4 million for NEV preferred equity.
- UniSource Energy issued guarantees in the aggregate amount of $5.5
million to secure the obligations of NEV to counterparties to energy
purchase and sale agreements.
As a result of these loans and guarantees, the remaining commitment
amount available was $0.5 million at July 31, 1998.
UniSource Energy is the guarantor of $32.8 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.
In August 1998, UniSource Energy agreed to guarantee a $10 million
loan that NEV obtained from an unrelated party. The debt underlying
the guarantee is not due until 1999.
From September 1997, the inception of Millennium's ownership in
NEV, through June 30, 1998, Millennium recorded approximately $23.8
million of NEV losses. The amount equals the total funds and
commitments provided by Millennium and UniSource Energy to NEV.
Accounting principles limit the amount of the loss to be recorded by
Millennium to the total amount invested and committed by Millennium and
UniSource Energy. Under its current obligations, NEV is expected to
continue to incur losses and require additional funds to fulfill its
obligations. Should Millennium or UniSource Energy provide additional
funding to NEV, the amounts provided would need to be immediately
expensed if NEV has incurred losses in excess of $23.8 million since
September 1997. NEV is seeking sources other than Millennium and
UniSource Energy to provide necessary funding. There can be no
assurance that any such financing will be obtained.
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. 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 were used in May 1998 to redeem $200 million of previously issued
variable interest rate bonds that would have matured in 2020 and 2021.
On May 15, 1998, TEP exchanged $46.9 million of its existing
12.22% First Mortgage Bonds due 2000 for an identical amount of new
12.22% Exchange Series First Mortgage Bonds due 2000. With the
exception of the elimination of a covenant restricting the payment of
dividends, the new bonds have substantially the same terms and
conditions as the existing bonds.
On August 4, 1998, TEP issued $140 million of First Collateral
Trust Bonds, Series A, and will use the proceeds on September 3, 1998
to redeem all of its First Mortgage Bonds due in 1999, 2001, 2002 and
2003, as well as $31.9 million of 12.22% First Mortgage Bonds due 2000
not tendered for exchange as described above. The bonds to be redeemed
bear interest at rates ranging from 7.55% to 12.22%. When TEP redeems
these bonds, covenants that currently prohibit TEP from paying common
stock dividends so long as it has an accumulated earnings deficit will
be eliminated. Dividends would thereafter be permitted if certain
other, more flexible financial covenants have been met. The First
Collateral Trust Bonds bear interest at 7.50% and mature in 2008. The
First Collateral Trust Bonds are secured by an equal aggregate
principal amount of bonds issued under TEP's General First Mortgage and
held by the 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 an equal
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 $86.3 million and $88.7
million at June 30, 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
---------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------------------------------
- Thousands of Dollars -
Federal Income Tax (Benefit)
Expense at Statutory Rate $ (923) $ 7,972 $(4,826) $ 6,077
State Income Tax (Benefit)
Expense, Net of Federal
Deduction (144) 1,225 (745) 934
Depreciation Differences
(Flow Through Basis) 2,419 - 3,459 -
Capital Loss Carryforwards (4,463) - (4,463) -
Investment Tax Credit
Amortization (572) (966) (1,145) (1,942)
Reduction in Valuation
Allowance - (14,975) - (29,293)
Other (12) (381) (92) 193
-------- --------- -------- ---------
Total Benefit for Federal
and State Income Taxes $(3,695) $ (7,125) $(7,812) $(24,031)
======== ========= ======== =========
TEP
---------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------------------------------
- Thousands of Dollars -
Federal Income Tax (Benefit)
Expense at Statutory Rate $ 3,162 $ 7,972 $2,468 $ 6,077
State Income Tax (Benefit)
Expense, Net of Federal
Deduction 488 1,225 381 934
Depreciation Differences
(Flow Through Basis) 2,419 - 3,459 -
Capital Loss Carryforwards (4,463) - (4,463) -
Investment Tax Credit
Amortization (572) (966) (1,145) (1,942)
Reduction in Valuation
Allowance - (14,975) - (29,293)
Other (72) (381) (115) 193
-------- --------- ------- ---------
Total (Benefit) Expense for
Federal and State Income Taxes $ 962 $ (7,125) $ 585 $(24,031)
======== ========= ======= =========
Income taxes are included in the income statements as follows:
UniSource Energy
---------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------------------------------
- Thousands of Dollars -
Operating Expenses $ 3,038 $ 4,260 $ 1,101 $ 1,912
Other Income (Deductions) (3,016) (11,385) (2,385) (25,943)
Unregulated Energy
Businesses - Net (3,717) - (6,528) -
-------- --------- -------- ---------
Total Income Tax Benefit $(3,695) $ (7,125) $(7,812) $(24,031)
======== ========= ======== =========
TEP
---------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------------------------------
- Thousands of Dollars -
Operating Expenses $ 3,038 $ 4,260 $ 1,101 $ 1,912
Other Income (Deductions) (2,076) (11,385) (516) (25,943)
-------- --------- -------- ---------
Total Income Tax (Benefit)
Expense $ 962 $ (7,125) $ 585 $(24,031)
======== ========= ======== =========
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. NEW ACCOUNTING STANDARD
- --------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 (FAS 133),
Accounting for Derivative Instruments and Hedging Activities. This
Statement requires that all derivative financial instruments be
recognized as either assets or liabilities in the balance sheet.
Measurement is at fair value and if the derivative is not designated as
a hedging instrument, changes in fair values (i.e., gains and losses)
are to be recognized in earnings in the period of change. If certain
conditions are met, a derivative may be designated a hedge, in which
case the accounting for changes in fair value will depend on the
specific exposure being hedged. The Company is required to adopt FAS
133 in the first quarter of 2000. We are still evaluating the impact,
if any, that the adoption of FAS 133 will have on our financial
statements.
NOTE 9. RECLASSIFICATIONS
- --------------------------
Minor reclassifications have been made to the prior year financial
statements to conform to the current year's presentation.
NOTE 10. REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------
With respect to the unaudited consolidated financial information
of UniSource Energy and TEP for the three-month and six-month periods
ended June 30, 1998, PricewaterhouseCoopers LLP reported that they have
applied limited procedures in accordance with professional standards
for a review of such information. However, their separate report dated
August 4, 1998, appearing herein, states that they did not audit and
they do not express an opinion on that unaudited consolidated financial
information. PricewaterhouseCoopers 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. PricewaterhouseCoopers 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 PricewaterhouseCoopers 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, although losses from energy-related
ventures of MEH and its subsidiaries have resulted in losses reported by
the Company for the six-months ended June 30, 1998.
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 second quarter and the first six months
compared with the same periods in the prior year,
- the outlook for dividends on common stock,
- changes in liquidity and capital resources during the second quarter
and first six months 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 3,
which present the results of operations for the quarters and the six month
periods ended June 30, 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 net income of $1.1 million for the quarter
ended June 30, 1998, and a net loss of $6.0 million for the first six
months of 1998. This compares with net income of $29.9 million in the
second quarter and $41.4 million for the first six months of 1997.
Our results in the second quarter of 1998 were affected primarily by
the following factors: losses from unregulated energy-related subsidiaries
($5.6 million after-tax), lower non-cash regulatory revenues ($3.1 million
pre-tax), and higher interest expense ($3.4 million pre-tax). Also, the
results in the second quarter of 1997 included the effect of the following
non-recurring items:
- $15.0 million net operating loss carryforward tax benefits,
- $10.2 million in pre-tax other income from a reversal of loss
provision, and
- $2.6 million in pre-tax consulting fees paid to NEV.
Excluding these adjustments, we would have recorded net income of $10.4
million in the second quarter of 1997. These changes are discussed in more
detail in Results of Operations and Investments in Energy-Related
Affiliates, below.
Our results in the first six months of 1998 were affected primarily by
the following factors: losses from unregulated energy-related subsidiaries
($9.7 million after-tax), lower non-cash regulatory revenues ($8.1 million
pre-tax), and higher interest expense ($7.6 million pre-tax). The results
of the first six months of 1997 also included the effects of the following
non-recurring items:
- $29.3 million net operating loss carryforward tax benefits,
- $10.2 million in pre-tax other income from a reversal of loss
provision,
- $2.9 million in pre-tax VSP expense, and
- $3.7 million in pre-tax consulting fees paid to NEV.
Excluding these adjustments, net income would have been $10.0 million in
the first six months of 1997. These factors are discussed in more detail in
Results of Operations and Investments in Energy-Related Affiliates, below.
The Company's and TEP's financial prospects are 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 three
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's financial prospects are also subject to uncertainties
relating to the start-up and developmental activities of the unregulated
energy-related affiliates. Although the Company's investments in
unregulated energy-related affiliates comprise less than 1% of total
assets, start-up costs and other subsidiary developmental activities have
contributed to losses from these activities in 1998. These losses have
contributed to the losses reported by the Company for the six-month period
ended June 30, 1998.
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 Competition, Retail; Shared Savings
Proposal; Investments in Energy-Related Affiliates; and Results of
Operations 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. On August 4, 1998, TEP issued bonds to
refinance all of the First Mortgage Bonds that prohibit the payment of
dividends, and called for the redemption of these bonds (which mature
between 1999 and 2003) on September 3, 1998. See Financing Developments,
TEP First Mortgage Bonds and Dividends on Common Stock, below.
Despite these improvements, TEP's and UniSource Energy's consolidated
capital structures remain highly leveraged and include $329 million of
variable rate debt obligations which will impact TEP's earnings and cash
flow if interest rates change.
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 August 7, 1998, cash balances, including cash equivalents for
UniSource Energy, were approximately $132 million, of which $102 million
was held by TEP and its consolidated subsidiaries.
COMPETITION
- -----------
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.
Retail Electric Competition Rules
In December 1996, the ACC adopted rules that require a phase-in of
retail electric competition in Arizona beginning January 1, 1999. The
rules were adopted as a framework to implement competition. On August 5,
1998 the ACC adopted amendments to the rules which, in part, provide a two-
year phase-in schedule in which all retail customers will have access to
competitive generation by January 1, 2001.
The key provisions of the rules include the following:
- Each Affected Utility shall make available at least 20% of its 1995
system retail peak demand for competitive generation supply on a
first-come, first-served basis, as follows: (1) All Affected Utility
customers with non-coincident peak demand load of 1 MW or greater will
be eligible for competitive electric services no later than January 1,
1999. (2) Groups of Affected Utility customers with individual non-
coincident peak load demands of 40 kW or greater aggregated into a
combined load of 1 MW or greater will also be eligible for competitive
service no later than January 1, 1999. Each Affected Utility shall
also offer a residential phase-in program with a minimum of 1/2 of 1%
of residential customers having access to competitive electric
services on January 1, 1999, with the number of customers eligible in
this program to increase by 1/2 of 1% every quarter until January 1,
2001. All retail customers shall be entitled to obtain competitive
electric services no later than January 1, 2001.
TEP currently serves about 80 customers who qualify under the 1 MW or
greater category described above, representing 351 MW of load. Of
this load, 60% is under contract through 2001.
- Each Affected Utility shall file a report detailing possible
mechanisms to provide benefits, such as rate reductions of 3% - 5%, to
all Standard Offer customers.
- Each Affected Utility shall make available to all customers in its
service territory Standard Offer bundled generation, transmission,
ancillary, distribution and other necessary services at regulated
rates. After January 1, 2001, Standard Offer service shall be
provided by the Affected Utilities, which will become Utility
Distribution Companies (UDCs), who shall also act as providers of last
resort.
- The Affected Utilities shall provide non-discriminatory open access to
transmission and distribution facilities to serve all customers. The
ACC supports the development of an Independent System Operator (ISO)
or, absent an ISO, an Independent Scheduling Administrator (ISA).
- All competitive generation assets and services shall be separated from
an Affected Utility prior to January 1, 2001. Such separation shall
either be to an unaffiliated party or to a separate corporate
affiliate or affiliates. If an Affected Utility chooses to transfer
its competitive generation assets or competitive services to a
competitive electric affiliate, such transfer shall be at a value
determined by the ACC to be fair and reasonable.
Appeal of ACC Order
In February 1997, TEP filed in the Arizona Superior Court an appeal
of the ACC order adopting the rules. TEP 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.
Stranded Cost Recovery
On June 22, 1998, the ACC adopted an order which outlines its policy
for stranded cost recovery by Arizona utilities in a competitive energy
market. The order is an amended version of the original order proposed by
the ACC Hearing Officer on May 6, 1998. The proposed order was discussed
in the Company's and TEP's Report on Form 10-Q for the period ended March
31, 1998.
The order provides two methods for stranded cost recovery for the
Affected Utilities: (1) Divestiture/Auction Methodology and (2) Transition
Revenues Methodology. The order encourages, but does not require, full
divestiture of generating assets through an auction to unaffiliated third
parties. The order states that only those Affected Utilities choosing
divestiture through the Auction/Divestiture Methodology shall have the
opportunity to recover 100% of unmitigated stranded costs. The key
components of the order are summarized below:
Divestiture/Auction Methodology
-------------------------------
- Affected Utilities choosing divestiture through the auction method
must file a divestiture plan for ACC approval no later than October 1,
1998. Divestiture must be completed by January 1, 2001.
- The amount of stranded costs shall be the difference between the value
of generation assets (generating plants, purchased power contracts,
fuel contracts, and related regulatory assets) under traditional
regulation and the market value of the assets after divestiture. The
definition of stranded costs shall include reasonable costs incurred
for premiums, penalties or other payments necessary to effect
divestiture, income tax ramifications of divestiture, redemption costs
associated with tax-exempt two-county debt which may have to be
redeemed upon transfer of the assets, and other reasonable costs
necessarily incurred to accomplish divestiture. Unmitigated stranded
costs shall also include reasonable employee severance and retraining
costs necessitated by electric competition.
- An Affected Utility shall be permitted to collect 100% of its stranded
costs, including a return on its unamortized balance over a ten-year
period, with a true-up mechanism.
- The ACC will work with the Affected Utility to provide sufficient
assurances in order to avoid triggering write-offs related to the
application of FAS 71.
- An Affected Utility's generation affiliate may acquire the generation
assets of its parent or sister company, or the generation assets of
another Affected Utility in the auction if it establishes that it is
the highest bidder and that the acquisition will not result in the
entity having more than 40% of the state's total generation megawatts
of capacity.
- An Affected Utility that divests all its generation costs to non-
affiliated entities, that results in negative stranded costs (not
including regulatory assets), shall be entitled to keep 50% of the
negative stranded costs.
- All Affected Utilities' customers shall pay their appropriate share of
stranded costs either through a Competitive Transition Charge (CTC) or
a standard offer rate, collected over a maximum of ten years.
Transition Revenues Methodology
-------------------------------
- The order states that "this option would be to provide sufficient
revenues necessary to maintain financial integrity, such as avoiding
default under currently existing financial instruments for a period of
ten years, at the end of which time there would be no remaining
stranded costs, or for the Commission to otherwise provide an
allocation of stranded cost responsibilities and risks between
ratepayers and shareholders as is determined to be in the public
interest for a given Affected Utility."
Each Affected Utility must file its choice of options for stranded
cost recovery by August 21, 1998. In addition, the Affected Utility will
need to file an implementation plan that would include the following items,
if appropriate, for their option choice: the estimation of stranded costs
separated out into regulatory assets and other generation related assets; a
preliminary plan for auction/divestiture; the minimum financial ratios to
maintain financial viability for ten years; the amount of regulatory assets
requested, how much of those assets are generation related, and the
Commission Decision Number that approved such assets; and other information
as necessary.
TEP will cease to account for its generation operations using FAS 71
at the time the ACC approves a cost recovery plan specific to TEP,
including the specific amount of stranded costs that TEP can recover and a
determination of a cost recovery method. The amount and method of recovery
that the ACC approves for TEP will determine whether write-offs will be
incurred at that time. The ACC is not expected to make a final
determination of a stranded cost recovery plan for TEP until at least the
fourth quarter of 1998. We are unable to predict the amount of write-offs,
if any, that may be incurred at that time.
State and Federal Legislative Initiatives on Retail Electric
Competition
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 was
passed by the Arizona State Legislature and signed by the Governor in May
1998. The legislation requires 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 public-power entities such as SRP; however, the bill encourages
broader application of the legislation's principles by the ACC to the
state's investor-owned utilities, including TEP, and cooperatives.
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. Congress is not expected to act on the
legislation in 1998. 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.
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
ISO for the region. An ISO would be responsible for ensuring transmission
reliability and nondiscriminatory access to the regional transmission grid.
Over 50 participants have signed a Development Agreement and expect to
complete the detailed developmental work by the end of 1998. 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.
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 an equal 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 $86.3 million and $88.7 million at June 30, 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.
ACCOUNTING FOR THE EFFECTS OF REGULATION
- ----------------------------------------
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 expenses be charged to customers in the
future. In this situation, FAS 71 requires that TEP not show these
expenses on its current income statements but "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 regulators.
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. In that event, 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
June 30, 1998, if we ceased to apply FAS 71 to all of TEP's regulated
operations, we would record an extraordinary loss of approximately $152
million, net of the related deferred income tax benefit of $103 million.
While our cash flows may be affected by regulatory orders and market
conditions, our cash flows would not be affected if we ceased to apply FAS
71.
If we cease to apply 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.
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
cease to account 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 concluded 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.
On June 22, 1998, the ACC adopted an order which outlines its policy
for stranded cost recovery by Arizona utilities in a competitive energy
market. On August 5, 1998, the ACC adopted amendments to the Retail
Electric Competition Rules which, in part, provide a two-year phase-in
schedule in which all retail customers will have access to competitive
generation by January 1, 2001. See Competition, Retail for a discussion of
the ACC order regarding stranded cost recovery and the ACC competition
rules.
TEP will cease to account for its generation operations using FAS 71
at the time the ACC approves a cost recovery plan specific to TEP,
including the specific amount of stranded costs that TEP can recover and a
cost recovery method. The amount and method of recovery that the ACC
approves for TEP will determine whether write-offs will be incurred at that
time. The ACC is not expected to approve a final stranded cost recovery
plan for TEP until at least the fourth quarter of 1998. We are unable to
predict the amount of write-offs, if any, that may be incurred at that
time.
In May 1998, the Arizona Legislature passed and the Governor signed a
bill regarding retail electric competition in Arizona. See Competition,
Retail for a discussion of legislative initiatives on retail competition.
INVESTMENTS IN ENERGY-RELATED AFFILIATES
- ----------------------------------------
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:
- Nations Energy Corporation (Nations Energy) develops independent power
projects worldwide.
- 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 June 30, 1998, NEV had contracts to
purchase energy for and sell energy to customers principally in
California and New York with a combined electrical demand of more that
1,500 MW. NEV began serving its California customers on March 31,
1998 when the California retail electricity market opened to
competition.
- 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.
- 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 $5.6
million for the second quarter and $9.7 million for the first six months of
1998. This loss is included in the Other Income (Deductions) section on
UniSource Energy's income statement. Almost all of MEH's losses in both
the second quarter and first six months 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. Start-up costs associated with expansion into
additional regions of the country also contributed to the losses in the
first half of 1998. Although the delays in establishment of the
competitive market caused losses at NEV in the first six months, NEV
expects losses to decline as more customers are added throughout the year.
From September 1997, the inception of Millennium's ownership
in NEV, through June 30, 1998, Millennium recorded approximately $23.8
million of NEV losses. The amount equals the total funds and commitments
provided by Millennium and UniSource Energy to NEV. Accounting principles
limit the amount of the loss to be recorded by Millennium to the total
amount invested and committed by Millennium and UniSource Energy. Under
its current obligations, NEV is expected to continue to incur losses and
require additional funds to fulfill its obligations. Should Millennium or
UniSource Energy provide additional funding to NEV, the amounts provided
would need to be immediately expensed if NEV has incurred losses in excess
of $23.8 million since September 1997. NEV is seeking sources other than
Millennium and UniSource Energy to provide necessary funding. There can be
no assurance that any such financing will be obtained.
Depending on the nature of future investment opportunities, we expect
to make additional investments in energy-related ventures. The ACC Holding
Company Order requires that the capitalization (debt and equity) of the
Company's affiliates other than TEP 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. As described below, TEP has called for the redemption of
those First Mortgage Bonds which have covenants restricting the payment of
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
On August 4, 1998, TEP called for the redemption on September 3, 1998
of the five outstanding issues of First Mortgage Bonds (aggregating $137
million in principal amount) which prevent TEP from paying dividends unless
specific cash flow coverage and retained earnings tests are met. As of
June 30, 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 redeemed.
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 June 30, 1998, the required minimum net worth was $169
million. TEP's actual net worth at June 30, 1998 was $223.7 million. See
Financing Developments, TEP Credit Agreement, below. As of June 30, 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 June 30, 1998, TEP's equity ratio on that basis was 15.6%.
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 net income of $1.1 million in the second
quarter of 1998 compared with net income of $29.9 million in the second
quarter of 1997. Net income per average share of Common Stock was $0.03
for the second quarter of 1998 compared with net income per average share
of Common Stock of $0.93 for the second quarter of 1997. Net income would
have been $10.4 million or $0.32 per share in the second quarter of 1997 if
the recognition of tax benefits and other one-time adjustments had been
excluded. The major reasons for the variance between the results for the
second quarter of 1998 and the adjusted results for the second quarter of
1997 were:
- higher losses from investments in unregulated energy-related
businesses,
- lower retail sales due to mild weather conditions,
- lower non-cash regulatory revenues, and
- higher interest expense.
For the first six months of 1998, the Company recorded a net loss of
$6.0 million, compared with net income of $41.4 million for the first six
months of 1997. The net loss per average share of Common Stock was $0.19
for the first six months of 1998 compared with net income per average share
of Common Stock of $1.29 for the first six months of 1997. We would have
recorded net income of $10.0 million or $0.31 per share in the first six
months 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 half of 1998 and the adjusted results for the first half of 1997
were the same factors that impacted the second quarter as described above.
TEP recorded net income of $8.1 million for the second quarter of
1998, compared with net income of $29.9 million in the second quarter of
1997. The second quarter earnings decrease was primarily attributable to
lower tax benefit recognition, nonrecurring items, lower retail sales due
to mild weather conditions, lower non-cash regulatory revenues and higher
interest expense from refinancings. Earnings for the six-months ended June
30, 1998 were $6.5 million, compared with net income of $41.4 million for
the same period in 1997. Earnings for the six-month period were affected
by the same factors as discussed above for the second quarter.
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 June 30 1998 1997 Amount Percent
- -------------------------- ---- ---- ----- -------
<S> <C> <C> <C> <C>
Electric kWh Sales (000):
Retail Customers 1,819,112 1,886,216 (67,104) (3.6)%
Sales for Resale 1,036,756 749,074 287,682 38.4
--------- --------- -------
Total 2,855,868 2,635,290 220,578 8.4
Electric Revenues (000):
Retail Customers $150,735 $159,249 $(8,514) (5.3)%
Amortization of MSR Option
Gain Regulatory Liability 0 3,092 (3,092) (100.0)
Sales for Resale 28,951 20,629 8,322 40.3
-------- -------- -------
Total $179,686 $182,970 $(3,284) (1.8)
</TABLE>
<TABLE>
<CAPTION>
Increase/(Decrease)
-------------------
Six Months Ended June 30 1998 1997 Amount Percent
- ------------------------ ---- ---- ----- -------
<S> <C> <C> <C> <C>
Electric kWh Sales (000):
Retail Customers 3,609,421 3,508,657 100,764 2.9%
Sales for Resale 1,886,888 1,464,261 422,627 28.9
--------- --------- -------
Total 5,496,309 4,972,918 523,391 10.5
Electric Revenues (000):
Retail Customers $288,884 $289,186 $(302) (0.1)%
Amortization of MSR Option
Gain Regulatory Liability 0 8,105 (8,105) (100.0)
Sales for Resale 51,805 39,960 11,845 29.6
-------- -------- ------
Total $340,689 $337,251 $3,438 1.0
</TABLE>
TEP's kWh sales to retail customers decreased by 3.6% during the
second quarter of 1998 compared with the second quarter of 1997. Although
TEP experienced retail customer growth of 1.8%, moderate weather conditions
in the quarter contributed to the decline in retail kWh sales. Based on
cooling degree days, a commonly used measure in the electric industry that
is calculated by subtracting 75 from the average of the high and low daily
temperatures, the Tucson area registered a decrease of approximately 36% in
cooling degree days for the second quarter of 1998 compared with the same
period in 1997, and a decrease of approximately 41% in cooling degree days
compared with the ten year average for the same period from 1988 to 1997.
Cooling degree days for the second quarter of 1998 were 256, compared to
402 for the second quarter of 1997 and 435 for the ten-year average.
For the first six months of 1998, kWh sales to retail customers were
2.9% higher than the same period in 1997. Although the weather was milder
in the second quarter, which reduced retail electric usage, the weather in
the first quarter was cooler than in 1997, which increased the electric
heating load for that quarter. KWh sales to the Company's mining customers
also increased for the six-month period of 1998 due to contract amendments
that went into effect in mid-1997.
Revenues from sales to retail customers decreased by 5.3% in the
second quarter of 1998 compared to the same period in 1997 because of the
lower kWh sales. This decrease in retail revenues is slightly larger than
the decrease 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. Retail revenues for the six-month period of 1998 were
relatively flat, with the increase in kWh sales noted above offset by the
impacts of lower rates under long-term contracts to large customers.
The lower retail demand in the second quarter allowed TEP to increase
its wholesale sales activity. Our kWh sales for resale increased by 38.4%
and the related revenues grew by 40.3% in the second quarter of 1998
relative to the same period in 1997. For the six months ending June 30,
1998, sales for resale were up 28.9% and wholesale revenues increased 29.6%
compared to the same period in 1997.
Retail electric sales rebounded in late June and in July 1998, as a
result of higher summer temperatures and increased humidity in TEP's retail
service territory. On July 16, 1998, TEP set a record for retail
electricity sold in a 24-hour period, distributing 33,959 megawatt-hours to
its retail customers, a 7.0% increase over the previous record set in 1997.
In addition, on July 16, 1998, TEP experienced a new record peak demand of
1,786 MW, an increase of 7.7% over the previous record of 1,659 MW set on
August 10, 1997.
TEP's non-cash revenue from the Amortization of the MSR Option Gain
Regulatory Liability was $3.1 million lower in the second quarter and $8.1
million lower in the first half of 1998 compared to the same periods 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 unchanged in the second quarter and 3.5% higher in the first
half of 1998 than the same periods in 1997.
Operating Expenses
Fuel and Purchased Power expense increased by 10% in the second
quarter and 8% in the first half of 1998 compared with the same period in
1997 because of the increased purchased power to support the higher
wholesale sales we discussed above. If we exclude the growth in Fuel
and Purchased Power expense, other operating expenses decreased in total by
5% in the second quarter and by 2% in the first half of 1998 over the same
periods in 1997.
Maintenance and Repairs expense was lower in both the second quarter
and first half of 1998 than in the same periods of 1997. Maintenance
expense was higher for those periods in 1997 due to scheduled maintenance
work at the Springerville station.
Other Income (Deductions)
UniSource Energy and TEP recognized $15 million of NOL benefit in the
second quarter of 1997 and none in 1998. This reduced benefit recognition,
offset by lower tax expense resulting from decreased income, caused the
second quarter 1998 income tax benefits included in Other Income
(Deductions) to decrease by $4.7 million and $9.3 million for UniSource
Energy and TEP, respectively, from the second quarter of 1997.
Compared with the first six months of 1997, 1998 income tax benefits
included in Other Income (Deductions) decreased by $17.0 million and $25.4
million for UniSource Energy and TEP, respectively. These changes are
mainly due to lower recognition of Net Operating Loss (NOL) benefits offset
by greater tax benefits as a result of lower income. UniSource Energy and
TEP recognized $29.3 million of NOL benefit in the first six months of 1997
and none in 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.
A Reversal of Loss Provision of $10.2 million was recorded in the
second quarter of 1997. The Reversal of Loss Provision relates to the
dissolution of a subsidiary which formed part of TEP's former investment
operations.
Other Income for TEP includes interest income on the promissory note
it received from the Company in exchange for the transfer of its stock in
MEH. See Note 3 of Notes to the Condensed Consolidated Financial
Statement--Transfer of MEH from TEP to UniSource Energy. TEP recorded
interest income of $2.3 million in the second quarter and $4.6 million in
the first half of 1998 from this note. On the Consolidated Statement of
Income for the Company, this income is eliminated as an inter-company
transaction.
The unregulated energy subsidiaries owned by MEH reported a net loss
of $5.6 million for the second quarter and $9.7 million for the first half
of 1998, compared with net income of $0.5 million in the second quarter and
a net loss of $0.4 million for the first half of 1997. The delayed
implementation of California's competitive electricity market until March
31, 1998, expansion into additional regions of the country, and other
subsidiary development activities affected the financial results for these
businesses. See Investments in Energy-Related Affiliates.
Interest Expense
Interest expense increased by $3.4 million in the second quarter and
by $7.6 million of the first six months of 1998 relative to the same
periods in 1997. Higher letter of credit fees for 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 accounted
for the increase. (See Financing Developments, TEP Sale of Bonds, below).
These refinancings benefit 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, the lease on three internal combustion turbine
generating units having a combined generating capacity of 96 MW ended. TEP
is in the process of evaluating the need for this type of peaking
generation resource in the near term. 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 $43.9 million, or 50% during
the twelve months ended June 30, 1998. The June 30, 1998 ending balance
was $132.1 million compared with the June 30, 1997 ending balance of $88.2
million. For the twelve-month period ended June 30, 1998, net cash flows
from operating activities exceeded the cash needed for investing and
financing activities.
Net cash flows from operating activities increased in aggregate by
$27.5 million in the first six months of 1998 compared with the same period
in 1997. This increase was mainly due to the payment of $30 million in
contract termination fees to the Springerville coal supplier in the first
half of 1997 compared to $10.0 million paid to the coal supplier in the
first half of 1998 (see Note 6 of Notes to Condensed Consolidated Financial
Statements--Rate Matters). In addition to the contract termination fees,
we received $11.3 million in June 1998 from the sale of emission
allowances.
Total net cash outflows from investing activities increased by $12.5
million during the first half of 1998 compared with the same period in
1997. An $8.9 million increase in Investments in Joint Ventures and a $4.4
million increase in Construction Expenditures were the primary reasons for
this change.
Total net cash outflows from financing activities decreased by $13.0
million in the first half of 1998 compared with the same period in 1997.
Net retirements of long-term debt and capital lease obligations were
greater in the first half of 1997, primarily due to the repayment of the
$31 million balance outstanding on TEP's Renewable Term Loan.
Our consolidated cash balance, including cash equivalents, at August
7, 1998 was approximately $132 million. Of this amount, $102 million was
held by TEP and its wholly-owned subsidiaries. These amounts exclude the
proceeds from the sale of TEP's First Collateral Trust Bonds on August 4,
1998, which will be used for the redemption of five series of First
Mortgage Bonds on September 3, 1998 (see Financing Developments, TEP First
Mortgage Bonds, below). 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 increased by $15.0 million, or 17%, from the
June 30, 1997 ending balance of $88.2 million to the June 30, 1998 ending
balance of $103.2 million. 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 August 7, 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. The
proceeds were 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). 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 were supported by a letter of credit.
This LOC was collateralized by Second Mortgage Bonds under the terms of
TEP's Credit Agreement. When TEP redeemed these bonds, the Letter of
Credit Facility decreased from $444 million to $341 million and the Second
Mortgage Bonds collateralizing those LOCs decreased by $103 million. The
1981 Series B Apache Bonds were supported by a letter of credit outside of
the Credit Agreement. This LOC was collateralized by First Mortgage Bonds.
When TEP redeemed these bonds, it eliminated the supporting LOC and retired
$103 million of First Mortgage Bonds collateralizing the LOC.
TEP Credit Agreement
As of June 30, 1998 and as of August 7, 1998, TEP had no borrowings
outstanding under its $100 million Revolving Credit Facility.
As described above in TEP Sale of Bonds, after TEP redeemed the 1981
Series A Apache County Pollution Control Revenue Bonds on May 15, 1998, the
amount of its Letter of Credit Facility decreased to $341 million and the
amount of its total facilities under the Credit Agreement, which includes
the Revolving Credit Facility discussed above, decreased to $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 June 30, 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 complete these transactions
by the end of the third quarter 1998. TEP's objective is to extend
maturities and eliminate certain restrictive covenants contained in the
existing First Mortgage Bonds.
On May 15, 1998, TEP exchanged $46.9 million of its existing 12.22%
First Mortgage Bonds due 2000 for an identical amount of new 12.22%
Exchange Series First Mortgage Bonds due 2000. With the exception of the
elimination of a covenant restricting the payment of dividends, the new
bonds have substantially the same terms and conditions as the existing
bonds.
On August 4, 1998, TEP issued $140 million of First Collateral Trust
Bonds, Series A, and will use the proceeds on September 3, 1998 to redeem
all of its First Mortgage Bonds due in 1999, 2001, 2002, and 2003, as well
as the $31.9 million of 12.22% First Mortgage Bonds due 2000 not tendered
for exchange as described above. The bonds to be redeemed bear interest at
rates ranging from 7.55% to 12.22%. When TEP redeems the bonds as
described above, TEP will have eliminated covenants that currently prohibit
it from paying common stock dividends so long as it has an accumulated
earnings deficit (see Dividends on Common Stock). The First Collateral
Trust Bonds, Series A bear interest at 7.50% and mature in 2008. The First
Collateral Trust Bonds are not secured by a direct mortgage or other lien
on property of TEP, but instead are collateralized by an equal aggregate
principal amount of bonds issued under TEP's General First Mortgage and
held by the trustee. If and when the bonds collateralizing the First
Collateral Trust bonds constitute all bonds outstanding under TEP's General
First Mortgage, the bonds issued under the General First Mortgage may be
surrendered and substituted with an equal amount of bonds issued under the
General Second Mortgage. If and when the bonds collateralizing the First
Collateral Trust bonds constitute all bonds outstanding under the General
Second Mortgage, the bonds may be surrendered and the First Collateral
Trust Bonds, Series A will become unsecured obligations of TEP.
UniSource Energy--Loans and Guarantees
In December 1997, Millennium committed to provide NEV with $20 million
of funding. At July 31, 1998, NEV had received the following under the $20
million commitment:
- Millennium provided $10 million in loans to NEV.
- Millennium provided $4 million for NEV preferred equity.
- UniSource Energy issued guarantees in the aggregate amount of $5.5
million to secure the obligations of NEV to counterparties to energy
purchase and sale agreements.
As a result of these loans and guarantees, the remaining commitment amount
available was $0.5 million at July 31, 1998.
UniSource Energy is the guarantor of $32.8 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.
In August 1998, UniSource Energy agreed to guarantee a $10 million
loan that NEV obtained from an unrelated party. The debt underlying the
guarantee is not due until 1999.
IMPACT OF YEAR 2000 ON COMPUTER SYSTEMS AND APPLICATIONS
- --------------------------------------------------------
The Company continues to review, test and make modifications to its
computer systems and applications in an effort to ensure that its
generation, transmission and distribution facilities will provide
uninterrupted service and that year 2000 transactions can be processed.
The Company's year 2000 program commenced in 1996.
We have completed an inventory and assessment for each of our critical
enterprise information systems. The remediation of these systems began in
1996 and is expected to be completed by the end of 1998, including testing
and implementation.
We are reviewing 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. We anticipate
the inventory and assessment stages of the control and embedded systems
program to be substantially completed in the third quarter of 1998. We
expect remediation efforts to begin in the third quarter of 1998 and to
be substantially completed by the end of the second quarter of 1999.
The Company intends to begin contingency planning to attempt to address
the possibility that not all remediation efforts will succeed.
The Company has also 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.
Such interconnected systems are critical to the reliability and integrity
of each interconnected electric service provider. It is possible that the
failure of one such interconnected provider to achieve year 2000 compliance
could disrupt the provision of electric services by others. TEP and other
providers in the WSCC are working together in an effort to avoid such
disruptions.
From 1996 through June 30, 1998, year 2000 project costs of
approximately $600,000 have been incurred, all of which were expensed. A
budget of $1.35 million has been established for year 2000 project costs.
All 2000 remediation costs will be expensed as incurred.
At this time we believe that all identified modifications to systems
which the Company operates will be made within the required time frames.
Notwithstanding the Company's efforts, there can be no assurance that all
year 2000 problems with systems the Company operates will be identified and
remediated in a timely fashion. Although the Company believes that, as a
result of its year 2000 program, any problems arising from the failure to
achieve year 2000 compliance will be minor, it is possible that non-
compliance could disrupt the generation, transmission or distribution of
electric energy. 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 4. -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------------------------
The Company conducted its Annual Meeting of Shareholders on May 8,
1998. At that meeting, the shareholders of the Company elected members of
the Board of Directors.
The total votes were as follows:
<TABLE>
Against Broker
(i)Election of Directors For or Withheld Abstain Non-Votes
- ------------------------ --- ---------- ------- ---------
<S> <C> <C> <C> <C>
Charles E. Bayless 29,532,611 470,128 -- --
Larry W. Bickle 29,553,180 449,559 -- --
Elizabeth T. Bilby 29,539,126 463,613 -- --
Harold W. Burlingame 29,555,633 447,106 -- --
Jose L. Canchola 29,524,772 477,967 -- --
John L. Carter 29,579,686 423,053 -- --
John A. Jeter 29,543,949 458,790 -- --
R. B. O'Rielly 29,514,936 487,803 -- --
Martha R. Seger 29,547,476 455,263 -- --
H. Wilson Sundt 29,541,023 461,716 -- --
</TABLE>
ITEM 5. - OTHER INFORMATION
- -----------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
UniSource Energy
Daniel W. L. Fessler was elected to the Board of Directors effective
May 8, 1998. Mr. Fessler, 56, was the President of the California Public
Utilities Commission from 1991 to 1996, and is a partner in the law firm of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., in San Francisco, CA.
James S. Pignatelli was elected Chairman, President and Chief
Executive Officer of the Company effective July 6, 1998, replacing Charles
E. Bayless, who accepted the positions of Chairman, President and CEO of
Illinova Corporation, in Decatur, IL. Mr. Pignatelli had been Senior Vice
President and Chief Operating Officer of TEP since 1996. He was named
UniSource Energy Senior Vice President and Chief Operating Officer upon
formation of UniSource Energy as TEP's holding company. In 1998, he was
named TEP Executive Vice President and was elected to TEP's Board of
Directors.
Ira R. Adler was named Executive Vice President and elected to the
Company's Board of Directors effective July 6, 1998. Mr. Adler had been
Senior Vice President and Chief Financial Officer of TEP since 1990. He
was named UniSource Energy Senior Vice President and Chief Financial
Officer upon formation of UniSource Energy as TEP's holding company. In
1998, he was named TEP Executive Vice President and was elected to TEP's
Board of Directors.
TEP
James S. Pignatelli was elected Chairman, President and Chief
Executive Officer of TEP effective July 6, 1998, replacing Charles E.
Bayless.
George W. Miraben was named Executive Vice President and elected to
TEP's Board of Directors effective July 6, 1998. Mr. Miraben has been
Senior Vice President of Policy and Human Resources since 1996.
The Board of Directors of TEP consists of Mr. Pignatelli, Mr. Adler,
Mr. Miraben, and the following members (who are also members of the
UniSource Energy Board of Directors): Elizabeth T. Bilby, Harold W.
Burlingame, John L. Carter, John A. Jeter, and Martha R. Seger.
SHAREHOLDER PROPOSAL DEADLINE FOR 1999 ANNUAL MEETING
Rule 14a-4 of the Securities and Exchange Commission's proxy rules
allows the Company to use discretionary voting authority to vote on a
matter coming before an annual meeting of the shareholders which are not
included in the Company's proxy statement, if the Company does not have
notice of the matter at least 45 days before the date on which the Company
first mailed its proxy materials for the prior year's annual meeting of the
shareholders. In addition, discretionary voting authority may generally
also be used if the Company receives timely notice of such matter (as
described in the preceding sentence) and if, in the proxy statement, the
Company describes the nature of such matter and how the Company intends to
exercise its discretion to vote on such matter. Accordingly, for the 1999
Annual Meeting of the Company, any such notice must be submitted to the
Secretary of the Company on or before February 13, 1999.
This requirement is separate and apart from the Securities and
Exchange Commission's requirements that a shareholder must meet in order to
have a shareholder proposal included in the Company's proxy statement.
Shareholder proposals intended to be presented at the 1999 Annual Meeting
of the Company must be received by the Company no later than December 2,
1998 in order to be eligible for inclusion in the Company's proxy statement
and the form of proxy relating to that meeting.
ADDITIONAL FINANCIAL DATA
The following table reflects the ratio of earnings to fixed charges for
TEP:
12 Months Ended
---------------
June 30, December 31,
1998 1997
---- ----
Ratio of Earnings to Fixed 1.32 1.39
Charges
ITEM 6. -- EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------------------------------------------
(a) Exhibits.
-- See Exhibit Index.
(b) Reports on Form 8-K.
-- Dated June 26, 1998, reporting on the ACC order regarding stranded
cost recovery and certain changes in Executive Officers and
Directors of the Registrants.
-- Dated July 16, 1998, reporting on the Proposed Revisions of the
Retail Electric Competition Rules before the ACC.
-- Dated July 22, 1998 reporting on the Earnings for the Second
Quarter 1998 of the Registrants.
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: August 13, 1998 Ira R. Adler
-------------------------------
Ira R. Adler
Executive Vice President and Principal
Financial Officer
TUCSON ELECTRIC POWER COMPANY
------------------------------
(Registrant)
Date: August 13, 1998 Ira R. Adler
-------------------------------
Ira R. Adler
Executive Vice President and Principal
Financial Officer
EXHIBIT INDEX
4(a)- Thirty-third Supplemental Indenture, dated as of May 1,
1998.
4(b)- Thirty-fourth Supplemental Indenture dated as of August 1,
1998.
4(c)- Supplemental Indenture No. 3 creating a series of bonds
designated Second Mortgage Bonds, Collateral Series, dated as of
August 1,1998.
4(d)- Indenture of Trust, dated as of August 1, 1998, between TEP and
the Bank of Montreal Trust Company.
11 - Statement re computation of per share earnings - UniSource
Energy.
12 - Computation of Ratio of Earnings to Fixed Charges - TEP.
15(a)- Letter regarding unaudited interim financial information
(PricewaterhouseCoopers LLP).
15(b)- Letter regarding unaudited interim financial information
(Deloitte &Touche LLP).
27(a)- Financial Data Schedule - UniSource Energy.
27(b)- Financial Data Schedule - TEP.
Exhibit 15(a)
August 12, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that our report dated August 4, 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, 333-43769, 333-53309,
333-53333 and 333-53337) and by Tucson Electric Power Company in
the Prospectus constituting part of its Post Effective Amendment
No. 1 to the 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,
PricewaterhouseCoopers LLP
Phoenix, Arizona
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000941138
<NAME> UNISOURCE ENERGY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,922,924
<OTHER-PROPERTY-AND-INVEST> 76,694
<TOTAL-CURRENT-ASSETS> 296,850
<TOTAL-DEFERRED-CHARGES> 317,427
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,613,895
<COMMON> 638,847
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (428,003)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 210,844
0
0
<LONG-TERM-DEBT-NET> 1,211,795
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,225
0
<CAPITAL-LEASE-OBLIGATIONS> 884,720
<LEASES-CURRENT> 13,578
<OTHER-ITEMS-CAPITAL-AND-LIAB> 291,733
<TOT-CAPITALIZATION-AND-LIAB> 2,613,895
<GROSS-OPERATING-REVENUE> 340,544
<INCOME-TAX-EXPENSE> 1,101
<OTHER-OPERATING-EXPENSES> 285,757
<TOTAL-OPERATING-EXPENSES> 286,858
<OPERATING-INCOME-LOSS> 53,686
<OTHER-INCOME-NET> (116)
<INCOME-BEFORE-INTEREST-EXPEN> 53,570
<TOTAL-INTEREST-EXPENSE> 59,547
<NET-INCOME> (5,977)
0
<EARNINGS-AVAILABLE-FOR-COMM> (5,977)
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 44,892
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
Exhibit 4(a)
THIRTY-THIRD SUPPLEMENTAL INDENTURE
Dated as of May 1, 1998
TUCSON ELECTRIC POWER COMPANY
to
THE CHASE MANHATTAN BANK,
As Trustee
Creating a New Issue of First Mortgage Bonds,
12.22% Exchange Series due 2000
Supplemental to Indenture dated as of April 1, 1941, of
The Tucson Gas, Electric Light and Power Company (predecessor
to Tucson Electric Power Company), to The Chase National Bank of the
City of New York, as Trustee (predecessor to The Chase Manhattan Bank).
<PAGE>
THIRTY-THIRD SUPPLEMENTAL INDENTURE, dated as of May 1, 1998, made by
and between Tucson Electric Power Company ("Company"), a corporation
organized and existing under the laws of the State of Arizona, having its
principal place of business at 220 West Sixth Street, in the City of Tucson,
Arizona, party of the first part, and THE CHASE MANHATTAN BANK ("Trustee"),
a banking corporation organized and doing business under the laws of the
State of New York, having its principal corporate trust office at 450 W.
33rd Street, New York, N.Y., as Trustee, party of the second part.
WHEREAS, The Tucson Gas, Electric Light and Power Company, predecessor
of the Company and herein called the "Predecessor Company", heretofore
executed and delivered to The Chase National Bank of the City of New York,
as Trustee ("Predecessor Trustee"), its Indenture dated as of April 1, 1941
("Original Indenture") to secure its First Mortgage Bonds, issuable in
series; and
WHEREAS, on March 31, 1955 The Chase National Bank of the City of New
York was merged into President and Directors of the Manhattan Company under
the name of The Chase Manhattan Bank, and The Chase Manhattan Bank became
the successor Trustee under the Original Indenture as supplemented and
amended; and
WHEREAS, on February 20, 1964 the Predecessor Company was merged with
and into the Company and the Company assumed and agreed to pay the principal
of and premium, if any, and interest on all bonds then issued and
outstanding under the Indenture, also agreeing to perform and fulfill all
the covenants and conditions of the Indenture binding upon the Predecessor
Company, and also agreeing that the Company succeed and be substituted for
the Predecessor Company under the Indenture; and
WHEREAS, on September 9, 1965 The Chase Manhattan Bank became The Chase
Manhattan Bank (National Association) and the continuity of the business of
The Chase Manhattan Bank including its business of acting as corporate
trustee, and its corporate existence, was not affected, so that The Chase
Manhattan Bank (National Association) was vested with all the trusts,
powers, discretions, immunities, privileges and all other matters as were
vested in the Predecessor Trustee under the Indenture, with like effect as
if originally named as Trustee therein; and
WHEREAS, on July 14, 1996 The Chase Manhattan Bank (National
Association) merged with and into Chemical Bank and the surviving
corporation was renamed The Chase Manhattan Bank and The Chase Manhattan
Bank became the successor Trustee under the Indenture so that The Chase
Manhattan Bank is vested with all the trusts, powers, discretions,
immunities, privileges and all other matters as were vested in the
Predecessor Trustee under the Indenture, with like effect as if originally
named as Trustee therein; and
WHEREAS, the Company (or the Predecessor Company) has heretofore
executed and delivered to the Trustee (or the Predecessor Trustee) the
Original Indenture and the indentures supplemental thereto, and has issued
the series of bonds, set forth below:
<PAGE>
<TABLE>
<CAPTION>
Principal Principal
Indenture or Series Amount Amount Out-
Supplemental Date of Bonds Issued standing
Indenture
- ------------------------- ------------- ---------------------- -------------- --------------------
<S> <C> <C> <C> <C>
Original Apr. 1, 1941 3 1/2% Series due 1966 $ 3,500,000 None
1 First Oct. 1, 1946 None None None
Second Oct, 1, 1947 3 1/8% Series due 1977 750,000 None
2,4,5 Third Apr. 1, 1949 3 1/8% Series due 1979 3,500,000 None
4,5 Fourth Dec. 1, 1952 3 5/8% Series due 1982 5,000,000 None
4,5 Fifth Jan. 1, 1955 3 1/4% Series due 1985 3,500,000 None
4,5 Sixth Jan. 1, 1958 4 5/8% Series due 1988 7,500,000 None
1,4,5 Seventh Nov. 1, 1959 5 3/8% Series due 1989 7,500,000 None
1,4,5 Eighth Nov. 1, 1961 4.70% Series due 1991 10,000,000 None
6 Ninth Feb. 20, 1964 None None None
1,4,5 Tenth Feb. 1, 1965 4.55% Series due 1995 16,000,000 None
1,4,5 Eleventh Feb. 1, 1966 4 7/8% Series due 1996 10,000,000 None
2,3,4,5 Twelfth Nov. 1. 1969 8 1/2% Series due 1999 15,000,000 15,000,000
2 Thirteenth Jan. 20. 1970 None None None
2,4,5 Fourteenth Sept. 1, 1971 8 1/8% Series due 2001 25,000,000 25,000,000
4,5 Fifteenth Mar. 1, 1972 7.55% Series due 2002 25,000,000 25,000,000
4,5 Sixteenth May 1, 1973 7.65% Series due 2003 40,000,000 40,000,000
1,4,5 Seventeenth Nov. 1, 1975 10 1/2% Series due 2005 50,000,000 None
1 Eighteenth Nov. 1, 1975 Poll. Control Series A 15,700,000 None
Nineteenth July 1, 1976 Poll. Control Series B 25,000,000 24,000,000
1,2,4 Twentieth Oct. 1, 1977 8 1/2% Series due 2009 60,000,000 60,000,000
Twenty-First Nov. 1, 1977 Poll. Control Series C 32,500,000 None
Twenty-Second Jan. 1, 1978 Poll. Control Series D 40,000,000 40,000,000
Twenty-Third July 1, 1980 Poll. Control Series E 16,300,000 None
Twenty-Fourth Oct. 1, 1980 Poll. Control Series F 100,000,000 None
2 Twenty-Fifth Apr. 1, 1981 Poll. Control Series A 126,000,000 None
1 Twenty-Sixth Apr. 1, 1981 Poll. Control Series B 163,000,000 None
1,2 Twenty-Seventh Oct. 1, 1981 Poll. Control Series G 100,000,000 100,000,000
7 Twenty-Eighth June 1, 1990 12.22% Series due 2000 96,000,000 78,750,000
Twenty-Ninth Dec. 1, 1992 Poll. Control Series H 3,561,644 3,561,644
Thirtieth Dec. 1, 1992 Ind. Develop. Series C 20,722,222.22 None
Thirty-First May 1, 1996 Poll. Control Series I 18,347,124 None
Thirty-Second May 1, 1996 Poll. Control Series J 16,149,864 None
<FN>
1 Contains amendatory provisions relating to specific series.
2 Contains general amendatory provisions.
3 Contains general amendatory provisions required by the Trust Indenture
Act of 1939, as amended.
4 Incorporates covenant regarding replacement reserve (Section 9, Article
IV, of Original Indenture).
5 Contains (or incorporates) Covenant regarding distributions on and
acquisitions of stock (Article V of Third Supplemental Indenture).
6 Contains assumption provisions.
7 Contains modified covenant regarding distributions on and acquisitions
of stock and negative covenants regarding liens, businesses other than
the Utility Business and Investments.
</TABLE>
<PAGE>
(the Original Indenture, the Supplemental Indentures listed above and this
Supplemental Indenture being herein collectively referred to as the
"Indenture"); and
WHEREAS, the Predecessor Company covenanted in and by the Original
Indenture to execute and deliver such further instruments and do such
further acts as may be necessary or proper to carry out more effectually the
purposes of the Original Indenture and to make subject to the lien thereof
property acquired after the execution and delivery of the Original
Indenture; and
WHEREAS, the Company proposes to create a new series of First Mortgage
Bonds, to mature June 1, 2000, to be designated as First Mortgage Bonds,
12.22% Exchange Series due 2000 (hereinafter sometimes called the "Bonds" or
"Bonds of the 2000 Exchange Series"), and to vary in certain respects the
provisions contained in Article V of the Original Indenture, to the extent
that such provisions apply to the Bonds; and
WHEREAS, the Company, pursuant to the provisions of the Original
Indenture, has, by appropriate corporate action, duly resolved and
determined to execute this Supplemental Indenture for the purpose of
providing for the creation of said Bonds of the 2000 Exchange Series and of
specifying the form, provisions and particulars thereof as in said Original
Indenture provided or permitted and of giving to the Bonds of the 2000
Exchange Series the protection and security of the Indenture, and of further
confirming the lien of the Indenture upon the additional properties
hereinafter described; and
WHEREAS, the text of the Bonds of the 2000 Exchange Series is to be
substantially in the form set forth on Exhibit A to this Supplemental
Indenture; and
WHEREAS, all acts and proceedings required by law and by the charter
and by-laws of the Company, including all action requisite on the part of
its shareholders, directors and officers necessary to make the Bonds of the
2000 Exchange Series, when executed by the Company, authenticated and
delivered by the Trustee and duly issued, the valid, binding and legal
obligations of the Company, and to constitute this Supplemental Indenture a
valid, binding and legal indenture supplemental to the Original Indenture,
in accordance with its and their terms, have been done and taken; and the
execution and delivery of this Supplemental Indenture have been in all
respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That Tucson
Electric Power Company, the Company herein named, in consideration of the
premises and of One Dollar ($1.00) to it duly paid by the Trustee at or
before the ensealing and delivery of these presents, the receipt whereof is
hereby acknowledged, and in order to secure the payment of the principal of
and interest and premium, if any, on all bonds from time to time outstanding
under the Indenture, according to the terms of said bonds and of the
coupons, if any, attached thereto, and to further secure the performance and
observance of all the covenants and conditions contained in said bonds and
in the Indenture (except any covenant of the Company with respect to the
refund or reimbursement of taxes, assessments or other governmental charges
on account of the ownership of the bonds of any series or the income derived
therefrom, for which the holders of the bonds shall look only to the Company
and not to the property hereby mortgaged or pledged), has granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged,
pledged, set over and confirmed, and by these presents doth grant, bargain,
sell, release, convey, assign, transfer, mortgage, pledge, set over and
confirm unto THE CHASE MANHATTAN BANK, as Trustee, and its successor or
successors in the trust and its assigns forever, with the same force and
effect and subject to the same reservations, exceptions, limitations,
restrictions, servitudes, easements, rights and privileges as contained in
the original Indenture and to "permitted encumbrances" as defined in the
Original Indenture, as though specifically described in the granting clauses
of the Original Indenture, all and singular the premises, property, assets,
rights and franchises of the Company (except as in the Original Indenture
expressly excepted), whether now or hereafter owned, constructed or
acquired, of whatever character and wherever situated, including, among
other things (but reference to or enumeration of any particular kinds,
classes or items or property shall not be deemed to exclude from the
operation and effect of the Indenture any kind, class or item not so
referred to or enumerated), all right, title and interest of the Company in
and to all plants for the generation of electricity by water, steam and/or
other power; all power houses, gas plants, gas holders, substations,
transmission lines, distributing systems; all offices, buildings and
structures, and the equipment thereof; all machinery, engines, boilers,
dynamos, machines, regulators, meters, transformers, generators and motors;
all appliances whether electrical, gas or mechanical, conduits, cables and
lines; all mains and pipes, service pipes, fittings, valves and connections,
poles, wires, tools, implements, apparatus, furniture, and chattels; all
municipal franchises and other franchises; all lines for the transmission
and/or distribution of electric current, or gas, including towers, poles,
wires, cables, pipes, conduits, street lighting systems and all apparatus
for use in connection therewith; all real estate, lands, leaseholds; all
easements, servitudes, licenses, permits, rights, powers, franchises,
privileges, rights of way and other rights in or relating to real estate or
the occupancy of the same and all the right, title and interest of the
Company in and to all other property of any kind or nature appertaining to
and/or used and/or occupied and/or enjoyed in connection with any property
hereinbefore described; it being the intention of the parties that all
property of every kind, real, personal or mixed, other than excepted
property, which may be acquired by the Company after the date hereof, shall,
immediately upon the acquisition thereof by the Company, to the extent of
such acquisition, and without any further conveyance or assignment, become
and be subject to the direct lien on the Indenture as fully and completely
as though now owned by the Company and specifically described in the
Indenture.
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in any wise appertaining to the aforesaid
premises, property, assets, rights and franchises or any part thereof, with
the reversion and reversions, remainder and remainders, and all the estate,
right, title and interest and claim whatsoever, at law as well as in equity,
which the Company now has or may hereafter acquire in and to the aforesaid
premises, property, assets, rights and franchises and every part and parcel
thereof.
And the Company, for itself and its successors, does hereby covenant
and agree to and with the Trustee and its successors in the trust under the
Indenture, for the benefit of those who shall hold the bonds and coupons, or
any of them, to be issued hereunder and thereunder, as follows:
ARTICLE I.
CREATION AND DESCRIPTION OF BONDS OF THE 2000 EXCHANGE SERIES.
SECTION 1. A new series of bonds to be issued under and secured by the
Indenture is hereby created, to be designated as First Mortgage Bonds,
12.22% Exchange Series due 2000. The Bonds of the 2000 Exchange Series
shall be limited to an aggregate principal amount of _____________________
Dollars ($____________), excluding any Bonds of the 2000 Exchange Series
which may be authenticated in exchange for or in lieu of or in substitution
for or on transfer of other Bonds of the 2000 Exchange Series pursuant to
any provisions of the Original Indenture or of this Supplemental Indenture.
Said Bonds shall be substantially in the form set forth in Exhibit A to this
Supplemental Indenture.
All Bonds of the 2000 Exchange Series shall mature June 1, 2000 and
shall bear interest at the rate of 12.22% per annum, payable semi-annually
on June 1 and December 1 in each year, the beginning of the first interest
period being December 1, 1997 and the first interest payment date being June
1, 1998; and the principal of, and the interest, and premium, if any, on,
the Bonds shall be payable at the office or agency of the Company in the
Borough of Manhattan, The City of New York, or in the City of Tucson in coin
or currency of the United States of America which at the time of payment
shall be legal tender for the payment of public and private debts; provided
that a holder of a Bond may elect to receive payments of the principal of,
and the interest, and premium, if any, on such Bond (other than at maturity
or upon redemption of the Bonds as a whole) by wire transfer of immediately
available funds to an account maintained by such holder at a bank located in
the United States of America if appropriate wire transfer instructions are
received by such office or agency not less than 15 calendar days prior to
the date for payment.
The holder of any Bond on any record date (as hereinbelow defined)
with respect to any interest payment date shall be entitled to receive the
interest payable on such interest payment date notwithstanding the
cancellation of such Bond upon any exchange or transfer thereof subsequent
to the record date and prior to such interest payment date, except if and to
the extent the Company shall default in the payment of the interest due on
such interest payment date, in which case such defaulted interest shall be
paid to the person in whose name such Bond (or any Bond or Bonds issued upon
transfer or exchange thereof) is registered on the date of payment of such
defaulted interest. The term "record date" as used in this Section with
respect to any interest payment date shall mean the May 15 or November 15,
as the case may be, next preceding such interest payment date, or, if such
May 15 or November 15 shall be a legal holiday or a day on which banking
institutions in The City of New York are authorized by law to remain closed,
the next preceding day which shall not be a legal holiday or a day on which
such institutions are so authorized to remain closed; provided, however,
that, with respect to the interest payment date of June 1, 1998, the record
date shall be the date of the initial authentication and delivery of the
Bonds of the 2000 Exchange Series.
Each Bond shall be dated as provided in Section 4 of Article II of the
Original Indenture, except that, if there is no existing default in the
payment of interest on the Bonds, each Bond authenticated by or on behalf of
the Trustee between the record date with respect to any interest payment
date and such interest payment date shall be dated as of such interest
payment date.
The Company shall not be required to make any transfer or exchange of
any Bonds for a period of 10 days next preceding any selection of Bonds for
redemption, nor shall it be required to make transfers or exchanges of any
Bonds which shall have been designated for redemption in whole or in part.
The Bonds of the 2000 Exchange Series shall be issued in fully
registered form only, in denominations of $1,000 and multiplies thereof.
The Bonds of the 2000 Exchange Series shall be registrable and
exchangeable at the office or agency of the Company in the Borough of
Manhattan, The City of New York in the manner and upon the terms set forth
in Section 5 of Article II of the Original Indenture, without payment of any
charge other than a sum sufficient to reimburse the Company for any stamp
tax or other governmental charge incident thereto.
SECTION 2. The Trustee agrees that if any mutilated, lost, stolen or
destroyed Bonds of the 2000 Exchange Series was held by an original holder
or other institutional holder (a) an agreement of indemnity satisfactory to
the Company from such original holder or such other institutional holder
shall constitute "indemnity in a sum deemed satisfactory" by the Trustee for
purposes of Section 11 of Article II of the Indenture and (b) the Trustee
will look only to the Company for reimbursement of its expenses incurred in
connection with such replacement.
SECTION 3. The Bonds of the 2000 Exchange Series may be executed by
the Company and delivered to the Trustee and, upon compliance with all
applicable provisions and requirements of the Original Indenture in respect
thereof, shall be authenticated by the Trustee and delivered (without
awaiting the filing or recording of the Supplemental Indenture) in
accordance with the written order or orders of the Company.
ARTICLE II.
REDEMPTION OF AND PAYMENTS DUE UPON
ACCELERATION OF THE BONDS OF THE 2000 EXCHANGE SERIES.
SECTION 1. The Bonds of the 2000 Exchange Series are redeemable prior
to maturity at the option of the Company, as a whole at any time, or in part
from time to time in a minimum aggregate principal amount at any one time of
not less than $20,000,000, provided, that no less than $20,000,000 in
aggregate principal amount of the Bonds of the 2000 Exchange Series remains
outstanding after giving effect to any such partial redemption, upon at
least 30 days' prior notice, all as provided in the Indenture, at the
principal amount of Bonds so to be redeemed and accrued interest to the date
fixed for redemption, together with an amount equal to the Make-Whole
Premium, provided, that the Company shall, on the date of any such
redemption, deliver to the Trustee and to the holders of the Bonds so to be
redeemed a certificate stating the amount of the Make-Whole Premium being
paid upon such redemption and demonstrating the calculation thereof.
Anything in the Indenture to the contrary notwithstanding and except as set
forth in the fourth succeeding paragraph, the redemption price for all
redemptions of the Bonds of the 2000 Exchange Series shall be the redemption
price set forth in the next preceding sentence, and each redemption of the
Bonds of the 2000 Exchange Series shall be pro rata among the Bonds of the
2000 Exchange Series as provided in section 3 of this Article II.
For purposes of this Supplemental Indenture, the term "Make-Whole
Premium" shall mean with respect to any redemption or payment (whether on
account of acceleration or otherwise) of the Bonds of the 2000 Exchange
Series, (a) to the extent that the Treasury Rate at the time of such
redemption or payment is lower than 12.22% per annum, the excess of (i) the
present value of the principal and interest payments on and in respect of
the Bonds of the 2000 Exchange Series being redeemed or paid, as the case
may be, that would otherwise become due and payable (without giving effect
to such redemption or payment), discounted at a rate which is equal to the
Treasury Rate over (ii) the principal amount of the Bonds of the 2000
Exchange Series being redeemed or paid, as the case may be, and (b) to the
extent that the Treasury Rate at the time of such redemption or payment is
equal to or higher than 12.22% per annum, zero.
For purposes of this Supplemental Indenture, the term "Treasury Rate"
shall mean at the time of any redemption or payment with respect to any
Bonds of the 2000 Exchange Series being redeemed or paid (whether on account
of acceleration or otherwise), as the case may be, the arithmetic average of
the two most recent yields to maturity on the United States Treasury
obligation with a constant maturity determined by reference to the
applicable display on the Bloomberg Financial Markets Service L.P. (or, if
such display is no longer available, any publicly available reliable source
of similar market data) for the two business days next preceding the date of
such redemption or payment) most nearly equal to (by rounding to the nearest
month) the Remaining Life to Maturity of the Bonds of the 2000 Exchange
Series then being redeemed or paid (whether on account of acceleration or
otherwise).
For purposes of this Supplemental Indenture, the term "Remaining Life
to Maturity" of Bonds of the 2000 Exchange Series shall mean, at any date,
the number of years obtained by dividing the then Remaining Dollar-years of
such Bonds by the then outstanding principal amount of such Bonds. For
purposes of this definition, the "Remaining Dollar-years" of any such Bonds
shall mean, at any date, the product obtained by multiplying (a) the
aggregate outstanding principal amount of such Bonds, by (b) the number of
twelve-month periods (calculated to the nearest one-twelfth) which will
elapse between such date and June 1, 2000.
In the event that all or substantially all of the electric utility
properties of the Company at the time subject to the lien of the Indenture
shall be sold, taken by eminent domain or otherwise disposed of, as an
entirety or substantially as an entirety, and shall be released from the
lien of the Indenture, the entire award or other cash proceeds of such sale,
taking or other disposition, together with any other Available Moneys (as
defined in Section 11 of Article VII of the Original Indenture), if any,
then held by the Trustee, shall, to the extent and in the manner provided in
Section 11 of Article VII of the original Indenture, be applied to the pro
rata payment or redemption of the bonds of all series then outstanding under
the Indenture, all as more fully provided in the Original Indenture, and the
Bonds of the 2000 Exchange Series shall, in such event, become subject to
such redemption or payment. All such redemptions of the Bonds of the 2000
Exchange Series shall be at the redemption price specified in the first
paragraph of this Section 1.
SECTION 2. All of the provisions of Article V of the Original
Indenture, other than Sections 2 and 3 thereof and the fourth paragraph of
Section 4 thereof, shall be applicable to the redemption of Bonds of the
2000 Exchange Series; and the "Available Moneys", as defined in Section 11
of Article VII of the Original Indenture, apportioned to Bonds of the 2000
Exchange Series, shall be applied by the Trustee to the payment of the
redemption price thereof together with accrued interest to the date fixed
for such payment, or if such apportioned Available Moneys are insufficient
for such full payment, then, upon notice similar to that provided in the
fourth paragraph of said Section 11 in respect of the bonds referred to
therein, first to the payment of the unpaid interest accrued to the date
fixed for payment and the balance to the payment of the then applicable
redemption price (exclusive of such interest), to the extent that such
moneys shall suffice, pro rata, as provided in Section 11 of Article VII of
the Original Indenture, upon presentation and stamping in a manner similar
to that provided by Section 11 of Article VII of the Original Indenture for
the bonds referred to therein and the coupons appurtenant thereto, interest
to cease to accrue upon Bonds of the 2000 Exchange Series on the payment
date specified in the notice to the extent of the partial payment so
provided. Until the full amount then due and owing on all Bonds of the 2000
Exchange Series shall have been paid, no such partial payment shall
discharge the obligation of the Company on such Bonds, except to the extent
of such partial payment; and the balance of principal, if any, remaining
after such payment shall thereafter constitute the unpaid obligation of the
Company upon the Bonds of the 2000 Exchange Series and the principal amount
of the Bonds of the 2000 Exchange Series upon which interest shall
thereafter be due and payable.
SECTION 3. Anything contained in the fourth paragraph of Section 4 of
Article V of the Original Indenture to the contrary notwithstanding, in case
less than all of the outstanding Bonds of the 2000 Exchange Series are to be
redeemed, the principal amount to be redeemed shall be prorated among the
holders of the Bonds of the 2000 Exchange Series in the proportion that
their respective holdings bear to the aggregate principal amount of Bonds of
the 2000 Exchange Series outstanding on the date of selection. The portion
of any Bond of the 2000 Exchange Series to be redeemed shall be in the
principal amount of $1,000 or a multiple thereof and such allocations as may
be requisite for this purpose shall be made by the Trustee in its
uncontrolled discretion. The Trustee shall promptly notify the Company in
writing of the distinctive numbers of the Bonds of the 2000 Exchange Series
and the portions thereof so selected for redemption.
SECTION 4. Anything in the Indenture to the contrary notwithstanding,
if the principal of all bonds outstanding under the Indenture and the
interest accrued thereon shall have become immediately due and payable
pursuant to any provision of Article VIII of the Original Indenture, the
principal of all Bonds of the 2000 Exchange Series outstanding under the
Indenture and interest accrued thereon shall, together with, to the extent
permitted by applicable law, an amount equal to the Make-Whole Premium with
respect to such Bonds of the 2000 Exchange Series, become immediately due
and payable, and the Company shall forthwith pay to the holders of the Bonds
of the 2000 Exchange Series then outstanding the entire principal of and all
interest accrued on such Bonds of the 2000 Exchange Series plus such Make-
Whole Premium; provided, that in such event the trust estate shall be
applied to the payment of such Make-Whole Premium only in accordance with
Article VIII of the Original Indenture. The term "premium" when used in the
Bonds of the 2000 Exchange Series or the Indenture in conjunction with
references to principal of and interest on the Bonds, shall mean any amount
due upon any payment, redemption or prepayment of any of the Bonds of the
2000 Exchange Series, other than principal and interest, and shall include
the Make-Whole Premium.
SECTION 5. The holder of each and every Bond of the 2000 Exchange
Series issued hereunder hereby agrees to accept payment thereof prior to
maturity on the terms and conditions provided for in this Article II.
ARTICLE III.
ADDITIONAL COVENANTS.
The Company covenants and agrees that, so long as any Bonds of the
2000 Exchange Series shall be outstanding, and unless the Company shall have
delivered to the Trustee any number of concurrent instruments of similar
tenor executed by holders of a majority or more in aggregate principal
amount of the Bonds of the 2000 Exchange Series then outstanding in which
such holders waive the same in the particular case, the Company will duly
perform and observe each and all of the covenants and agreements hereinafter
set forth in this Article III.
SECTION 1. The Company will not declare or pay any dividends on its
shares of common stock (other than dividends payable in shares of its common
stock), or make any other distribution on its shares of common stock, or
purchase or redeem any shares of its capital stock of any class (other than
with the proceeds of additional capital stock financing and other than
mandatory sinking fund payments with respect to capital stock senior to the
common stock of the Company issued after the date hereof) if the Company's
Consolidated Net Worth as of the last day of any fiscal quarter following
the date hereof is less than (a) the sum of (i) $133,000,000, (ii) 40% of
the Company's Consolidated Net Income for each fiscal year after December
31, 1996, for which Consolidated Net Income is positive and (iii) with
respect to each of the first three fiscal quarters of a fiscal year after
the most recent fiscal year end, 40% of the Company's Consolidated Net
Income as of the end of such fiscal quarter, taken on a fiscal year-to-date
basis, if positive, minus (b) the least of (x) $175,000,000, (y) the
aggregate amount of non-cash charges taken by the Company after the date
hereof pursuant to the requirements of Statement of Financial Accounting
Standards No. 101 and (z) in the event that the Applicable Credit Ratings
assigned to the Company's First Mortgage Bonds shall be downgraded within 90
days after the public disclosure of any decision by the Company to apply
Statement of Financial Accounting Standards No. 101, zero. For purposes of
this Section 1, (a) "Consolidated Net Worth" means, as of the last day of
any fiscal quarter, common stock equity of the Company as of such day, (b)
"Consolidated Net Income" means, for any fiscal period net income of the
Company and its consolidated Subsidiaries, determined on a consolidated
basis, and (c) "Applicable Credit Ratings" means (i) in the event that the
credit rating levels assigned to the Company's First Mortgage Bonds by
Moody's Investor Service, Inc. ("Moody's") and Standard & Poor's Rating
Group ("S&P") are different, the higher of such ratings, and (ii) in the
event that the credit rating levels assigned to the Company's First Mortgage
Bonds by Moody's and S&P are the same, both such ratings. All
determinations pursuant to this Section 1 shall be made in accordance with
generally accepted accounting principles as in effect from time to time.
SECTION 2. The Company will not, and will not permit any Subsidiary to,
engage to any material extent in any business other than the Utility
Business.
For purposes of this Section 2, (a) "Utility Business" means the
business of producing, developing, generating, transmitting, distributing,
selling or supplying electrical energy for any purpose, or any business
incidental thereto or necessary in connection therewith, or any business
reasonably desirable in connection therewith which the Arizona Corporation
Commission or other utility regulatory body shall have authorized the
Company to enter, and (b) the term "Subsidiary" shall mean any corporation,
a majority of the voting stock of which is owned by the Company or by one or
more Subsidiaries or by the Company and one or more Subsidiaries.
SECTION 3. The Company will not permit the aggregate principal amount
of its First Mortgage Bonds outstanding under the Indenture at any time to
exceed $411,313,000; provided that, for purposes of this Section 3, those
First Mortgage Bonds, 12.22% Series due 2000 tendered in exchange for Bonds
of the 2000 Exchange Series shall not be deemed to be outstanding on the
date of the initial authentication and delivery of the Bonds of the 2000
Exchange Series and; provided, further, that, for purposes of this Section
3, if First Mortgage Bonds ("Refunding Bonds") shall have been issued and
authenticated for the purpose of refinancing outstanding First Mortgage
Bonds ("Refunded Bonds") and the corresponding Refunded Bonds shall have
been irrevocably called for redemption and the proceeds of the Refunding
Bonds shall have been deposited with the Trustee, such Refunded Bonds shall
not be deemed to be outstanding.
ARTICLE IV.
THE TRUSTEE
The Trustee hereby accepts the trusts created by this Supplemental
Indenture upon the terms and conditions in the Original Indenture as
modified and amended and in this Supplemental Indenture set forth. The
Trustee shall not be responsible in any manner whatsoever for or in respect
of the validity or sufficiency of this Supplemental Indenture or of the due
execution hereof by the Company, or for or in respect of the recitals
contained herein, all of which recitals are made by the Company solely. In
general, each and every term and condition contained in Article XII of the
Original Indenture shall apply to this Supplemental Indenture with the same
force and effect as if the same were herein set forth in full, with such
omissions, variations and modifications thereof as may be appropriate to
make the same conform to this Supplemental Indenture.
ARTICLE V.
MISCELLANEOUS PROVISIONS
SECTION 1. Subject to the variations contained in Article IV of this
Supplemental Indenture, the Original Indenture, as heretofore modified,
amended and supplemented, is in all respect ratified and confirmed, and the
Original Indenture, this Supplemental Indenture and all other indentures
supplemental to the Original Indenture shall be read, taken and construed as
one and the same instrument. Neither the execution of this Supplemental
Indenture nor anything herein contained shall be construed to impair the
lien of the Indenture on any of the property subject thereto, and such lien
shall remain in full force and effect as security for all Bonds now
outstanding or hereinafter issued under the Indenture. All terms defined in
Article I of the Original Indenture, as heretofore supplemented and amended,
shall, for all purposes of this Supplemental Indenture, have the meanings in
said Article I specified, unless the context otherwise requires.
SECTION 2. 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
Supplemental Indenture, shall be a legal holiday or a day on which banking
institutions in The City of New York are authorized by law to remain closed,
such payment may be made or act performed or right exercised on the next
succeeding day not a legal holiday or a day on which such banking
institutions are authorized by law to remain closed, with the same force and
effect as if done on the nominal date provided in this Supplemental
Indenture, and no interest shall accrue for the period after such nominal
date.
SECTION 3. This Supplemental Indenture may be executed in any number
of counterparts, and all said counterparts executed and delivered, each as
an original, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, TUCSON ELECTRIC POWER COMPANY has caused its
corporate name to be hereunto affixed, and this instrument to be signed by
its President or a Vice President, and its corporate seal to be hereunto
affixed and attested by its Secretary or an Assistant Secretary for and in
its behalf; and THE CHASE MANHATTAN BANK has caused its corporate name to be
hereunto affixed, and this instrument to be signed by its President, a Vice
President or any Assistant Vice President and its corporate seal to be
hereunto affixed and attested by its Secretary or a Trust Officer, for and
in its behalf, all as of the day and year first above written.
TUCSON ELECTRIC POWER COMPANY
Attest: ___________________ By:__________________________
Assistant Secretary Vice President
Signed, sealed and delivered
by Tucson Electric Power
Company in the presence of:
___________________________
THE CHASE MANHATTAN BANK,
as Trustee
Attest:____________________ By:__________________________
Trust Officer Assistant Vice President
Signed, sealed and delivered
by The Chase Manhattan Bank
in the presence of:
___________________________
STATE OF ARIZONA )
): ss.:
COUNTY OF PIMA )
On this _______ day of ________, 1998, before me, ______________, the
undersigned officer, personally appeared _____________, who acknowledged
himself to be a Vice President and duly authorized agent of TUCSON ELECTRIC
POWER COMPANY, an Arizona corporation, and that he, as such Vice President
being authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation by
himself as a Vice President.
The foregoing instrument was also acknowledged before me by said
_____________, Vice President of TUCSON ELECTRIC POWER COMPANY, an Arizona
corporation, on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
Notary Public
My commission expires:
STATE OF NEW YORK )
): ss.:
COUNTY OF NEW YORK )
On this _____ day of ________, 1998, before me, _____________, the
undersigned officer, personally appeared _____________, who acknowledged
himself to be an Assistant Vice President and duly authorized agent of THE
CHASE MANHATTAN BANK, a corporation, and that he, as such Assistant Vice
President being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the corporation by
himself as an Assistant Vice President.
The foregoing instrument was also acknowledged before me by said
_____________, an Assistant Vice President of THE CHASE MANHATTAN BANK, a
corporation, on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
______________________
Notary Public
My commission expires:
<PAGE>
Exhibit A
[Form of Bond]
No.__________ $_______________________
TUCSON ELECTRIC POWER COMPANY
FIRST MORTGAGE BOND, 12.22% EXCHANGE SERIES DUE 2000
DUE JUNE 1, 2000
TUCSON ELECTRIC POWER COMPANY, a corporation of the State of Arizona
(hereinafter sometimes called the Company), for value received, promises to
pay to _________________________________________________________________ ,
or registered assigns, the principal sum of
DOLLARS
on June 1, 2000, in coin or currency of the United States of America which
at the time of payment shall be legal tender for the payment of public and
private debts, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, or in the City of Tucson, and semi-
annually, on June 1 and December 1 in each year, to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) thereon in like coin
or currency at said office or agency, at the rate of 12.22% per annum, from
the semi-annual interest payment date next preceding the date of this bond
(unless this bond be dated on an interest payment date, in which case from
the date hereof; or unless this bond be dated prior to the first interest
payment date in respect hereof, in which case from the beginning of the
first interest period for bonds of this series), until the Company's
obligation with respect to such principal sum shall be discharged, and, to
the extent permitted by applicable law, at the rate of 12.22% per annum
(computed as set forth above) on any overdue payment of principal of or
premium, if any, or interest on this bond. The interest so payable on any
June 1 or December 1 will, subject to certain exceptions provided in the
Thirty-Third Supplemental Indenture, dated as of May 1, 1998, hereinafter
referred to, be paid to the person in whose name this bond is registered at
the close of business on the May 15 or November 15 next preceding such June
1 or December 1. Notwithstanding any provision to the contrary in this bond
or in the Indenture hereinafter referred to, a holder of this bond may elect
to receive payments of the principal of, and the interest, and premium, if
any, on this bond (other than at maturity or upon redemption of the bonds of
this series as a whole) by wire transfer of immediately available funds to
an account maintained by such holder at a bank located in the United States
of America if appropriate wire transfer instructions are received by such
office or agency of the Company not less than 15 calendar days prior to the
date for payment.
This bond is one of an issue of bonds of the Company, issued and to be
issued in one or more series under and equally and ratably secured (except
as any sinking, amortization, improvement, renewal or other fund,
established in accordance with the provisions of the indenture hereinafter
mentioned, may afford additional security for the bonds of any particular
series) by a certain mortgage and deed of trust (which, together with all
indentures supplemental thereto, including the Thirty-Third Supplemental
Indenture, dated as of May 1, 1998, is hereinafter called the "Indenture"),
dated as of April 1, 1941, made by The Tucson Gas, Electric Light and Power
Company (Tucson Electric Power Company, successor by merger) to The Chase
National Bank of the City of New York (The Chase Manhattan Bank, successor
by merger), now The Chase Manhattan Bank, as Trustee (hereinafter called the
"Trustee"), to which Indenture reference is hereby made for a description of
the property mortgaged and pledged, the nature and extent of the security
provided by the Indenture, the rights and limitations of rights of the
Company, the Trustee and the holders of said bonds with respect to the
security provided by the Indenture, the powers, duties and immunities of the
Trustee, the terms and conditions upon which said bonds are and are to be
secured, and the circumstances under which additional bonds may be issued,
to all of which provisions the holder, by accepting this bond, assents. To
the extent permitted by and as provided in the Indenture, the rights and
obligations of the Company and the rights of the holders of said bonds may
be changed and modified, with the consent of the Company, by the affirmative
vote of the holders of at least 75% in aggregate principal amount of the
bonds then outstanding (excluding bonds disqualified from voting by reason
of the Company's interest therein as provided in the Indenture), or by the
affirmative vote of the holders of at least 75% in aggregate principal
amount of the bonds of any one or more series then outstanding and entitled
to vote and affected by such modification or alteration in case one or more
but less than all of the series of bonds then outstanding under the
Indenture are so affected, or in either case by the written consent of the
holders of such percentage of bonds; provided, that without the consent of
the holder hereof no such modification or alteration shall be made which
will permit the extension of the time of payment of the principal of or the
interest on this bond or a reduction in the principal amount hereof, or
premium, if any, or rate of interest hereon or any other modification of the
terms of payment of such principal, premium or interest or will deprive the
holder of any lien provided by the Indenture upon the mortgaged property or
reduce the percentage of bonds required for the aforesaid action under the
Indenture. The Company has reserved the right to amend the Indenture
without any consent or other action by holders of any series of bonds
created after July 31, 1976 (including this series) so as to change 75% in
the foregoing sentence to 60%. This bond is one of a series of bonds
designated as the First Mortgage Bonds, 12.22% Exchange Series due 2000, of
the Company.
The bonds of this series are redeemable prior to maturity at the option
of the Company, as a whole at any time, or in part from time to time in a
minimum aggregate principal amount at any one time of not less than
$20,000,000, provided that not less than $20,000,000 in aggregate principal
amount of the bonds of this series remains outstanding after giving effect
to any such partial redemption, upon at least 30 days' prior notice (which
may be conditioned upon the deposit of the redemption moneys with the
Trustee before the redemption date), all as provided in the Indenture, at
the principal amount of bonds so to be redeemed and accrued interest to the
date fixed for redemption, together with an amount equal to the Make-Whole
Premium as such term is defined in said Thirty-Third Supplemental Indenture.
Anything in the Indenture to the contrary notwithstanding and except as set
forth in the next succeeding paragraph, the redemption price for all
redemptions of the bonds of this series shall be the redemption price set
forth in the next preceding sentence, and each redemption of the bonds of
this series shall be pro rata among the bonds of this series as provided in
the Thirty-Third Supplemental Indenture.
In the event that all or substantially all of the electric utility
properties of the Company at the time subject to the lien of the Indenture
shall be sold, taken by eminent domain or otherwise disposed of, as an
entirety or substantially as an entirety, and shall be released from the
lien of the Indenture, the entire award or other cash proceeds of such sale,
taking or other disposition, together with certain moneys, if any, then held
by the Trustee, shall, to the extent and in the manner provided in the
Indenture, be applied to the pro rata payment or redemption of the bonds of
all series then outstanding under the Indenture, all as more fully provided
therein, and this bond shall, in such event, become subject to such
redemption or payment. If such sale, taking or other disposition and
release shall be to a municipality or other governmental subdivision or
public authority, or in the event that a controlling interest in the stock
of the Company shall be acquired by or on behalf of a municipality or other
governmental subdivision or public authority which shall cause the
redemption of the bonds of all series then outstanding under the Indenture,
the redemption of this bond shall be at a price equal to its principal
amount, with accrued interest to the date fixed for redemption; all other
redemptions (including, without limitation, all sales, takings, releases and
acquisitions of the sort described above which were negotiated, procured or
the result of action by the Company or any Affiliate of the Company) to be
at the redemption price specified in the next preceding paragraph.
If this bond or any portion hereof shall be called for redemption and
payment of the redemption price shall be duly provided by the Company as
specified in the Indenture, interest shall cease to accrue on this bond or
such portion hereof from and after the date for redemption fixed in the
notice thereof.
The principal of this bond and the interest accrued hereon may become or
be declared due and payable before the maturity hereof, on the conditions,
in the manner and at the times set forth in the Indenture, upon the
happening of a default as therein provided.
Anything in the Indenture to the contrary notwithstanding, upon notice
by the Trustee in writing to the Company pursuant to Section 3 of Article
VIII of the Original Indenture declaring the principal of all bonds
outstanding under the Indenture and the interest accrued thereon immediately
due and payable, the principal of all bonds of this series outstanding under
the Indenture and interest accrued thereon shall, together with, to the
extent provided in the Thirty-Third Supplemental Indenture and permitted by
applicable law, an amount equal to the Make-Whole Premium, as such term is
defined in said Thirty-Third Supplemental Indenture, with respect to such
bonds of this series, become immediately due and payable.
This bond is transferable by the registered owner hereof in person or by
attorney authorized in writing, at the office or agency of the Company in
the Borough of Manhattan, The City of New York upon surrender and
cancellation of this bond, and upon any such transfer a new bond of this
series, for the same aggregate principal amount, will be issued to the
transferee in exchange herefor. The Company and the Trustee may deem and
treat the person in whose name this bond is registered as the absolute owner
hereof for the purpose of receiving payment and for all other purposes.
This bond, alone or with other bonds of this series, may in like manner be
exchanged at such office or agency for one or more new bonds of this series
of the same aggregate principal amount, all as provided in the Indenture.
Subject to the provisions of the Thirty-Third Supplemental Indenture, dated
as of May 1, 1998, hereinbefore referred to, if this bond is surrendered for
transfer between the record date with respect to any interest payment date
and such interest payment date, the new bond or bonds will be dated as of
such interest payment date. Upon each such transfer or exchange the Company
may require the payment of any stamp or other tax or governmental charge
incident thereto.
No recourse shall be had for the payment of the principal of, or
premium, if any, or interest on this bond, or for any claim based hereon or
otherwise in respect hereof or of the Indenture, against any incorporator,
shareholder, director or officer, as such, past, present or future, of the
Company or of any predecessor or successor corporation, either directly or
through the Company or any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or by any legal or equitable proceeding or
otherwise howsoever (including, without limiting the generality of the
foregoing, any proceeding to enforce any claimed liability of shareholders
of the Company, based upon any theory of disregarding the corporate entity
of the Company or upon any theory that the Company was acting as the agent
or instrumentality of the shareholders); all such liability being, by the
acceptance hereof and as a part of the consideration for the issuance
hereof, expressly waived and released by every holder hereof, and being
likewise waived and released by the terms of the Indenture under which this
bond is issued, as more fully provided in said Indenture.
This bond shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by The Chase
Manhattan Bank, or its successor, as Trustee under said Indenture.
IN WITNESS WHEREOF, the Company has caused this bond to be signed in its
name by the manual or facsimile signature of its President or one of its
Vice Presidents, and its corporate seal, or a facsimile thereof, to be
impressed or imprinted hereon and attested by the manual or facsimile
signature of its Secretary or one of its Assistant Secretaries.
Dated ________
TUCSON ELECTRIC POWER COMPANY
By_______________________
President
Attest:____________________
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the bonds, of the series designated therein, described
in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:____________________
Exhibit 4(b)
=======================================
THIRTY-FOURTH SUPPLEMENTAL INDENTURE
Dated as of August 1, 1998
------------
TUCSON ELECTRIC POWER COMPANY
to
THE CHASE MANHATTAN BANK,
AS TRUSTEE
------------
Creating a New Issue of First Mortgage Bonds,
Collateral Series due 2008
------------
Supplemental to Indenture dated as of April 1, 1941, of
The Tucson Gas, Electric Light and Power Company (predecessor
to Tucson Electric Power Company), to The Chase National Bank
of the City of New York, as Trustee (predecessor to
The Chase Manhattan Bank).
====================================
<PAGE>
THIRTY-FOURTH SUPPLEMENTAL INDENTURE, dated as of August 1,
1998, made by and between Tucson Electric Power Company
("Company"), a corporation organized and existing under the laws
of the State of Arizona, having its principal place of business
at 220 West Sixth Street, in the City of Tucson, Arizona, party
of the first part, and The Chase Manhattan Bank, trustee
("Trustee"), a banking corporation organized and doing business
under the laws of the State of New York, having its principal
corporate trust office at 450 W. 33rd Street, New York, N.Y., as
Trustee, party of the second part.
WHEREAS, The Tucson Gas, Electric Light and Power Company,
predecessor of the Company and herein called the "Predecessor
Company", heretofore executed and delivered to The Chase National
Bank of the City of New York, as Trustee ("Predecessor Trustee"),
its Indenture dated as of April 1, 1941 ("Original Indenture") to
secure its First Mortgage Bonds, issuable in series; and
WHEREAS, on March 31, 1955 The Chase National Bank of the
City of New York was merged into President and Directors of the
Manhattan Company under the name of The Chase Manhattan Bank, and
The Chase Manhattan Bank became the successor Trustee under the
Original Indenture as supplemented and amended; and
WHEREAS, on February 20, 1964 the Predecessor Company was
merged with and into the Company and the Company assumed and
agreed to pay the principal of and premium, if any, and interest
on all bonds then issued and outstanding under the Indenture,
also agreeing to perform and fulfill all the covenants and
conditions of the Indenture binding upon the Predecessor Company,
and also agreeing that the Company succeed and be substituted for
the Predecessor Company under the Indenture; and
WHEREAS, on September 9, 1965 The Chase Manhattan Bank
became The Chase Manhattan Bank (National Association) and the
continuity of the business of The Chase Manhattan Bank including
its business of acting as corporate trustee, and its corporate
existence, was not affected, so that The Chase Manhattan Bank
(National Association) was vested with all the trusts, powers,
discretions, immunities, privileges and all other matters as were
vested in the Predecessor Trustee under the Indenture, with like
effect as if originally named as Trustee therein; and
WHEREAS, on July 14, 1996 The Chase Manhattan Bank (National
Association) merged with and into Chemical Bank and the surviving
corporation was renamed The Chase Manhattan Bank, and The Chase
Manhattan Bank thereby became the successor Trustee under the
Indenture so that The Chase Manhattan Bank is vested with all the
trusts, powers, discretions, immunities, privileges and all other
matters as were vested in the Predecessor Trustee under the
Indenture, with like effect as if originally named as Trustee
therein; and
WHEREAS, the Company (or the Predecessor Company) has
heretofore executed and delivered to the Trustee (or the
Predecessor Trustee) the Original Indenture and the indentures
supplemental thereto, and has issued the series of bonds, set
forth below:
Indenture or Date
Supplemental --------- Series
Indenture of Bonds
------------ --------
Original Apr. 1, 1941 3 1/2% Series due 1966
1 First Oct. 1, 1946 None
Second Oct, 1, 1947 3 1/8% Series due 1977
2,4,5 Third Apr. 1, 1949 3 1/8% Series due 1979
4,5 Fourth Dec. 1, 1952 3 5/8% Series due 1982
4,5 Fifth Jan. 1, 1955 3 1/4% Series due 1985
4,5 Sixth Jan. 1, 1958 4 5/8% Series due 1988
1,4,5 Seventh Nov. 1, 1959 5 3/8% Series due 1989
1,4,5 Eighth Nov. 1, 1961 4.70% Series due 1991
6 Ninth Feb. 20, 1964 None
1,4,5 Tenth Feb. 1, 1965 4.55% Series due 1995
1,4,5 Eleventh Feb. 1, 1966 4 7/8% Series due 1996
2,3,4,5 Twelfth Nov. 1. 1969 8 1/2% Series due 1999
2 Thirteenth Jan. 20. 1970 None
2,4,5 Fourteenth Sept. 1, 1971 8 1/8% Series due 2001
4,5 Fifteenth Mar. 1, 1972 7.55% Series due 2002
4,5 Sixteenth May 1, 1973 7.65% Series due 2003
1,4,5 Seventeenth Nov. 1, 1975 10 1/2% Series due 2005
1 Eighteenth Nov. 1, 1975 Poll. Control Series A
Nineteenth July 1, 1976 Poll. Control Series B
1,2,4 Twentieth Oct. 1, 1977 8 1/2% Series due 2009
Twenty-First Nov. 1, 1977 Poll. Control Series C
Twenty-Second Jan. 1, 1978 Poll. Control Series D
Twenty-Third July 1, 1980 Poll. Control Series E
Twenty-Fourth Oct. 1, 1980 Poll. Control Series F
2 Twenty-Fifth Apr. 1, 1981 Poll. Control Series A
1 Twenty-Sixth Apr. 1, 1981 Poll. Control Series B
1,2 Twenty-Seventh Oct. 1, 1981 Poll. Control Series G
7 Twenty-Eighth June 1, 1990 12.22% Series due 2000
Twenty-Ninth Dec. 1, 1992 Poll. Control Series H
Thirtieth Dec. 1, 1992 Ind. Develop. Series C
Thirty-First May 1, 1996 Poll. Control Series I
Thirty Second May 1, 1996 Poll. Control Series J
8 Thirty-Third May 1, 1998 12.22% Exch. Series due
2000
Indenture or Principal Principal
Supplemental Amount Amount Out-
Indenture Issued standing
------------ --------- -----------
Original $ 3,500,000 None
1 First None None
Second 750,000 None
2,4,5 Third 3,500,000 None
4,5 Fourth 5,000,000 None
4,5 Fifth 3,500,000 None
4,5 Sixth 7,500,000 None
1,4,5 Seventh 7,500,000 None
1,4,5 Eighth 10,000,000 None
6 Ninth None None
1,4,5 Tenth 16,000,000 None
1,4,5 Eleventh 10,000,000 None
2,3,4,5 Twelfth 15,000,000 15,000,000
2 Thirteenth None None
2,4,5 Fourteenth 25,000,000 25,000,000
4,5 Fifteenth 25,000,000 25,000,000
4,5 Sixteenth 40,000,000 40,000,000
1,4,5 Seventeenth 50,000,000 None
1 Eighteenth 15,700,000 None
Nineteenth 25,000,000 23,500,000
1,2,4 Twentieth 60,000,000 57,900,000
Twenty-First 32,500,000 None
Twenty-Second 40,000,000 40,000,000
Twenty-Third 16,300,000 None
Twenty-Fourth 100,000,000 None
2 Twenty-Fifth 126,000,000 None
1 Twenty-Sixth 163,000,000 None
1,2 Twenty-Seventh 100,000,000 None
7 Twenty-Eighth 96,000,000 31,872,000
Twenty-Ninth 3,561,644 None
Thirtieth 20,722,222.22 None
Thirty-First 18,347,124 None
Thirty Second 16,149,864 None
8 Thirty-Third 46,878,000 46,878,000
-------------------
1 Contains amendatory provisions relating to specific series.
2 Contains general amendatory provisions.
3 Contains general amendatory provisions required by the Trust
Indenture Act of 1939, as amended.
4 Incorporates covenant regarding replacement reserve (Section
9, Article IV, of Original Indenture).
5 Contains (or incorporates) Covenant regarding distributions
on and acquisitions of stock (Article V of Third
Supplemental Indenture).
6 Contains assumption provisions.
7 Contains modified covenant regarding distributions on and
acquisitions of stock and negative covenants regarding
liens, businesses other than the Utility Business and
Investments.
8 Contains modified covenant regarding distributions on and
acquisitions of stock and negative covenants regarding
businesses other than the Utility Business and a limitation
on the aggregate principal amount of bonds which may be
issued under the Indenture.(the Original Indenture, the
Supplemental Indentures listed above and this Supplemental
Indenture being herein collectively referred to as the
"Indenture"); and
WHEREAS, the Predecessor Company covenanted in and by the
Original Indenture to execute and deliver such further
instruments and do such further acts as may be necessary or
proper to carry out more effectually the purposes of the Original
Indenture and to make subject to the lien thereof property
acquired after the execution and delivery of the Original
Indenture; and
WHEREAS, the Company proposes to create a new series of
First Mortgage Bonds, to mature August 1, 2008, to be designated
as First Mortgage Bonds, Collateral Series due 2008 (hereinafter
sometimes called the "Bonds" or "Bonds of the 2008 Series"), and
to be issued and delivered to the trustee under the 1998
Indenture (as hereinafter defined) as the basis for the
authentication and delivery under the 1998 Indenture of G series
of securities, all as hereinafter provided, and to vary in
certain respects the provisions contained in Article V of the
Original Indenture, to the extent that such provisions apply to
the Bonds; and
WHEREAS, the Company, pursuant to the provisions of the
Original Indenture, has, by appropriate corporate action, duly
resolved and determined to execute this Supplemental Indenture
for the purpose of providing for the creation of said Bonds of
the 2008 Series and of specifying the form, provisions and
particulars thereof as in said Original Indenture provided or
permitted and of giving to the Bonds of the 2008 Series the
protection and security of the Indenture, and of further
confirming the lien of the Indenture upon the additional
properties hereinafter described; and
WHEREAS, the text of the Bonds of the 2008 Series is to be
substantially in the form set forth on Exhibit A to this
Supplemental Indenture; and
WHEREAS, all acts and proceedings required by law and by the
charter and by-laws of the Company, including all action
requisite on the part of its shareholders, directors and officers
necessary to make the Bonds of the 2008 Series, when executed by
the Company, authenticated and delivered by the Trustee and duly
issued, the valid, binding and legal obligations of the Company,
and to constitute this Supplemental Indenture a valid, binding
and legal indenture supplemental to the Original Indenture, in
accordance with its and their terms, have been done and taken;
and the execution and delivery of this Supplemental Indenture
have been in all respects duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That
Tucson Electric Power Company, the Company herein named, in
consideration of the premises and of One Dollar ($1.00) to it
duly paid by the Trustee at or before the ensealing and delivery
of these presents, the receipt whereof is hereby acknowledged,
and in order to secure the payment of the principal of and
interest and premium, if any, on all bonds from time to time
outstanding under the Indenture, according to the terms of said
bonds and of the coupons, if any, attached thereto, and to
further secure the performance and observance of all the
covenants and conditions contained in said bonds and in the
Indenture (except any covenant of the Company with respect to the
refund or reimbursement of taxes, assessments or other
governmental charges on account of the ownership of the bonds of
any series or the income derived therefrom, for which the holders
of the bonds shall look only to the Company and not to the
property hereby mortgaged or pledged), has granted, bargained,
sold, released, conveyed, assigned, transferred, mortgaged,
pledged, set over and confirmed, and by these presents doth
grant, bargain, sell, release, convey, assign, transfer,
mortgage, pledge, set over and confirm unto THE CHASE MANHATTAN
BANK, as Trustee, and its successor or successors in the trust
and its assigns forever, with the same force and effect and
subject to the same reservations, exceptions, limitations,
restrictions, servitudes, easements, rights and privileges as
contained in the original Indenture and to "permitted
encumbrances" as defined in the Original Indenture, as though
specifically described in the granting clauses of the Original
Indenture, all and singular the premises, property, assets,
rights and franchises of the Company (except as in the Original
Indenture expressly excepted), whether now or hereafter owned,
constructed or acquired, of whatever character and wherever
situated, including, among other things (but reference to or
enumeration of any particular kinds, classes or items or property
shall not be deemed to exclude from the operation and effect of
the Indenture any kind, class or item not so referred to or
enumerated), all right, title and interest of the Company in and
to all plants for the generation of electricity by water, steam
and/or other power; all power houses, gas plants, gas holders,
substations, transmission lines, distributing systems; all
offices, buildings and structures, and the equipment thereof; all
machinery, engines, boilers, dynamos, machines, regulators,
meters, transformers, generators and motors; all appliances
whether electrical, gas or mechanical, conduits, cables and
lines; all mains and pipes, service pipes, fittings, valves and
connections, poles, wires, tools, implements, apparatus,
furniture, and chattels; all municipal franchises and other
franchises; all lines for the transmission and/or distribution of
electric current, or gas, including towers, poles, wires, cables,
pipes, conduits, street lighting systems and all apparatus for
use in connection therewith; all real estate, lands, leaseholds;
all easements, servitudes, licenses, permits, rights, powers,
franchises, privileges, rights of way and other rights in or
relating to real estate or the occupancy of the same and all the
right, title and interest of the Company in and to all other
property of any kind or nature appertaining to and/or used and/or
occupied and/or enjoyed in connection with any property
hereinbefore described; it being the intention of the parties
that all property of every kind, real, personal or mixed, other
than excepted property, which may be acquired by the Company
after the date hereof, shall, immediately upon the acquisition
thereof by the Company, to the extent of such acquisition, and
without any further conveyance or assignment, become and be
subject to the direct lien on the Indenture as fully and
completely as though now owned by the Company and specifically
described in the Indenture.
TOGETHER WITH all and singular the tenements, hereditaments
and appurtenances belonging or in any wise appertaining to the
aforesaid premises, property, assets, rights and franchises or
any part thereof, with the reversion and reversions, remainder
and remainders, and all the estate, right, title and interest and
claim whatsoever, at law as well as in equity, which the Company
now has or may hereafter acquire in and to the aforesaid
premises, property, assets, rights and franchises and every part
and parcel thereof.
And the Company, for itself and its successors, does hereby
covenant and agree to and with the Trustee and its successors in
the trust under the Indenture, for the benefit of those who shall
hold the bonds and coupons, or any of them, to be issued
hereunder and thereunder, as follows:
ARTICLE I.
CREATION AND DESCRIPTION OF BONDS OF THE 2008 SERIES.
SECTION 1. A new series of bonds to be issued under and
secured by the Indenture is hereby created, to be designated as
First Mortgage Bonds, Collateral Series due 2008. The Bonds of
the 2008 Series shall be limited to an aggregate principal amount
of One Hundred Forty Million Dollars ($140,000,000), excluding
any Bonds of the 2008 Series which may be authenticated in
exchange for or in lieu of or in substitution for or on transfer
of other Bonds of the 2008 Series pursuant to any provisions of
the Original Indenture or of this Supplemental Indenture. Said
Bonds shall be substantially in the form set forth in Exhibit A
to this Supplemental Indenture.
All Bonds of the 2008 Series shall mature August 1, 2008.
The Bonds of the 2008 Series shall not bear interest. The
principal of the Bonds shall be payable at the office or agency
of the Company in the Borough of Manhattan, The City of New York,
or in the City of Tucson, upon presentation thereof, in coin or
currency of the United States of America which at the time of
payment shall be legal tender for the payment of public and
private debts.
The Bonds of the 2008 Series shall be issued and delivered
by the Company to Bank of Montreal Trust Company, as trustee
under the Indenture, to be dated as of August 1, 1998, as
supplemented (the "1998 Indenture"), of the Company to such
trustee (the "1998 Indenture Trustee"), as the basis for the
authentication and delivery of securities under the 1998
Indenture. As provided in the 1998 Indenture, the Bonds of the
2008 Series, when so issued and delivered, will be registered in
the name of the 1998 Indenture Trustee or its nominee and will be
owned and held by the 1998 Indenture Trustee, subject to the
provisions of the 1998 Indenture, for the benefit of the holders
of all securities from time to time outstanding under the 1998
Indenture, and the Company shall have no interest therein. The
Bonds of the 2008 Series shall not be transferable except as
required to effect transfer to any successor trustee under the
1998 Indenture.
Anything herein to the contrary notwithstanding, any payment
by the Company under the 1998 Indenture of the principal of the
securities which shall have been authenticated and delivered
under the 1998 Indenture on the basis of the delivery to the 1998
Indenture Trustee of Bonds of the 2008 Series (other than by the
application of the proceeds of a payment in respect of such Bonds
of the 2008 Series) shall, to the extent thereof, be deemed to
satisfy and discharge the obligation of the Company, if any, to
make a payment of principal of such Bonds of the 2008 Series
which is then due.
The Trustee shall be entitled to presume that the obligation
of the Company to pay the principal of the Bonds of the 2008
Series as the same shall become due and payable, whether at
maturity, upon redemption or otherwise, shall have been fully
satisfied and discharged unless and until it shall have received
a written notice from the 1998 Indenture Trustee, signed by an
authorized officer thereof, stating that the principal of
specified Bonds of the 2008 Series has become due and payable and
has not been fully paid, and specifying the amount of funds
required to make such payment.
Each Bond shall be dated as provided in SECTION 4 of Article
II of the Original Indenture and the Bonds of the 2008 Series
shall be issued in fully registered form only, in denominations
of $1,000 and multiplies thereof.
The Bonds of the 2008 Series shall be registrable and
exchangeable at the office or agency of the Company in the
Borough of Manhattan, The City of New York in the manner and upon
the terms set forth in SECTION 5 of Article II of the Original
Indenture, without payment of any charge.
SECTION 2. The Bonds of the 2008 Series may be executed by
the Company and delivered to the Trustee and, upon compliance
with all applicable provisions and requirements of the Original
Indenture in respect thereof, shall be authenticated by the
Trustee and delivered (without awaiting the filing or recording
of the Supplemental Indenture) in accordance with the written
order or orders of the Company.
ARTICLE II.
REDEMPTION OF THE BONDS OF THE 2008 SERIES
SECTION 1. The Bonds of the 2008 Series shall be redeemable
prior to maturity at the option of the Company, as a whole at any
time, or in part from time to time, upon at least 30 days' prior
notice, all as provided in the Indenture, at the principal amount
of Bonds so to be redeemed.
SECTION 2. In the event that all or substantially all of the
electric utility properties of the Company at the time subject to
the lien of the Indenture shall be sold, taken by eminent domain
or otherwise disposed of, as an entirety or substantially as an
entirety, and shall be released from the lien of the Indenture,
the entire award or other cash proceeds of such sale, taking or
other disposition, together with any other Available Moneys (as
defined in SECTION 11 of Article VII of the Original Indenture),
if any, then held by the Trustee, shall, to the extent and in the
manner provided in SECTION 11 of Article VII of the Original
Indenture, be applied to the pro rata payment or redemption of
the bonds of all series then outstanding under the Indenture, all
as more fully provided in the Original Indenture, and the Bonds
of the 2008 Series shall, in such event, become subject to such
redemption or payment. All such redemptions of the Bonds of the
2008 Series shall be at a redemption price equal to the principal
amount thereof.
SECTION 3. All of the provisions of Article V of the
Original Indenture, other than SECTIONs 2 and 3 thereof and the
fourth paragraph of SECTION 4 thereof, shall be applicable to the
redemption of Bonds of the 2008 Series; and the "Available
Moneys", as defined in SECTION 11 of Article VII of the Original
Indenture, apportioned to Bonds of the 2008 Series, shall be
applied by the Trustee to the payment of the redemption price
thereof, or if such apportioned Available Moneys are insufficient
for such full payment, then, upon notice similar to that provided
in the fourth paragraph of said SECTION 11 in respect of the
bonds referred to therein, first to the payment of the unpaid
interest accrued to the date fixed for payment and the balance to
the payment of the then applicable redemption price (exclusive of
such interest), to the extent that such moneys shall suffice, pro
rata, as provided in SECTION 11 of Article VII of the Original
Indenture, upon presentation and stamping in a manner similar to
that provided by SECTION 11 of Article VII of the Original
Indenture for the bonds referred to therein and the coupons
appurtenant thereto. Until the full amount then due and owing
on all Bonds of the 2008 Series shall have been paid, no such
partial payment shall discharge the obligation of the Company on
such Bonds, except to the extent of such partial payment; and the
balance of principal, if any, remaining after such payment shall
thereafter constitute the unpaid obligation of the Company upon
the Bonds of the 2008 Series.
SECTION 4. The holder of each and every Bond of the 2008
Series issued hereunder hereby agrees to accept payment thereof
prior to maturity on the terms and conditions provided for in
this Article II.
ARTICLE III.
THE TRUSTEE
The Trustee hereby accepts the trusts created by this
Supplemental Indenture upon the terms and conditions in the
Original Indenture as modified and amended and in this
Supplemental Indenture set forth. The Trustee shall not be
responsible in any manner whatsoever for or in respect of the
validity or sufficiency of this Supplemental Indenture or of the
due execution hereof by the Company, or for or in respect of the
recitals contained herein, all of which recitals are made by the
Company solely. In general, each and every term and condition
contained in Article XII of the Original Indenture shall apply to
this Supplemental Indenture with the same force and effect as if
the same were herein set forth in full, with such omissions,
variations and modifications thereof as may be appropriate to
make the same conform to this Supplemental Indenture.
ARTICLE IV.
MISCELLANEOUS PROVISIONS
SECTION 1. Subdivision (9) of SECTION 6 of Article III of
the Original Indenture is hereby amended to read as follows:
(9) An Engineer's Certificate, made and dated not more
than 10 days prior to the date of such application, stating
that the signers have no knowledge of and do not believe
that there have been, since the close of the period covered
by the Engineer's Certificate specified in subdivision (3)
above, property retirements in an amount which (after
reduction of such amount by amounts of the character
referred to in Clause (D) of subdivision 3 in respect of
such property retirements) exceeds the amount of property
additions since the close of such period by more than the
amount of the unapplied balance of property additions
calculated to be remaining upon the granting of the
application (before any reduction of such unapplied balance
of property additions by any amount of net property
additions applied to the withdrawal of cash deposited with
the Trustee in connection with such property retirements).
SECTION 2. SECTION 1 of Article VIII of the Original
Indenture is hereby amended to:
(a) insert ";or" at the end of clause (f) therein; and
(b) add immediately following clause (f) the following:
"(g) so long as the trustee under the Indenture,
dated as of August 1, 1998 as the same may be amended
and supplemented (the '1998 Indenture'), from the
Company to Bank of Montreal Trust Company, trustee (the
'1998 Indenture Trustee'), shall hold any bond
outstanding hereunder which were delivered to the 1998
Indenture Trustee as the basis for the authentication
and delivery of securities under the 1998 Indenture
which remain outstanding thereunder, an 'Event of
Default' under the 1998 Indenture; provided, however,
that, anything in this Indenture to the contrary
notwithstanding, the waiver or cure of such 'Event of
Default' and the rescission and annulment of the
consequences thereof shall constitute a cure of the
corresponding default under this Indenture and a
rescission and annulment of the consequences thereof."
SECTION 3. The holders of the Bonds of the 2008 Series
shall be deemed to have consented to the execution and delivery
of a supplemental indenture containing one or more, or all, of
the amendments to the Original Indenture set forth on Exhibit B
to this Supplemental Indenture.
SECTION 4. Subject to the variations contained in Article
II of this Supplemental Indenture and the amendments heretofore
made or contemplated in this Article IV, the Original Indenture,
as heretofore modified, amended and supplemented, is in all
respect ratified and confirmed, and the Original Indenture, this
Supplemental Indenture and all other indentures supplemental to
the Original Indenture shall be read, taken and construed as one
and the same instrument. Neither the execution of this
Supplemental Indenture nor anything herein contained shall be
construed to impair the lien of the Indenture on any of the
property subject thereto, and such lien shall remain in full
force and effect as security for all Bonds now outstanding or
hereinafter issued under the Indenture. All terms defined in
Article I of the Original Indenture, as heretofore supplemented
and amended, shall, for all purposes of this Supplemental
Indenture, have the meanings in said Article I specified, unless
the context otherwise requires.
SECTION 5. 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 Supplemental Indenture, shall be a legal
holiday or a day on which banking institutions in The City of New
York are authorized by law to remain closed, such payment may be
made or act performed or right exercised on the next succeeding
day not a legal holiday or a day on which such banking
institutions are authorized by law to remain closed, with the
same force and effect as if done on the nominal date provided in
this Supplemental Indenture, and no interest shall accrue for the
period after such nominal date.
SECTION 6. This Supplemental Indenture may be executed in
any number of counterparts, and all said counterparts executed
and delivered, each as an original, shall constitute but one and
the same instrument.
IN WITNESS WHEREOF, Tucson Electric Power Company has caused
its corporate name to be hereunto affixed, and this instrument to
be signed by its President or a Vice President, and its corporate
seal to be hereunto affixed and attested by its Secretary or an
Assistant Secretary for and in its behalf; and The Chase
Manhattan Bank has caused its corporate name to be hereunto
affixed, and this instrument to be signed by its President, a
Vice President or any Assistant Vice President and its corporate
seal to be hereunto affixed and attested by its Secretary or a
Trust Officer, for and in its behalf, all as of the day and year
first above written.
Tucson Electric Power
Company
Attest: By:
----------------------- ---------------------------
Assistant Secretary Vice President
Signed, sealed and delivered
by Tucson Electric Power
Company in the presence of:
The Chase Manhattan Bank,
as Trustee
-----------------------------
Attest: By:
----------------------- ---------------------------
Trust Officer Assistant Vice President
Signed, sealed and delivered
by The Chase Manhattan Bank
in the presence of:
-----------------------------
<PAGE>
STATE OF ARIZONA )
): ss.:
COUNTY OF PIMA )
On this 31st day of July, 1998, before me personally
appeared Kevin P. Larson, who acknowledged himself to be a Vice
President and duly authorized agent of Tucson Electric Power
Company, an Arizona corporation, and that he, as such Vice
President being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the
name of the corporation by himself as a Vice President.
The foregoing instrument was also acknowledged before me by
said Kevin P. Larson, Vice President of Tucson Electric Power
Company, an Arizona corporation, on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
-------------------------------
Notary Public
My commission expires:
<PAGE>
STATE OF NEW YORK )
): ss.:
COUNTY OF NEW YORK )
On this 3rd day of August, 1998, before me personally
appeared , such officer acknowledged
himself to be a and duly authorized
agent of The Chase Manhattan Bank, a corporation, and that he, as
such officer being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the
name of the corporation by himself as such officer.
The foregoing instrument was also acknowledged before me by
said , a of The
Chase Manhattan Bank, a corporation, on behalf of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
-------------------------------
Notary Public
My commission expires:
<PAGE>
EXHIBIT A
[Form of Bond]
This bond is not transferable, except to a
successor trustee under the 1998 Indenture
(as defined herein)
No. $
------------------------- ------------------
TUCSON ELECTRIC POWER COMPANY
FIRST MORTGAGE BOND, COLLATERAL SERIES DUE 2008
DUE AUGUST 1, 2008
TUCSON ELECTRIC POWER COMPANY, a corporation of the State of
Arizona (hereinafter sometimes called the Company), for value
received, promises to pay to
, or registered assigns,
the principal sum of
DOLLARS
on August 1, 2008, in coin or currency of the United States of
America which at the time of payment shall be legal tender for
the payment of public and private debts, at the office or agency
of the Company in the Borough of Manhattan, The City of New York,
or in the City of Tucson. This bond shall not bear interest.
This bond is one of an issue of bonds of the Company, issued
and to be issued in one or more series under and equally and
ratably secured (except as any sinking, amortization,
improvement, renewal or other fund, established in accordance
with the provisions of the indenture hereinafter mentioned, may
afford additional security for the bonds of any particular
series) by a certain mortgage and deed of trust (which, together
with all indentures supplemental thereto, including the Thirty-
Fourth Supplemental Indenture, dated as of August 1, 1998, is
hereinafter called the "Indenture"), dated as of April 1, 1941,
made by The Tucson Gas, Electric Light and Power Company (Tucson
Electric Power Company, successor by merger) to The Chase
National Bank of the City of New York (The Chase Manhattan Bank,
successor by merger), now The Chase Manhattan Bank, as Trustee
(hereinafter called the "Trustee"), to which Indenture reference
is hereby made for a description of the property mortgaged and
pledged, the nature and extent of the security provided by the
Indenture, the rights and limitations of rights of the Company,
the Trustee and the holders of said bonds with respect to the
security provided by the Indenture, the powers, duties and
immunities of the Trustee, the terms and conditions upon which
said bonds are and are to be secured, and the circumstances under
which additional bonds may be issued, to all of which provisions
the holder, by accepting this bond, assents. To the extent
permitted by and as provided in the Indenture, the rights and
obligations of the Company and the rights of the holders of said
bonds may be changed and modified, with the consent of the
Company, by the affirmative vote of the holders of at least 75%
in aggregate principal amount of the bonds then outstanding
(excluding bonds disqualified from voting by reason of the
Company's interest therein as provided in the Indenture), or by
the affirmative vote of the holders of at least 75% in aggregate
principal amount of the bonds of any one or more series then
outstanding and entitled to vote and affected by such
modification or alteration in case one or more but less than all
of the series of bonds then outstanding under the Indenture are
so affected, or in either case by the written consent of the
holders of such percentage of bonds; provided, that without the
--------
consent of the holder hereof no such modification or alteration
shall be made which will permit the extension of the time of
payment of the principal of or the interest on this bond or a
reduction in the principal amount hereof, or premium, if any, or
rate of interest hereon or any other modification of the terms of
payment of such principal, premium or interest or will deprive
the holder of any lien provided by the Indenture upon the
mortgaged property or reduce the percentage of bonds required for
the aforesaid action under the Indenture. The Company has
reserved the right to amend the Indenture without any consent or
other action by holders of any series of bonds created after
July 31, 1976 (including this series) so as to change 75% in the
foregoing sentence to 60%. This bond is one of a series of bonds
designated as the First Mortgage Bonds, Collateral Series due
2008 of the Company.
The bonds of this series are being issued and delivered by
the Company to Bank of Montreal Trust Company, as trustee under
the Indenture, dated as of August 1, 1998, as supplemented (the
"1998 Indenture"), of the Company to such trustee (the "1998
Indenture Trustee"), as the basis for the authentication and
delivery of securities under the 1998 Indenture. As provided in
the 1998 Indenture, the bonds of this series are to be registered
in the name of the 1998 Indenture Trustee or its nominee and will
be owned and held by the 1998 Indenture Trustee, subject to the
provisions of the 1998 Indenture, for the benefit of the holders
of all securities from time to time outstanding under the 1998
Indenture, and the Company shall have no interest therein. The
bonds of this series shall not be transferable except as required
to effect transfer to any successor trustee under the 1998
Indenture.
Anything herein to the contrary notwithstanding, any payment
by the Company under the 1998 Indenture of the principal of the
securities which shall have been authenticated and delivered
under the 1998 Indenture on the basis of the delivery to the 1998
Indenture Trustee of bonds of this series (other than by the
application of the proceeds of a payment in respect of such bonds
of this series) shall, to the extent thereof, be deemed to
satisfy and discharge the obligation of the Company, if any, to
make a payment of principal of such bonds of this series which is
then due.
The bonds of this series are redeemable prior to maturity at
the option of the Company, as a whole at any time, or in part
from time to time, upon at least 30 days' prior notice (which may
be conditioned upon the deposit of the redemption moneys with the
Trustee before the redemption date), all as provided in the
Indenture, at the principal amount of bonds so to be redeemed.
In the event that all or substantially all of the electric
utility properties of the Company at the time subject to the lien
of the Indenture shall be sold, taken by eminent domain or
otherwise disposed of, as an entirety or substantially as an
entirety, and shall be released from the lien of the Indenture,
the entire award or other cash proceeds of such sale, taking or
other disposition, together with certain moneys, if any, then
held by the Trustee, shall, to the extent and in the manner
provided in the Indenture, be applied to the pro rata payment or
redemption of the bonds of all series then outstanding under the
Indenture, all as more fully provided therein, and this bond
shall, in such event, become subject to such redemption or
payment. Any such redemption of this bond shall be at a
redemption price equal to its principal amount.
The principal of this bond may become or be declared due and
payable before the maturity hereof, on the conditions, in the
manner and at the times set forth in the Indenture, upon the
happening of a default as therein provided.
This bond is non-transferable except as required to effect
transfer to any successor trustee under the 1998 Indenture, any
such transfer to be made, at the office or agency of the Company
in the Borough of Manhattan, The City of New York upon surrender
and cancellation of this bond, and upon any such transfer a new
bond of this series, for the same aggregate principal amount,
will be issued to the transferee in exchange herefor. The Company
and the Trustee may deem and treat the person in whose name this
bond is registered as the absolute owner hereof for the purpose
of receiving payment and for all other purposes. This bond,
alone or with other bonds of this series, may in like manner be
exchanged at such office or agency for one or more new bonds of
this series of the same aggregate principal amount, all as
provided in the Indenture.
No recourse shall be had for the payment of the principal of
this bond, or for any claim based hereon or otherwise in respect
hereof or of the Indenture, against any incorporator,
shareholder, director or officer, as such, past, present or
future, of the Company or of any predecessor or successor
corporation, either directly or through the Company or any
predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or by any legal or equitable proceeding
or otherwise howsoever (including, without limiting the
generality of the foregoing, any proceeding to enforce any
claimed liability of shareholders of the Company, based upon any
theory of disregarding the corporate entity of the Company or
upon any theory that the Company was acting as the agent or
instrumentality of the shareholders); all such liability being,
by the acceptance hereof and as a part of the consideration for
the issuance hereof, expressly waived and released by every
holder hereof, and being likewise waived and released by the
terms of the Indenture under which this bond is issued, as more
fully provided in said Indenture.
This bond shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have
been signed by The Chase Manhattan Bank, or its successor, as
Trustee under said Indenture.
IN WITNESS WHEREOF, the Company has caused this bond to be
signed in its name by the manual or facsimile signature of its
President or one of its Vice Presidents, and its corporate seal,
or a facsimile thereof, to be impressed or imprinted hereon and
attested by the manual or facsimile signature of its Secretary or
one of its Assistant Secretaries.
Dated
-------------------
TUCSON ELECTRIC POWER COMPANY
By
---------------------------------
President
Attest:
--------------------------
Secretary
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the bonds, of the series designated therein,
described in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By:
-------------------------------
<PAGE>
EXHIBIT B
MODIFICATIONS OF THE ORIGINAL INDENTURE
1. (a) The modification of the introductory paragraph to the
definition of "property additions" contained in Section 4 of
Article I of the Original Indenture to read as follows:
"'Property additions' shall mean any new or additional
property (including separate and distinct units, plants,
systems and properties), and improvements, extensions or
additions to or about the property of the Company, in every
case properly chargeable to the utility plant accounts of
the Company, purchased, constructed or otherwise acquired by
the Company and used or useful or to be used in the Utility
Business; provided, however, that"
;and
(b) The modification of subdivision (b) in the definition of
"property additions" contained in Section 4 of Article I of the
Original Indenture by:
(i) deleting the period at the end of clause (7) of
said subdivision (b) and replacing such period by a semi-
colon; and
(ii) adding to said subdivision (b) a new clause (8)
reading as follows:
"(8) Any property (other than space satellites) which
is located outside the territorial limits of the United
States of America and its coastal waters and the Dominion
of Canada and its coastal waters [and the United Mexican
States and its coastal waters]<FN1>. 'Space satellites',
shall mean any form of space satellites, space stations
and other analogous facilities (including without
limitation solar power satellites, stations and other
analogous facilities), whether or not in the Earth's
atmosphere."
;and
(c) The modification of the definition of "Utility
Business" contained in Section 2 of Article I of the Original
Indenture to read as follows:
--------------------
* Note: The holders of the Bonds of the 2008 Series
shall be deemed to have consented to the modification described
in paragraph l(b) whether or not the bracketed language is
contained therein.
<PAGE>
"'Utility Business' shall mean the business of producing,
generating, manufacturing, transporting, transmitting,
distributing or supplying energy or fuel in any form, including
without limitation electricity, gas (natural or artificial) or
solar or geothermal energy, or water or steam, for any and all
purposes."
;and
(d) The modification of Clause (A) of subdivision 3 of
Section 6 of Article III of the Original Indenture to read as
follows:
"(A) showing the amount, if any, of the unapplied balance
of property additions included in the most recent
certificate, if any, theretofore filed with the Trustee,
whether pursuant to this subdivision (3), or pursuant to
Section 9 of this Article, or pursuant to Section 9 of
Article VII;"
(e) The modification of Clause (E) of subdivision 3 of
Section 6 of Article III of the Original Indenture to read as
follows:
"(E) showing the amount of the net property additions
available as a basis for the authentication and delivery of
bonds pursuant to Section 4 of this Article, which amount
shall be determined as follows: To the amount shown in
Clause (A) of this subdivision (3), there shall be added the
amount of the cost or fair value, whichever shall be the
less (such cost and/or fair value to be in all cases taken
at the lowest amounts shown by any of the certificates
delivered pursuant to this Section) of the property
additions included in Clause (B) of this subdivision (3);
and from the aggregate amount so arrived at there shall be
deducted the amount by which the aggregate amount of the
property retirements shown pursuant to Clause (C) of this
subdivision (3) shall exceed the aggregate of the amounts
shown pursuant to Clause (D) of this subdivision (3);"
2. The modification of Sections 2 and 5 of Article I of the
Original Indenture by deleting the words "and verified" following
the word "signed" from the definitions of "engineer's
certificate", "Treasurer's certificate" and "net earnings
certificate".
3. The deletion of all of the following, and any and all
references thereto, which shall be in force and effect at the
date of any meeting or meetings of bondholders under the Original
Indenture: Article V of the supplemental indentures to the
Original Indenture dated, respectively, as of April 1, 1949,
December 1, 1952, January 1, 1955, January 1, 1958, November 1,
1959, November 1, 1961, February 1, 1965, February 1, 1966,
November 1, 1969, September 1, 1971, March 1, 1972, May 1, 1973
and November 1, 1975.
4. (a) The deletion of all of the following, and any and
all references thereto, which shall be in force and effect at the
date of any meeting or meetings of bondholders under the Original
Indenture: Section 9 of Article IV of the Original Indenture,
Article III of the supplemental indenture to the Original
Indenture, dated as of October 1, 1947, and Article IV of the
supplemental indentures to the Original Indenture, dated,
respectively, as of April 1, 1949, December 1, 1952, January 1,
1955, January 1, 1958, November 1, 1959, November 1, 1961,
February 1, 1965, February 1, 1966, November 1, 1969, September
1, 1971, March 1, 1972, May 1, 1973, November 1, 1975 and October
1, 1977;
or, in the alternative
(b) The modification of the first two paragraphs of Section
9 of Article IV of the Original Indenture to read as follows:
"Section 9. So long as any of the bonds of the Series due
1966 shall remain outstanding (unless and except to the extent
that a regulatory body having jurisdiction shall direct a lesser
amount), the Company will (subject to the provisions of Section 4
of Article XI) for each calendar year, charge against income or
earned surplus and credit to replacement reserve in respect of
its property pertaining to the Utility Business or other reserve
for the write-down or write-off of such property, amounts which
shall aggregate not less than (a) ten per centum (10%) of
its gross operating revenues from the Utility Business during
such year remaining after deducting from such gross operating
revenues (i) an amount equal to the cost to the Company during
each such year of fuel in any form used or to be used in the
Utility Business, including the cost of acquisition and
transportation thereof, and (ii) an amount equal to the cost to
the Company during such year of electricity and gas purchased for
resale or exchange, less (b) the amounts expended during such
year for maintenance of the property of the Company pertaining to
the Utility Business.
--------------------
* Note: The holders of the Bonds of the 2008 Series
shall be deemed to have consented to the modification described
in paragraph 4(b) either with the percentage shown above or with
any higher percentage.
<PAGE>
Within two calendar months after December 31 of each
year, the Company shall file with the Trustee a Treasurer's
certificate stating:
(a) The amount of its gross operating revenues from
the Utility Business during the next preceding year
remaining after deducting from such gross revenues (i)
the cost during such year of fuel in any form used or to
be used in the Utility Business, including the cost of
acquisition and transportation thereof, and (ii) the cost
during such year of electricity and gas purchased for
resale or exchange;
(b) The amounts expended by the Company during said
year for maintenance of the property of the Company
pertaining to the Utility Business;
(c) The amounts charged against income or earned
surplus and credited to replacement reserve in respect of
its property pertaining to the Utility Business or other
reserve for the write down or write-off of such property,
by the Company during such year; and
(d) That the Company has complied, if such be the
case, with the covenant in this Section 9 contained."
or, in the alternative
(c) The modification of the first two paragraphs of Section
9 of Article IV of the Original Indenture to read as follows:
"Section 9. So long as any of the bonds of the Series
due 1966 shall remain outstanding (unless and except to
the extent that a regulatory body having jurisdiction
shall direct a lesser amount), the Company will (subject
to the provisions of Section 4 of Article XI) for each
calendar year, charge against income or earned surplus
and credit to replacement reserve in respect of its
property pertaining to the Utility Business or other
reserve for the write-down or write-off of such property,
amounts which shall aggregate not less than the lower of
(a)(i) two per centum (2%)<FN3> of the cost of the
depreciable property of the Company subject to the lien
of this Indenture less (ii) the amounts expended during
each such year for maintenance of the property of the
Company pertaining to the Utility Business or (b)(i) ten
per centum (10%)<FN4> of its gross operating revenues
from the Utility Business, during such year remaining
after deducting from such gross operating revenues (A) an
amount equal to the cost to the Company during such year,
of fuel in any form used or to be used in the Utility
Business, including the cost of acquisition and
transportation thereof, and (B) an amount equal to the
cost to the Company during such year of electricity and
gas purchased for resale or exchange less (ii) the
amounts expended during each such year for maintenance of
the property of the Company pertaining to the Utility
Business.
--------------------
* Note: The Trustee shall vote in favor of, or
consent to, the modification described in paragraph 4(c) with the
percentages shown above or with any higher percentage in either
instance or both instances.
<PAGE>
Within two calendar months after December 31 of each
year, the Company shall file with the Trustee a
Treasurer's certificate stating:
(a) The cost of the depreciable property of the
Company subject to the lien of this Indenture;
(b) The amount of its gross operating revenues from
the Utility Business during the next preceding year
remaining after deducting from such gross revenues (i)
the cost during such year of fuel in any form used or
to be used in the Utility Business, including the cost
of acquisition and transportation thereof, and (ii) the
cost during such year of electricity and gas purchased
for resale or exchange;
(c) The amounts expended by the Company during said
year for maintenance of the property of the Company
pertaining to the Utility Business;
(d) The amounts charged against income or earned
surplus and credited to replacement reserve in respect
of its property pertaining to the Utility Business or
other reserve for the write down or write-off of such
property, by the Company during such year; and
(e) That the Company has complied, if such be the
case, with the covenant in this Section 9 contained".
<PAGE>
5. The modification of clause (e) in subdivision (7) of
Section 6 of Article III of the Original Indenture to read as
follows:
"(e) that the Company has corporate authority and all
necessary permission from governmental authorities to
acquire and own such property additions;"
6. The modification of Clause (A) of Section 5 of Article I
of the Original Indenture by inserting after the term "gross
operating revenues" the parenthetical phrase "(whether or not
collected by the Company subject to refund at a future date)".
7. The modification of Clause (A) of Section 5 of Article I
of the Original Indenture by inserting after the term "net non-
operating income", the first time it appears, the parenthetical
phrase "(which shall be deemed to include, without limitation, an
amount equal to the total amount of the allowance for funds used
during construction, or any similar or analogous amount, included
in the utility plant accounts of the Company as part of the cost
of construction)".
8. The modification of Clause (A) of Section 5 of Article I
of the Original Indenture by changing the percentage set forth in
the proviso thereto from 15% to 25% or any percentage less than
25%.
9. The modification of Section 5 of Article III of the
Company Mortgage to read as follows:
"Section 5. No bonds shall be authenticated and delivered
upon the basis of property additions unless as shown by a net
earnings certificate the net earnings of the Company for the
period therein referred to shall have been in the aggregate
either (a) at least equivalent to two times the annual interest
requirements as shown by such net earnings certificate or (b) at
least equivalent to fifteen per centum (15%) of the
aggregate principal amount of bonds and other indebtedness the
annual interest requirements in respect of which are shown in
such net earnings certificate."
10. The modification of the first paragraph of Section 6 of
Article IV of the Original Indenture to read as follows:
--------------------
* Note: The holders of the Bonds of the 2008 Series
shall be deemed to have consented to the modification described
in paragraph 9 either with the percentage shown above or with any
higher percentage.
<PAGE>
"Section 6. That it will keep the mortgaged property
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 part of the property, 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 (the adequacy
of such insurance fund, trust or other agreement, to be evidenced
by a certificate to be filed with the Trustee of an independent
actuary or other qualified person selected by the Company and
satisfactory to the Trustee). Any insurance policy may contain
deductible provisions in a dollar amount per occurrence equal to
the deductible amount usually contained in insurance policies or
other arrangements for insurance of other companies owning and
operating similar property, provided that the dollar amount of
such deductible provisions may in any event be at least equal to
5% of the aggregate principal amount of bonds outstanding
hereunder. Any loss from fire and such other risks, except any
loss of merchandise, materials and supplies and except any other
loss less than an amount equal to 5%<FN6> of the aggregate
principal amount of bonds outstanding hereunder, shall be made
payable to the Trustee as its interest may appear, unless
required by the terms of any prior lien to be paid to the trustee
or other holder thereof, as evidenced by an opinion of counsel.
If the Company shall insure such property in whole or in part
through an insurance fund, trust or other agreement, it hereby
covenants and agrees to pay to the Trustee the amount of all
losses, except in respect of any particular loss less than
5%<FN6> of the aggregate principal amount of bonds outstanding
hereunder, to the extent that such amounts shall not be payable
by insurance companies, and the amounts so required to be paid to
the Trustee (as well as the amounts of all losses permitted to be
retained by the Company because not in excess of 5% of the
aggregate principal amount of bonds outstanding hereunder) shall
be deemed to constitute proceeds of insurance for all purposes of
this Indenture. All moneys received by the Trustee as proceeds
of insurance against loss or damage shall be held and applied as
hereinafter provided. On or prior to September 15 in each year,
and at any other time upon the written request of the Trustee,
the Company will furnish to the Trustee a Treasurer's certificate
stating in substance that the Company has complied with all the
terms and conditions of this Section, containing a detailed
statement of the insurance then in effect upon the property of
the Company on a date therein specified (which date shall be
within 30 days of the filing of such certificate) and, except in
respect of property insured by means of an insurance fund, trust
or other agreement as permitted by this Section, showing the
numbers of the policies of insurance in effect and the names of
the issuing companies, the amounts of such policies, the
deductible provisions of such policies and the property covered
by such policies; and, in case any of the property shall at the
time be insured by means of an insurance fund, trust or other
agreement, as permitted by this Section, the Company shall, at
the time of furnishing each such Treasurer's certificate, also
furnish to the Trustee a certificate, as described above, with
respect to the adequacy of such insurance fund, trust or other
arrangement. Subject to the provisions of Section 2 of Article
XII hereof, the Trustee shall be entitled to accept any such
Treasurer's certificate, and, if required, any such other
certificate above described, as satisfactory evidence of
compliance by the Company with the provisions of this Section,
and shall be under no duty with respect to any such Treasurer's
certificate or any such other certificate, except to exhibit the
same to any bondholder upon request."
--------------------
* Note: The holders of the Bonds of the 2008 Series
shall be deemed to have consented to the modification contained
in paragraph 10 either with the percentages shown above or, in
any instance, a lower percentage.
<PAGE>
11. The modification of Section 4 of Article VII of the
Original Indenture to read as follows:
"Section 4. Unless a default as defined in Section 1 of
Article VIII hereof shall have happened and shall be continuing,
the Trustee shall, whenever from time to time requested by the
Company, and after being furnished with a certificate and opinion
of counsel that all conditions precedent to the release in this
Section provided for have been complied with, and without
requiring compliance with any of the foregoing provisions of
Section 3 of this Article (but subject to the requirements of
Section 19 of Article IV hereof), release from the lien hereof
any property (except cash, obligations or other personal property
deposited or pledged or required to be deposited or pledged with
the Trustee) which, as set forth in the certificate or opinion of
an engineer, appraiser, or other expert furnished to the Trustee
pursuant to Section 19 of Article IV hereof, is of a value not
exceeding, in the aggregate in any period of 12 consecutive
calendar months the greater of the sum of $25,000 or 1% of the
aggregate principal amount of bonds at the time outstanding. The
Company covenants that it will forthwith deposit with the Trustee
the consideration received by it from the disposition of any
property so released, to be held and applied as a part of the
mortgaged property, in the manner provided in Section 9 of this
Article, or with the trustee or other holder of a prior lien, if
required by the terms thereof, as evidenced by an opinion of
counsel."
12. The modification of the first proviso of Section 5 of
Article IV of the Original Indenture to read as follows:
"provided, however, that nothing in this Section 5
contained shall require the Company to observe or conform to
any requirement of governmental authority or to pay, or
cause to be paid or discharged, or make provision for, any
such tax, assessment, lien or charge, (a) so long as the
validity thereof shall be contested in good faith and by
appropriate proceedings or (b) with respect to any such
requirement of governmental authority, so long as the
Company shall be in good faith doing all things
technologically and economically feasible and prudent on its
part to observe or conform to such requirement, unless, in
any case, any part of the mortgaged property will thereby be
lost or forfeited;"
13. (a) The modification of the first sentence of Section 3
of Article VII of the Original Indenture to read as follows:
"Section 3. The Company shall have the right (in addition
to the rights conferred by Sections 2, 4 and 5 of this
Article) at any time and from time to time, unless a default
as defined in Section 1 of Article VIII hereof shall have
happened and shall be continuing, to sell, dispose of or
exchange any part of the mortgaged property (other than any
cash, obligations or other personal property deposited or
pledged with or required to be deposited or pledged with the
Trustee) the ownership of which by the Company shall no
longer be desirable in the judicious management and
maintenance of the mortgaged property or in the conduct of
the business of the Company, or which the Company shall have
been directed to sell or dispose of by order of any
governmental authority having jurisdiction in the premises,
or shall desire to sell or dispose of in reasonable
anticipation of the making of such an order."
; and
(b) The modification of Clause (C)(1) of Section 3 of
Article VII of the Original Indenture to read as follows:
"(1) that the Company has sold, disposed of or exchanged
or has contracted to sell, dispose of or exchange the
property so to be released for a consideration described, in
reasonable detail, in said certificate, and either (a) that
such sale or exchange is desirable in the conduct of the
business of the Company, and that the ownership by the
Company of the property to be released is no longer
desirable in the judicious management and maintenance of the
mortgaged property or in the conduct of the business of the
Company, or (b) that such sale or disposition is made to
comply with an order or orders of a designated governmental
authority having jurisdiction to require such sale or
disposition, or in reasonable anticipation of the making of
such an order;".
14. The amendment of Section 2 of Article I of the Original
Indenture to add thereto a definition of the term "fair value"
substantially to the following effect:
"Fair value", with respect to property, shall mean the
fair value of such property as may be determined by
reference to (a) the amount which would be likely to be
obtained in an arm's-length transaction with respect to such
property between an informed and willing buyer and an
informed and willing seller, under no compulsion,
respectively, to buy or sell, (b) the amount of investment
with respect to such property which, together with a
reasonable return thereon, would be likely to be recovered
through ordinary business operations or otherwise, (c) the
cost, accumulated depreciation and replacement cost with
respect to such property and/or (d) any other relevant
factors; provided, however, that (x) the fair value of
property shall be determined without deduction for any prior
liens on such property (except as otherwise provided in
clause (2) of subparagraph (C) of Section 3 of Article VII
and (y) the fair value to the Company of property additions
shall not reflect any reduction relating to the fact that
such property additions may be of less value to a person
which is not the owner or operator of the mortgaged property
or any portion thereof than to a person which is such owner
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 otherwise
available to the engineer certifying the same.
15. The amendment of Section 2 of Article I of the Original
Indenture to add thereto definitions of the terms "purchase money
mortgage" and "purchase money obligations" substantially to the
following effect:
"Purchase money mortgage" means, with respect to any
property being acquired or disposed of by the Company or
being released from the lien of this Indenture, a lien on
such property which
(a) is taken or retained by the transferor of such
property to secure all or part of the purchase price
thereof;
(b) is granted to one or more persons other than the
transferor which, by making advances or incurring an
obligation, give value to enable the grantor of such lien
to acquire rights in or the use of such property;
(c) is granted to any other person in connection with
the release of such property from the lien of this
Indenture on the basis of the deposit with the Trustee or
the trustee or other holder of a prior lien of
obligations secured by such lien on such property (as
well as any other property subject thereto);
(d) is held by a trustee or agent for the benefit of
one or more persons described in clause (a), (b) and/or
(c) above, provided that such lien may be held, in
addition, for the benefit of one or more other persons
which shall have theretofore given, or may thereafter
give, value to or for the benefit or account of the
grantor of such lien for one or more other purposes; or
(e) otherwise constitutes a purchase money mortgage or
a purchase money security interest under applicable law;
and, without limiting the generality of the foregoing, for
purposes of this Indenture, the term shall be deemed to
include any lien described above whether or not such lien
(x) shall permit the issuance or other incurrence of
additional indebtedness secured by such lien on such
property, (y) shall permit the subjection to such lien of
additional property and the issuance or other incurrence of
additional indebtedness on the basis thereof and/or (z)
shall have been granted prior to the acquisition,
disposition or release of such property, shall attach to or
otherwise cover property other than the property being
acquired, disposed of or released and/or shall secure
obligations issued prior and/or subsequent to the issuance
of the obligations delivered in connection with such
acquisition, disposition or release. The term "purchase
money obligation" shall mean an obligation secured by a
purchase money mortgage.
16. The amendment of clause (b) in subdivision (1) of
Section 9 of Article VII or the Original Indenture to read as
follows:
(b) in an amount equal to 166 2/3% of the principal
amount of bonds to the authentication and delivery of
which the Company shall be entitled under the provisions
of Section 7 of Article III hereof.
17. The amendment of the first paragraph of Section 3 of
Article VII of the Original Indenture to:
(i) to delete therefrom the proviso in the second
sentence of such paragraph or to provide that such proviso
may be disregarded upon specified conditions; or
(ii) to delete from such proviso the phrase "15% of";
or
(iii) to change the term 15% in such proviso therein to
any higher percentage not exceeding one hundred per centum
(100%).
18. The amendment of Section 7 of Article III of the
Original Indenture change the semi-colon at the end of clause (4)
in the first paragraph thereof to a period and to delete the
remainder of said first paragraph.
Exhibit 4(c)
=================================================================
SUPPLEMENTAL INDENTURE NO. 3
------------------------
TUCSON ELECTRIC POWER COMPANY
TO
BANK OF MONTREAL TRUST COMPANY,
TRUSTEE
--------------------------
Dated as of August 1, 1998
-------------------------
Supplemental to Indenture of Mortgage and Deed of Trust,
dated as of December 1, 1992
-----------------------
Creating Series of Bonds Designated
First Mortgage Bonds, Collateral Series due 2008
-------------------------
================================================================
This instrument constitutes a mortgage, a deed of trust and a
security agreement.
SUPPLEMENTAL INDENTURE NO. 3, dated as of August 1, 1998,
between TUCSON ELECTRIC POWER COMPANY (hereinafter sometimes
called (the "Company"), a corporation organized and existing
under the laws of the State of Arizona, having its principal
office at 220 West Sixth Street, in the City of Tucson, Arizona,
as trustor, and BANK OF MONTREAL TRUST COMPANY, a banking
corporation organized and existing under the laws of the State of
New York and having its principal office at 88 Pine Street, in
the Borough of Manhattan, The City of New York, New York, as
trustee (hereinafter sometimes called the "Trustee"), under the
Indenture of Mortgage and Deed of Trust, dated as of December 1,
1992 (hereinafter called the "Original Indenture"), as heretofore
supplemented, this Supplemental Indenture No. 3 being
supplemental thereto (the Original Indenture as heretofore
supplemented, and as supplemented hereby, and as it may from time
to time be further supplemented, modified, altered or amended by
any supplemental indenture entered into in accordance with and
pursuant to the provisions thereof, is hereinafter called the
"Indenture").
RECITALS OF THE COMPANY
WHEREAS the Original Indenture was authorized, executed and
delivered by the Company to provide for the issuance from time to
time of its Bonds (such term and all other capitalized terms used
herein without definition having the meanings assigned to them in
the Original Indenture), to be issued in one or more series as
therein contemplated, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on
the Bonds; and
WHEREAS, the Company has heretofore executed and delivered
to the Trustee two supplemental indentures for the purposes
recited therein including the creation of two series of Bonds, as
set forth in Schedule A hereto; and
WHEREAS, the Company proposes to establish a series of Bonds
designated "First Mortgage Bonds, Collateral Series due 2008",
such series to be limited in aggregate principal amount (except
as contemplated in clause (b) of Section 2 of Article II of the
Original Indenture) to $140,000,000, such series of Bonds and
such Bonds to be hereinafter sometimes called, respectively,
"Series 3" and "Series 3 Bonds"; and
WHEREAS, all acts and proceedings required by law and by the
articles of incorporation and by-laws of the Company, including
all action requisite on the part of its shareholders, directors
and officers, necessary to make the Series 3 Bonds, when executed
by the Company, authenticated and delivered by the Trustee and
duly issued, the valid, binding and legal obligations of the
Company, and to constitute this Supplemental Indenture a valid,
binding and legal instrument, in accordance with its and their
terms, have been done and taken; and the execution and delivery
of this Supplemental Indenture No. 3 have been in all respects
duly authorized.
GRANTING CLAUSES
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 3
WITNESSETH, that, in order to secure the payment of the principal
of and premium, if any, and interest, if any, on all Bonds at any
time Outstanding under the Indenture according to their tenor,
purport and effect, and to secure the performance and observance
of all the covenants and conditions therein and herein contained
(except any covenant of the Company with respect to the refund or
reimbursement of taxes, assessments or other governmental charges
on account of the ownership of the Bonds of any series or the
income derived therefrom, for which the Holders of the Bonds
shall look only to the Company and not to the property hereby
mortgaged or pledged), and to declare the terms and conditions
upon and subject to which the Series 3 Bonds are to be issued,
and for and in consideration of the premises and of the mutual
covenants herein contained and of the purchase and acceptance of
the Bonds by the Holders thereof, and of the sum of $1 duly paid
to the Company by the Trustee at or before the ensealing and
delivery hereof, and for other good and valuable consideration,
the receipt and sufficiency whereof are hereby acknowledged, the
Company has executed and delivered this Indenture, and by these
presents does grant, bargain, sell, release, convey, assign,
transfer, mortgage, pledge, set over and confirm unto the
Trustee, and grant to the Trustee a security interest in:
All and singular the premises, property, assets,
rights and franchises of the Company (except Excepted
Property), whether now or hereafter owned, constructed
or acquired, of whatever character and wherever
situated including, among other things (but reference
to or enumeration of any particular kinds, classes or
items of property shall not be deemed to exclude from
the operation and effect of this Indenture any kind,
class or item not so referred to or enumerated), all
right, title and interest of the Company in and to the
property described as granted in "Schedule B" attached
to this Supplemental Indenture No. 3 and made part of
these Granting Clauses to the same extent as if fully
set forth in the same, and all plants for the
generation of electricity by water, steam and/or other
power; all power houses, substations, transmission
lines, distributing systems; all offices, buildings and
structures, and the equipment thereof; all machinery,
engines, boilers, dynamos, machines, regulators,
meters, transformers, generators and motors; all
appliances whether electrical, gas or mechanical,
conduits, cables and lines; all pipes, service pipes,
fittings, valves and connections, poles, wires, tools,
implements, apparatus, furniture, and chattels; all
municipal franchises and other franchises; all lines
for the transmission and/or distribution of electric
current, including towers, poles, wires, cables, pipes,
conduits, street lighting systems and all apparatus for
use in connection therewith; all real estate, lands,
leaseholds; all easements, servitudes, licenses,
permits, rights, powers, franchises, privileges,
rights-of-way and other rights in or relating to real
estate or the occupancy of the same and all the right,
title and interest of the Company in and to all other
property of any kind or nature appertaining to and/or
used and/or occupied and/or enjoyed in connection with
any property hereinbefore described; it being the
intention of the parties that all property of every
kind, real, personal or mixed (including, but not
limited to, all property of the types hereinbefore
described), other than Excepted Property, which may be
acquired by the Company after the date hereof, shall,
immediately upon the acquisition thereof by the
Company, to the extent of such acquisition, and without
any further conveyance or assignment, become and be
subject to the direct lien of the Indenture as fully
and completely as though now owned by the Company and
described in said "Schedule B"; it further being the
intention of the paries, however, that the lien of and
security interest granted by this Indenture shall not
result in the Trustee having greater rights with
respect to any property of the Company, real, personal
or mixed (including, but not limited to, leasehold
interests in property) than the rights of the Company
with respect to such property.
TOGETHER WITH all and singular the tenements, hereditaments
and appurtenances belonging or in any wise appertaining to the
aforesaid premises, property, assets, rights and franchises or
any part thereof, with the reversion and reversions, remainder
and remainders, and all the estate, right, title and interest and
claim whatsoever, at law as well as in equity, which the Company
now has or may hereafter acquire in and to the aforesaid
premises, property, assets, rights and franchises and every part
and parcel thereof.
Subject, however, to the reservations, exceptions,
limitations and restrictions contained in the several deeds,
leases, servitudes, contracts, decrees, judgments, or other
instruments through which the Company acquired or claims title to
or enjoys the use of the aforesaid properties; and subject also
to such easements, leases, reservations, servitudes, reversions
and other rights and privileges of others and such mortgages,
liens and other encumbrances in, on, over, across or through said
properties as existed at the time of the acquisition of such
properties by the Company or as have been granted by the Company
to other persons at or prior to the time of the issuance and
delivery of the Bonds of the Initial Series, including, but not
limited to, the lien of the 1941 Mortgage and the security
interest created thereby; and subject also to Permitted En-
cumbrances and, as to any property acquired by the Company after
the time of the issuance and delivery of the Bonds of the Initial
Series, to any easements, leases, reservations, servitudes,
reversions and other rights and privileges of others and
mortgages, liens or other encumbrances thereon existing, and to
any mortgages, liens and other encumbrances for unpaid portions
of the purchase money placed thereon, at the time of such
acquisition, it being understood that with respect to any such
after-acquired property the Lien of the Indenture (as hereinafter
defined) shall at all times be junior, subject and subordinate to
the lien of the 1941 Mortgage and the security interest created
thereby; and subject also to the provisions of Article XI of the
Original Indenture;
TO HAVE AND TO HOLD the Trust Estate and all and singular
the lands, properties, estates, rights, franchises, privileges
and appurtenances hereby granted, bargained, sold, released,
conveyed, assigned, transferred, mortgaged, pledged, set over and
confirmed, together with all the appurtenances thereunto
appertaining, unto the Trustee and its successors and assigns,
forever;
BUT IN TRUST, NEVERTHELESS, for the equal and proportionate
use, benefit, security and protection of those who from time to
time shall hold the Bonds authenticated and delivered hereunder
and duly issued by the Company, without any discrimination,
preference or priority of any one Bond over any other by reason
of priority in the time of issue, sale or negotiation thereof or
otherwise, except as provided in Section 2 of Article IV of the
Original Indenture, so that, subject to said provisions, each and
all of said Bonds shall have the same right, lien and privilege
under the Indenture and shall be equally secured hereby (except
as any sinking, amortization, improvement, renewal or other fund,
established in accordance with the provisions of the Indenture,
may afford additional security for the Bonds of any particular
series), and shall have the same proportionate interest and share
in the Trust Estate, with the same effect as if all of the Bonds
had been issued, sold and negotiated simultaneously on the date
of the delivery hereof; and in trust for enforcing payment of the
principal of the Bonds, and premium, if any, and interest, if
any, thereon, according to the tenor, purport and effect of the
Bonds and of the Indenture, and for enforcing the terms,
provisions, covenants and agreements herein and in the Bonds set
forth;
UPON CONDITION that, until the happening of a Default, the
Company shall be suffered and permitted to possess, use and enjoy
the Trust Estate (except money, securities and other personal
property pledged or deposited with or required to be pledged or
deposited with the Trustee hereunder) and to receive and use the
rents, issues, income, revenues, earnings and profits therefrom,
all as more specifically provided in Section 1 of Article VII of
the Original Indenture;
AND UPON THE TRUSTS, USES AND PURPOSES and subject to the
covenants, agreements and conditions hereinafter set forth and
declared.
ARTICLE
SERIES 3 BONDS
SECTION 1. BASIC PROVISIONS.
There is hereby established a series of Bonds having the
following terms and characteristics (the lettered subdivisions
set forth below corresponding to the lettered subdivisions of
SECTION 2 of Article II of the Indenture):
(a) the title of the Bonds of such series, being
Series No. 3 under the Indenture, shall be "First Mortgage
Bonds, Collateral Series due 2008" (such Bonds being
hereinafter sometimes called the "Series 3 Bonds");
(b) the aggregate principal amount of Series 3 Bonds
which may be authenticated and delivered under the Indenture
shall be limited to $140,000,000, except as contemplated in
subdivision (b) of SECTION 2 of Article II of the Original
Indenture;
(c) not applicable;
(d) the Series 3 Bonds shall mature on August 1, 2008;
(e) the Series 3 Bonds shall not bear interest;
(f) the office of the Trustee in New York, New York,
shall be the office or agency of the Company in The City of
New York at which (i) the principal of the Series 3 Bonds
shall be payable upon presentation thereof, (ii)
registration of transfer of Series 3 Bonds may be effected,
(iii) exchanges of Series 3 Bonds may be effected and (iv)
notices, and demands to or upon the Company in respect of
the Series 3 Bonds or the Indenture may be served; provided,
however, that the Company reserves the right to change, by
written notice to the Trustee, such office or agency in The
City of New York; and provided, further, that the principal
office of the Company in Tucson, Arizona shall be an
additional financial office or agency where the principal of
the Series 3 Bonds shall be payable upon presentation
thereof;
(g) The Series 3 Bonds shall be redeemable at the
option of the Company, in whole at any time or in part from
time to time, at a redemption price equal to the principal
amount of the Series 3 Bonds to be redeemed;
(h) not applicable;
(i) the Series 3 Bonds shall be issued in
denominations of $1,000 and integral multiples thereof;
(j) not applicable;
(k) not applicable;
(l) not applicable;
(m) not applicable;
(n) not applicable;
(o) not applicable;
(p) not applicable;
(q) The Series 3 Bonds shall be issued and delivered
by the Company to Bank of Montreal Trust Company, as trustee
under the Indenture, to be dated as of August 1, 1998, as
supplemented (the "1998 Indenture"), of the Company to such
trustee (the "1998 Indenture Trustee"), in exchange for
obligations of the Company which have heretofore been
delivered to the 1998 Indenture Trustee, as the basis for
the authentication and delivery of securities under the 1998
Indenture. As provided in the 1998 Indenture, the Series 3
Bonds, when so issued and delivered, will be registered in
the name of the 1998 Indenture Trustee or its nominee and
will be owned and held by the 1998 Indenture Trustee,
subject to the provisions of the 1998 Indenture, for the
benefit of the holders of all securities from time to time
outstanding under the 1998 Indenture, and the Company shall
have no interest therein. The Series 3 Bonds shall not be
transferable except as required to effect transfer to any
successor trustee under the 1998 Indenture.
(r) not applicable;
(s) no service charge shall be made for the
registration of transfer or exchange of Series 3A Bonds;
provided, however, that the Company may require payment of a
sum sufficient to cover any tax or governmental charge
payable in connection with such transfer or exchange; and
(t) not applicable.
SECTION 2. ADDITIONAL PROVISIONS.
Set forth below in this SECTION 2 are additional terms of
the Series 3 Bonds, as contemplated by clause (u) in the first
paragraph of SECTION 1 of Article II of the Original Indenture.
(a) Anything herein to the contrary notwithstanding,
any payment by the Company under the 1998 Indenture of the
principal of the securities which shall have been
authenticated and delivered under the 1998 Indenture on the
basis of the delivery to the 1998 Indenture Trustee of
Series 3 Bonds (other than by the application of the
proceeds of a payment in respect of such Series 3 Bonds)
shall, to the extent thereof, be deemed to satisfy and
discharge the obligation of the Company, if any, to make a
payment of principal of such Series 3 Bonds which is then
due.
The Trustee shall be entitled to presume that the
obligation of the Company to pay the principal of the Series
3 Bonds as the same shall become due and payable, whether at
maturity, upon redemption or otherwise, shall have been
fully satisfied and discharged unless and until it shall
have received a written notice from the 1998 Indenture
Trustee, signed by an authorized officer thereof, stating
that the principal of specified Series 3 Bonds has become
due and payable and has not been fully paid, and specifying
the amount of funds required to make such payment.
(b) the Series 3 Bonds shall have such other terms,
and shall bear such restrictive legends, as are set forth in
the form of Series 3 Bond attached hereto as Exhibit A;
(c) if the Company shall make any deposit of money
and/or Government Obligations with respect to any Series 3
Bonds, or any portion of the principal amount thereof, as
contemplated by SECTION 1 of Article XV of the Original
Indenture, then the Company shall not deliver a Treasurer's
Certificate described in clause (z) in the first paragraph
of said SECTION 1 unless the Company shall also deliver to
the Trustee, together with such other Treasurer's
Certificate either:
i) an instrument wherein the Company,
notwithstanding the satisfaction and discharge of its
indebtedness in respect of the such Series 3 Bonds,
shall assume the obligation (which shall be absolute
and unconditional) to irrevocably deposit with the
Trustee such additional sums of money, if any, or
additional Government Obligations (meeting the
requirements of said SECTION 1 of Article XV), if any,
or any combination thereof, at such time or times, as
shall be necessary, together with the money and/or
Government Obligations theretofore so deposited, to pay
when due the principal of such Series 3 Bonds or
portions thereof, all in accordance with and subject to
the provisions of said SECTION 1; provided, however,
that such instrument may state that the obligation of
the Company to make additional deposits as aforesaid
shall be subject to the delivery to the Company by the
Trustee of a notice asserting the deficiency
accompanied by an opinion of an Independent public
accountant of nationally recognized standing showing
the calculation thereof (which opinion shall be
obtained at the expense of the Company); or
ii) an Opinion of Counsel to the effect that the
Holders of such Series 3 Bonds, or portions of the
principal amount thereof, will not recognize income,
gain or loss for United States federal income tax
purposes as a result of the satisfaction and discharge
of the Company's indebtedness in respect thereof and
will be subject to United States federal income tax on
the same amounts, at the same times and in the same
manner as if such satisfaction and discharge had not
been effected.
ARTICLE II.
AMENDMENTS
SECTION 1. CURRENT AMENDMENTS.
The Original Indenture is hereby amended as set forth
in Schedule C hereto.
SECTION 2. PROSPECTIVE AMENDMENTS.
The Holder of the Series 3 Bonds shall be deemed to
have consented to the execution and delivery of a supplemental
indenture containing one or more, or all, the amendments to the
Original Indenture set forth in Schedule D hereto.
ARTICLE III
MISCELLANEOUS PROVISIONS
This Supplemental Indenture No. 3 is a supplement to the
Original Indenture. As heretofore supplemented and further
supplemented by this Supplemental Indenture No. 3, the Original
Indenture is in all respects ratified, approved and confirmed,
and the Original Indenture as heretofore supplemented and this
Supplemental Indenture No. 3 shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, Tucson Electric Power Company has caused
its corporate name to be hereunto affixed, and this instrument to
be signed by one of its Vice Presidents, and its corporate seal
to be hereunto affixed and attested by one of its Assistant
Secretaries for and in its behalf; and Bank of Montreal Trust
Company, in evidence of its acceptance of the trust hereby
created, has caused its corporate name to be hereunto affixed,
and this instrument to be signed by one of its Vice Presidents
and its corporate seal to be hereunto affixed and attested by one
of its Vice Presidents for and in its behalf, all as of the day
and year first above written.
TUCSON ELECTRIC POWER COMPANY
By
---------------------------------
Vice President
Attest:
--------------------------------
Assistant Secretary
BANK OF MONTREAL TRUST COMPANY,
Trustee
By --------------------------------
Peter Morse
Vice President
Attest:
-------------------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
This instrument was acknowledged before me this 3rd day of
August, 1998 by KEVIN P. LARSON, a Vice President of TUCSON
ELECTRIC POWER COMPANY, an Arizona corporation, known to me to be
the individual who executed this instrument, and known to me to
be a Vice President of said corporation, and who personally
acknowledged before me and stated that he executed said
instrument on behalf of said corporation for the purposes and
consideration therein expressed.
-----------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
This instrument was acknowledged before me this 3rd day of
August, 1998 by PETER MORSE, a Vice President of BANK OF MONTREAL
TRUST COMPANY, a New York banking corporation, known to me to be
the individual who executed this instrument, and known to me to
be a Vice President of said corporation, and who personally
acknowledged before me and stated that he executed said
instrument on behalf of said corporation for the purposes and
consideration therein expressed.
------------------------------
SCHEDULE A
Supplemental Securities
Indenture of Series
No. Dated as of Series No. Designation
----------- ----------- ---------- -----------
1 December 1, 1 Second
1992 Mortgage
Bonds,
Collateral
Series A
2 December 1, 2 Second
1997 Mortgage
Bonds,
Collateral
Series B
Principal Amount
Authorized Issued(1) Outstanding(1)
---------- -------- -------------
$ 50,000,000 $ 50,000,000 None
$543,875,000 $543,875,000 $543,875,000
- ----------------------------
(1) As of August 4, 1998.
SCHEDULE B
DESCRIPTION OF MORTGAGED PROPERTY
GENERIC DESCRIPTION
All electric generating plants, gas generating plant, gas
holders, steam plant, gas regulating stations, substations and
other properties of the Company, including all power houses,
transmission lines, buildings, pipes, structures and works, and
the lands of the Company on which the same are situated, and all
the Company's lands, easements, rights, rights-of-way, water
rights, rights to the use of water, including all of the
Company's right, title and interest in and to any and all decrees
therefor, permits, franchises, consents, privileges, licenses,
poles, towers, wires, switch racks, insulators, pipes, machinery,
engines, boilers, motors, regulators, meters, tools, appliances,
equipment, appurtenances and supplies, forming a part of or
appertaining to said plants, holders, sites, stations or other
properties, or any of them, or used or enjoyed, or capable of
being used or enjoyed in conjunction or connection therewith; and
All electric substations and substation sites of the Company
including all buildings, structures, towers, poles, lines, and
all equipment, appliances and devices for transforming,
converting and distributing electric energy, and all the right,
title and interest of the Company in and to the land on which the
same are situated, and all of the Company's lands, easements,
rights-of-way, rights, franchises, privileges, machinery,
equipment, fixtures, appliances, devices, appurtenances and
supplies forming a part of said substation or any of them, or
used or enjoyed, or capable of being used or enjoyed, in
conjunction or connection therewith; and
All warehouses, buildings, structures, works and sites and
the Company's lands on which the same are situated, and all
easements, rights-of-way, permits, franchises, consents,
privileges, licenses, machinery, equipment, furniture and
fixtures, appurtenances and supplies forming a part of said
warehouses, buildings, structures, works and sites, or any of
them, or used or enjoyed or capable of being used or enjoyed in
connection or conjunction therewith; and
All electric distribution systems of the Company, including
towers, poles, wires, insulators, appliances, devices,
appurtenances and equipment, and all the Company's other
property, real, personal or mixed, forming a part of, or used,
occupied or enjoyed in connection with or in any way appertaining
to said distribution systems, or any of them, together with all
of the Company's rights-of-way, easements, permits, privileges,
municipal or other franchises, licenses, consents and rights for
or relating to the construction, maintenance or operation thereof
through, over, under or upon any public streets or highways, or
public or private lands; and also all branches, extensions,
improvements and developments of or appertaining to or connected
with said electric distribution systems, or any of them, and all
other electric distribution systems of the Company and parts
thereof wherever situated, and whether now owned or hereafter
acquired, as well as all rights-of-way, easements, privileges,
permits, municipal or other franchises, consents and rights for
or relating to the construction, maintenance or operation
thereof, or any part thereof, through, over, under or upon public
or private lands, whether now owned or hereafter acquired; and
All electric transmission and/or distribution lines of the
Company, including the towers, poles, pole lines, wires, switch
racks, insulators, supports, guys, telephone and telegraph lines
and other appliances and equipment, and all other property of the
Company, real, personal or mixed, forming a part thereof or
appertaining thereto, together with all of the Company's rights-
of-way, easements, permits, privileges, municipal or other
franchises, consents, licenses and rights, for or relating to the
construction, maintenance or operation thereof, through, over,
under or upon any public streets or highways or other lands,
public or private; also all extension, branches, taps,
developments and improvements of or to any and all of the above
described transmission and/or distribution lines, telephone and
telegraph lines or any of them, as well as all rights-of-way,
easements, permits, privileges, rights and municipal or other
franchises, licenses and consents, for or relating to the
construction, maintenance or operation of said lines or any of
them, or any part thereof, through, over, under or upon any
public streets or highways or any public or private lands,
whether now owned or hereafter acquired;
Excepting, however, any property of the character of
"Excepted Property" within the meaning of the Supplemental
Indenture to which this Schedule A is attached.
SPECIFIC DESCRIPTION OF ADDITIONAL REAL PROPERTY
[None]
SCHEDULE C
CURRENT AMENDMENTS TO ORIGINAL INDENTURE
(1)(a) SECTION 2 of Article II of the Original Indenture
is hereby amended to read as follows:
SECTION 2. BONDS ISSUABLE IN SERIES.
The Bonds may be issued in one or more series. Subject
to the next succeeding paragraph of this SECTION, there
shall be established by specification in a supplemental
indenture or in a Certified Resolution, or in a Treasurer's
Certificate pursuant to a supplemental indenture or a
Certified Resolution:
(a) the title of the Bonds of such series (which
shall distinguish the Bonds of such series from Bonds
of all other series);
(b) any limit upon the aggregate principal amount
of the Bonds of such series which may be authenticated
and delivered under this Indenture (except for Bonds
authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other
Bonds of such series pursuant to SECTION 6, SECTION 10
or SECTION 11 of this Article, SECTION 6 of Article V
or SECTION 6 of Article XIII and except for any Bonds
which, pursuant to SECTION 12 of this Article, are
deemed never to have been authenticated and delivered
hereunder);
(c) the Persons (without specific identification)
to whom interest on Bonds of such series, or any
Tranche thereof, shall be payable on any Interest
Payment Date, if other than the Persons in whose names
such Bonds (or one or more Predecessor Bonds) are
registered at the close of business on the Regular
Record Date for such interest;
(d) the date or dates on which the principal of
the Bonds of such series, or any Tranche thereof, is
payable or any formulary or other method or other means
by which such date or dates shall be determined, by
reference to an index or other fact or event
ascertainable outside of this Indenture or otherwise
(without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension); and
the right, if any, to extend the Maturity of the Bonds
of such series, or any Tranche thereof, and the
duration of any such extension;
(e) the rate or rates at which the Bonds of such
series, or any Tranche thereof, shall bear interest, if
any (including the rate or rates at which overdue
principal shall bear interest, if different from the
rate or rates at which such Bonds shall bear interest
prior to Maturity, and, if applicable, the rate or
rates at which overdue premium or interest shall bear
interest, if any), or any formulary or other method or
other means by which such rate or rates shall be
determined, by reference to an index or other fact or
event ascertainable outside of this Indenture or
otherwise; the date or dates from which such interest
shall accrue; the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date,
if any, for the interest payable on such Bonds on any
Interest Payment Date; the basis of computation of
interest, if other than as provided in SECTION 8 of
this Article; and the right, if any, to extend the
interest payment periods and the duration of any such
extension;
(f) the place or places at which and/or the
methods (if other than as provided elsewhere in this
Indenture) by which (i) the principal of and premium,
if any, and interest, if any, on Bonds of such series,
or any Tranche thereof, shall be payable, (ii)
registration of transfer of Bonds of such series, or
any Tranche thereof, may be effected, (iii) exchanges
of Bonds of such series, or any Tranche thereof, may be
effected and (iv) notices and demands to or upon the
Company in respect of the Bonds of such series, or any
Tranche thereof, and this Indenture may be served; and,
if such is the case, that the principal of such Bonds
shall be payable without the presentment or surrender
thereof;
(g) the period or periods within which or the
date or dates on which, the price or prices at which
and the terms and conditions upon which the Bonds of
such series, or any Tranche thereof, may be redeemed,
in whole or in part, at the option of the Company;
(h) the obligation or obligations, if any, of the
Company to redeem or purchase the Bonds of such series,
or any Tranche thereof, pursuant to any sinking fund or
other mandatory redemption provisions or at the option
of a Holder thereof and the period or periods within
which or the date or dates on which, the price or
prices at which and the terms and conditions upon which
such Bonds shall be redeemed or purchased, in whole or
in part, pursuant to such obligation, and applicable
exceptions to the requirements of SECTION 4 of Article
IV in the case of mandatory redemption or redemption at
the option of the Holder;
(i) the denominations in which Bonds of such
series, or any Tranche thereof, shall be issuable if
other than denominations of One Thousand Dollars
($1,000) and any integral multiple thereof;
(j) the currency or currencies, including com-
posite currencies, in which payment of the principal of
and premium, if any, and interest, if any, on the Bonds
of such series, or any Tranche thereof, shall be
payable (if other than in Dollars); and the formulary
or other method or other means by which the equivalent
of any such amount in Dollars is to be determined for
any purpose, including for the purpose of determining
the principal amount of such Bonds deemed to be
Outstanding at any time; it being understood that, for
purposes of calculations under this Indenture
(including calculations under Articles I and III), any
amounts denominated in a currency other than Dollars or
in a composite currency shall be converted to Dollar
equivalents by calculating the amount of Dollars which
could have been purchased by the amount of such other
currency based on such quotations or methods of
determination as shall be specified pursuant to this
clause; provided, however, that the instrument
establishing the Bonds of such series or Tranche shall
contain provisions substantially to the effect that if,
at any time when the principal of such Bonds, together
with premium, if any, and accrued interest, if any,
thereon, shall be due and payable or at any time when
there shall be a determination by a court of competent
jurisdiction of the extent to which the obligations of
the Company in respect of the Bonds then Outstanding or
otherwise under this Indenture are deemed to be secured
obligations of the Company, the amount of Dollars into
which an amount equal to the principal of such Bonds
could be converted under then current currency exchange
rates exceeds the amount of Dollars into which an
amount equal to the principal of such Bonds have been
converted under currency exchange rates prevailing at
the time of the initial authentication and delivery of
such Bonds, then the Company's obligation to pay such
excess amount in respect of principal, together with
the associated excess amounts in respect of premium, if
any, and accrued interest, if any, shall be deemed to
be secured by and entitled to the benefit of the Lien
of this Indenture only to the extent that any proceeds
of sale of the Trust Estate and/or any other assets of
the Company subject to such Lien shall exceed the
amount necessary to pay, satisfy and discharge, or duly
provide therefor, all other obligations of the Company
on the Bonds then Outstanding or otherwise under this
Indenture; and, to the extent of any inconsistency
between such provisions so contained in such instrument
and any other provision of this Indenture, such
provisions of such instrument shall control;
(k) if the principal of or premium, if any, or
interest, if any, on the Bonds of such series, or any
Tranche thereof, are to be payable, at the election of
the Company or a Holder thereof, in a coin or currency
other than that in which the Bonds are stated to be
payable, the coin or currency in which payment of any
amount as to which such election is made will be
payable, the period or periods within which, and the
terms and conditions upon which, such election may be
made; it being understood that, for purposes of
calculations under this Indenture (including
calculations under Articles I and III), any such
election shall be required to be taken into account, in
the manner contemplated in clause (j) of this
paragraph, only after such election shall have been
made; provided, however, the instrument establishing
the Bonds of such series or Tranche shall contain
provisions having substantially the same effect as the
provisions described in the proviso to clause (j) of
this paragraph;
(l) if the principal of or premium, if any, or
interest, if any, on the Bonds of such series, or any
Tranche thereof, are to be payable, or are to be
payable at the election of the Company or a Holder
thereof, in securities or other property, the type and
amount of such securities or other property, or the
formulary or other method or other means by which such
amount shall be determined, and the period or periods
within which, and the terms and conditions upon which,
any such election may be made; it being understood that
all calculations under this Indenture (including
calculations under Articles I and III) shall be made on
the basis of the fair market value of such securities
or the fair value of such other property, in either
case determined as of the most recent practicable date,
except that, in the case of any amount of principal or
interest that may be so payable at the election of the
Company or a Holder, if such election shall not yet
have been made, such calculations shall be made on the
basis of the amount of principal or interest, as the
case may be, that would be payable if no such election
were made; provided, however, the instrument
establishing the Bonds of such series or Tranche shall
contain provisions having substantially the same effect
as the provisions described in the proviso to clause
(j) of this paragraph;
(m) if the amount payable in respect of principal
of or premium, if any, or interest, if any, on the
Bonds of such series, or any Tranche thereof, may be
determined with reference to an index or other fact or
event ascertainable outside of this Indenture, the
manner in which such amounts shall be determined (to
the extent not established pursuant to clause (e) of
this paragraph); it being understood that all
calculations under this Indenture (including
calculations under Articles I and III) shall be made on
the basis of the amount that would be payable as
principal if such principal were due, or on the basis
of the interest rates in effect, as the case may be, on
the date next preceding the date of such calculation;
provided, however, the instrument establishing the
Bonds of such series or Tranche shall contain
provisions having substantially the same effect as the
provisions described in the proviso to clause (j) of
this paragraph;
(n) if other than the principal amount thereof,
the portion of the principal amount of Bonds of such
series, or any Tranche thereof, which shall be payable
upon declaration of acceleration of the Maturity
thereof pursuant to SECTION 3 of Article VIII;
(o) the terms, if any, pursuant to which the
Bonds of such series, or any Tranche thereof, may be
converted into or exchanged for shares of capital stock
or other securities of the Company or any other Person;
(p) the obligations or instruments, if any, which
shall be considered to be Eligible Obligations in
respect of the Bonds of such series, or any Tranche
thereof, denominated in a currency other than Dollars
or in a composite currency, and any additional or
alternative provisions for the reinstatement of the
Company's indebtedness in respect of such Bonds after
the satisfaction and discharge thereof as provided in
SECTION 1 of Article XV;
(q) if the Bonds of such series, or any Tranche
thereof, are to be issued in global form, (i) any
limitations on the rights of the Holder or Holders of
such Bonds to transfer or exchange the same or to
obtain the registration of transfer thereof, (ii) any
limitations on the rights of the Holder or Holders
thereof to obtain certificates therefor in definitive
form in lieu of temporary form and (iii) any and all
other matters incidental to such Bonds;
(r) if the Bonds of such series, or any Tranche
thereof, are to be issuable as bearer securities, any
and all matters incidental thereto which are not
specifically addressed in a supplemental indenture as
contemplated by clause (f) of SECTION 2 of Article
XIII;
(s) to the extent not established pursuant to
clause (q) of this paragraph, any limitations on the
rights of the Holders of the Bonds of such Series, or
any Tranche thereof, to transfer or exchange such Bonds
or to obtain the registration of transfer thereof; and
if a service charge will be made for the registration
of transfer or exchange of Bonds of such series, or any
Tranche thereof, the amount or terms thereof;
(t) any exceptions to SECTION 13 of Article XVI
with respect to the Bonds of such series, or any
Tranche thereof; and
(u) any other terms of the Bonds of such series,
or any Tranche thereof.
With respect to Bonds of a series subject to a Periodic
Offering, the indenture supplemental hereto, Certified
Resolution or Treasurer's Certificate which establishes such
series may provide general terms or parameters for Bonds of
such series and provide either that the specific terms of
Bonds of such series, or any Tranche thereof, shall be
specified in a Written Order or that such terms shall be
determined by the Company or its agents in accordance with
procedures specified therein or to be specified in a Written
Order.
The form of the Bonds of each series, or any Tranche
thereof, shall be set forth in a supplemental indenture,
Certified Resolution or Treasurer's Certificate.
(b) SECTION 1 of Article I of the Original Indenture
is hereby amended to include therein the following additional
definitions:
"DOLLAR" or "$" shall mean a dollar or other equivalent
unit in such coin or currency of the United States of
America as at the time shall be legal tender for the payment
of public and private debts.
"ELIGIBLE OBLIGATIONS" shall mean:
(a) with respect to Bonds denominated in Dollars,
Government Obligations; or
(b) with respect to Bonds denominated in a
currency other than Dollars or in a composite currency,
such other obligations or instruments as shall be
specified with respect to such Securities as
contemplated by SECTION 2 of Article II.
"INTEREST PAYMENT DATE", when used with respect to any
Bond, shall mean the Stated Maturity of an installment of
interest on such Bond.
"MATURITY", when used with respect to any Bond, shall
mean the date on which the principal of such Bond or an
installment of principal becomes due and payable as provided
in such Bond or in this Indenture, whether at the stated
maturity, by declaration of acceleration, upon call for
redemption or otherwise.
"STATED MATURITY", when used with respect to any
obligation or any installment of principal thereof or
interest thereon, shall mean the date on which the principal
of such obligation or such installment of principal or
interest is stated to be due and payable (without regard to
any provisions for redemption, prepayment, acceleration,
purchase or extension).
(c) Article XV of the Original Indenture is hereby
amended by substituting the term "Eligible Obligations" for the
term "Government Obligations" wherever in such Article the latter
term currently appears.
(2) The definition of the term "Retired Bond" in SECTION 2
of Article I of the Original Indenture is hereby amended to read
as follows:
"RETIRED BOND" shall mean, as of any time, (a) any Bond
authenticated and delivered under this Indenture which no
longer remains Outstanding by reason of the applicability of
clause (a) or (b) in the definition of "OUTSTANDING" (other
than any Predecessor Bond of any Bond), provided, however,
that no Bond which shall have ceased to be Outstanding prior
to the Initial Certification Date shall be deemed to be a
Retired Bond unless such Bond shall have been included in
the Initial Engineer's Certificate as if such Bond had been
Outstanding at the Initial Certification Date; and (b) any
bond authenticated and delivered under the 1941 Mortgage
which at such time could be used as the basis for the
authentication and delivery of additional bonds pursuant to
SECTION 7 of Article III of the 1941 Mortgage, provided,
however, that (x) no bond which shall have ceased to be
"outstanding" under the 1941 Mortgage prior to the Initial
Certification Date shall be deemed to be a Retired Bond
unless such bond shall have been included in the Initial
Engineer's Certificate as if such bond had been
"outstanding" at the Initial Certification Date and (y) any
bond which shall have ceased to be "outstanding" under the
1941 Mortgage on or after the Initial Certification Date and
could otherwise have been used under SECTION 7 of Article
III of the 1941 Mortgage shall be deemed to be a Retired
Bond notwithstanding any subsequent satisfaction and
discharge of the 1941 Mortgage.
(3) Subdivision (9) of SECTION 6 of Article III of the
Original Indenture is hereby amended to read as follows:
(9) An Engineer's Certificate, made and dated not more
than 10 days prior to the date of such application, stating
that the signers have no knowledge of and do not believe
that there have been, since the close of the period covered
by the Engineer's Certificate specified in subdivision (3)
above, Property Retirements in an amount which (after
reduction of such amount by amounts of the character
referred to in Clause (D) of subdivision 3 in respect of
such Property Retirements) exceeds the amount of Property
Additions since the close of such period by more than the
amount of the Unapplied Balance of Property Additions
calculated to be remaining upon the granting of the
application (before any reduction of such Unapplied Balance
of Property Additions by any amount of Net Property
Additions applied to the withdrawal of cash deposited with
the Trustee in connection with such Property Retirements).
(4) Subdivision (2) of SECTION 7 of Article III of the
Original Indenture is hereby amended to read as follows:
(2) A Treasurer's Certificate stating (a) that the
Company is not to the best of the knowledge and belief of
the signers in default under any of the provisions of this
Indenture and (b) that Bonds theretofore authenticated an
delivered under this Indenture, and/or bonds, theretofore
authenticated and delivered under the 1941 Mortgage, of a
specified aggregate principal amount (not less than the
aggregate principal amount of Bonds for which such request
for authentication and delivery is made under this SECTION)
constitute Retired Bonds; and further stating that no part
of such Retired Bonds has been theretofore made the basis
under any of the provisions of this Indenture or the 1941
Mortgage for the authentication and delivery of Bonds
hereunder or bonds under the 1941 Mortgage, or the
withdrawal of cash or the release of any property and that
none of such Retired Bonds has been retired by the use of
the proceeds of any insurance on any Funded Property (or
"funded property" under the 1941 Mortgage) or the proceeds
of the release or other disposition of any part of the
Funded Property (or "funded property" under the 1941
Mortgage), or through the operation of any sinking fund or
other fund applicable to the retirement thereof, except to
the extent, if any, that the provisions establishing such
fund expressly permit the issuance of (x) Bonds under this
SECTION in respect of Bonds retired through the operation of
such fund or (y) bonds under SECTION 7 of Article III of the
1941 Mortgage in respect of bonds retired through the
operation of such fund; and further stating the interest
rate or rates and the maturity date or dates borne by all
such Retired bonds.
(5) SECTION 2 of Article XIII of the Original Indenture is
hereby amended to add at the end thereof a new paragraph reading
as follows:
Anything in this Indenture to the contrary
notwithstanding, if the instrument creating the Bonds of any
series or Tranche shall so provide, (a) the Holders of such
Bonds shall be deemed to have consented to a supplemental
indenture containing the additions, changes or eliminations
to or from the Indenture which shall be specified in such
instrument, (b) no action on the part of such Holders shall
be required to evidence such consent and (c) such consent
may be counted in the determination of whether or not the
Holders of the requisite principal amount of Bonds shall
have consented to such supplemental indenture.
(6) Subsection (d) of SECTION 8 of Article XIV of the
Original Indenture is hereby amended adding at the end thereof
the following:
Any such request, demand, authorization, direction, notice,
consent, waiver or other act, given or made as aforesaid,
shall be effective whether or not the Holders which
authorized or agreed or consented to the same remain Holders
after such record date and whether or not the Bonds held by
such Holders remain Outstanding after such record date.
SECTION 1 of Article XV of the Original Indenture is
hereby amended by:
(a) deleting the word "and" from the end of clause (x)
in the first paragraph thereof;
(b) deleting the period at the end of clause (y) in
the first paragraph thereof and adding at the end of clause (y)
"; and";
(c) adding a new clause (z) at the end of the first
paragraph reading as follows:
(z) if such deposit shall have been made prior to
the maturity or redemption date of such Bonds, a
Treasurer's Certificate stating the Company's intention
that, upon delivery of such Treasurer's Certificate,
its indebtedness in respect of such Bonds or portions
thereof will have been satisfied and discharged as
contemplated in this SECTION.
(d) deleting the second paragraph thereof and
substituting therefor a new second paragraph reading as follows:
Upon receipt by the Trustee of money or Eligible
Obligations, or both, in accordance with this SECTION, together
with the documents required by clauses (x), (y) and (z) above,
the Trustee shall, upon Written Request, acknowledge in writing
that such Bonds or portions thereof are deemed to have been paid
for all purposes of this Indenture and that the entire
indebtedness of the Company in respect thereof has been satisfied
and discharged as contemplated in this SECTION. In the event
that all of the conditions set forth in the preceding paragraph
shall have been satisfied in respect of any Bonds or portions
thereof except that, for any reason, the Treasurer's Certificate
specified in clause (z) (if otherwise required) shall not have
been delivered, such Bonds or portions thereof shall nevertheless
be deemed to have been paid for all purposes of this Indenture,
and the Holders of such Bonds or portions thereof shall
nevertheless be no longer entitled to the benefit of the Lien of
this Indenture or of any of the covenants of the Company under
Article IV (except the covenants contained in SECTIONs 2, 3 and 4
thereof) or any other covenants made in respect of such Bonds or
portions thereof, but the indebtedness of the Company in respect
of such Bonds or portions thereof shall not be deemed to have
been satisfied and discharged for any other purpose; and, upon
Written Request, the Trustee shall acknowledge in writing that
such Bonds or portions thereof are deemed to have been paid for
all purposes of this Indenture.
(7) SECTION 1 of Article VIII of the Original Indenture is
hereby amended to:
(a) insert "; or" at the end of clause (f) therein;
and
(b) add immediately following clause (f) the
following:
"(g) so long as the trustee under the
Indenture, dated as of August 1, 1998 as the
same may be amended and supplemented (the
`1998 Indenture'), from the Company to Bank
of Montreal Trust Company, as trustee (the
`1998 Indenture Trustee'), shall hold any
bonds outstanding hereunder which were
delivered to the 1998 Indenture Trustee as
the basis for the authentication and delivery
of securities under the 1998 Indenture which
remain outstanding thereunder, an `Event of
Default' under the 1998 Indenture; provided,
however, that, anything in this Indenture to
the contrary notwithstanding, the waiver or
cure of such `Event of Default' and the
rescission and annulment of the consequences
thereof shall constitute a cure of the
corresponding default under Indenture and a
rescission and annulment of the consequences
thereof."
SCHEDULE D
PROSPECTIVE AMENDMENTS TO ORIGINAL INDENTURE
1. The amendment of SECTION 2 of Article I of the
Original Indenture to add thereto a definition of the term
"fair value" substantially to the following effect:
"FAIR VALUE", with respect to property, means the
fair value of such property as may be determined by
reference to (a) the amount which would be likely to be
obtained in an arm's-length transaction with respect to
such property between an informed and willing buyer and
an informed and willing seller, under no compulsion,
respectively, to buy or sell, (b) the amount of
investment with respect to such property which,
together with a reasonable return thereon, would be
likely to be recovered through ordinary business
operations or otherwise, (c) the Cost, accumulated
depreciation and replacement cost with respect to such
property and/or (d) any other relevant factors;
provided, however, that (x) the fair value of property
shall be determined without deduction for any Prior
Liens on such property (except as otherwise provided in
clause (2) of subparagraph (C) of SECTION 3 of Article
VII and (y) the fair value to the Company of Property
Additions shall not reflect any reduction relating to
the fact that such Property Additions may be of less
value to a Person which is not the owner or operator of
the Mortgaged Property or any portion thereof than to a
Person which is such owner 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 otherwise available to the
Engineer certifying the same.
2. The amendment of SECTION 2 of Article I of the
Original Indenture to add thereto definitions of the terms
"purchase money mortgage" and "purchase money obligations"
substantially to the following effect:
"PURCHASE MONEY MORTGAGE" means, with respect to
any property being acquired or disposed of by the
Company or being released from the Lien of this
Indenture, a lien on such property which
(a) is taken or retained by the transferor of
such property to secure all or part of the
purchase price thereof;
(b) is granted to one or more Persons other
than the transferor which, by making advances or
incurring an obligation, give value to enable the
grantor of such lien to acquire rights in or the
use of such property;
(c) is granted to any other Person in
connection with the release of such property from
the Lien of this Indenture on the basis of the
deposit with the Trustee or the trustee or other
holder of a Prior Lien of obligations secured by
such lien on such property (as well as any other
property subject thereto);
(d) is held by a trustee or agent for the
benefit of one or more Persons described in clause
(a), (b) and/or (c) above, provided that such lien
may be held, in addition, for the benefit of one
or more other Persons which shall have theretofore
given, or may thereafter give, value to or for the
benefit or account of the grantor of such lien for
one or more other purposes; or
(e) otherwise constitutes a purchase money
mortgage or a purchase money security interest
under applicable law;
and, without limiting the generality of the foregoing,
for purposes of this Indenture, the term shall be
deemed to include any lien described above whether or
not such lien (x) shall permit the issuance or other
incurrence of additional indebtedness secured by such
lien on such property, (y) shall permit the subjection
to such lien of additional property and the issuance or
other incurrence of additional indebtedness on the
basis thereof and/or (z) shall have been granted prior
to the acquisition, disposition or release of such
property, shall attach to or otherwise cover property
other than the property being acquired, disposed of or
released and/or shall secure obligations issued prior
and/or subsequent to the issuance of the obligations
delivered in connection with such acquisition,
disposition or release. The term "PURCHASE MONEY
OBLIGATION" shall mean an obligation secured by a
purchase money lien.
3. The amendment of clause (b) in subdivision (1) of
SECTION 9 of Article VII or the Original Indenture to read
as follows:
(b) in an amount equal to ten-sevenths
(10/7ths) of the principal amount of Bonds to the
authentication and delivery of which the Company
is entitled under the provisions of SECTION 7 of
Article III hereof.
4. The amendment of subparagraph E in the first
paragraph of SECTION 3 of Article VIII of the Original
Indenture to:
(i) to delete therefrom the second proviso or to
provide that the second proviso may be disregarded upon
specified conditions; or
(ii) to delete from the second proviso therein the
phrase "fifteen per centum (15%) of "; or
(iii) to change the phrase "fifteen per centum
(15%)" in the second proviso therein to any higher
percentage not exceeding one hundred per centum (100%).
5. The amendment of SECTION 7 of Article III of the
Original Indenture to change the semi-colon at the end of clause
(5) in the first paragraph thereof to a period and to delete the
remainder of said first paragraph.
EXHIBIT A
[Form of Bond]
(See legends at the end of this
Bond for restrictions on transfer.)
No. --------------- $-----------
TUCSON ELECTRIC POWER COMPANY
FIRST MORTGAGE BOND, COLLATERAL SERIES DUE 2008
DUE AUGUST 1, 2008
TUCSON ELECTRIC POWER COMPANY, a corporation of the State of
Arizona (hereinafter sometimes called the Company), for value
received, promises to pay to
or registered assigns, the principal sum of DOLLARS
on August 1, 2008, in coin or currency of the United States of
America which at the time of payment shall be legal tender for
the payment of public and private debts, at the office or agency
of the Company in The City of New York, or in the City of Tucson,
Arizona, upon presentation hereof. This Bond shall not bear
interest.
This bond is one of an issue of bonds of the Company, issued
and to be issued in one or more series under and equally and
ratably secured (except as any sinking, amortization,
improvement, renewal or other fund, established in accordance
with the provisions of the indenture hereinafter mentioned, may
afford additional security for the bonds of any particular
series) by the Indenture of Mortgage and Deed of Trust, dated as
of December 1, 1992 (the "Original Indenture"), from the Company
to Bank of Montreal Trust Company, trustee (the "Trustee"), as
supplemented by various supplemental indentures including
Supplemental Indenture No. 3, dated as of August 1, 1998 (the
Original Indenture, as so supplemented, and such Supplemental
Indenture being hereinafter called the "Indenture" and
"Supplemental Indenture No. 3", respectively), to which Indenture
reference is hereby made for a description of the property
mortgaged and pledged, the nature and extent of the security
provided by the Indenture, the rights and limitations of rights
of the Company, the Trustee and the holders of said bonds with
respect to the security provided by the Indenture, the powers,
duties and immunities of the Trustee, the terms and conditions
upon which such bonds are and are to be secured, and the
circumstances under which additional bonds may be issued.
The acceptance of this bond shall be deemed to constitute the
consent and agreement by the holder hereof to all of the terms
and provisions of the Indenture. This bond is one of a series of
bonds designated as the First Mortgage Bonds, Collateral Series
due 2008, of the Company.
The Indenture permits, with certain exceptions as therein
provided, the Trustee to enter into one or more supplemental
indentures for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of,
the Indenture with the consent of the holders of not less than
sixty per centum (60%) in aggregate principal amount of the bonds
of all series then outstanding under the Indenture, considered as
one class; provided, however, that if there shall be bonds of
more than one series outstanding under the Indenture and if a
proposed supplemental indenture shall directly affect the rights
of the holders of bonds of one or more, but less than all, of
such series, then the consent only of the holders of bonds in
aggregate principal amount of the outstanding bonds of all series
so directly affected, considered as one class, shall be required;
and provided, further, that if the bonds of any series shall have
been issued in more than one tranche and if the proposed
supplemental indenture shall directly affect the rights of the
holder of bonds of one or more, but less than all, of such
tranches, then the consent only of the holders of bonds in
aggregate principal amount of the outstanding bonds of all
tranches so directly affected, considered as one class, shall be
required; and provided, further, that the Indenture permits the
Trustee to enter into one or more supplemental indentures for
limited purposes without the consent of any holders of bonds.
Any such consent by the holder of this bond shall be conclusive
and binding upon such holder and upon all future holders of this
bond and of any bond issued upon the registration of transfer
hereof or in exchange therefor or in lieu hereof, whether or not
notation of such consent is made upon this bond. The holders of
this bond shall be deemed to have consented to certain amendments
to the Indenture which are specified in Supplemental Indenture
No. 3.
The bonds of this series are being issued and delivered by
the Company to Bank of Montreal Trust Company, as trustee under
the Indenture, dated as of August 1, 1998, as supplemented (the
"1998 Indenture"), of the Company to such trustee (the "1998
Indenture Trustee"), in exchange for other obligations of the
Company which have heretofore been delivered to the 1998
Indenture Trustee, as the basis for the authentication and
delivery of securities under the 1998 Indenture. As provided in
the 1998 Indenture, the bonds of this series are to be registered
in the name of the 1998 Indenture Trustee or its nominee and will
be owned and held by the 1998 Indenture Trustee, subject to the
provisions of the 1998 Indenture, for the benefit of the holders
of all securities from time to time outstanding under the 1998
Indenture, and the Company shall have no interest therein. The
bonds of this series shall not be transferable except as required
to effect transfer to any successor trustee under the 1998
Indenture.
Anything herein to the contrary notwithstanding, any payment
by the Company under the 1998 Indenture of the principal of the
securities which shall have been authenticated and delivered
under the 1998 Indenture on the basis of the delivery to the 1998
Indenture Trustee of bonds of this series (other than by the
application of the proceeds of a payment in respect of such bonds
of this series) shall, to the extent thereof, be deemed to
satisfy and discharge the obligation of the Company, if any, to
make a payment of principal of such bonds of this series which is
then due.
The bonds of this series are redeemable prior to maturity at
the option of the Company, as a whole at any time or in part from
time to time, at the principal amount of bonds so to be redeemed.
Notice of redemption shall be given by mail to the holders
of bonds of this series, not less than 30 nor more than 60 days
prior to the redemption date. As provided in the Indenture,
notice of redemption may state that such redemption shall be
conditional upon the receipt by the Trustee, on or prior to the
date fixed for redemption, of money sufficient to pay the
principal of this bond; a notice of redemption so conditioned
shall be of no force or effect if such money is not so received
and, in such event, the Company shall not be required to redeem
this bond.
In the event of redemption of this bond in part only, a new
bond or bonds of this series, of like tenor, for the unredeemed
portion hereof will be issued to the holder hereof upon the
surrender hereof.
The principal of this bond may become or be declared due and
payable before the stated maturity hereof, on the conditions, in
the manner and at the times set forth in the Indenture, upon the
happening of a default as therein provided.
This bond is non-transferable except as required to effect
transfer to any successor trustee under the 1998 Indenture, any
such transfer to be registered at the office or agency of the
Company in The City of New York, upon surrender of this bond by
the registered owner hereof or by attorney authorized in writing,
and upon any such registration of transfer a new bond of this
series, for the same aggregate principal amount and having the
same stated maturity date, will be issued to the transferee in
exchange herefor. Prior to due presentment for registration of
transfer, the Company and the Trustee may deem and treat the
person in whose name this bond is registered as the absolute
owner hereof for the purpose of receiving payment and for all
other purposes. This bond, alone or with other bonds of this
series, may in like manner be exchanged at such office or agency
for one or more bonds of this series of the same aggregate
principal amount and having the same stated maturity date and
interest rate, all as provided in the Indenture.
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 for all
purposes of the Indenture and to be no longer Outstanding
thereunder, and the Company's entire indebtedness in respect
thereof will be deemed to have been satisfied and discharged, if
there has been irrevocably deposited with the Trustee or any
Paying Agent (other than the Company), in trust, money in an
amount which will be sufficient, and/or Government Obligations,
the principal of and interest on which when due, without regard
to any reinvestment thereof, will provide moneys which, together
with moneys so deposited, will be sufficient, to pay when due the
principal of and interest on this bond when due.
No recourse shall be had for the payment of the principal of
or interest on this bond, or for any claim based hereon or
otherwise in respect hereof or of the Indenture, against any
incorporator, shareholder, director or officer, as such, past,
present or future, of the Company or of any predecessor or
successor corporation, either directly or through the Company or
any predecessor or successor corporation, whether by virtue of
any constitution, statute or rule of law, or by the enforcement
of any assessment or penalty or by any legal or equitable
proceeding or otherwise howsoever (including, without limiting
the generality of the foregoing, any proceeding to enforce any
claimed liability of shareholders of the Company, based upon any
theory of disregarding the corporate entity of the Company or
upon any theory that the Company was acting as the agent or
instrumentality of the shareholders); all such liability being,
by the acceptance hereof and as a part of the consideration for
the issuance hereof, expressly waived and released by every
holder hereof, and being likewise waived and released by the
terms of the Indenture under which this bond is issued, as more
fully provided in said Indenture.
This bond shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have
been signed by Bank of Montreal Trust Company, or its successor,
as Trustee under the Indenture.
IN WITNESS WHEREOF, the Company has caused this bond to be
signed in its name by the manual or facsimile signature of its
President or one of its Vice Presidents, and its corporate seal,
or a facsimile thereof, to be impressed or imprinted hereon and
attested by the manual by the manual or facsimile signature of
its Secretary or one of its Assistant Secretaries.
Dated
TUCSON ELECTRIC POWER COMPANY
By:
-------------------------
Attest:
-------------------
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the bonds, of the series designated therein,
described in the within-mentioned Indenture.
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By:
--------------------------------
Authorized Signature
Exhibit 4(d)
==================================
TUCSON ELECTRIC POWER COMPANY
TO
BANK OF MONTREAL TRUST COMPANY
TRUSTEE
_______________
Indenture
DATED AS OF AUGUST 1, 1998
_______________
==================================
TUCSON ELECTRIC POWER COMPANY
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND
INDENTURE, DATED AS OF AUGUST 1, 1998
TRUST INDENTURE ACT SECTION INDENTURE SECTION(S)
----------------------------------------------------------------
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . 809
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 809
(a)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . 808, 810
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . 813
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 813
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 813
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . 901
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 901
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 901
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . 902
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 902
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 902
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 902
Section 314(a) . . . . . . . . . . . . . . . . . . . . 902, 507
(b) . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . 312, 315, 318, 319
(e) . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . . 801, 803
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 802
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 801
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 801
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 714
Section 316(a) . . . . . . . . . . . . . . . . . . . . 712, 713
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . 702, 712
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 713
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 708
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . 703
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 705
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 503
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . 107
TABLE OF CONTENTS
-----------------
PAGE
----
Recital of the Company . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. General Definitions . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . . . . 2
Authorized Officer . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . 3
Class A Bonds . . . . . . . . . . . . . . . . . . . . . 3
Class A Mortgage . . . . . . . . . . . . . . . . . . . . 3
Collateral Release Date . . . . . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Order or Company Request . . . . . . . . . . . . 3
Consolidated Tangible Net Worth . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . . . . . . . . 3
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Discount Security . . . . . . . . . . . . . . . . . . . 4
Interest . . . . . . . . . . . . . . . . . . . . . . . . 4
Dollar or $ . . . . . . . . . . . . . . . . . . . . . . 4
Eligible Obligations . . . . . . . . . . . . . . . . . . 4
Event of Default . . . . . . . . . . . . . . . . . . . . 4
Excepted Property . . . . . . . . . . . . . . . . . . . 4
Expert . . . . . . . . . . . . . . . . . . . . . . . . . 4
Governmental Authority . . . . . . . . . . . . . . . . . 4
Government Obligations . . . . . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indenture . . . . . . . . . . . . . . . . . . . . . . . 5
Independent . . . . . . . . . . . . . . . . . . . . . . 5
Independent Expert's Certificate . . . . . . . . . . . . 5
Interest Payment Date . . . . . . . . . . . . . . . . . 5
Investment Securities . . . . . . . . . . . . . . . . . 5
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Maturity . . . . . . . . . . . . . . . . . . . . . . . . 5
1941 Mortgage . . . . . . . . . . . . . . . . . . . . . 5
1992 Mortgage . . . . . . . . . . . . . . . . . . . . . 6
Notice of Default . . . . . . . . . . . . . . . . . . . 6
Officer's Certificate . . . . . . . . . . . . . . . . . 6
Opinion of Counsel . . . . . . . . . . . . . . . . . . . 6
Outstanding . . . . . . . . . . . . . . . . . . . . . . 6
Outstanding . . . . . . . . . . . . . . . . . . . . . . 7
Paying Agent . . . . . . . . . . . . . . . . . . . . . . 7
Periodic Offering . . . . . . . . . . . . . . . . . . . 7
Permitted Secured Debt . . . . . . . . . . . . . . . . . 7
Person . . . . . . . . . . . . . . . . . . . . . . . . . 7
Place of Payment . . . . . . . . . . . . . . . . . . . . 7
Predecessor Security . . . . . . . . . . . . . . . . . . 8
Purchase Money Lien . . . . . . . . . . . . . . . . . . 8
Redemption Date . . . . . . . . . . . . . . . . . . . . 8
Redemption Price . . . . . . . . . . . . . . . . . . . . 8
Regular Record Date . . . . . . . . . . . . . . . . . . 8
Required Currency . . . . . . . . . . . . . . . . . . . 8
Responsible Officer . . . . . . . . . . . . . . . . . . 8
Secured Debt . . . . . . . . . . . . . . . . . . . . . . 8
Securities . . . . . . . . . . . . . . . . . . . . . . . 8
Security Register . . . . . . . . . . . . . . . . . . . 8
Security Registrar . . . . . . . . . . . . . . . . . . . 8
Special Record Date . . . . . . . . . . . . . . . . . . 8
Stated Interest Rate . . . . . . . . . . . . . . . . . . 9
Stated Maturity . . . . . . . . . . . . . . . . . . . . 9
Successor . . . . . . . . . . . . . . . . . . . . . . . 9
Tranche . . . . . . . . . . . . . . . . . . . . . . . . 9
Trust Indenture Act . . . . . . . . . . . . . . . . . . 9
Trustee . . . . . . . . . . . . . . . . . . . . . . . . 9
United States . . . . . . . . . . . . . . . . . . . . . 9
Unpaid Interest . . . . . . . . . . . . . . . . . . . . 9
SECTION 102. Compliance Certificates and Opinions . . . . . 9
SECTION 103. Content and Form of Documents Delivered to
Trustee . . . . . . . . . . . . . . . . . . . . 10
SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . 11
SECTION 105. Notices, Etc. to Trustee and Company . . . . . 13
SECTION 106. Notice to Holders of Securities; Waiver . . . . 14
SECTION 107. Conflict with Trust Indenture Act . . . . . . . 14
SECTION 108. Effect of Headings and Table of Contents . . . 14
SECTION 109. Successors and Assigns . . . . . . . . . . . . 14
SECTION 110. Separability Clause . . . . . . . . . . . . . . 15
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . 15
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . 15
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . 15
SECTION 114. Investment of Cash Held by Trustee . . . . . . 15
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . 17
SECTION 202. Form of Trustee's Certificate of Authentication 17
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series . . . . . 18
SECTION 302. Denominations . . . . . . . . . . . . . . . . . 21
SECTION 303. Execution, Dating, Certificate of
Authentication . . . . . . . . . . . . . . . . 22
SECTION 304. Temporary Securities . . . . . . . . . . . . . 24
SECTION 305. Registration, Registration of Transfer and
Exchange . . . . . . . . . . . . . . . . . . 25
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . . . 26
SECTION 307. Payment of Interest; Interest Rights Preserved 27
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . 28
SECTION 309. Cancellation by Security Registrar . . . . . . 28
SECTION 310. Computation of Interest . . . . . . . . . . . . 29
SECTION 311. Payment to Be in Proper Currency . . . . . . . 29
SECTION 312. Delivery of Class A Bonds . . . . . . . . . . . 29
SECTION 313. Registration and Ownership of Class A Bonds . . 31
SECTION 314. Payments on Class A Bonds . . . . . . . . . . . 31
SECTION 315. Surrender of Class A Bonds . . . . . . . . . . 32
SECTION 316. No Transfer of Class A Bonds . . . . . . . . . 33
SECTION 317. Voting of Class A Bonds . . . . . . . . . . . . 33
SECTION 318. Discharge of Class A Mortgages . . . . . . . . 34
SECTION 319. Experts' Certificates . . . . . . . . . . . . . 35
ARTICLE FOUR
REDEMPTION OF SECURITIES
SECTION 401. Applicability of Article . . . . . . . . . . . 36
SECTION 402. Election to Redeem; Notice to Trustee . . . . . 36
SECTION 403. Selection of Securities to Be Redeemed . . . . 36
SECTION 404. Notice of Redemption . . . . . . . . . . . . . 37
SECTION 405. Securities Payable on Redemption Date . . . . . 38
SECTION 406. Securities Redeemed in Part . . . . . . . . . . 39
ARTICLE FIVE
COVENANTS
SECTION 501. Payment of Securities. . . . . . . . . . . . . 39
SECTION 502. Maintenance of Office or Agency . . . . . . . . 39
SECTION 503. Money for Securities Payments to Be Held in
Trust . . . . . . . . . . . . . . . . . . . . 40
SECTION 504. Corporate Existence . . . . . . . . . . . . . . 41
SECTION 505. Maintenance of Properties . . . . . . . . . . . 41
SECTION 506. Waiver of Certain Covenants . . . . . . . . . . 42
SECTION 507. Annual Officer's Certificate as to Compliance. 42
SECTION 508. Limitation on Secured Debt . . . . . . . . . . 42
ARTICLE SIX
SATISFACTION AND DISCHARGE
SECTION 601. Satisfaction and Discharge of Securities . . . 48
SECTION 602. Satisfaction and Discharge of Indenture . . . . 50
SECTION 603. Application of Trust Money . . . . . . . . . . 51
ARTICLE SEVEN
EVENTS OF DEFAULT; REMEDIES
SECTION 701. Events of Default . . . . . . . . . . . . . . . 51
SECTION 702. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . 53
SECTION 703. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . 54
SECTION 704. Application of Money Collected . . . . . . . . 55
SECTION 705. Trustee May File Proofs of Claim . . . . . . . 55
SECTION 706. Trustee May Enforce Claims without Possession
of Securities . . . . . . . . . . . . . . . . 56
SECTION 707. Limitation on Suits . . . . . . . . . . . . . . 56
SECTION 708. Unconditional Right of Holders to Receive
Principal, Premium and Interest . . . . . . . 57
SECTION 709. Restoration of Rights and Remedies . . . . . . 57
SECTION 710. Rights and Remedies Cumulative . . . . . . . . 57
SECTION 711. Delay or Omission Not Waiver . . . . . . . . . 58
SECTION 712. Control by Holders of Securities . . . . . . . 58
SECTION 713. Waiver of Past Defaults . . . . . . . . . . . . 58
SECTION 714. Undertaking for Costs . . . . . . . . . . . . . 59
SECTION 715. Waiver of Stay or Extension Laws . . . . . . . 59
SECTION 716. Defaults under Class A Mortgages . . . . . . . 59
ARTICLE EIGHT
THE TRUSTEE
SECTION 801. Certain Duties and Responsibilities . . . . . . 60
SECTION 802. Notice of Defaults . . . . . . . . . . . . . . 61
SECTION 803. Certain Rights of Trustee . . . . . . . . . . . 61
SECTION 804. Not Responsible for Recitals or Issuance of
Securities . . . . . . . . . . . . . . . . . . 62
SECTION 805. May Hold Securities . . . . . . . . . . . . . . 63
SECTION 806. Money Held in Trust . . . . . . . . . . . . . . 63
SECTION 807. Compensation and Reimbursement . . . . . . . . 63
SECTION 808. Disqualification; Conflicting Interests . . . . 64
SECTION 809. Corporate Trustee Required; Eligibility . . . . 64
SECTION 810. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . . . 65
SECTION 811. Acceptance of Appointment by Successor . . . . 66
SECTION 812. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . 67
SECTION 813. Preferential Collection of Claims against
Company . . . . . . . . . . . . . . . . . . . 67
SECTION 814. Appointment of Authenticating Agent . . . . . . 67
ARTICLE NINE
LISTS OF HOLDERS; REPORTS BY TRUSTEE AND COMPANY
SECTION 901. Lists of Holders . . . . . . . . . . . . . . . 69
SECTION 902. Reports by Trustee and Company . . . . . . . . 70
ARTICLE TEN
CONSOLIDATION, MERGER, CONVEYANCE
OR OTHER TRANSFER
SECTION 1001. Company may Consolidate, etc., Only on
Certain Terms . . . . . . . . . . . . . . . . 70
SECTION 1002. Successor Substituted . . . . . . . . . . . . 71
SECTION 1003. Release of Company upon Conveyance or
Other Transfer . . . . . . . . . . . . . . . 71
SECTION 1004. Merger into Company . . . . . . . . . . . . . 71
SECTION 1005. Transfer of Less than the Entirety . . . . . . 72
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 1101. Supplemental Indentures without
Consent of Holders . . . . . . . . . . . . . 74
SECTION 1102. Supplemental Indentures with Consent of
Holders . . . . . . . . . . . . . . . . . . . 75
SECTION 1103. Execution of Supplemental Indentures . . . . . 77
SECTION 1104. Effect of Supplemental Indentures . . . . . . 77
SECTION 1105. Conformity with Trust Indenture Act . . . . . 78
SECTION 1106. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . . . 78
SECTION 1107. Modification without Supplemental Indenture . 78
ARTICLE TWELVE
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING
SECTION 1201. Purposes for Which Meetings May Be Called. . . 78
SECTION 1202. Call, Notice and Place of Meetings . . . . . . 79
SECTION 1203. Persons Entitled to Vote at Meetings . . . . . 79
SECTION 1204. Quorum; Action . . . . . . . . . . . . . . . . 80
SECTION 1205. Attendance at Meetings; Determination of Voting
Rights; Conduct and Adjournment of Meetings . 81
SECTION 1206. Counting Votes and Recording Action of
Meetings . . . . . . . . . . . . . . . . . . . 82
SECTION 1207. Action without Meeting . . . . . . . . . . . . 82
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 1301. Liability Solely Corporate . . . . . . . . . . 82
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 84
INDENTURE, dated as of August 1, 1998 between TUCSON
ELECTRIC POWER COMPANY, a corporation organized and existing
under the laws of the State of Arizona (hereinafter sometimes
called the "Company"), and BANK OF MONTREAL TRUST COMPANY, a
banking corporation organized and existing under the laws of the
State of New York, trustee (hereinafter sometimes called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and
delivery of this Indenture to provide for the issuance from time
to time of debentures, notes or other evidences of indebtedness
(herein called the "Securities"), to be issued in one or more
series as contemplated herein; all acts necessary to make this
Indenture a valid agreement of the Company have been performed.
NOW, THEREFORE, THIS INDENTURE WITNESSETH that, in
consideration of the premises and of the purchase of the
Securities by the Holders thereof, it is hereby covenanted and
agreed by and between the Company and the Trustee that all the
Securities are to be authenticated and delivered subject to the
further covenants, conditions and trusts hereinafter set forth,
and the Company hereby covenants and agrees to and with the
Trustee, for the equal and ratable benefit of all Holders of the
Securities or of series thereof (except as otherwise contemplated
herein), as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. GENERAL DEFINITIONS.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the
meanings assigned to them in this Article and include
the plural as well as the singular;
(b) all terms used herein without definition
which are defined in the Trust Indenture Act, either
directly or by reference therein, have the meanings
assigned to them therein;
(c) all terms used herein without definition
which are defined in the Uniform Commercial Code as in
effect in any jurisdiction in which any property of the
Company is located shall have the meanings assigned to
them therein with respect to such property;
(d) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance
with generally accepted accounting principles in the
United States; and, except as otherwise herein
expressly provided, the term "generally accepted
accounting principles" with respect to any computation
required or permitted hereunder shall mean such
accounting principles as are generally accepted in the
United States at the date of such computation or, at
the election of the Company from time to time, at the
date of the execution and delivery of this Indenture;
provided, however, that in determining generally
accepted accounting principles applicable to the
Company, effect shall be given, to the extent required,
to any order, rule or regulation of any administrative
agency, regulatory authority or other governmental body
having jurisdiction over the Company; and
(e) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this
Indenture as a whole and not to any particular Article,
Section or other subdivision.
"ACT", when used with respect to any Holder of a
Security, has the meaning specified in Section 104.
"AFFILIATE" of any specified Person means any other
Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct
generally the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"AUTHENTICATING AGENT" means any Person (other than the
Company or an Affiliate of the Company) authorized by the Trustee
to act on behalf of the Trustee to authenticate the Securities of
one or more series.
"AUTHORIZED OFFICER" means the Chairman of the Board,
the President, any Vice President, the Treasurer, any Assistant
Treasurer or the Corporate Secretary or any other duly authorized
officer, agent or attorney-in-fact of the Company named in an
Officer's Certificate signed by any of such corporate officers.
"BOARD OF DIRECTORS" means either the board of
directors of the Company or any committee thereof duly authorized
to act in respect of matters relating to this Indenture.
"BOARD RESOLUTION" means a copy of a resolution
certified by the Corporate Secretary or an Assistant Corporate
Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"BUSINESS DAY", when used with respect to a Place of
Payment or any other particular location specified in the
Securities or this Indenture, means any day, other than a
Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other
location are generally authorized or required by law, regulation
or executive order to remain closed, except as may be otherwise
specified as contemplated by Section 301.
"CLASS A BONDS" means bonds or other obligations now or
hereafter issued and Outstanding under either Class A Mortgage;
provided, however, that, for purposes of Section 312 as of any
time while the 1941 Mortgage remains in effect, "Class A Bonds"
means bonds or other obligations issued under the 1941 Mortgage;
and provided, further, that, for purposes of Section 312 as of
any time after the 1941 Mortgage shall have been satisfied and
discharged and while the 1992 Mortgage shall remain in effect,
"Class A Bonds" means bonds or other obligations issued under the
1992 Mortgage.
"CLASS A MORTGAGE" means the 1941 Mortgage or the 1992
Mortgage.
"COLLATERAL RELEASE DATE" means the date, if any, on
which Class A Bonds are surrendered by the Trustee pursuant to
Section 318 without any other Class A Bonds being substituted
therefor, as contemplated by subsection (e) of Section 318.
"COMMISSION" means the Securities and Exchange
Commission, as from time to time constituted, created under the
Securities Exchange Act of 1934, as amended, or, if at any time
after the date of the execution and delivery of this Indenture
such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body, if
any, performing such duties at such time.
"COMPANY" means the Person named as the "Company" in
the first paragraph of this Indenture until a successor Person
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such
successor Person.
"COMPANY ORDER" or "Company Request" means a written
request or order signed in the name of the Company by an
Authorized Officer and delivered to the Trustee.
"CONSOLIDATED TANGIBLE NET WORTH" has the meaning
specified in Section 508.
"CORPORATE TRUST OFFICE" means the office of the
Trustee at which at any particular time its corporate trust
business shall be principally administered, which office at the
date of the execution and delivery of this Indenture is located
at 88 Pine Street, New York, New York 10005.
"CORPORATION" means a corporation, association,
company, joint stock company or business trust.
"DEBT" has the meaning specified in Section 508.
"DISCOUNT SECURITY" means any Security which provides
for an amount less than the principal amount thereof to be due
and payable upon a declaration of acceleration of the Maturity
thereof pursuant to Section 702. "INTEREST" with respect to a
Discount Security means interest, if any, borne by such Security
at a Stated Interest Rate.
"DOLLAR" or "$" means a dollar or other equivalent unit
in such coin or currency of the United States as at the time
shall be legal tender for the payment of public and private
debts.
"ELIGIBLE OBLIGATIONS" means:
(a) with respect to Securities denominated in
Dollars, Government Obligations; or
(b) with respect to Securities denominated in a
currency other than Dollars or in a composite currency,
such other obligations or instruments as shall be
specified with respect to such Securities as
contemplated by Section 301.
"EVENT OF DEFAULT" has the meaning specified in Section
701.
"EXCEPTED PROPERTY" has the meaning specified in
Section 508.
"EXPERT" means a Person which is an engineer, appraiser
or other expert and which, with respect to any certificate to be
signed by such Person and delivered to the Trustee, is qualified
to pass upon the matter set forth in such certificate; "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
"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.
"GOVERNMENTAL AUTHORITY" means the government of the
United States or of any State or Territory thereof or of the
District of Columbia or of any county, municipality or other
political subdivision of any thereof, or any department, agency,
authority or other instrumentality of any of the foregoing.
"GOVERNMENT OBLIGATIONS" means:
(a) direct obligations of, or obligations the
principal of and interest on which are unconditionally
guaranteed by, the United States 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 (which may include the
Trustee or any Paying Agent) subject to Federal or
State supervision or examination with a combined
capital and surplus of at least Fifty Million Dollars
($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.
"HOLDER" means a Person in whose name a Security is
registered in the Security Register.
"INDENTURE" means this instrument as originally
executed and delivered and as it may from time to time be amended
and/or supplemented by one or more indentures or other
instruments supplemental hereto entered into pursuant to the
applicable provisions hereof and shall include the terms of
particular series of Securities established as contemplated by
Section 301.
"INDEPENDENT", when applied to any Expert, means such a
Person who (a) is in fact independent, (b) does not have any
direct material financial interest in the transferee or in any
obligor upon the Securities or in any Affiliate of the
transferee, (c) is not connected with the transferee or such
other 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.
"INDEPENDENT EXPERT'S CERTIFICATE" means a certificate
signed by an authorized officer of the Company (or, in the case
of a certificate delivered pursuant to Section 1005, of the
transferee of the subject property) and by an Independent Expert
(which Independent Expert shall be selected either by the board
of directors or by an authorized officer of the Company or such
transferee, as the case may be, the execution of such certificate
by such authorized officer to be conclusive evidence of such
selection) and delivered to the Trustee.
"INTEREST PAYMENT DATE", when used with respect to any
Security, means the Stated Maturity of an installment of interest
on such Security.
"INVESTMENT SECURITIES" has the meaning specified in
Section 114.
"LIEN" has the meaning specified in Section 508.
"MATURITY", when used with respect to any Security,
means the date on which the principal of such Security or an
installment of principal becomes due and payable as provided in
such Security or in this Indenture, whether at the Stated
Maturity, by declaration of acceleration, upon call for
redemption or otherwise.
"1941 MORTGAGE" means the Indenture, dated as of
April 1, 1941, of The Tucson Gas, Electric Light and Power
Company, predecessor of the Company, heretofore executed and
delivered to The Chase National Bank of the City of New York,
predecessor of The Chase Manhattan Bank, as trustee, as such
indenture has been heretofore and is hereafter amended and
supplemented.
"1992 MORTGAGE" means the Indenture of Mortgage and
Deed of Trust, dated as of December 1, 1992 of the Company
executed and delivered to Bank of Montreal Trust Company, as
trustee, as such indenture has been heretofore and is hereafter
amended and supplemented.
"NOTICE OF DEFAULT" has the meaning specified in
Section 701.
"OFFICER'S CERTIFICATE" means a certificate signed by
an Authorized Officer and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of
counsel, who may be counsel for the Company or other counsel
acceptable to the Trustee and who may be an employee or Affiliate
of the Company.
"OUTSTANDING", when used with respect to Securities,
means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture,
except:
(a) Securities theretofore canceled or delivered
to the Trustee for cancellation;
(b) Securities deemed to have been paid for all
purposes of this Indenture in accordance with Section
601 (whether or not the Company's indebtedness in
respect thereof shall be satisfied and discharged for
any other purpose); and
(c) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which
other Securities have been authenticated and delivered
pursuant to this Indenture, other than any such
Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it and
the Company that such Securities are held by a bona
fide purchaser or purchasers in whose hands such
Securities are valid obligations of the Company;
provided, however, that in determining whether or not the Holders
of the requisite principal amount of the Securities Outstanding
under this Indenture, or the Outstanding Securities of any series
or Tranche, have given or made any request, demand,
authorization, direction, notice, consent or waiver hereunder or
whether or not a quorum is present at a meeting of Holders of
Securities,
(x) Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the
Company or of such other obligor (unless the Company,
such obligor or such Affiliate owns all Securities
Outstanding under this Indenture, or all Outstanding
Securities of each such series and each such Tranche,
as the case may be, determined without regard to this
clause (x)) shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice,
consent or waiver or upon any such determination as to
the presence of a quorum, only Securities which the
Trustee knows to be so owned shall be so disregarded;
provided, however, that Securities so owned which have
been pledged in good faith may be regarded as
Outstanding if it is established to the reasonable
satisfaction of the Trustee that the pledgee, and not
the Company, any such other obligor or Affiliate of
either thereof, has the right so to act with respect to
such Securities and that the pledgee is not the Company
or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor; and
(y) the principal amount of a Discount Security
that shall be deemed to be Outstanding for such
purposes shall be the amount of the principal thereof
that would be due and payable as of the date of such
determination upon a declaration of acceleration of the
Maturity thereof pursuant to Section 702; and
provided, further, that, in the case of any Security the
principal of which is payable from time to time without
presentment or surrender, the principal amount of such Security
that shall be deemed to be Outstanding at any time for all
purposes of this Indenture shall be the original principal amount
thereof less the aggregate amount of principal thereof
theretofore paid.
"OUTSTANDING", when used with respect to Class A Bonds,
has the meaning specified in the related Class A Mortgage.
"PAYING AGENT" means any Person, including the Company,
authorized by the Company to pay the principal of and premium, if
any, or interest, if any, on any Securities on behalf of the
Company.
"PERIODIC OFFERING" means an offering of Securities of
a series from time to time any or all of the specific terms of
which Securities, including without limitation the rate or rates
of interest, if any, thereon, the Stated Maturity or Maturities
thereof and the redemption provisions, if any, with respect
thereto, are to be determined by the Company or its agents from
time to time subsequent to the initial request for the
authentication and delivery of such Securities by the Trustee,
all as contemplated in Section 301 and clause (b) of Section 303.
"PERMITTED SECURED DEBT" has the meaning specified in
Section 508.
"PERSON" means any individual, corporation,
partnership, limited liability partnership, limited liability
company, joint venture, trust or unincorporated organization or
any Governmental Authority.
"PLACE OF PAYMENT", when used with respect to the
Securities of any series, or any Tranche thereof, means the place
or places, specified as contemplated by Section 301, at which,
subject to Section 502, principal of and premium, if any, and
interest, if any, on the Securities of such series or Tranche are
payable.
"PREDECESSOR SECURITY" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed (to
the extent lawful) to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"PURCHASE MONEY LIEN" has the meaning specified in
Section 508.
"REDEMPTION DATE", when used with respect to any
Security to be redeemed, means the date fixed for such redemption
by or pursuant to this Indenture.
"REDEMPTION PRICE", when used with respect to any
Security to be redeemed, means the price at which it is to be
redeemed pursuant to this Indenture.
"REGULAR RECORD DATE" for the interest payable on any
Interest Payment Date on the Securities of any series means the
date specified for that purpose as contemplated by Section 301.
"REQUIRED CURRENCY" has the meaning specified in
Section 311.
"RESPONSIBLE OFFICER", when used with respect to the
Trustee, means any officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"SECURED DEBT" has the meaning specified in Section
508.
"SECURITIES" means any bonds, notes and other evidences
of indebtedness authenticated and delivered under this Indenture.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the
respective meanings specified in Section 305.
"SPECIAL RECORD DATE" for the payment of any Unpaid
Interest on the Securities of any series means a date fixed by
the Trustee pursuant to Section 307.
"STATED INTEREST RATE" means a rate (whether fixed or
variable) at which an obligation by its terms is stated to bear
simple interest. Any calculation or other determination to be
made under this Indenture by reference to the Stated Interest
Rate on an obligation shall be made (a) if the Company's
obligations in respect of any other indebtedness shall be
evidenced or secured in whole or in part by such obligation, by
reference to the lower of the Stated Interest Rate on such
obligation and the Stated Interest Rate on such other
indebtedness and (b) without regard to the effective interest
cost to the Company of such obligation or of any such other
indebtedness.
"STATED MATURITY", when used with respect to any
obligation or any installment of principal thereof or interest
thereon, means the date on which the principal of such obligation
or such installment of principal or interest is stated to be due
and payable (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension).
"SUCCESSOR" has the meaning set forth in Section 1001.
"TRANCHE" means a group of Securities which (a) are of
the same series and (b) have identical terms except as to
principal amount and/or date of issuance.
"TRUST INDENTURE ACT" means, as of any time, the Trust
Indenture Act of 1939, or any successor statute, as in effect at
such time.
"TRUSTEE" means the Person named as the "Trustee" in
the first paragraph of this Indenture until a successor trustee
shall have become such with respect to one or more series of
Securities pursuant to the applicable provisions of this
Indenture, and thereafter "Trustee" shall mean or include each
Person who is then a Trustee hereunder, and, if at any time there
is more than one Person acting as trustee hereunder, "Trustee"
shall mean each such Person so acting.
"UNITED STATES" means the United States of America, its
Territories, its possessions and other areas subject to its
political jurisdiction.
"UNPAID INTEREST" has the meaning specified in Section
307.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Except as otherwise expressly provided in this
Indenture, upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee an Officer's Certificate
stating that all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with and an Opinion of Counsel stating that in the opinion of
such counsel all such conditions precedent, if any, have been
complied with, it being understood that in the case of any such
application or request as to which the furnishing of such
documents is specifically required by any provision of this
Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(a) a statement that each individual signing such
certificate or opinion has read such covenant or
condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope
of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(c) a statement that, in the opinion of each such
individual, such individual has made such examination
or investigation as is necessary to enable such
individual to express an informed opinion as to whether
or not such covenant or condition has been complied
with; and
(d) a statement as to whether, in the opinion of
each such individual, such condition or covenant has
been complied with.
SECTION 103. CONTENT AND FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
(a) Any Officer's Certificate may be based (without
further examination or investigation), insofar as it relates to
or is dependent upon legal matters, upon an opinion of, or
representations by, counsel, unless, in any case, such officer
has actual knowledge that the certificate or opinion or
representations with respect to the matters upon which such
Officer's Certificate may be based as aforesaid are erroneous.
Any Opinion of Counsel may be based (without further
examination or investigation), insofar as it relates to or is
dependent upon factual matters, information with respect to which
is in the possession of the Company, upon a certificate of, or
representations by, an officer or officers of the Company, unless
such counsel has actual knowledge that the certificate or opinion
or representations with respect to the matters upon which his
opinion may be based as aforesaid are erroneous. In addition,
any Opinion of Counsel may be based (without further examination
or investigation), insofar as it relates to or is dependent upon
matters covered in an Opinion of Counsel rendered by other
counsel, upon such other Opinion of Counsel, unless such counsel
has actual knowledge that the Opinion of Counsel rendered by such
other counsel with respect to the matters upon which his Opinion
of Counsel may be based as aforesaid are erroneous. If, in order
to render any Opinion of Counsel provided for herein, the signer
thereof shall deem it necessary that additional facts or matters
be stated in any Officer's Certificate provided for herein, then
such certificate may state all such additional facts or matters
as the signer of such Opinion of Counsel may request.
(b) In any case where several matters are required to
be certified by, or covered by an opinion of, any specified
Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some
matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such
matters in one or several documents. Where any Person is
required to make, give or execute two or more applications,
requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
(c) Whenever, subsequent to the receipt by the Trustee
of any Board Resolution, Officer's Certificate, Opinion of
Counsel or other document or instrument, a clerical,
typographical or other inadvertent or unintentional error or
omission shall be discovered therein, a new document or
instrument may be substituted therefor in corrected form with the
same force and effect as if originally filed in the corrected
form and, irrespective of the date or dates of the actual
execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered
as of the date or dates required with respect to the document or
instrument for which it is substituted. Anything in this
Indenture to the contrary notwithstanding, if any such corrective
document or instrument indicates that action has been taken by or
at the request of the Company which could not have been taken had
the original document or instrument not contained such error or
omission, the action so taken shall not be invalidated or
otherwise rendered ineffective but shall be and remain in full
force and effect, except to the extent that such action was a
result of willful misconduct or bad faith. Without limiting the
generality of the foregoing, any Securities issued under the
authority of such defective document or instrument shall
nevertheless be the valid obligations of the Company entitled to
the benefits provided by this Indenture equally and ratably with
all other Outstanding Securities, except as aforesaid.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction,
notice, consent, election, waiver or other action provided by
this Indenture to be made, given or taken by Holders may be
embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing or, alternatively, may be
embodied in and evidenced by the record of Holders voting in
favor thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders duly called and held in
accordance with the provisions of Article Twelve, or a
combination of such instruments and any such record. Except as
herein otherwise expressly provided, such action shall become
effective when such instrument or instruments or record or both
are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments and any
such record (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments and so voting at
any such meeting. Proof of execution of any such instrument or
of a writing appointing any such agent, or of the holding by any
Person of a Security, shall be sufficient for any purpose of this
Indenture and (subject to Section 801) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this
Section. The record of any meeting of Holders shall be proved in
the manner provided in Section 1206.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the affidavit
of a witness of such execution or by a certificate of a notary
public or other officer authorized by law to take acknowledgments
of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof or may be
proved in any other manner which the Trustee and the Company deem
sufficient. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his
authority.
(c) The ownership of Securities, the principal amount
(except as otherwise contemplated in clause (y) of the first
proviso to the definition of Outstanding) and serial numbers of
Securities held by any Person, and the date of holding the same,
shall be proved by the Security Register.
(d) Any request, demand, authorization, direction,
notice, consent, election, waiver or other Act of a Holder shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such
action is made upon such Security.
(e) Until such time as written instruments shall have
been delivered to the Trustee with respect to the requisite
percentage of principal amount of Securities for the action
contemplated by such instruments, any such instrument executed
and delivered by or on behalf of a Holder may be revoked with
respect to any or all of such Securities by written notice by
such Holder or any subsequent Holder, proven in the manner in
which such instrument was proven.
(f) Securities of any series, or any Tranche thereof,
authenticated and delivered after any Act of Holders may, and
shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any action taken by such Act of
Holders. If the Company shall so determine, new Securities of
any series, or any Tranche thereof, so modified as to conform, in
the opinion of the Trustee and the Company, to such action may be
prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities
of such series or Tranche.
(g) The Company may, at its option, by Company Order,
fix in advance a record date for the determination of Holders
entitled to give any request, demand, authorization, direction,
notice, consent, waiver or other Act solicited by the Company,
but the Company shall have no obligation to do so; provided,
however, that the Company may not fix a record date for the
giving or making of any notice, declaration, request or direction
referred to in the next sentence. In addition, the Trustee may,
at its option, fix in advance a record date for the determination
of Holders of Securities of any series entitled to join in the
giving or making of any Notice of Default, any declaration of
acceleration referred to in Section 702, any request to institute
proceedings referred to in Section 707 or any direction referred
to in Section 712, in each case with respect to Securities of
such series. If any such record date is fixed, such request,
demand, authorization, direction, notice, consent, waiver or
other Act, or such notice, declaration, request or direction, may
be given before or after such record date, but only the Holders
of record at the close of business on the record date shall be
deemed to be Holders for the purposes of determining (i) whether
Holders of the requisite proportion of the Outstanding Securities
have authorized or agreed or consented to such Act (and for that
purpose the Outstanding Securities shall be computed as of the
record date) and/or (ii) which Holders may revoke any such Act
(notwithstanding subsection (e) of this Section); and any such
Act, given as aforesaid, shall be effective whether or not the
Holders which authorized or agreed or consented to such Act
remain Holders after such record date and whether or not the
Securities held by such Holders remain Outstanding after such
record date.
SECTION 105. NOTICES, ETC. TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice,
consent, election, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with, the Trustee by any Holder or by the
Company, or the Company by the Trustee or by any Holder, shall be
sufficient for every purpose hereunder (unless otherwise
expressly provided herein) if the same shall be in writing and
delivered personally to an officer or other responsible employee
of the addressee, or transmitted by facsimile transmission, telex
or other direct written electronic means to such telephone number
or other electronic communications address set forth opposite
such parties name below or as the parties hereto shall from time
to time designate, or transmitted by registered mail, charges
prepaid, to the applicable address set opposite such party's name
below or to such other address as either party hereto may from
time to time designate:
If to the Trustee, to:
Bank of Montreal Trust Company
88 Pine Street
New York, New York 10005
Attention: Corporate Trust Department
Telephone: (212) 701-7650
Facsimile: (212) 701-7664
If to the Company, to:
Tucson Electric Power Company
220 West Sixth Street
Tucson, Arizona 85702
Attention: Treasurer
Telephone: (520) 884-3660
Facsimile: (520) 884-3888
Any communication contemplated herein shall be deemed
to have been made, given, furnished and filed if personally
delivered, on the date of delivery, if transmitted by facsimile
transmission, telex or other direct written electronic means, on
the date of transmission, and if transmitted by registered mail,
on the date of receipt.
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER.
Except as otherwise expressly provided herein, where
this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given, and shall be deemed given, to
Holders if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at the address of such Holder
as it appears in the Security Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the
giving of such notice.
In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable
to give such notice to Holders by mail, then such notification as
shall be made with the approval of the Trustee shall constitute a
sufficient notification for every purpose hereunder. In any case
where notice to Holders is given by mail, neither the failure to
mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice
with respect to other Holders.
Any notice required by this Indenture may be waived in
writing by the Person entitled to receive such notice, either
before or after the event otherwise to be specified therein, and
such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or
conflicts with another provision hereof which is required or
deemed to be included in this Indenture by, or is otherwise
governed by, any provision of the Trust Indenture Act, such other
provision shall control; and if any provision hereof otherwise
conflicts with the Trust Indenture Act, the Trust Indenture Act
shall control.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings in this Indenture and
the Table of Contents are for convenience only and shall not
affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or the
Securities shall be held to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or the Securities, express or
implied, shall give to any Person, other than the parties hereto,
their successors hereunder and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by
and construed in accordance with the law of the State of New York
(including without limitation Section 5-1401 of the New York
General Obligations Law or any successor to such statute), except
to the extent that the Trust Indenture Act shall be applicable.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption
Date or Stated Maturity of any Security shall not be a Business
Day at any Place of Payment, then (notwithstanding any other
provision of this Indenture or of the Securities other than a
contrary provision in the Securities of any series, or any
Tranche thereof, or in the indenture supplemental hereto, Board
Resolution or Officer's Certificate which establishes the terms
of the Securities of such series or Tranche) payment of interest
or principal and premium, if any, need not be made at such Place
of Payment on such date, but may be made on the next succeeding
Business Day at such Place of Payment with the same force and
effect as if made on the Interest Payment Date or Redemption
Date, or at the Stated Maturity, and, if such payment is made or
duly provided for on such Business Day, no interest shall accrue
on the amount so payable for the period from and after such
Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be, to such Business Day.
SECTION 114. INVESTMENT OF CASH HELD BY TRUSTEE.
Any cash held by the Trustee or any Paying Agent under
any provision of this Indenture shall, at the request of the
Company evidenced by Company Order, be invested or reinvested in
Investment Securities designated by the Company (such Company
Order to contain a representation to the effect that the
securities designated therein constitute Investment Securities),
and any interest on such Investment Securities shall be promptly
paid over to the Company as received free and clear of any Lien.
Such Investment Securities shall be held subject to the same
provisions hereof as the cash used to purchase the same, but upon
a like request of the Company shall be sold, in whole or in
designated part, and the proceeds of such sale shall be held
subject to the same provisions hereof as the cash used to
purchase the Investment Securities so sold. If such sale shall
produce a net sum less than the cost of the Investment Securities
so sold, the Company shall pay to the Trustee or any such Paying
Agent, as the case may be, such amount in cash as, together with
the net proceeds from such sale, shall equal the cost of the
Investment Securities so sold, and if such sale shall produce a
net sum greater than the cost of the Investment Securities so
sold, the Trustee or any such Paying Agent, as the case may be,
shall promptly pay over to the Company an amount in cash equal to
such excess, free and clear of any Lien. In no event shall the
Trustee be liable for any loss incurred in connection with the
sale of any Investment Security pursuant to this Section.
Notwithstanding the foregoing, if an Event of Default
shall have occurred and be continuing, interest on Investment
Securities and any gain upon the sale thereof shall be held, in
trust, until such Event of Default shall have been cured or
waived, whereupon such interest and gain shall be promptly paid
over to the Company free and clear of any Lien.
"INVESTMENT SECURITIES" means any of the following
obligations or securities on which neither the Company, any other
obligor on the Securities nor any Affiliate of either is the
obligor: (a) Government Obligations; (b) interest bearing deposit
accounts (which may be represented by certificates of deposit) in
any national or state bank (which may include the Trustee or any
Paying Agent) or savings and loan association which has
outstanding securities rated by a nationally recognized rating
organization in either of the two (2) highest rating categories
(without regard to modifiers) for short term securities or in any
of the three (3) highest rating categories (without regard to
modifiers) for long term securities; (c) bankers' acceptances
drawn on and accepted by any commercial bank (which may include
the Trustee or any Paying Agent) which has outstanding securities
rated by a nationally recognized rating organization in either of
the two (2) highest rating categories (without regard to
modifiers) for short term securities or in any of the three (3)
highest rating categories (without regard to modifiers) for long
term securities; (d) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed
by, any State or Territory of the United States or the District
of Columbia, or any political subdivision of any of the
foregoing, which are rated by a nationally recognized rating
organization in either of the two (2) highest rating categories
(without regard to modifiers) for short term securities or in any
of the three (3) highest rating categories (without regard to
modifiers) for long term securities; (e) bonds or other
obligations of any agency or instrumentality of the United
States; (f) corporate debt securities which are rated by a
nationally recognized rating organization in either of the two
(2) highest rating categories (without regard to modifiers) for
short term securities or in any of the three (3) highest rating
categories (without regard to modifiers) for long term
securities; (g) repurchase agreements with respect to any of the
foregoing obligations or securities with any banking or financial
institution (which may include the Trustee or any Paying Agent)
which has outstanding securities rated by a nationally recognized
rating organization in either of the two (2) highest rating
categories (without regard to modifiers) for short term
securities or in any of the three (3) highest rating categories
(without regard to modifiers) for long term securities;
(h)securities issued by any regulated investment company
(including any investment company for which the Trustee or any
Paying Agent is the advisor), as defined in Section 851 of the
Internal Revenue Code of 1986, as amended, or any successor
section of such Code or successor federal statute, provided that
the portfolio of such investment company is limited to
obligations or securities of the character and investment quality
contemplated in clauses (a) through (f) above and repurchase
agreements which are fully collateralized by any of such
obligations or securities; and (i) any other obligations or
securities which may lawfully be purchased by the Trustee in its
capacity as such.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The definitive Securities of each series shall be in
substantially the form or forms established in the Officer's
Certificate, the indenture supplemental hereto or the Board
Resolution establishing such series, in any case with such
appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and
may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or
as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of the
Securities. If the form or forms of Securities of any series are
established in a Board Resolution or in an Officer's Certificate,
such Board Resolution and Officer's Certificate, if any, shall be
delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication
and delivery of such Securities.
The Securities of each series shall be issuable in
registered form without coupons. The definitive Securities shall
be produced in such manner as shall be determined by the officers
executing such Securities, as evidenced by their execution
thereof.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in
substantially the form set forth below:
This is one of the Securities of the series
designated therein referred to in the within-mentioned
Indenture.
-----------------------------
as Trustee
By: -------------------------
Authorized Signature
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may
be authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series.
Subject to the last paragraph of this Section, prior to the
authentication and delivery of Securities of any series there
shall be established by specification in an Officer's
Certificate, a supplemental indenture or a Board Resolution:
(a) the title of the Securities of such series
(which shall distinguish the Securities of such series
from Securities of all other series);
(b) any limit upon the aggregate principal amount
of the Securities of such series which may be
authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in
lieu of, other Securities of such series pursuant to
Section 304, 305, 306, 406 or 1106 and except for any
Securities which, pursuant to Section 303, are deemed
never to have been authenticated and delivered
hereunder);
(c) the Persons (without specific identification)
to whom interest, if any, on Securities of such series,
or any Tranche thereof, shall be payable, if other than
the Persons in whose names such Securities (or one or
more Predecessor Securities) are registered at the
close of business on the Regular Record Date for such
interest;
(d) the date or dates on which the principal of
the Securities of such series, or any Tranche thereof,
is payable or any formulary or other method or other
means by which such date or dates shall be determined,
by reference to an index or other fact or event
ascertainable outside of this Indenture or otherwise
(without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension); and
the right, if any, to extend the Maturity of the
Securities of such series, or any Tranche thereof, and
the duration of any such extension;
(e) the rate or rates at which the Securities of
such series, or any Tranche thereof, shall bear
interest, if any (including the rate or rates at which
overdue principal shall bear interest, if different
from the rate or rates at which such Securities shall
bear interest prior to Maturity, and, if applicable,
the rate or rates at which overdue premium or interest
shall bear interest, if any), or any formulary or other
method or other means by which such rate or rates shall
be determined, by reference to an index or other fact
or event ascertainable outside of this Indenture or
otherwise; the date or dates from which such interest
shall accrue; the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date,
if any, for the interest payable on such Securities on
any Interest Payment Date; the basis of computation of
interest, if other than as provided in Section 310; and
the right, if any, to extend the interest payment
periods and the duration of any such extension;
(f) the place or places at which and/or the
methods (if other than as provided elsewhere in this
Indenture) by which (i) the principal of and premium,
if any, and interest, if any, on Securities of such
series, or any Tranche thereof, shall be payable, (ii)
registration of transfer of Securities of such series,
or any Tranche thereof, may be effected, (iii)
exchanges of Securities of such series, or any Tranche
thereof, may be effected and (iv) notices and demands
to or upon the Company in respect of the Securities of
such series, or any Tranche thereof, and this Indenture
may be served; the Security Registrar and any Paying
Agent or Agents for such series or Tranche; and, if
such is the case, that the principal of such Securities
shall be payable without the presentment or surrender
thereof;
(g) the period or periods within which or the
date or dates on which, the price or prices at which
and the terms and conditions upon which the Securities
of such series, or any Tranche thereof, may be
redeemed, in whole or in part, at the option of the
Company;
(h) the obligation or obligations, if any, of the
Company to redeem or purchase the Securities of such
series, or any Tranche thereof, pursuant to any sinking
fund or other mandatory redemption provisions or at the
option of a Holder thereof and the period or periods
within which or the date or dates on which, the price
or prices at which and the terms and conditions upon
which such Securities shall be redeemed or purchased,
in whole or in part, pursuant to such obligation, and
applicable exceptions to the requirements of
Section 404 in the case of mandatory redemption or
redemption at the option of the Holder;
(i) the denominations in which Securities of such
series, or any Tranche thereof, shall be issuable if
other than denominations of One Thousand Dollars
($1,000) and any integral multiple thereof;
(j) the currency or currencies, including
composite currencies, in which payment of the principal
of or premium, if any, or interest, if any, on the
Securities of such series, or any Tranche thereof,
shall be payable (if other than in Dollars) and the
formulary or other method or other means by which the
equivalent of any such amount in Dollars is to be
determined for any purpose, including for the purpose
of determining the principal amount of such Securities
deemed to be Outstanding at any time;
(k) if the principal of or premium, if any, or
interest, if any, on the Securities of such series, or
any Tranche thereof, are to be payable, at the election
of the Company or a Holder thereof, in a coin or
currency other than that in which the Securities are
stated to be payable, the period or periods within
which, and the terms and conditions upon which, such
election may be made;
(l) if the principal of or premium, if any, or
interest, if any, on the Securities of such series, or
any Tranche thereof, are to be payable, or are to be
payable at the election of the Company or a Holder
thereof, in securities or other property, the type and
amount of such securities or other property, or the
formulary or other method or other means by which such
amount shall be determined, and the period or periods
within which, and the terms and conditions upon which,
any such election may be made;
(m) if the amount payable in respect of the
principal of or premium, if any, or interest, if any,
on the Securities of such series, or any Tranche
thereof, may be determined with reference to an index
or other fact or event ascertainable outside of this
Indenture, the manner in which such amounts shall be
determined (to the extent not established pursuant to
clause (e) of this paragraph);
(n) if other than the principal amount thereof,
the portion of the principal amount of Securities of
such series, or any Tranche thereof, which shall be
payable upon declaration of acceleration of the
Maturity thereof pursuant to Section 702;
(o) the terms, if any, pursuant to which the
Securities of such series, or any Tranche thereof, may
be converted into or exchanged for shares of capital
stock or other securities of the Company or any other
Person;
(p) the obligations or instruments, if any, which
shall be considered to be Eligible Obligations in
respect of the Securities of such series, or any
Tranche thereof, denominated in a currency other than
Dollars or in a composite currency, and any additional
or alternative provisions for the reinstatement of the
Company's indebtedness in respect of such Securities
after the satisfaction and discharge thereof as
provided in Section 601;
(q) if the Securities of such series, or any
Tranche thereof, are to be issued in global form, (i)
any limitations on the rights of the Holder or Holders
of such Securities to transfer or exchange the same or
to obtain the registration of transfer thereof, (ii)
any limitations on the rights of the Holder or Holders
thereof to obtain certificates therefor in definitive
form in lieu of temporary form and (iii) any and all
other matters incidental to such Securities;
(r) if the Securities of such series, or any
Tranche thereof, are to be issuable as bearer
securities, any and all matters incidental thereto
which are not specifically addressed in a supplemental
indenture as contemplated by clause (f) of Section
1101;
(s) to the extent not established pursuant to
clause (q) of this paragraph, any limitations on the
rights of the Holders of the Securities of such Series,
or any Tranche thereof, to transfer or exchange such
Securities or to obtain the registration of transfer
thereof; and if a service charge will be made for the
registration of transfer or exchange of Securities of
such series, or any Tranche thereof, the amount or
terms thereof;
(t) any exceptions to Section 113, or variation
in the definition of Business Day, with respect to the
Securities of such series, or any Tranche thereof; and
(u) any other terms of the Securities of such
series, or any Tranche thereof.
With respect to Securities of a series subject to a
Periodic Offering, the Officer's Certificate, the indenture
supplemental hereto or the Board Resolution which establishes
such series, as the case may be, may provide general terms or
parameters for Securities of such series and provide either that
the specific terms of Securities of such series, or any Tranche
thereof, shall be specified in a Company Order or that such terms
shall be determined by the Company or its agents in accordance
with procedures specified in a Company Order as contemplated by
clause (b) of Section 303.
Unless otherwise specified with respect to a series of
Securities pursuant to Section 301(b), any limit upon the
aggregate principal amount of a series of Securities may be
increased without the consent of any Holders and additional
Securities of such series may be authenticated and delivered up
to the limit upon the aggregate principal amount authorized with
respect to such series as so increased.
Anything herein to the contrary notwithstanding, the
Trustee shall be under no obligation to authenticate and deliver
Securities of any series the terms of which, established as
contemplated by this Section, would affect the rights, duties,
obligations, liabilities or immunities of the Trustee under this
Indenture or otherwise.
SECTION 302. DENOMINATIONS.
Unless otherwise provided as contemplated by Section
301 with respect to any series of Securities, or any Tranche
thereof, the Securities of each series shall be issuable in
denominations of One Thousand Dollars ($1,000) and any integral
multiple thereof.
SECTION 303. EXECUTION, DATING, CERTIFICATE OF AUTHENTICATION.
Unless otherwise provided as contemplated by Section
301 with respect to any series of Securities, or any Tranche
thereof, the Securities shall be executed on behalf of the
Company by an Authorized Officer, and may have the corporate seal
of the Company affixed thereto or reproduced thereon and attested
by any other Authorized Officer. The signature of any or all of
these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures
of individuals who were at the time of execution Authorized
Officers of the Company shall bind the Company, notwithstanding
that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such
Securities.
The Trustee shall authenticate and deliver Securities
of a series, for original issue, at one time or from time to time
in accordance with the Company Order referred to below, upon
receipt by the Trustee of:
(a) the instrument or instruments establishing
the form or forms and terms of such series, as provided
in Sections 201 and 301;
(b) a Company Order requesting the authentication
and delivery of such Securities and, to the extent that
the terms of such Securities shall not have been
established in an Officer's Certificate, an indenture
supplemental hereto or a Board Resolution, all as
contemplated by Sections 201 and 301, either (i)
establishing such terms or (ii) in the case of
Securities of a series subject to a Periodic Offering,
specifying procedures, acceptable to the Trustee, by
which such terms are to be established (which
procedures may provide for authentication and delivery
pursuant to oral or electronic instructions from the
Company or any agent or agents thereof, which oral
instructions are to be promptly confirmed
electronically or in writing), in either case in
accordance with the instrument or instruments delivered
pursuant to clause (a) above;
(c) Securities of such series, executed on behalf
of the Company by an Authorized Officer;
(d) an Opinion of Counsel to the effect that:
(i) the form or forms of such Securities
have been duly authorized by the Company and have
been established in conformity with the provisions
of this Indenture;
(ii) the terms of such Securities have been
duly authorized by the Company and have been
established in conformity with the provisions of
this Indenture; and
(iii) when such Securities shall have
been authenticated and delivered by the Trustee
and issued and delivered by the Company in the
manner and subject to any conditions specified in
such Opinion of Counsel, such Securities will
constitute valid obligations of the Company,
entitled to the benefits provided by this
Indenture;
provided, however, that, with respect to Securities of
a series subject to a Periodic Offering, the Trustee
shall be entitled to receive such Opinion of Counsel
only once at or prior to the time of the first
authentication and delivery of such Securities
(provided that such Opinion of Counsel addresses the
authentication and delivery of all Securities of such
series) and that, in lieu of the opinions described in
clauses (ii) and (iii) above, Counsel may opine that:
(x) when the terms of such Securities shall
have been established pursuant to a Company Order
or Orders or pursuant to such procedures as may be
specified from time to time by a Company Order or
Orders, all as contemplated by and in accordance
with the instrument or instruments delivered
pursuant to clause (a) above, such terms will have
been duly authorized by the Company and will have
been established in conformity with the provisions
of this Indenture; and
(y) when such Securities shall have been
authenticated and delivered by the Trustee in
accordance with this Indenture and the Company
Order or Orders or the specified procedures
referred to in paragraph (x) above and issued and
delivered by the Company in the manner and subject
to any conditions specified in such Opinion of
Counsel, such Securities will constitute valid
obligations of the Company, entitled to the
benefits provided by this Indenture; and
(e) so long as the Collateral Release Date shall
not have occurred, the Class A Bond and documents
specified in Section 312.
With respect to Securities of a series subject to a
Periodic Offering, the Trustee may conclusively rely, as to the
authorization by the Company of any of such Securities, the forms
and terms thereof, the validity thereof and the compliance of the
authentication and delivery thereof with the terms and conditions
of this Indenture, upon the Opinion or Opinions of Counsel and
the certificates and other documents delivered pursuant to this
Article at or prior to the time of the first authentication and
delivery of Securities of such series until any of such opinions,
certificates or other documents have been superseded or revoked
or expire by their terms. In connection with the authentication
and delivery of Securities of a series subject to a Periodic
Offering, the Trustee shall be entitled to assume that the
Company's instructions to authenticate and deliver such
Securities do not violate any applicable law or any applicable
rule, regulation or order of any Governmental Authority having
jurisdiction over the Company.
If the form of terms of the Securities of any series
have been established by or pursuant to a Board Resolution or an
Officer's Certificate as permitted by Sections 201 or 301, the
Trustee shall not be required to authenticate such Securities if
the issuance of such Securities pursuant to this Indenture will
affect the Trustee's own rights, duties or immunities under the
Securities and this Indenture or otherwise in a manner which is
not reasonably acceptable to the Trustee.
Unless otherwise specified as contemplated by Section
301 with respect to any series of Securities, or any Tranche
thereof, each Security shall be dated the date of its
authentication.
Unless otherwise specified as contemplated by Section
301 with respect to any series of Securities, or any Tranche
thereof, no Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there
appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the
Trustee or an Authenticating Agent by manual signature of an
authorized officer thereof, and such certificate upon any
Security shall be conclusive evidence, and the only evidence,
that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if (a) any Security shall have
been authenticated and delivered hereunder to the Company, or any
Person acting on its behalf, but shall never have been issued and
sold by the Company, (b) the Company shall deliver such Security
to the Security Registrar for cancellation or shall cancel such
Security and deliver evidence of such cancellation to the
Trustee, in each case as provided in Section 309, and (c) the
Company, at its election, shall deliver to the Trustee a written
statement (which need not comply with Section 102 and need not be
accompanied by an Officer's Certificate or an Opinion of Counsel)
stating that such Security has never been issued and sold by the
Company, then, for all purposes of this Indenture, such Security
shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits hereof.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any
series, or any Tranche thereof, the Company may execute, and upon
Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed,
typewritten, mimeographed, photocopied or otherwise produced, in
any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, with such
appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities;
provided, however, that temporary Securities need not recite
specific redemption, sinking fund, conversion or exchange
provisions.
Except as otherwise specified as contemplated by
Section 301 with respect to the Securities of any series, or any
Tranche thereof, after the preparation of definitive Securities
of such series or Tranche, the temporary Securities of such
series or Tranche shall be exchangeable, without charge to the
Holder thereof, for definitive Securities of such series or
Tranche upon surrender of such temporary Securities at the office
or agency of the Company maintained pursuant to Section 502 in a
Place of Payment for such Securities. Upon such surrender of
temporary Securities, the Company shall, except as aforesaid,
execute and the Trustee shall authenticate and deliver in
exchange therefor definitive Securities of the same series and
Tranche, of authorized denominations and of like tenor and
aggregate principal amount.
Until exchanged in full as hereinabove provided,
temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of
the same series and Tranche and of like tenor authenticated and
delivered hereunder.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND
EXCHANGE.
The Company shall cause to be kept in one of the
offices designated pursuant to Section 502, with respect to the
Securities of each series, or any Tranche thereof, a register
(the "SECURITY REGISTER") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for
the registration of Securities of such series or Tranche and the
registration of transfer thereof. The Company shall designate
one Person to maintain the Security Register for the Securities
of each series and such Person is referred to herein, with
respect to such series, as the "SECURITY REGISTRAR". Anything
herein to the contrary notwithstanding, the Company may designate
one or more of its offices as an office in which a register with
respect to the Securities of one or more series, or any Tranche
or Tranches thereof, shall be maintained, and the Company may
designate itself the Security Registrar with respect to one or
more of such series. The Security Register shall be open for
inspection by the Trustee and the Company at all reasonable
times.
Except as otherwise specified as contemplated by
Section 301 with respect to the Securities of any series, or any
Tranche thereof, upon presentment for registration of transfer of
any Security of such series or Tranche at the office or agency of
the Company maintained pursuant to Section 502 in a Place of
Payment for such series or Tranche, and further upon satisfaction
of any conditions prescribed by applicable law, the Company shall
execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new
Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount.
Except as otherwise specified as contemplated by
Section 301 with respect to the Securities of any series, or any
Tranche thereof, any Security of such series or Tranche may be
exchanged at the option of the Holder, for one or more new
Securities of the same series and Tranche, of authorized
denominations and of like tenor and aggregate principal amount,
upon presentment of the Securities to be exchanged at any such
office or agency. Whenever any Securities are so presented for
exchange, and upon satisfaction of any conditions prescribed by
applicable law, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making
the exchange is entitled to receive.
All Securities delivered upon any registration of
transfer or exchange of Securities shall be valid obligations of
the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities presented upon
such registration of transfer or exchange.
Every Security presented for registration of transfer
or for exchange shall (if so required by the Company, the Trustee
or the Security Registrar) be duly endorsed or shall be
accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee or the Security
Registrar, as the case may be, duly executed by the Holder
thereof or his attorney duly authorized in writing.
Unless otherwise specified as contemplated by Section
301 with respect to Securities of any series, or any Tranche
thereof, no service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 406 or 1106 not involving any
transfer.
The Company shall not be required to execute or to
provide for the registration of transfer of or the exchange of
(a) Securities of any series, or any Tranche thereof, during a
period of fifteen (15) days immediately preceding the date notice
is to be given identifying the serial numbers of the Securities
of such series or Tranche called for redemption or (b) any
Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is presented to the Trustee,
the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of the same series
and Tranche, and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the
Trustee (a) evidence to their satisfaction of the ownership of
and the destruction, loss or theft of any Security and (b) such
security or indemnity as may be reasonably required by them to
save each of them and any agent of either of them harmless, then,
in the absence of notice to the Company or the Trustee that such
Security is held by a Person deemed to be a protected purchaser
under applicable law, the Company shall execute and the Trustee
shall authenticate and deliver, in lieu of any such destroyed,
lost or stolen Security, a new Security of the same series and
Tranche, and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
Notwithstanding the foregoing, in case any such
mutilated, destroyed, lost or stolen Security has become or is
about to become due and payable, the Company in its discretion
may, but subject to compliance with the foregoing conditions,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this
Section, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including
the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to
this Section in lieu of any destroyed, lost or stolen Security
shall constitute an additional contractual obligation of the
Company, whether or not the destroyed, lost or stolen Security
shall be at any time enforceable by anyone other than the Holder
of such new Security, and any such new Security shall be entitled
to all the benefits of this Indenture equally and proportionately
with any and all other Securities of such series duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Unless otherwise specified as contemplated by Section
301 with respect to the Securities of any series, or any Tranche
thereof, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.
Any interest on any Security of any series which is
payable, but is not punctually paid or duly provided for, on any
Interest Payment Date, including without limitation interest the
payment period for which has been extended as specified with
respect to such series as contemplated by Section 301 (herein
called "UNPAID INTEREST"), shall forthwith cease to be payable to
the Holder on the related Regular Record Date by virtue of having
been such Holder, and such Unpaid Interest may be paid by the
Company, at its election in each case, as provided in clause (a)
or (b) below:
(a) The Company may elect to make payment of any
Unpaid Interest to the Persons in whose names the
Securities of such series (or their respective
Predecessor Securities) are registered at the close of
business on a date (herein called a "SPECIAL RECORD
DATE") for the payment of such Unpaid Interest, which
shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of
Unpaid Interest proposed to be paid on each Security of
such series and the date of the proposed payment, and
at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Unpaid
Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held
in trust for the benefit of the Persons entitled to
such Unpaid Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date
for the payment of such Unpaid Interest which shall be
not more than thirty (30) days and not less than ten
(10) days prior to the date of the proposed payment and
not less than twenty-five (25) days after the receipt
by the Trustee of the notice of the proposed payment.
The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense
of the Company, shall, not less than fifteen (15) days
prior to such Special Record Date, cause notice of the
proposed payment of such Unpaid Interest and the
Special Record Date therefor to be mailed, first-class
postage prepaid, to each Holder of Securities of such
series at the address of such Holder as it appears in
the Security Register. Notice of the proposed payment
of such Unpaid Interest and the Special Record Date
therefor having been so mailed, such Unpaid Interest
shall be paid to the Persons in whose names the
Securities of such series (or their respective
Predecessor Securities) are registered at the close of
business on such Special Record Date.
(b) The Company may make payment of any Unpaid
Interest on the Securities of any series in any other
lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this
clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section and
Section 305, each Security delivered under this Indenture upon
registration of transfer of or in exchange for or in lieu of any
other Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to the due presentment of any Security for
registration of transfer, the Company, the Trustee and any agent
of the Company or the Trustee may treat the Person in whose name
any Security is registered as the absolute owner of such Security
for the purpose of receiving payment of principal of and premium,
if any, and (subject to Section 307) interest, if any, on such
Security and for all other purposes whatsoever, whether or not
such Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 309. CANCELLATION BY SECURITY REGISTRAR.
All Securities presented for payment, redemption,
registration of transfer or exchange shall, if presented to any
Person other than the Security Registrar, be delivered to the
Security Registrar and, if not theretofore canceled, shall be
promptly canceled by the Security Registrar. The Company may at
any time deliver to the Security Registrar for cancellation any
Securities previously authenticated and delivered hereunder which
the Company may have acquired in any manner whatsoever or which
the Company shall not have issued and sold, and all Securities so
delivered shall be promptly canceled by the Security Registrar.
Unless by a Company Order the Company shall direct that canceled
Securities be returned to it, all canceled Securities held by the
Security Registrar shall be disposed of in accordance with the
Security Registrar's customary procedures, and the Security
Registrar shall promptly deliver a certificate of disposition to
the Trustee and the Company. The Security Registrar shall
promptly deliver evidence of any cancellation of a Security in
accordance with this Section 309 to the Trustee and the Company.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by
Section 301 for Securities of any series, or any Tranche thereof,
interest on the Securities of each series shall be computed on
the basis of a three hundred sixty (360) day year consisting of
twelve (12) thirty (30) day months and, with respect to any
period less than a full calendar month, on the basis of the
actual number of days elapsed during such period.
SECTION 311. PAYMENT TO BE IN PROPER CURRENCY.
In the case of the Securities of any series, or any
Tranche thereof, denominated in any currency other than Dollars
or in a composite currency (the "Required Currency"), except as
otherwise specified with respect to such Securities as
contemplated by Section 301, the obligation of the Company to
make any payment of the principal thereof, or the premium, if
any, or interest, if any, thereon, shall not be discharged or
satisfied by any tender by the Company, or recovery by the
Trustee, in any currency other than the Required Currency, except
to the extent that such tender or recovery shall result in the
Trustee timely holding the full amount of the Required Currency
then due and payable. If any such tender or recovery is in a
currency other than the Required Currency, the Trustee may take
such actions as it considers appropriate to exchange such
currency for the Required Currency. The costs and risks of any
such exchange, including without limitation the risks of delay
and exchange rate fluctuation, shall be borne by the Company, the
Company shall remain fully liable for any shortfall or
delinquency in the full amount of Required Currency then due and
payable, and in no circumstances shall the Trustee be liable
therefor except in the case of its negligence or willful
misconduct.
SECTION 312. DELIVERY OF CLASS A BONDS.
As contemplated in Section 303 and so long as the
Collateral Release Date shall not have occurred, prior to the
authentication and delivery by the Trustee of Securities of any
series, the Company shall deliver to the Trustee, in addition to
the documents with respect to the Securities of such series
specified in Section 303,
(a) Class A Bonds (i) maturing (or being subject
to mandatory redemption) on such dates and in such
principal amounts that, at each Stated Maturity of the
Securities of such series (or the Tranche thereof then
to be authenticated and delivered), there shall mature
(or be redeemed) Class A Bonds equal in principal
amount to the Securities of such series or Tranche then
to mature and (ii) containing, in addition to any
mandatory redemption provisions applicable to all Class
A Bonds Outstanding under the related Class A Mortgage
and any mandatory redemption provisions contained
therein pursuant to clause (i) above, mandatory
redemption provisions correlative to the provisions, if
any, for the mandatory redemption (pursuant to a
sinking fund or otherwise) of the Securities of such
series or Tranche or for the redemption thereof at the
option of the Holder; it being expressly understood
that such Class A Bonds (x) may, but need not, bear
interest, (y) may, but need not, contain provisions for
the redemption thereof at the option of the Company,
any such redemption to be made at a redemption price or
prices not less than the principal amount thereof and
(z) shall be held by the Trustee in accordance with
this Article.
(b) an Opinion of Counsel to the effect that:
(i) the form or forms of such Class A Bonds
have been duly authorized by the Company and have
been established in conformity with the provisions
of the related Class A Mortgage;
(ii) the terms of such Class A Bonds have
been duly authorized by the Company and have been
established in conformity with the provisions of
the related Class A Mortgage; and
(iii) (A) such Class A Bonds have been duly
authenticated and delivered by the trustee under
the related Class A Mortgage and (B) when the
Securities to be authenticated and delivered on
the basis of the delivery to the Trustee of such
Class A Bonds shall have been authenticated and
delivered by the Trustee in accordance with this
Indenture and issued and delivered by the Company
in the manner and subject to any conditions
specified in such Opinion of Counsel, such Class A
Bonds will constitute valid obligations of the
Company, entitled to the benefit of the Lien of
such Class A Mortgage equally and ratably with all
other Class A Bonds then Outstanding under such
Class A Mortgage;
provided, however, that, with respect to Securities of
a series subject to a Periodic Offering, the Trustee
shall be entitled to receive such Opinion of Counsel
only once at or prior to the time of the first
authentication and delivery of such Securities and
that, in lieu of the opinions described in clauses (ii)
and (iii) above, counsel may opine that:
(x) when the terms of such Class A Bonds
shall have been established in accordance with the
instrument or instruments creating the series of
which such Class A Bonds are a part, such terms
will have been duly authorized by the Company and
will have been established in conformity with the
provisions of the related Class A Mortgage; and/or
(y) (A) either (1) such Class A Bonds have
been duly authenticated and delivered by the
trustee under the related Class A Mortgage or (2)
when such Class A Bonds shall have been
authenticated and delivered by the trustee under
the related Class A Mortgage in accordance with
the instrument or instruments creating the series
of which such Class A Bonds are a part, such Class
A Bonds will have been duly authenticated and
delivered under such Class A Mortgage and (B) when
such Class A Bonds shall have been issued and
delivered by the Company in the manner and subject
to any conditions specified in such Opinion of
Counsel, and when the Securities to be
authenticated and delivered on the basis of the
delivery to the Trustee of such Class A Bonds
shall have been authenticated and delivered by the
Trustee in accordance with this Indenture and
issued and delivered by the Company in the manner
and subject to any conditions specified in such
Opinion of Counsel, such Class A Bonds will
constitute valid obligations of the Company,
entitled to the benefit of the Lien of such Class
A Mortgage equally and ratably with all other
Class A Bonds then Outstanding under such Class A
Mortgage; and
(c) an Expert's Certificate as to the fair value
of such Class A Bonds, except as otherwise provided in
Section 319(d).
Notwithstanding the foregoing, the Trustee shall not be
entitled to receive Class A Bonds in connection with the
authentication and delivery of Securities of any series or
Tranche upon the surrender in exchange therefor of Outstanding
Securities of another series or Tranche, of like tenor and
aggregate principal amount, if and to the extent that the Trustee
shall retain the Class A Bonds delivered to it in connection with
the authentication and delivery of the Securities being
surrendered, as contemplated in Section 315.
SECTION 313. REGISTRATION AND OWNERSHIP OF CLASS A BONDS.
Class A Bonds delivered to the Trustee pursuant to this
Article shall be registered in the name of the Trustee or its
nominee and shall be owned and held by the Trustee, subject to
the provisions of this Indenture, for the benefit of the Holders
of all Securities from time to time Outstanding, and the Company
shall have no interest therein. The Trustee shall be entitled to
exercise all rights of securityholders under each Class A
Mortgage either in its discretion or as otherwise provided in
this Article or in Article Seven.
SECTION 314. PAYMENTS ON CLASS A BONDS.
(a) Any payment by the Company of principal of or
premium or interest on any Class A Bonds delivered to and held by
the Trustee pursuant to this Article shall be applied by the
Trustee to the payment of any principal, premium or interest, as
the case may be, in respect of the Securities which is then due,
and, to the extent of such application, the obligation of the
Company hereunder to make such payment in respect of the
Securities shall be deemed to have been satisfied and discharged.
If, at the time of any such payment of principal of
Class A Bonds delivered to and held by the Trustee pursuant to
this Article, there shall be no principal then due in respect of
the Securities, such payment in respect of such Class A Bonds
shall be held by the Trustee, in trust, and shall be applied to
the payment of the principal of an equal principal amount of
Securities at Maturity.
If, at the time of any such payment of premium or
interest on Class A Bonds delivered to and held by the Trustee
pursuant to this Article, there shall be no premium or interest,
as the case may be, then due in respect of the Securities, such
payment in respect of such Class A Bonds shall be remitted to the
Company upon receipt by the Trustee of a Company Order requesting
the same, together with an Officer's Certificate stating that no
Event of Default has occurred and is continuing; provided,
however, that, if an Event of Default shall have occurred and be
continuing, such proceeds shall be held by the Trustee, in trust,
until such Event of Default shall have been cured or waived.
(b) Any payment by the Company hereunder of principal
of or premium or interest on Securities which shall have been
authenticated and delivered upon the basis of the delivery to the
Trustee of Class A Bonds (other than by the application of the
proceeds of a payment in respect of such Class A Bonds) shall, to
the extent thereof, be deemed, for all purposes of this
Indenture, to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal, premium or
interest, as the case may be, in respect of such Class A Bonds
which is then due.
(c) The Trustee hereby waives notice of any redemption
of Class A Bonds delivered to it pursuant to this Article.
SECTION 315. SURRENDER OF CLASS A BONDS.
At the time any Securities which shall have been
authenticated and delivered on the basis of the delivery to the
Trustee of Class A Bonds cease to be Outstanding (other than as a
result of the application of the proceeds of the payment or
redemption of such Class A Bonds), the Trustee shall surrender
to, or upon the order of, the Company an equal principal amount
of such Class A Bonds upon receipt by the Trustee of:
(a) a Company Order requesting the surrender of
such Class A Bonds; and
(b) an Expert's Certificate as to the fair value
of such Class A Bonds, except as otherwise provided in
Section 319(d).
Notwithstanding the foregoing, in the event that
Outstanding Securities of any series or Tranche are surrendered
in exchange for Securities of another series or Tranche, of like
tenor and aggregate principal amount, the Trustee shall retain
the Class A Bonds delivered in connection with the authentication
and delivery of the Securities being surrendered unless the
Company, at its election, shall tender new Class A Bonds in
substitution therefor.
SECTION 316. NO TRANSFER OF CLASS A BONDS.
Anything in this Indenture to the contrary
notwithstanding, the Trustee shall not sell, assign or otherwise
transfer any Class A Bonds delivered to and held by it pursuant
to this Article except to a successor trustee under this
Indenture and except as provided in Section 315. The Company may
take such actions as it shall deem necessary, desirable or
appropriate to effect compliance with such restrictions on
transfer, including the placing of a legend on each such Class A
Bond and the issuance of stop-transfer instructions to the
trustee under the related Class A Mortgage or any other transfer
agent thereunder.
SECTION 317. VOTING OF CLASS A BONDS.
The Trustee shall, as the holder of Class A Bonds
delivered to and held by it pursuant to Sections 312 and 313,
attend such meeting or meetings of bondholders under each Class A
Mortgage or, at its option, deliver its proxy in connection
therewith, as relate to matters with respect to which it, as such
holder, is entitled to vote or consent. The Trustee, as such
holder of Class A Bonds Outstanding under any Class A Mortgage,
shall be deemed to have voted in favor of, and/or to have
consented to, such amendments to such Class A Mortgage, if any,
as shall be set forth in the instrument or instruments
establishing such Class A Bonds. As to all other matters arising
under such Class A Mortgage, so long as no Event of Default
hereunder shall have occurred and be continuing, either at any
such meeting or meetings, or otherwise when the consent of the
holders of the Class A Bonds Outstanding under such Class A
Mortgage is sought without a meeting, the Trustee shall vote as
holder of Class A Bonds delivered to and held by it pursuant to
this Article which were delivered under such Class A Mortgage, or
shall consent with respect thereto, proportionately with the vote
or consent of the holders of all other Class A Bonds Outstanding
under such Class A Mortgage the holders of which are eligible to
vote or consent, as indicated in a Class A Bondholder's
Certificate delivered to the Trustee; provided, however, that the
Trustee shall not so vote in favor of, or so consent to, any
amendment or modification of a Class A Mortgage which, if it were
an amendment or modification of this Indenture, would require the
consent of Holders, without the prior consent, obtained in the
manner prescribed in Section 1102, of Holders of Securities which
would be required under said Section 1102 for such an amendment
or modification of this Indenture.
For purposes of this Section, "CLASS A BONDHOLDER'S
CERTIFICATE" means a certificate signed by the temporary
chairman, the temporary secretary, the permanent chairman, the
permanent secretary, or an inspector of votes at any meeting or
meetings of bondholders under a Class A Mortgage, or by the
trustee under such Class A Mortgage in the case of consents of
such bondholders which are sought without a meeting, which states
what the signer thereof reasonably believes will be the
proportionate votes or consents of the holders of all Class A
Bonds (other than the Class A Bonds delivered to and held by the
Trustee pursuant to this Article) outstanding under such Class A
Mortgage and counted for the purposes of determining whether such
bondholders have approved or consented to the matter put before
them.
SECTION 318. DISCHARGE OF CLASS A MORTGAGES.
The Trustee shall surrender for cancellation to the
trustee under any Class A Mortgage all Class A Bonds delivered to
and then held by it pursuant to this Article which were delivered
under such Class A Mortgage upon receipt by the Trustee of:
(a) a Company Order requesting such surrender for
cancellation of such Class A Bonds;
(b) an Officer's Certificate to the effect that
no Class A Bonds are Outstanding under such Class A
Mortgage other than Class A Bonds delivered to and held
by the Trustee pursuant to this Article and that
promptly upon such surrender such Class A Mortgage will
be satisfied and discharged pursuant to the terms
thereof;
(c) an Expert's Certificate as to the fair value
of such Class A Bonds to be so surrendered, except as
otherwise provided in Section 319(d); and
(d) if, at the time of such surrender, any Class
A Bonds shall be Outstanding under another Class A
Mortgage,
(i) Class A Bonds authenticated and
delivered under such other Class A Mortgage in the
same aggregate principal amount or amounts,
bearing interest at the same rate or rates and
having the same Stated Maturity or Maturities as
the Class A Bonds to be surrendered;
(ii) an Expert's Certificate as to the fair
value of such Class A Bonds so delivered, except
as otherwise provided in Section 319(d); and
(iii) an Opinion of Counsel
(A) to the effect that, upon
satisfaction and discharge of the Class A
Mortgage under which the Class A Bonds to be
so surrendered were authenticated and
delivered, the Lien of such other Class A
Mortgage on the property formerly subject to
the Lien of such Class A Mortgage to be
satisfied and discharged will be subject to
no Lien except the Lien of such other Class A
Mortgage and other Liens of the character
permitted to exist or to be thereafter
created under such Class A Mortgage to be
satisfied and discharged; and
(B) to the effect set forth in clause
(b) of Section 312 with respect to such Class
A Bonds so authenticated and delivered under
such other Class A Mortgage and delivered to
the Trustee; or
(e) if, at the time of such surrender, there is
no other Class A Mortgage in effect,
(i) an Officer's Certificate to the effect
that upon such satisfaction and discharge, the
Company will be in compliance with the covenant
contained in Section 508; and
(ii) an Opinion of Counsel to the effect
that, upon satisfaction and discharge of such
Class A Mortgage, the property formerly subject to
the Lien of such Class A Mortgage will be subject
to no Lien which secures Secured Debt other than
Permitted Secured Debt.
SECTION 319. EXPERTS' CERTIFICATES.
(a) Each Expert's Certificate as to the fair value to
the Company of Class A Bonds delivered to the Trustee pursuant to
Section 312 or 318, or as to the fair value of Class A Bonds to
be surrendered pursuant to Section 315 or 318, shall be made by
an Independent Expert if the fair value to the Company of such
Class A Bonds so delivered and of all other Class A Bonds so
delivered, or the fair value of the Class A Bonds to be so
surrendered and of all other Class A Bonds so surrendered, as the
case may be, since the commencement of the then current calendar
year, as set forth in the certificates required by this
Indenture, is ten percentum (10%) or more of the aggregate
principal amount of the Securities at the time Outstanding; but
such Expert's Certificate shall not be required to be made by an
Independent Expert in the case of any delivery or surrender of
Class A Bonds if the fair value to the Company thereof or the
fair value thereof, as the case may be, and as set forth in the
certificates required by this Indenture, is less than Twenty-five
Thousand Dollars ($25,000) or less than one percentum (1%) of the
aggregate principal amount of the Securities at the time
Outstanding.
(b) Each Expert's Certificate with respect to the fair
value of Class A Bonds being surrendered shall state that, in the
opinion of the signer, such surrender will not impair the
security under this Indenture in contravention of the provisions
hereof; it being understood, however, that no surrender of Class
A Bonds effected in accordance with the provisions, and in
compliance with the conditions, set forth in this Article and in
Sections 102 and 103 shall be deemed to impair the security of
this Indenture in contravention of any provision hereof.
(c) In assessing the fair value to the Company or the
fair value, as the case may be, of any Class A Bond, an Expert
may consider, among other things, (i) the principal amount and
remaining term to Stated Maturity of, the interest rate, if any,
on and the redemption provisions contained in such Class A Bond,
(ii) the creditworthiness of the Company, including the effect,
if any, of the prospective delivery or surrender of such Class A
Bonds on the ratings assigned to the Securities by nationally
recognized statistical rating organizations, (iii) prevailing
economic and market conditions, (iv) the restrictions on the
transfer of such Class A Bond contained in Section 316, (v)
whether or not, at the time of such assessment, the obligations
of the Company in respect of such Class A Bond shall, under the
provisions of the related Class A Mortgage or under the
provisions of this Indenture, or both, be deemed to have been
satisfied and discharged, (vi) the effect, if any, of the
prospective delivery or surrender of such Class A Bond on the
nature and extent of the security and/or protection available to
the Holders under this Indenture and (vii) any other relevant
factors.
(d) Anything in this Indenture to the contrary
notwithstanding, the Company shall not be required to deliver any
Expert's Certificate pursuant to Section 312, 315 or 318 if, in
any particular case, the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that the Expert's
Certificate otherwise required to be delivered shall not, in such
case, be required by the Trust Indenture Act.
ARTICLE FOUR
REDEMPTION OF SECURITIES
SECTION 401. APPLICABILITY OF ARTICLE.
Securities of any series, or any Tranche thereof, which
are redeemable before their Stated Maturity shall be redeemable
in accordance with their terms and (except as otherwise specified
as contemplated by Section 301 for Securities of such series or
Tranche) in accordance with this Article.
SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities
shall be evidenced by a Board Resolution or an Officer's
Certificate. The Company shall, at least forty-five (45) days
prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the
Trustee in writing of such Redemption Date and of the principal
amount of such Securities to be redeemed. In the case of any
redemption of Securities (a) prior to the expiration of any
restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture or (b) pursuant to an
election of the Company which is subject to a condition specified
in the terms of such Securities, the Company shall furnish the
Trustee with an Officer's Certificate evidencing compliance with
such restriction or condition.
SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series, or any
Tranche thereof, are to be redeemed, the particular Securities to
be redeemed shall be selected by the Security Registrar from the
Outstanding Securities of such series or Tranche not previously
called for redemption, by such method as shall be provided for
any particular series or Tranche, or, in the absence of any such
provision, by such method of random selection as the Security
Registrar shall deem fair and appropriate and which may, in any
case, provide for the selection for redemption of portions (in
any authorized denomination for Securities of such series or
Tranche) of the principal amount of Securities of such series or
Tranche having a denomination larger than the minimum authorized
denomination for Securities of such series or Tranche; provided,
however, that if, as indicated in an Officer's Certificate, the
Company shall have offered to purchase all or any principal
amount of the Securities then Outstanding of any series, or any
Tranche thereof, and less than all of such Securities as to which
such offer was made shall have been tendered to the Company for
such purchase, the Security Registrar, if so directed by Company
Order, shall select for redemption all or any principal amount of
such Securities which have not been so tendered.
The Security Registrar shall promptly notify the
Company and the Trustee in writing of the Securities selected for
redemption and, in the case of any Securities selected to be
redeemed in part, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed
or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.
SECTION 404. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner
provided in Section 106 to the Holders of the Securities to be
redeemed not less than thirty (30) nor more than sixty (60) days
prior to the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Securities of any series
or Tranche are to be redeemed, the identification of
the particular Securities to be redeemed and the
portion of the principal amount of any Security to be
redeemed in part,
(d) that on the Redemption Date the Redemption
Price, together with accrued interest, if any, to the
Redemption Date, will become due and payable upon each
such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said
date,
(e) the place or places where such Securities are
to be surrendered for payment of the Redemption Price
and accrued interest, if any, unless it shall have been
specified as contemplated by Section 301 with respect
to such Securities that such surrender shall not be
required,
(f) that the redemption is for a sinking or other
fund, if such is the case, and
(g) such other matters as the Company shall deem
desirable or appropriate.
With respect to any notice of redemption of Securities
at the election of the Company, unless, upon the giving of such
notice, such Securities shall be deemed to have been paid in
accordance with Section 601, such notice may state that such
redemption shall be conditional upon the receipt by the Paying
Agent or Agents for such Securities, on or prior to the date
fixed for such redemption, of money sufficient to pay the
principal of and premium, if any, and interest, if any, on such
Securities and that if such money shall not have been so received
such notice shall be of no force or effect and the Company shall
not be required to redeem such Securities. In the event that
such notice of redemption contains such a condition and such
money is not so received, the redemption shall not be made and
within a reasonable time thereafter notice shall be given, in the
manner in which the notice of redemption was given, that such
money was not so received and such redemption was not required to
be made, and the Paying Agent or Agents for the Securities
otherwise to have been redeemed shall promptly return to the
Holders thereof any of such Securities which had been surrendered
for payment upon such redemption.
Notice of redemption of Securities to be redeemed at
the election of the Company, and any notice of non-satisfaction
of a condition for redemption as aforesaid, shall be given by the
Company or, upon Company Request, by the Security Registrar in
the name and at the expense of the Company. Notice of mandatory
redemption of Securities shall be given by the Security Registrar
in the name and at the expense of the Company.
SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid,
and the conditions, if any, set forth in such notice having been
satisfied, the Securities or portions thereof so to be redeemed
shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date
(unless, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price
and accrued interest, if any) such Securities or portions
thereof, if interest-bearing, shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with
such notice, such Security or portion thereof shall be paid by
the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided, however, that
no such surrender shall be a condition to such payment if so
specified as contemplated by Section 301 with respect to such
Security; and provided, further, that, except as otherwise
specified as contemplated by Section 301 with respect to such
Security, any installment of interest on any Security the Stated
Maturity of which installment is on or prior to the Redemption
Date shall be payable to the Holder of such Security, or one or
more Predecessor Securities, registered as such at the close of
business on the related Regular Record Date according to the
terms of such Security and subject to the provisions of Section
307.
SECTION 406. SECURITIES REDEEMED IN PART.
Upon the surrender of any Security which is to be
redeemed only in part at a Place of Payment therefor (with, if
the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Company or the Trustee, as the case may be, duly executed by, the
Holder thereof or his attorney duly authorized in writing), the
Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security, without service charge, a
new Security or Securities of the same series and Tranche, of any
authorized denomination requested by such Holder and of like
tenor and in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so
surrendered.
ARTICLE FIVE
COVENANTS
SECTION 501. PAYMENT OF SECURITIES.
The Company shall pay the principal of and premium, if
any, and interest, if any, on the Securities of each series in
accordance with the terms of such Securities and this Indenture.
SECTION 502. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in each Place of Payment for
the Securities of each series, or any Tranche thereof, an office
or agency where payment of such Securities shall be made, where
the registration of transfer or exchange of such Securities may
be effected and where notices and demands to or upon the Company
in respect of such Securities and this Indenture may be served.
The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of each such office
or agency and prompt notice to the Holders of any such change in
the manner specified in Section 106. If at any time the Company
shall fail to maintain any such required office or agency in
respect of Securities of any series, or any Tranche thereof, or
shall fail to furnish the Trustee with the address thereof,
payment of such Securities shall be made, registration of
transfer or exchange thereof may be effected and notices and
demands in respect thereof may be served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the
Trustee as its agent for all such purposes in any such event.
The Company may also from time to time designate one or
more other offices or agencies with respect to the Securities of
one or more series, or any Tranche thereof, for any or all of the
foregoing purposes and may from time to time rescind such
designations; provided, however, that, unless otherwise specified
as contemplated by Section 301 with respect to the Securities of
such series or Tranche, no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain
an office or agency for such purposes in each Place of Payment
for such Securities in accordance with the requirements set forth
above. The Company shall give prompt written notice to the
Trustee, and prompt notice to the Holders in the manner specified
in Section 106, of any such designation or rescission and of any
change in the location of any such other office or agency.
Anything herein to the contrary notwithstanding, any
office or agency required by this Section may be maintained at an
office of the Company, in which event the Company shall perform
all functions to be performed at such office or agency.
SECTION 503. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying
Agent with respect to the Securities of any series, or any
Tranche thereof, it shall, on or before each due date of the
principal of and premium, if any, and interest, if any, on any of
such Securities, segregate and hold in trust for the benefit of
the Persons entitled thereto a sum sufficient to pay the
principal and premium or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided. The Company shall promptly notify the Trustee of any
failure by the Company (or any other obligor on such Securities)
to make any payment of principal of or premium, if any, or
interest, if any, on such Securities.
Whenever the Company shall have one or more Paying
Agents for the Securities of any series, or any Tranche thereof,
it shall, on or before each due date of the principal of and
premium, if any, and interest, if any, on such Securities,
deposit with such Paying Agents sums sufficient (without
duplication) to pay the principal and premium or interest so
becoming due, such sums to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company shall
promptly notify the Trustee of any failure by it so to act.
The Company shall cause each Paying Agent for the
Securities of any series, or any Tranche thereof, other than the
Company or the Trustee, to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section, that such
Paying Agent shall:
(a) hold all sums held by it for the payment of
the principal of and premium, if any, or interest, if
any, on such Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein
provided;
(b) give the Trustee notice of any failure by the
Company (or any other obligor upon such Securities) to
make any payment of principal of or premium, if any, or
interest, if any, on such Securities; and
(c) at any time during the continuance of any
such failure, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in trust
by such Paying Agent and furnish to the Trustee such
information as it possesses regarding the names and
addresses of the Persons entitled to such sums.
The Company may at any time pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held
by the Trustee upon the same trusts as those upon which such sums
were held by the Company or such Paying Agent and, if so stated
in a Company Order delivered to the Trustee, in accordance with
the provisions of Article Six; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of and premium, if any, or interest, if any, on any
Security and remaining unclaimed for two years after such
principal and premium, if any, or interest, if any, has become
due and payable shall be paid to the Company on Company Request,
or, if then held by the Company, shall be discharged from such
trust; and, upon such payment or discharge, the Holder of such
Security shall, as an unsecured general creditor and not as the
Holder of an Outstanding Security, look only to the Company for
payment of the amount so due and payable and remaining unpaid,
and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make
any such payment to the Company, may at the expense of the
Company cause to be mailed, on one occasion only, notice to such
Holder 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 mailing, any unclaimed balance of such
money then remaining will be paid to the Company.
SECTION 504. CORPORATE EXISTENCE.
Subject to the rights of the Company under Article Ten,
the Company shall do or cause to be done all things necessary to
preserve and keep its corporate existence in full force and
effect.
SECTION 505. MAINTENANCE OF PROPERTIES.
The Company shall cause (or, with respect to property
owned in common with others, make reasonable effort to cause) all
its properties used or useful in the conduct of its businesses,
considered as a whole, to be maintained and kept in good
condition, repair and working order and shall cause (or, with
respect to property owned in common with others, make reasonable
effort to cause) to be made such repairs, renewals, replacements,
betterments and improvements thereof, as, in the judgment of the
Company, may be necessary in order that the operation of such
properties, considered as a whole, may be conducted in accordance
with common industry practice; provided, however, that nothing in
this Section shall prevent the Company from discontinuing, or
causing the discontinuance of, the operation and maintenance of
any of its properties; and provided, further, that nothing in
this Section shall prevent the Company from selling, transferring
or otherwise disposing of, or causing the sale, transfer or other
disposition of, any of its properties.
SECTION 506. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to
comply with any term, provision or condition set forth in
(a) any covenant or restriction specified with
respect to the Securities of any one or more series, or
any Tranche or Tranches thereof, as contemplated by
Section 301 if before the time for such compliance the
Holders of a majority in aggregate principal amount of
the Outstanding Securities of all series and Tranches
with respect to which compliance with such covenant or
restriction is to be omitted, considered as one class,
shall, by Act of such Holders, either waive such
compliance in such instance or generally waive
compliance with such term, provision or condition;
provided, however, that no such waiver shall be
effective as to any matters contemplated in clause (a),
(b) or (c) in Section 1102 without consent of the
Holders specified in such Section; and
(b) Section 504 or 505 or Article Ten if before
the time for such compliance the Holders of a majority
in principal amount of Securities Outstanding under
this Indenture shall, by Act of such Holders, either
waive such compliance in such instance or generally
waive compliance with such term, provision or
condition;
but, in either case, no such waiver shall extend to or affect
such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective,
the obligations of the Company and the duties of the Trustee in
respect of any such term, provision or condition shall remain in
full force and effect.
SECTION 507. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
Not later than December 1 in each year, commencing
December 1, 1998, the Company shall deliver to the Trustee an
Officer's Certificate which need not comply with Section 102,
executed by the principal executive officer, the principal
financial officer or the principal accounting officer of the
Company, as to such officer's knowledge of the Company's
compliance with all conditions and covenants under this
Indenture, such compliance to be determined without regard to any
period of grace or requirement of notice under this Indenture.
SECTION 508. LIMITATION ON SECURED DEBT.
(a) On and after the Collateral Release Date and so
long as any Securities shall remain Outstanding, the Company
shall not create, issue, incur or assume any Secured Debt other
than Permitted Secured Debt without the consent of the Holders of
a majority in principal amount of the Outstanding Securities of
all series and Tranches, considered as one class.
(b) the provisions of clause (a) above shall not
prohibit the creation, issuance, incurrence or assumption of any
Secured Debt if either
(i) the Company shall make effective provision
whereby all Securities then Outstanding shall be
secured equally and ratably with such Secured Debt; or
(ii) the Company shall deliver to the Trustee
bonds, notes or other evidences of indebtedness secured
by the Lien which secures such Secured Debt
(hereinafter called "Secured Obligations") (A) in an
aggregate principal amount equal to the aggregate
principal amount of the Securities then Outstanding,
(B) maturing (or being subject to mandatory redemption)
on such dates and in such principal amounts that, at
each Stated Maturity of the Outstanding Securities,
there shall mature (or be redeemed) Secured Obligations
equal in principal amount to the Securities then to
mature and (C) containing, in addition to any mandatory
redemption provisions applicable to all Secured
Obligations outstanding under such Lien and any
mandatory redemption provisions contained therein
pursuant to clause (B) above, mandatory redemption
provisions correlative to the provisions, if any, for
the mandatory redemption (pursuant to a sinking fund or
otherwise) of the Securities or for the redemption
thereof at the option of the Holder, as well as a
provision for mandatory redemption upon an acceleration
of the maturity of all Outstanding Securities
following an Event of Default (such mandatory
redemption to be rescinded upon the rescission of such
acceleration); it being expressly understood that such
Secured Obligations (X) may, but need not, bear
interest, (Y) may, but need not, contain provisions for
the redemption thereof at the option of the issuer, any
such redemption to be made at a redemption price or
prices not less than the principal amount thereof and
(Z) shall be held by the Trustee for the benefit of the
Holders of all Securities from time to time
Outstanding subject to such terms and conditions
relating to surrender to the Company, transfer
restrictions, voting, application of payments of
principal and interest and other matters as shall be
set forth in an indenture supplemental hereto
specifically providing for the delivery to the Trustee
of such Secured Obligations.
(c) If the Company shall elect either of the
alternatives described in clause (b) above, the Company shall
deliver to the Trustee:
(i) an indenture supplemental to the Indenture
(A) together with appropriate inter-creditor
arrangements, whereby all Securities then Outstanding
shall be secured by the Lien referred to in clause (b)
above equally and ratably with all other indebtedness
secured by such Lien or (B) providing for the delivery
to the Trustee of Secured Obligations;
(ii) an Officer's Certificate (A) stating that, to
the knowledge of the signer, (1) no Event of Default
has occurred and is continuing and (2) no event has
occurred and is continuing which entitles the secured
party under such Lien to accelerate the maturity of the
indebtedness outstanding thereunder and (B) stating the
aggregate principal amount of indebtedness issuable,
and then proposed to be issued, under and secured by
such Lien;
(iii) an Opinion of Counsel (A) if the Securities
then Outstanding are to be secured by such Lien, to the
effect that all such Securities then Outstanding are
entitled to the benefit of such Lien equally and
ratably with all other indebtedness outstanding under
such Lien or (B) if Secured Obligations are to be
delivered to the Trustee, to the effect that such
Secured Obligations have been duly issued under such
Lien and constitute valid obligations, entitled to the
benefit of such Lien equally and ratably with all other
indebtedness then outstanding under such Lien.
(d) For all purposes of this Indenture, except as
otherwise expressly provided or unless the context otherwise
requires:
"CONSOLIDATED TANGIBLE NET WORTH" means (i) common
stock equity minus (ii) the aggregate amount of all
intangible assets (other than intangible assets the cost of
which is expected by the Company to be recovered through
revenues from the sale of electrical capacity and/or energy
or the provision of related services), in each case as shown
on the consolidated balance sheet of the Company and its
consolidated subsidiaries, all as determined in accordance
with generally accepted accounting principles as applied to
entities conducting the same businesses as the Company.
"DEBT", with respect to any Person, means (i)
indebtedness of such Person for borrowed money evidenced by
a bond, debenture, note or other written instrument or
agreement by which such Person is obligated to repay such
borrowed money and (ii) any guaranty by such Person of any
such indebtedness of another Person. "Debt" does not
include, among other things, (x) indebtedness of such Person
under any installment sale or conditional sale agreement or
any other agreement relating to indebtedness for the
deferred purchase price of property or services, (y)
obligations of such Person under any lease agreement
(including any lease intended as security), whether or not
such obligations are required to be capitalized on the
balance sheet of such Person under generally accepted
accounting principles, or (z) liabilities secured by any
Lien on any property owned by such Person if and to the
extent that such Person has not assumed or otherwise become
liable for the payment thereof.
"EXCEPTED PROPERTY" means:
(i) all cash on hand or in banks or other financial
institutions, deposit accounts, shares of stock, interests
in general or limited partnerships, bonds, notes, other
evidences of indebtedness and other securities, of
whatsoever kind and nature, not hereafter paid or delivered
to, deposited with or held by the Trustee hereunder or
required so to be;
(ii) all contracts, leases, operating agreements and
other agreements of whatsoever kind and nature; all contract
rights, bills, notes and other instruments and chattel paper
(except to the extent that any of the same constitute
securities, in which case they are separately excepted under
clause (i) above); all revenues, income and earnings, all
accounts, accounts receivable and unbilled revenues, and all
rents, tolls, issues, products and profits, claims, credits,
demands and judgments; all governmental and other licenses,
permits, franchises, consents and allowances; and all
patents, patent licenses and other patent rights, patent
applications, trade names, trademarks, copyrights, claims,
credits, choses in action and other intangible property and
general intangibles including, but not limited to, computer
software;
(iii) all automobiles, buses, trucks, truck cranes,
tractors, trailers and similar vehicles and movable
equipment; all rolling stock, rail cars and other railroad
equipment; all vessels, boats, barges and other marine
equipment; all airplanes, helicopters, aircraft engines and
other flight equipment; all parts, accessories and supplies
used in connection with any of the foregoing; and all
personal property of such character that the perfection of a
security interest therein or other Lien thereon is not
governed by the Uniform Commercial Code as in effect in the
jurisdiction in which such property is located;
(iv) all goods, stock in trade, wares, merchandise and
inventory held for the purpose of sale or lease in the
ordinary course of business; all materials, supplies,
inventory and other items of personal property which are
consumable (otherwise than by ordinary wear and tear) in
their use in the operation of any property of the Company;
all fuel, including nuclear fuel, whether or not any such
fuel is in a form consumable in the operation of any
property of the Company, including separate components of
any fuel in the forms in which such components exist at any
time before, during or after the period of the use thereof
as fuel; all hand and other portable tools and equipment;
all furniture and furnishings; and computers and data
processing, data storage, data transmission,
telecommunications and other facilities, equipment and
apparatus, which, in any case, are used primarily for
administrative or clerical purposes or are otherwise not
necessary for the operation or maintenance of the
facilities, machinery, equipment or fixtures of the Company
for (A) the generation, transmission or distribution of
electric energy, (B) the transmission, storage or
distribution of gas or (C) the appropriation, storage,
transmission or distribution of water;
(v) all coal, ore, gas, oil and other minerals and all
timber, and all rights and interests in any of the
foregoing, whether or not such minerals or timber shall have
been mined or extracted or otherwise separated from the
land; and all electric energy, gas (natural or artificial),
steam, water and other products generated, produced,
manufactured, purchased or otherwise acquired by the
Company;
(vi) all real property, leaseholds, gas rights, wells,
gathering, tap or other pipe lines, or facilities, equipment
or apparatus, in any case used or to be used primarily for
the production or gathering of natural gas; and
(vii) all property which is the subject of a lease
agreement designating the Company as lessee and all right,
title and interest of the Company in and to such property
and in, to and under such lease agreement, whether or not
such lease agreement is intended as security.
"LIEN" means any mortgage, deed of trust, pledge,
security interest, conditional sale or other title retention
agreement or any lease in the nature thereof.
"PERMITTED SECURED DEBT" means, as of any particular
time, any of the following:
(i) Secured Debt which matures less than one year from
the date of the issuance or incurrence thereof and is not
extendible at the option of the issuer; and any refundings,
refinancings and/or replacements of any such Secured Debt by
or with similar Secured Debt;
(ii) Secured Debt secured by Purchase Money Liens or
any other Liens existing or placed upon property at the time
of, or within one hundred eighty (180) days after, the
acquisition thereof by the Company, and any refundings,
refinancings and/or replacements of any such Secured Debt;
provided, however, that no such Purchase Money Lien or other
Lien shall extend to or cover any property of the Company
other than (A) the property so acquired and improvements,
extensions and additions to such property and renewals,
replacements and substitutions of or for such property or
any part or parts thereof and (B) with respect to Purchase
Money Liens, other property subsequently acquired by the
Company;
(iii) Secured Debt relating to governmental
obligations the interest on which is not included in gross
income for purposes of federal income taxation pursuant to
Section 103 of the Internal Revenue Code of 1986, as amended
(or any successor provision of law), for the purpose of
financing or refinancing, in whole or in part, costs of
acquisition or construction of property to be used by the
Company, to the extent that the Lien which secures such
Secured Debt is required either by applicable law or by the
issuer of such governmental obligations or is otherwise
necessary in order to establish or maintain such exclusion
from gross income; and any refundings, refinancings and/or
replacements of any such Secured Debt by or with similar
Secured Debt;
(iv) Secured Debt (A) which is related to the
construction or acquisition of property not previously owned
by the Company or (B) which is related to the financing of a
project involving the development or expansion of property
of the Company and (C) in either case, the obligee in
respect of which has no recourse to the Company or any
property of the Company other than the property constructed
or acquired with the proceeds of such transaction or the
project financed with the proceeds of such transaction (or
the proceeds of such property or such project); and any
refundings, refinancings and/or replacements of any such
Secured Debt by or with Secured Debt described in clause (C)
above;
(v) Secured Debt permitted under clause (b) above; and
(vi) in addition to the Permitted Secured Debt
described in clauses (i) through (v) above, Secured Debt not
otherwise permitted in this clause (c) in an aggregate
principal amount not exceeding 10% of the Consolidated
Tangible Net Worth of the Company and its consolidated
subsidiaries, as shown on the latest balance sheet of the
Company and its consolidated subsidiaries, audited by
independent certified public accountants, dated prior to the
date of the creation, issuance, incurrence or assumption of
such Secured Debt.
"PURCHASE MONEY LIEN" means, with respect to any
property being acquired by the Company, a Lien on such
property which
(i) is taken or retained by the transferor of such
property to secure all or part of the purchase price
thereof;
(ii) is granted to one or more Persons other than the
transferor which, by making advances or incurring an
obligation, give value to enable the grantor of such Lien to
acquire rights in or the use of such property;
(iii) is held by a trustee or agent for the benefit of
one or more Persons described in clause (i) or (ii) above,
provided that such Lien may be held, in addition, for the
benefit of one or more other Persons which shall have
theretofore given, or may thereafter give, value to or for
the benefit or account of the grantor of such Lien for one
or more other purposes; or
(iv) otherwise constitutes a purchase money mortgage or
a purchase money security interest under applicable law;
and, without limiting the generality of the foregoing, for
purposes of this Indenture, the term Purchase Money Lien
shall be deemed to include any Lien described above whether
or not such Lien (A) shall permit the issuance or other
incurrence of additional indebtedness secured by such Lien
on such property, (B) shall permit the subjection to such
Lien of additional property and the issuance or other
incurrence of additional indebtedness on the basis thereof
and/or (C) shall have been granted prior to the acquisition
of such property, shall attach to or otherwise cover
property other than the property being acquired and/or shall
secure obligations issued prior and/or subsequent to the
issuance of the obligations delivered in connection with
such acquisition.
"SECURED DEBT", with respect to any Person, means Debt
created, issued, incurred or assumed by such Person which is
secured by a Lien upon any property (other than Excepted
Property) of the Company, real, personal or mixed, of
whatever kind or nature and wherever located, whether owned
at the date of the initial authentication and delivery of
Securities hereunder, or thereafter acquired.
ARTICLE SIX
SATISFACTION AND DISCHARGE
SECTION 601. SATISFACTION AND DISCHARGE OF SECURITIES.
Any Security or Securities, or any portion of the
principal amount thereof, shall be deemed to have been paid for
all purposes of this Indenture, and the entire indebtedness of
the Company in respect thereof shall be satisfied and discharged,
if there shall have been irrevocably deposited with the Trustee
or any Paying Agent (other than the Company), in trust:
(a) money in an amount which shall be sufficient,
or
(b) in the case of a deposit made prior to the
Maturity of such Securities or portions thereof,
Eligible Obligations, which shall not contain
provisions permitting the redemption or other
prepayment thereof at the option of the issuer thereof,
the principal of and the interest on which when due,
without any regard to reinvestment thereof, will
provide moneys which, together with the money, if any,
deposited with or held by the Trustee or such Paying
Agent, shall be sufficient, or
(c) a combination of (a) or (b) which shall be
sufficient,
to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on such Securities or
portions thereof; provided, however, that in the case of the
provision for payment or redemption of less than all the
Securities of any series or Tranche, such Securities or portions
thereof shall have been selected by the Security Registrar as
provided herein and, in the case of a redemption, the notice
requisite to the validity of such redemption shall have been
given or irrevocable authority shall have been given by the
Company to the Trustee to give such notice, under arrangements
satisfactory to the Trustee; and provided, further, that the
Company shall have delivered to the Trustee and such Paying
Agent:
(x) if such deposit shall have been made prior to
the Maturity of such Securities, a Company Order
stating that the money and Eligible Obligations
deposited in accordance with this Section shall be held
in trust, as provided in Section 603;
(y) if Eligible Obligations shall have been
deposited, an Opinion of Counsel to the effect that
such obligations constitute Eligible Obligations and do
not contain provisions permitting the redemption or
other prepayment thereof at the option of the issuer
thereof, and an opinion of an independent public
accountant of nationally recognized standing, selected
by the Company, to the effect that the other
requirements set forth in clause (b) and, if
applicable, (c) above have been satisfied; and
(z) if such deposit shall have been made prior to
the Maturity of such Securities, an Officer's
Certificate stating the Company's intention that, upon
delivery of such Officer's Certificate, its
indebtedness in respect of such Securities or portions
thereof will have been satisfied and discharged as
contemplated in this Section.
Upon the deposit of money or Eligible Obligations, or
both, in accordance with this Section, together with the
documents required by clauses (x), (y) and (z) above, the Trustee
shall, upon Company Request, acknowledge in writing that such
Securities or portions thereof are deemed to have been paid for
all purposes of this Indenture and that the entire indebtedness
of the Company in respect thereof has been satisfied and
discharged as contemplated in this Section. In the event that
all of the conditions set forth in the preceding paragraph shall
have been satisfied in respect of any Securities or portions
thereof except that, for any reason, the Officer's Certificate
specified in clause (z) (if otherwise required) shall not have
been delivered, such Securities or portions thereof shall
nevertheless be deemed to have been paid for all purposes of this
Indenture, and the Holders of such Securities or portions thereof
shall nevertheless be no longer entitled to the benefits provided
by this Indenture or of any of the covenants of the Company under
Article Five (except the covenants contained in Sections 502 and
503) or any other covenants made in respect of such Securities or
portions thereof as contemplated by Section 301, but the
indebtedness of the Company in respect of such Securities or
portions thereof shall not be deemed to have been satisfied and
discharged prior to Maturity for any other purpose; and, upon
Company Request, the Trustee shall acknowledge in writing that
such Securities or portions thereof are deemed to have been paid
for all purposes of this Indenture.
If payment at Stated Maturity of less than all of the
Securities of any series, or any Tranche thereof, is to be
provided for in the manner and with the effect provided in this
Section, the Security Registrar shall select such Securities, or
portions of principal amount thereof, in the manner specified by
Section 403 for selection for redemption of less than all the
Securities of a series or Tranche.
In the event that Securities which shall be deemed to
have been paid for purposes of this Indenture, and, if such is
the case, in respect of which the Company's indebtedness shall
have been satisfied and discharged, all as provided in this
Section, do not mature and are not to be redeemed within the
sixty (60) day period commencing with the date of the deposit of
moneys or Eligible Obligations, as aforesaid, the Company shall,
as promptly as practicable, give a notice, in the same manner as
a notice of redemption with respect to such Securities, to the
Holders of such Securities to the effect that such deposit has
been made and the effect thereof.
Notwithstanding that any Securities shall be deemed to
have been paid for purposes of this Indenture, as aforesaid, the
obligations of the Company and the Trustee in respect of such
Securities under Sections 304, 305, 306, 404, 502, 503, 807 and
814 and this Article shall survive.
The Company shall pay, and shall indemnify the Trustee
or any Paying Agent with which Eligible Obligations shall have
been deposited as provided in this Section against, any tax, fee
or other charge imposed on or assessed against such Eligible
Obligations or the principal or interest received in respect of
such Eligible Obligations, including, but not limited to, any
such tax payable by any entity deemed, for tax purposes, to have
been created as a result of such deposit.
Anything herein to the contrary notwithstanding, (a)
if, at any time after a Security would be deemed to have been
paid for purposes of this Indenture, and, if such is the case,
the Company's indebtedness in respect thereof would be deemed to
have been satisfied and discharged, pursuant to this Section
(without regard to the provisions of this paragraph), the Trustee
or any Paying Agent, as the case may be, (i) shall be required to
return the money or Eligible Obligations, or combination thereof,
deposited with it as aforesaid to the Company or its
representative under any applicable Federal or State bankruptcy,
insolvency or other similar law or (ii) are unable to apply any
money held by the Trustee as provided in this Section and Section
603 with respect to such Security by reason of any order or
judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, such
Security shall thereupon be deemed retroactively not to have been
paid and any satisfaction and discharge of the Company's
indebtedness in respect thereof shall retroactively be deemed not
to have been effected, and such Security shall be deemed to
remain Outstanding and (b) any satisfaction and discharge of the
Company's indebtedness in respect of any Security shall be
subject to the provisions of the last paragraph of Section 503.
SECTION 602. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be
of further effect (except as hereinafter expressly provided), and
the Trustee, at the expense of the Company, shall execute such
instruments as the Company shall reasonably request to evidence
and acknowledge the satisfaction and discharge of this Indenture,
when:
(a) no Securities remain Outstanding hereunder;
and
(b) the Company has paid or caused to be paid all
other sums payable hereunder by the Company;
provided, however, that if, in accordance with the last paragraph
of Section 601, any Security, previously deemed to have been paid
for purposes of this Indenture, shall be deemed retroactively not
to have been so paid, this Indenture shall thereupon be deemed
retroactively not to have been satisfied and discharged, as
aforesaid, and to remain in full force and effect, and the
Company shall execute and deliver such instruments as the Trustee
shall reasonably request to evidence and acknowledge the same.
Notwithstanding the satisfaction and discharge of this
Indenture as aforesaid, the obligations of the Company and the
Trustee under Sections 304, 305, 306, 404, 502, 503, 807 and 814
and this Article shall survive.
Upon satisfaction and discharge of this Indenture as
provided in this Section, the Trustee shall turn over to the
Company any and all money, securities and other property then
held by the Trustee for the benefit of the Holders of the
Securities (other than money and Eligible Obligations held by the
Trustee pursuant to Section 603) and shall execute and deliver to
the Company such instruments as, in the judgment of the Company,
shall be necessary, desirable or appropriate to effect or
evidence the satisfaction and discharge of this Indenture.
SECTION 603. APPLICATION OF TRUST MONEY.
Neither the Eligible Obligations nor the money
deposited pursuant to Section 601, nor the principal or interest
payments on any such Eligible Obligations, shall be withdrawn or
used for any purpose other than, and shall be held in trust for,
the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal
amount thereof in respect of which such deposit was made, all
subject, however, to the provisions of Section 503; provided,
however, that any cash received from such principal or interest
payments on such Eligible Obligations, if not then needed for
such purpose, shall, to the extent practicable and upon Company
Request and delivery to the Trustee of the documents referred to
in clause (y) in the first paragraph of Section 601, be invested
in Eligible Obligations of the type described in clause (b) in
the first paragraph of Section 601 maturing at such times and in
such amounts as shall be sufficient, together with any other
moneys and the proceeds of any other Eligible Obligations then
held by the Trustee, to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on
such Securities or portions thereof on and prior to the Maturity
thereof, and interest earned from such reinvestment shall be paid
over to the Company as received, free and clear of any trust,
lien or pledge under this Indenture; and provided, further, that
any moneys held in accordance with this Section on the Maturity
of all such Securities in excess of the amount required to pay
the principal of and premium, if any, and interest, if any, then
due on such Securities shall be paid over to the Company free and
clear of any trust, lien or pledge under this Indenture; and
provided, further, that if an Event of Default shall have
occurred and be continuing, moneys to be paid over to the Company
pursuant to this Section shall be held until such Event of
Default shall have been waived or cured.
ARTICLE SEVEN
EVENTS OF DEFAULT; REMEDIES
SECTION 701. EVENTS OF DEFAULT.
"EVENT OF DEFAULT", wherever used herein with respect
to the Securities, means any of the following events which shall
have occurred and be continuing:
(a) failure to pay interest, if any, on any Security,
within sixty (60) days after the same becomes due and
payable if such failure shall occur prior to the Collateral
Release Date, or within thirty (30) days after the same
becomes due and payable if such failure shall occur on or
after the Collateral Release Date; provided, however, that
no such failure shall constitute an "Event of Default" if
the Company shall have made a valid extension of the
interest payment period with respect to the Securities of
the series, of which such Security is a part, if so provided
with respect to such series as contemplated by Section 301;
or
(b) failure to pay the principal of or premium, if
any, on any Security when due; provided, however, that no
such failure shall constitute an "Event of Default" if the
Company shall have made a valid extension of the Maturity of
the Securities of the series, of which such Security is a
part, if so provided with respect to such series as
contemplated by Section 301; or
(c) failure to perform or breach of any covenant or
warranty of the Company in this Indenture (other than a
covenant or warranty, a default in the performance of which
or breach of which is elsewhere in this Section specifically
dealt with) for a period of ninety (90) days after there has
been given, by registered or certified mail, to the Company
by the Trustee, or to the Company and the Trustee by the
Holders of at least twenty-five percentum (25%) in principal
amount of the Securities then Outstanding, a written notice
specifying such default or breach and requiring it to be
remedied and stating that such notice is a "NOTICE OF
DEFAULT" hereunder, unless the Trustee, or the Trustee and
the Holders of a principal amount of Securities not less
than the principal amount of Securities the Holders of which
gave such notice, 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
Holders of such principal amount of Securities, as the case
may be, 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
(d) a default under any bond, debenture, note or other
evidence of Debt of the Company or under any mortgage,
indenture or other instrument under which there may be
issued or by which there may be secured or evidenced any
Debt of the Company (including this Indenture), whether such
Debt now exists or shall hereafter be created, which default
(1) shall constitute a failure to make any payment in excess
of $5,000,000 of the principal of or interest on such Debt
when due and payable after the expiration of any applicable
grace period with respect thereto or (2) shall have resulted
in such Debt in an amount in excess of $10,000,000 becoming
or being declared due and payable prior to the date on which
it would otherwise have become due and payable, without such
payment having been made, such Debt having been discharged,
or such acceleration having been rescinded or annulled, as
the case may be, within a period of ninety (90) days after
there shall have been given, by registered or certified
mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least twenty-five percentum
(25%) in principal amount of the Securities then Outstanding
a written notice specifying such default and requiring the
Company to cause such payment to be made, such Debt to be
discharged or such acceleration to be rescinded or annulled,
as the case may be, and stating that such notice is a Notice
of Default hereunder; it being understood, however, that no
event described in this clause (d) shall constitute an Event
of Default prior to the Collateral Release Date; or
(e) the entry by a court having jurisdiction in the
premises of (i) a decree or order for relief in respect of
the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or
order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition by one or more
Persons other than the Company seeking reorganization,
arrangement, adjustment or composition of or in respect of
the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official for the
Company or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs, and
any such decree or order for relief or any such other decree
or order shall have remained unstayed and in effect for a
period of ninety (90) consecutive days; or
(f) the commencement by the Company of a voluntary
case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law
or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of
a decree or order for relief in respect of the Company in a
case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition
or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to
the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the
Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay
its debts generally as they become due, or the authorization
of such action by the Board of Directors.
(g) so long as the Trustee shall hold any Outstanding
Class A Bonds which were delivered to the Trustee in
connection with the authentication and delivery of
Securities which remain Outstanding hereunder, the
occurrence of a matured event of default under the Class A
Mortgage under which such Class A Bonds were authenticated
and delivered (other than any such matured event of default
which (i) is of similar kind or character to the Event of
Default described in clause (c) above and (ii) has not
resulted in the acceleration of the Class A Bonds
Outstanding under such Class A Mortgage); provided, however,
that, anything in this Indenture to the contrary
notwithstanding, the waiver or cure of any such event of
default under such Class A Mortgage and the rescission and
annulment of the consequences thereof under such Class A
Mortgage shall constitute a cure of the corresponding Event
of Default under this Indenture and a rescission and
annulment of the consequences thereof.
SECTION 702. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default shall have occurred and be
continuing, then in every such case the Trustee or the Holders of
not less than thirty-three percentum (33%) in principal amount of
the Securities then Outstanding may declare the principal amount
(or, if any of the Securities are Discount Securities, such
portion of the principal amount of such Securities as may be
specified in the terms thereof as contemplated by Section 301) of
all of the Securities then Outstanding to be due and payable
immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders), and upon such declaration such
principal amount (or specified amount), together with premium, if
any, and accrued interest, if any, thereon, shall become
immediately due and payable, all subject, however, in the case of
an Event of Default described in clause (g) of Section 701, to
the proviso contained in such clause (g).
At any time after such a declaration of acceleration of
the maturity of the Securities then Outstanding shall have been
made, but before a judgment or decree for payment of the money
due shall have been obtained by the Trustee as provided in this
Article, such declaration and its consequences shall, without
further act, be deemed to have been rescinded and annulled, if
(a) the Company shall have paid or deposited with
the Trustee a sum sufficient to pay
(i) all overdue interest, if any, on all
Securities then Outstanding;
(ii) the principal of and premium, if any,
on any Securities then Outstanding which have
become due otherwise than by such declaration of
acceleration and interest, if any, thereon at the
rate or rates prescribed therefor in such
Securities;
(iii) interest, if any, upon overdue
interest, if any, at the rate or rates prescribed
therefor in such Securities, to the extent that
payment of such interest is lawful; and
(iv) all amounts due to the Trustee under
Section 807; and
(b) all Events of Default, other than the non-
payment of the principal of Securities of such series
which shall have become due solely by such declaration
of acceleration, shall have been cured or waived as
provided in Section 713.
No such rescission shall affect any subsequent Event of Default
or impair any right consequent thereon.
SECTION 703. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
If an Event of Default described in clause (a) or (b)
of Section 701 shall have occurred and be continuing, the Company
shall, upon demand of the Trustee, pay to it, for the benefit of
the Holders of the Securities with respect to which such Event of
Default shall have occurred, the whole amount then due and
payable on such Securities for principal and premium, if any, and
interest, if any, and, in addition thereto, such further amount
as shall be sufficient to cover any amounts due to the Trustee
under Section 807.
If the Company shall fail to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of
an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any
other obligor upon such Securities, wherever situated.
If an Event of Default shall have occurred and be
continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of the
Securities then Outstanding by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect
and enforce any such rights, whether for the specific enforcement
of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
SECTION 704. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this
Article shall be applied in the following order, to the extent
permitted by law, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal
or premium, if any, or interest, if any, upon presentation of the
Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 807;
SECOND: To the payment of the whole amount then due
and unpaid upon the Outstanding Securities for principal and
premium, if any, and interest, if any, in respect of which
or for the benefit of which such money has been collected;
and in case such proceeds shall be insufficient to pay in
full the whole amount so due and unpaid upon such
Securities, then to the payment of such principal and
interest, if any, thereon without any preference or
priority, ratably according to the aggregate amount so due
and unpaid, with any balance then remaining to the payment
of premium, if any, and, if so specified as contemplated by
Section 301 with respect to the Securities of any series, or
any Tranche thereof, interest, if any, on overdue premium,
if any, and overdue interest, if any, ratably as aforesaid,
all to the extent permitted by applicable law;
THIRD: To the payment of the remainder, if any, to
the Company or to whomsoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may
direct.
SECTION 705. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the
property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of
the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Company for the payment
of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal, premium, if any, and interest, if any, owing and
unpaid in respect of the Securities and to file such other
papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim
for amounts due to the Trustee under Section 807) and of the
Holders allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders,
to pay to the Trustee any amounts due it under Section 807.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 706. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or
on the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders in respect of which such judgment has been recovered.
SECTION 707. LIMITATION ON SUITS.
No Holder shall have any right to institute any
proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or
for any other remedy hereunder, unless:
(a) such Holder shall have previously given written
notice to the Trustee of a continuing Event of Default;
(b) the Holders of a majority in aggregate principal
amount of the Securities then Outstanding shall have made
written request to the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee
hereunder;
(c) such Holder or Holders shall have offered to the
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for sixty (60) days after its receipt
of such notice, request and offer of indemnity shall have
failed to institute any such proceeding; and
(e) no direction inconsistent with such written
request shall have been given to the Trustee during such
sixty (60) day period by the Holders of a majority in
aggregate principal amount of the Securities then
Outstanding.
it being understood and intended that no one or more of the
Holders of any Securities shall have any right in any manner
whatever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other
Holders or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal
and ratable benefit of all Holders.
SECTION 708. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture,
the Holder of any Security shall have the right, which is
absolute and unconditional, to receive payment of the principal
of and premium, if any, and (subject to Section 307) interest, if
any, on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any
such payment, and such rights shall not be impaired without the
consent of such Holder.
SECTION 709. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Indenture
and such proceeding shall have been discontinued or abandoned for
any reason, or shall have been determined adversely to the
Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, the Trustee
and such Holder shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and
remedies of the Trustee and such Holder shall continue as though
no such proceeding had been instituted.
SECTION 710. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 711. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder to
exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of
any such Event of Default or an acquiescence therein. Every
right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 712. CONTROL BY HOLDERS OF SECURITIES.
If an Event of Default shall have occurred and be
continuing, the Holders of a majority in principal amount of the
Securities then Outstanding shall have the right to direct the
time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred on the Trustee with respect to the Securities of such
series; provided, however, that
(a) such direction shall not be in conflict with any
rule of law or with this Indenture, and could not involve
the Trustee in personal liability in circumstances where
indemnity would not, in the Trustee's sole discretion, be
adequate,
(b) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not
taking part in such direction, and
(c) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.
SECTION 713. WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the
Securities then Outstanding may on behalf of the Holders of all
the Securities then Outstanding waive any past default hereunder
and its consequences, except a default
(a) in the payment of the principal of or premium, if
any, or interest, if any, on any Security then Outstanding,
or
(b) in respect of a covenant or provision hereof which
under Section 1102 cannot be modified or amended without the
consent of the Holder of each Outstanding Security of any
series or Tranche affected.
Upon any such waiver, such default shall cease to
exist, and any and all Events of Default arising therefrom shall
be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 714. UNDERTAKING FOR COSTS.
The Company and the Trustee agree, and each Holder by
its acceptance of a Security shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant
in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant, all in the
manner, to the extent and except as provided in the Trust
Indenture Act; but the provisions of this Section shall not apply
to any suit instituted by the Company, to any suit instituted by
the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than ten percentum (10%)
in aggregate principal amount of the Securities then Outstanding,
or to any suit instituted by any Holder for the enforcement of
the payment of the principal of or premium, if any, or interest,
if any, on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 715. WAIVER OF STAY OR EXTENSION LAWS.
To the full extent that it may lawfully so agree, the
Company shall not at any time set up, claim or otherwise seek to
take the benefit or advantage of any stay or extension law, now
or hereafter in effect, in order to prevent or hinder the
enforcement of this Indenture; and the Company, for itself and
all who may claim under it, so far as it or they now or hereafter
may lawfully do so, hereby waives the benefit of all such laws.
SECTION 716. DEFAULTS UNDER CLASS A MORTGAGES.
In addition to every other right and remedy provided
herein, the Trustee may (but shall not be obligated to) exercise
any right or remedy available to the Trustee in its capacity as
owner and holder of Class A Bonds which arises as a result of a
default or matured event of default under any Class A Mortgage,
whether or not an Event of Default shall then have occurred and
be continuing.
ARTICLE EIGHT
THE TRUSTEE
SECTION 801. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) Except during the continuance of an Event of
Default,
(i) the Trustee undertakes to perform such
series, such duties and only such duties as are
specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any
such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to
the requirements of this Indenture.
(b) In case an Event of Default shall have occurred
and be continuing, the Trustee shall exercise such of the rights
and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of
his own affairs.
(c) No provision of this Indenture shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this subsection shall not be construed to
limit the effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible
Officer, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with
respect to any action taken or omitted to be taken by
it in good faith in accordance with the direction of
the Holders of a majority in principal amount of the
Securities then Outstanding, as provided herein,
relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the
Trustee, under this Indenture with respect to the
Securities of such series; and
(iv) no provision of this Indenture shall require
the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
SECTION 802. NOTICE OF DEFAULTS.
The Trustee shall give the Holders notice of any
default hereunder in the manner and to the extent required to do
so by the Trust Indenture Act, unless such default shall have
been cured or waived; provided, however, that in the case of any
default of the character specified in Section 701(c), no such
notice to Holders shall be given until at least seventy-five (75)
days after the occurrence thereof; and provided, further, that,
subject to the provisions of Section 801, the Trustee shall not
be deemed to have knowledge of such default unless either (i) a
Responsible Officer of the Trustee shall have actual knowledge of
such default or (ii) the Trustee shall have received written
notice thereof from the Company or any Holder or, in the case of
a default described in Section 701(d), from the holder of any
indebtedness or from the trustee under any mortgage, indenture or
other instrument referred to in such Section. For the purpose of
this Section, the term "default" means any event which is, or
after notice or lapse of time, or both, would become, an Event of
Default. The Trustee shall give to the trustee under each Class
A Mortgage a copy of each notice of default given to the Holders
pursuant to this Section. In addition, the Trustee shall give to
the Holders copies of each notice of default under any Class A
Mortgage given to the Trustee in its capacity as owner and holder
of Class A Bonds delivered thereunder.
SECTION 803. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 801 and to the
applicable provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties;
(b) any request, direction or act of the Company
mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order, or as otherwise expressly
provided herein, and any resolution of the Board of
Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence is
specifically prescribed herein) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any Holder pursuant
to this Indenture, unless such Holder shall have offered to
the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by
it complying with such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it
shall (subject to applicable legal requirements) be entitled
to examine, during normal business hours, the books, records
and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder; and
(h) the Trustee shall not be charged with knowledge of
any Event of Default unless either (i) a Responsible Officer
of the Trustee shall have actual knowledge of the Event of
Default or (ii) written notice of such Event of Default
shall have been given to the Trustee by the Company, any
other obligor on such Securities or by any Holder of such
Securities or, in the case of a default described in Section
701(d), from the holder of any indebtedness or from the
trustee under any mortgage, indenture or other instrument
referred to in such Section.
SECTION 804. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES.
The recitals contained herein and in the Securities
(except the Trustee's certificates of authentication) shall be
taken as the statements of the Company, and neither the Trustee
nor any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of
Securities or the proceeds thereof.
SECTION 805. MAY HOLD SECURITIES.
Each of the Trustee, any Authenticating Agent, any
Paying Agent, any Security Registrar or any other agent of the
Company or the Trustee, in its individual or any other capacity,
may become the owner or pledgee of Securities and, subject to
Sections 808 and 813, may otherwise deal with the Company with
the same rights it would have if it were not such Trustee,
Authenticating Agent, Paying Agent, Security Registrar or other
agent.
SECTION 806. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not
be segregated from other funds, except to the extent required by
law. The Trustee shall be under no liability for interest on or
investment of any money received by it hereunder except as
expressly provided herein or otherwise agreed with, and for the
sole benefit of, the Company.
SECTION 807. COMPENSATION AND REIMBURSEMENT.
The Company shall
(a) pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express
trust);
(b) except as otherwise expressly provided herein,
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances reasonably incurred or
made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel),
except to the extent that any such expense, disbursement or
advance may be attributable to its negligence, wilful
misconduct or bad faith; and
(c) indemnify the Trustee and hold it harmless from
and against any loss, liability or expense reasonably
incurred by it arising out of or in connection with the
acceptance or administration of the trust or trusts
hereunder or the performance of its duties hereunder,
including the reasonable costs and expenses of defending
itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence, wilful
misconduct or bad faith.
As security for the performance of the obligations of
the Company under this Section, the Trustee shall have a lien
prior to the Securities upon all property and funds held or
collected by the Trustee as such other than property and funds
held in trust under Section 603 (except moneys payable to the
Company as provided in Section 603). "Trustee" for purposes of
this Section shall include any predecessor Trustee; provided,
however, that the negligence, wilful misconduct or bad faith of
any Trustee hereunder shall not affect the rights of any other
Trustee hereunder.
SECTION 808. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee shall have or acquire any conflicting
interest within the meaning of the Trust Indenture Act, it shall
either eliminate such conflicting interest or resign to the
extent, in the manner and with the effect, and subject to the
conditions, provided in the Trust Indenture Act and this
Indenture. For purposes of Section 310(b)(1) of the Trust
Indenture Act and to the extent permitted thereby, the Trustee,
in its capacity as trustee in respect of the Securities of any
series, shall not be deemed to have a conflicting interest
arising from its capacity as trustee in respect of the Securities
of any other series.
SECTION 809. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which
shall be
(a) a corporation organized and doing business under
the laws of the United States, any State or Territory
thereof or the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined
capital and surplus of at least Ten Million Dollars
($10,000,000) and subject to supervision or examination by
Federal, State, Territorial or District of Columbia
authority, or
(b) if and to the extent permitted by the Commission
by rule, regulation or order upon application, a corporation
or other Person organized and doing business under the laws
of a foreign government, authorized under such laws to
exercise corporate trust powers, having a combined capital
and surplus of at least Fifty Million Dollars ($50,000,000)
or the Dollar equivalent of the applicable foreign currency
and subject to supervision or examination by authority of
such foreign government or a political subdivision thereof
substantially equivalent to supervision or examination
applicable to United States institutional trustees,
and, in either case, qualified and eligible under this Article
and the Trust Indenture Act. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of such supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section or the Trust
Indenture Act, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 810. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) 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 in accordance with the applicable requirements
of Section 811.
(b) The Trustee may resign at any time by giving
written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 811 shall
not have been delivered to the Trustee within thirty (30) days
after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in principal amount of the Securities
then Outstanding delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section
808 after written request therefor by the Company or by
any Holder who has been a bona fide Holder for at least
six months, or
(ii) the Trustee shall cease to be eligible under
Section 809 or Section 310(a) of the Trust Indenture
Act and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(iii) the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent or
a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (x) the Company may remove the Trustee
with respect to all Securities or (y) subject to Section 714, any
Holder who has been a bona fide Holder for at least six (6)
months may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee
or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause (other than as contemplated in clause (y)
in subsection (d) of this Section), the Company shall take prompt
steps to appoint a successor Trustee or Trustees and shall comply
with the applicable requirements of Section 811. If, within one
(1) year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount
of the Securities then Outstanding delivered to the Company and
the retiring Trustee, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 811, become the
successor Trustee and to that extent supersede the successor
Trustee appointed by the Company. If no successor Trustee shall
have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 811, any Holder who
has been a bona fide Holder of a Security for at least six (6)
months may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) 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 Company shall have
delivered to the Trustee (i) an instrument executed by an
Authorized Officer appointing a successor Trustee or Trustees,
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 or Trustees in accordance with Section
811, the Trustee or Trustees shall be deemed to have resigned as
contemplated in subsection (b) of this Section, the successor
Trustee or Trustees shall be deemed to have been appointed
pursuant to subsection (e) of this Section and such appointment
shall be deemed to have been accepted as contemplated in Section
811, all as of such date, and all other provisions of this
Section and Section 811 shall be applicable to such resignation,
appointment and acceptance except to the extent inconsistent with
this subsection (f).
(g) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a
successor Trustee to all Holders of Securities. Each notice
shall include the name of the successor Trustee and the address
of its corporate trust office.
SECTION 811. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a
successor Trustee, every such successor Trustee so appointed
shall execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on the request of
the Company or the successor Trustee, such retiring Trustee
shall, upon payment of all sums owed to it, execute and deliver
an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee hereunder.
(b) Upon reasonable request of any such successor
Trustee, the Company shall execute instruments to more fully and
certainly vest in and confirm to such successor Trustee all
rights, powers and trusts referred to in subsection (a) of this
Section.
(c) No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
SECTION 812. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution
or filing of any paper or any further act on the part of any of
the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver
the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 813. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If the Trustee shall be or become a creditor of the
Company or any other obligor upon the Securities (other than by
reason of a relationship described in Section 311(b) of the Trust
Indenture Act), the Trustee shall be subject to any and all
applicable provisions of the Trust Indenture Act regarding the
collection of claims against the Company or such other obligor.
For purposes of Section 311(b) of the Trust Indenture Act:
(a) the term "CASH TRANSACTION" means any transaction
in which full payment for goods or securities sold is made
within seven days after delivery of the goods or securities
in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and
(b) the term "SELF-LIQUIDATING PAPER" means any draft,
bill of exchange, acceptance or obligation which is made,
drawn, negotiated or incurred by the Company or such obligor
for the purpose of financing the purchase, processing,
manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing
title to, possession of, or a lien upon, the goods, wares or
merchandise or the receivables or proceeds arising from the
sale of the goods, wares or merchandise previously
constituting the security, provided the security is received
by the Trustee simultaneously with the creation of the
creditor relationship with the Company or such obligor
arising from the making, drawing, negotiating or incurring
of the draft, bill of exchange, acceptance or obligation.
SECTION 814. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or
Agents with respect to the Securities of one or more series, or
any Tranche thereof, which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series or
Tranche issued upon original issuance, exchange, registration of
transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States,
any State or Territory thereof or the District of Columbia or the
Commonwealth of Puerto Rico, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of
not less than Ten Million Dollars ($10,000,000) and subject to
supervision or examination by Federal or State authority. If
such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published.
If at any time an Authenticating Agent shall cease to be eligible
in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and
with the effect specified in this Section.
Any corporation into which an Authenticating Agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to all or substantially all
of the corporate agency or corporate trust business of an
Authenticating Agent, shall continue to be an Authenticating
Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the Trustee or the
Authenticating Agent.
An Authenticating Agent may resign at any time by
giving written notice thereof to the Trustee and to the Company.
The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company. Any successor Authenticating Agent
upon acceptance of its appointment hereunder shall become vested
with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services under
this Section.
The provisions of Sections 308, 804 and 805 shall be
applicable to each Authenticating Agent.
If an appointment with respect to the Securities of one
or more series, or any Tranche thereof, shall be made pursuant to
this Section, the Securities of such series or Tranche may have
endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication
substantially in the following form:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
------------------------
As Trustee
By----------------------
As Authenticating Agent
By----------------------
Authorized Officer
If all of the Securities of a series may not be
originally issued at one time, and if the Trustee does not have
an office capable of authenticating Securities upon original
issuance located in a Place of Payment where the Company wishes
to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing
(which writing need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel), shall appoint, in
accordance with this Section and in accordance with such
procedures as shall be acceptable to the Trustee, an
Authenticating Agent having an office in a Place of Payment
designated by the Company with respect to such series of
Securities.
ARTICLE NINE
LISTS OF HOLDERS; REPORTS BY TRUSTEE AND COMPANY
SECTION 901. LISTS OF HOLDERS.
Semiannually, not later than June 30 and December 31 in
each year, commencing June 30, 1999, and within 30 days of such
other times as the Trustee may request in writing, the Company
shall furnish or cause to be furnished to the Trustee information
as to the names and addresses of the Holders, as of a date no
more than fifteen (15) days prior to the date such information is
so furnished, and the Trustee shall preserve such information and
similar information received by it in any other capacity and
afford to the Holders access to information so preserved by it,
all to such extent, if any, and in such manner as shall be
required by the Trust Indenture Act; provided, however, that no
such list need be furnished so long as the Trustee shall be the
Security Registrar.
SECTION 902. REPORTS BY TRUSTEE AND COMPANY.
Not later than November 15 in each year, commencing
November 15, 1999, the Trustee shall transmit to the Holders, the
Commission and each securities exchange upon which any Securities
are listed, a report, dated as of the next preceding September
15, with respect to any events and other matters described in
Section 313(a) of the Trust Indenture Act, in such manner and to
the extent required by the Trust Indenture Act. The Trustee
shall transmit to the Holders, the Commission and each securities
exchange upon which any Securities are listed, and the Company
shall file with the Trustee (within thirty (30) days after filing
with the Commission in the case of reports which pursuant to the
Trust Indenture Act must be filed with the Commission and
furnished to the Trustee) and transmit to the Holders, such other
information, reports and other documents, if any, at such times
and in such manner, as shall be required by the Trust Indenture
Act. The Company shall notify the Trustee of the listing of any
Securities on any securities exchange.
ARTICLE TEN
CONSOLIDATION, MERGER, CONVEYANCE
OR OTHER TRANSFER
SECTION 1001. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.
The Company shall not consolidate with or merge into
any other Person, or convey or otherwise transfer, or lease, all
of its properties, as or substantially as an entirety, to any
Person, unless:
(a) the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by
conveyance or other transfer, or which leases (for a term
extending beyond the last Stated Maturity of the Securities
then Outstanding), all of the properties of the Company, as
or substantially as an entirety, shall be a Person organized
and existing under the laws of the United States, any State
or Territory thereof or the District of Columbia or under
the laws of Canada or any Province thereof (such corporation
being hereinafter sometimes called the "SUCCESSOR") and
shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, the due and punctual payment of
the principal of and premium, if any, and interest, if any,
on all the Securities then Outstanding and the performance
and observance of every covenant and condition of this
Indenture to be performed or observed by the Company; and
(b) the Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each of
which shall state that such consolidation, merger,
conveyance or other transfer or lease, and such supplemental
indenture, comply with this Article and that all conditions
precedent herein provided for relating to such transaction
have been complied with.
Anything in this Indenture to the contrary
notwithstanding, the conveyance or other transfer, or lease, 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 conveyance or other transfer,
or lease, of all the properties of the Company, as or
substantially as an entirety, unless, immediately following such
conveyance, transfer or lease, the Company shall own no unleased
properties in the other such categories of property not so
conveyed or otherwise transferred or leased. 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 1002. SUCCESSOR SUBSTITUTED.
Upon any consolidation or merger or any conveyance or
other transfer of all the properties of the Company, as or
substantially as an entirety, in accordance with Section 1001,
the Successor shall succeed to, and be substituted for, and may
exercise every power and right of, the Company under this
Indenture with the same effect as if such Successor had been
named as the "Company" herein. Without limiting the generality
of the foregoing, the Successor may execute and deliver to the
Trustee, and thereupon the Trustee shall, subject to the
provisions of Article Three, authenticate and deliver,
Securities. All Securities so executed by the Successor, and
authenticated and delivered by the Trustee, shall in all respects
be entitled to the benefits provided by this Indenture equally
and ratably with all Securities executed, authenticated and
delivered prior to the time such consolidation, merger,
conveyance or other transfer became effective.
SECTION 1003. RELEASE OF COMPANY UPON CONVEYANCE OR OTHER
TRANSFER.
In the case of a conveyance or other transfer to any
Person or Persons as contemplated in Section 1001, upon the
satisfaction of all the conditions specified in Section 1001 the
Company (such term being used in this Section without giving
effect to such transaction) shall be released and discharged from
all obligations and covenants under this Indenture and on and
under all Securities then Outstanding (unless the Company shall
have delivered to the Trustee an instrument in which it shall
waive such release and discharge) and the Trustee shall
acknowledge in writing that the Company has been so released and
discharged.
SECTION 1004. MERGER INTO COMPANY.
Nothing in this Indenture shall be deemed to prevent or
restrict any consolidation or merger after the consummation of
which the Company would be the surviving or resulting entity or
any conveyance or other transfer, or lease of any part of the
properties of the Company which does not constitute the entirety,
or substantially the entirety, thereof.
SECTION 1005. TRANSFER OF LESS THAN THE ENTIRETY.
(a) If, at any time after the Collateral Release Date,
the Company shall have conveyed or otherwise transferred any part
of its properties which does not constitute the entirety, or
substantially the entirety, thereof to another Person meeting the
requirements set forth in clause (a) of the first paragraph of
Section 1001 and if:
(i) the transferee of such part of the properties
of the Company shall have executed and delivered to the
Trustee an indenture supplemental hereto, in form
reasonably satisfactory to the Trustee, which contains
an assumption by such transferee of the due and
punctual payment of the principal of and premium, if
any, and interest, if any, on all the Securities then
Outstanding and the performance and observance of every
covenant and condition of this Indenture to be
performed or observed by the Company;
(ii) there shall have been delivered to the
Trustee an Independent Expert's Certificate
(A) describing the property so conveyed or
otherwise transferred (such description of
property to be made by reference either to
specific items, units and/or elements of property
or portions thereof, on a percentage or Dollar
basis, or to properties reflected in specified
accounts in the Company's books of account or
portions thereof, on a Dollar basis); provided,
however, that such property shall be identified in
such certificate as facilities for the generation,
transmission or distribution of electric energy;
(B) stating, in the judgment of the signers,
the fair value to the transferee of the property
so conveyed or otherwise transferred; provided,
however, that there shall be excluded from the
property so evaluated any property subject to any
mortgage, deed of trust, security interest or
other lien which secures indebtedness for borrowed
money or for the deferred purchase price of
property;
(C) stating an amount equal to seventy
percent (70%) of the amount stated pursuant to
clause (B) above;
(D) stating an amount equal to the aggregate
principal amount of the Securities then
Outstanding; and
(E) stating that the amount stated pursuant
to clause (D) above does not exceed the amount
stated pursuant to clause (C) above; and
(iii) the Company shall have delivered to the
Trustee an Officer's Certificate and an Opinion of
Counsel each of which shall state that such conveyance
or other transfer and such supplemental indenture
comply with this Section and that all conditions
precedent relating to such transactions provided for in
this Section and otherwise in this Indenture have been
complied with;
then, upon the satisfaction of all such conditions,
(x) the Company shall be released and discharged from
all obligations and covenants under this Indenture and on
and under all Securities then Outstanding (unless the
Company shall have delivered to the Trustee an instrument in
which it shall waive such release and discharge), and the
Trustee shall acknowledge in writing that the Company has
been so released and discharged; and
(y) if the Company shall have been released and
discharged as contemplated in clause (x) above, such
transferee shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this
Indenture with the same effect as if such transferee had
been named the "Company" herein; and without limiting the
generality of the foregoing, such transferee shall be deemed
a "Successor" for purposes of Section 1002 and for all other
purposes of this Indenture.
In assessing the fair value of such property so
conveyed or otherwise transferred, an Expert may consider, among
other things (a) the amount which would be likely to be obtained
in an arm's-length transaction with respect to such property
between an informed and willing buyer and an informed and willing
seller, under no compulsion, respectively, to buy or sell, (b)
the amount of investment with respect to such property which,
together with a reasonable return thereon, would be likely to be
recovered through ordinary business operations or otherwise, (c)
the cost, accumulated depreciation and replacement cost with
respect to such property and/or (d) any other relevant factors;
provided, however, that (x) the fair value of property 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 on such property 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 or operator of the property or any
portion thereof than to a Person which is such owner 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 Expert certifying the same.
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURES
SECTION 1101. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Company and the
Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form reasonably
satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person
to the Company and the assumption by any such successor
of the covenants of the Company herein and in the
Securities, all as provided in Article Ten; or
(b) to add one or more covenants of the Company
or other provisions for the benefit of all Holders or
for the benefit of the Holders of, or to remain in
effect only so long as there shall be Outstanding,
Securities of one or more specified series, or one or
more specified Tranches thereof, or to surrender any
right or power herein conferred upon the Company; or
(c) to change or eliminate any provision of this
Indenture or to add any new provision to this
Indenture; provided, however, that if such change,
elimination or addition shall adversely affect the
interests of the Holders of Securities of any series or
Tranche in any material respect, such change,
elimination or addition shall become effective with
respect to such series or Tranche only when no Security
of such series or Tranche remains Outstanding; or
(d) to provide additional collateral security for
the Securities; or
(e) to establish the form or terms of Securities
of any series or Tranche as contemplated by Sections
201 and 301; or
(f) to provide for the authentication and
delivery of bearer securities and coupons appertaining
thereto representing interest, if any, thereon and for
the procedures for the registration, exchange and
replacement thereof and for the giving of notice to,
and the solicitation of the vote or consent of, the
holders thereof, and for any and all other matters
incidental thereto; or
(g) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee or by a
co-trustee or separate trustee; or
(h) to provide for the procedures required to
permit the Company to utilize, at its option, a non-
certificated system of registration for all, or any
series or Tranche of, the Securities; or
(i) to change any place or places where (1) the
principal of and premium, if any, and interest, if any,
on all or any series of Securities, or any Tranche
thereof, shall be payable, (2) all or any series of
Securities, or any Tranche thereof, may be surrendered
for registration of transfer, (3) all or any series of
Securities, or any Tranche thereof, may be surrendered
for exchange and (4) notices and demands to or upon the
Company in respect of all or any series of Securities,
or any Tranche thereof, and this Indenture may be
served; or
(j) to cure any ambiguity, to correct or
supplement any provision herein which may be defective
or inconsistent with any other provision herein; or to
make any other changes to the provisions hereof or to
add other provisions with respect to matters or
questions arising under this Indenture, provided that
such other changes or additions shall not adversely
affect the interests of the Holders of Securities of
any series or Tranche in any material respect.
Without limiting the generality of the foregoing, if
the Trust Indenture Act as in effect at the date of the execution
and delivery of this Indenture or at any time thereafter shall be
amended and
(x) if any such amendment shall require one or
more changes to any provisions hereof or the inclusion
herein of any additional provisions, or shall by
operation of law be deemed to effect such changes or
incorporate such provisions by reference or otherwise,
this Indenture shall be deemed to have been amended so
as to conform to such amendment to the Trust Indenture
Act, and the Company and the Trustee may, without the
consent of any Holders, enter into an indenture
supplemental hereto to evidence such amendment hereof;
or
(y) if any such amendment shall permit one or
more changes to, or the elimination of, any provisions
hereof which, at the date of the execution and delivery
hereof or at any time thereafter, are required by the
Trust Indenture Act to be contained herein or are
contained herein to reflect any provisions of the Trust
Indenture Act as in effect at such date, this Indenture
shall be deemed to have been amended to effect such
changes or elimination, and the Company and the Trustee
may, without the consent of any Holders, enter into an
indenture supplemental hereto to amend this Indenture
to effect such changes or elimination.
SECTION 1102. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
Subject to the provisions of Section 1101, with the
consent of the Holders of a majority in aggregate principal
amount of the Securities of all series then Outstanding under
this Indenture, considered as one class, by Act of said Holders
delivered to the Company and the Trustee, the Company and the
Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, this
Indenture; provided, however, that if there shall be Securities
of more than one series Outstanding hereunder and if a proposed
supplemental indenture shall directly affect the rights of the
Holders of Securities of one or more, but less than all, of such
series, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all
series so directly affected, considered as one class, shall be
required; and provided, further, that if the Securities of any
series shall have been issued in more than one Tranche and if the
proposed supplemental indenture shall directly affect the rights
of the Holders of Securities of one or more, but less than all,
of such Tranches, then the consent only of the Holders of a
majority in aggregate principal amount of the Outstanding
Securities of all Tranches so directly affected, considered as
one class, shall be required; and provided, further, that no such
supplemental indenture shall:
(a) change the Stated Maturity of the principal
of, or any installment of principal of or interest on,
any Security other than pursuant to the terms thereof,
or reduce the principal amount thereof or the rate of
interest thereon (or the amount of any installment of
interest thereon) or change the method of calculating
such rate or reduce any premium payable thereon, or
reduce the amount of the principal of any Discount
Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof
pursuant to Section 702, or change the coin or currency
(or other property), in which any Security or premium,
if any, or interest, if any, thereon is payable, or
impair the right to institute suit for the enforcement
of any such payment on or after the Maturity of any
Security, without, in any such case, the consent of the
Holder of such Security; or
(b) permit the creation of any Lien ranking prior
to the Lien of this Indenture with respect to any Class
A Bond delivered to and held by the Trustee pursuant to
Article Three, or (except in accordance with the
provisions of Article Three) terminate a Lien of this
Indenture on any such Class A Bond or deprive the
Holders of the benefit of the Lien of this Indenture on
any Class A Bond, without, in any such case, the
consent of the Holders of all Securities then
Outstanding; or
(c) reduce the percentage in principal amount of
the Outstanding Securities of any series, or any
Tranche thereof, the consent of the Holders of which is
required for any such supplemental indenture, or the
consent of the Holders of which is required for any
waiver of compliance with any provision of this
Indenture or of any default hereunder and its
consequences, or reduce the requirements of Section
1204 for quorum or voting, without, in any such case,
the consent of the Holder of each Outstanding Security
of such series or Tranche; or
(d) modify any of the provisions of this Section,
Section 506 or Section 713 with respect to the
Securities of any series or any Tranche thereof (except
to increase the percentages in principal amount
referred to in this Section or such other Sections or
to provide that other provisions of this Indenture
cannot be modified or waived without the consent of the
Holders of all Securities of such series or Tranche)
without, in any such case, the consent of the Holder of
each Outstanding Security of such series or Tranche;
provided, however, that this clause shall not be deemed
to require the consent of any Holder with respect to
changes in the references to "the Trustee" and
concomitant changes in this Section, or the deletion of
this proviso, in accordance with the requirements of
Sections 811(b) and 1101(g).
A supplemental indenture which (x) changes or
eliminates any covenant or other provision of this Indenture
which has expressly been included solely for the benefit of the
Holders of, or which is to remain in effect only so long as there
shall be Outstanding, Securities of one or more specified series,
or one or more Tranches thereof, or (y) modifies the rights of
the Holders of Securities of such series or Tranches with respect
to such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the Holders of
Securities of any other series or Tranche.
It shall not be necessary for any Act of Holders under
this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
Anything in this Indenture to the contrary notwithstanding,
if the Officer's Certificate, supplemental indenture or Board
Resolution, as the case may be, establishing the Securities of
any series or Tranche shall so provide, (a) the Holders of such
Securities shall be deemed to have consented to a supplemental
indenture containing the additions, changes or eliminations to or
from the Indenture which shall be specified in such Officer's
Certificate, supplemental indenture or Board Resolution
establishing such series or Tranche, (b) no Act of such Holders
shall be required to evidence such consent and (c) such consent
may be counted in the determination of whether or not the Holders
of the requisite principal amount of Securities shall have
consented to such supplemental indenture.
SECTION 1103. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts
created by, any supplemental indenture permitted by this Article
or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject
to Section 801) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter
into any such supplemental indenture which affects the Trustee's
own rights, duties, immunities or liabilities under this
Indenture or otherwise.
SECTION 1104. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution and delivery of any supplemental
indenture under this Article this Indenture shall be modified in
accordance therewith, and such supplemental indenture shall form
a part of this Indenture for all purposes; and every Holder of
Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby. Any supplemental indenture
permitted by this Article may restate this Indenture in its
entirety, and, upon the execution and delivery thereof, any such
restatement shall supersede this Indenture as theretofore in
effect for all purposes.
SECTION 1105. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture
Act.
SECTION 1106. REFERENCE IN SECURITIES TO SUPPLEMENTAL
INDENTURES.
Securities of any series, or any Tranche thereof,
authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities of
any series, or any Tranche thereof, so modified as to conform, in
the opinion of the Trustee and the Company, to any such
supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series or Tranche.
SECTION 1107. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE.
To the extent, if any, that the terms of any particular
series of Securities shall have been established in an Officer's
Certificate or a Board Resolution as contemplated by Section 301,
and not in a supplemental indenture, additions to, changes in or
the elimination of any of such terms may be effected by means of
a supplemental Officer's Certificate or a supplemental Board
Resolution, as the case may be, delivered to, and accepted by,
the Trustee; provided, however, that such supplemental Officer's
Certificate or supplemental Board Resolution shall not be
accepted by the Trustee or otherwise be effective unless all
conditions set forth in this Indenture which would be required to
be satisfied if such additions, changes or elimination were
contained in a supplemental indenture shall have been
appropriately satisfied. Upon the acceptance thereof by the
Trustee, any such supplemental Officer's Certificate or
supplemental Board Resolution shall be deemed to be a
"supplemental indenture" for purposes of Section 1104 and 1106.
ARTICLE TWELVE
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING
SECTION 1201. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Securities of one or more, or
all, series, or any Tranche or Tranches thereof, may be called at
any time and from time to time pursuant to this Article to make,
give or take any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this
Indenture to be made, given or taken by Holders of Securities of
such series or Tranches.
SECTION 1202. CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of
Holders of Securities of one or more, or all, series, or any
Tranche or Tranches thereof, for any purpose specified in Section
1201, to be held at such time and (except as provided in
subsection (b) of this Section) at such place in the Borough of
Manhattan, The City of New York, as the Trustee shall determine,
or, with the approval of the Company, at any other place. Notice
of every such meeting, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken
at such meeting, shall be given, in the manner provided in
Section 106, not less than twenty-one (21) nor more than one
hundred eighty (180) days prior to the date fixed for the
meeting.
(b) The Trustee may be asked to call a meeting of the
Holders of Securities of one or more, or all, series, or any
Tranche or Tranches thereof, by the Company or by the Holders of
thirty-three percentum (33%) in aggregate principal amount of all
of such series and Tranches, considered as one class, for any
purpose specified in Section 1201, by written request setting
forth in reasonable detail the action proposed to be taken at the
meeting. If the Trustee shall have been asked by the Company to
call such a meeting, the Company shall determine the time and
place for such meeting and may call such meeting by giving notice
thereof in the manner provided in subsection (a) of this Section,
or shall direct the Trustee, in the name and at the expense of
the Company, to give such notice. If the Trustee shall have been
asked to call such a meeting by Holders in accordance with this
subsection (b), and the Trustee shall not have given the notice
of such meeting within twenty-one (21) days after receipt of such
request or shall not thereafter proceed to cause the meeting to
be held as provided herein, then the Holders of Securities of
such series and Tranches, in the principal amount above
specified, may determine the time and the place in the Borough of
Manhattan, The City of New York, or in such other place as shall
be determined or approved by the Company, for such meeting and
may call such meeting for such purposes by giving notice thereof
as provided in subsection (a) of this Section.
(c) Any meeting of Holders of Securities of one or
more, or all, series, or any Tranche or Tranches thereof, shall
be valid without notice if the Holders of all Outstanding
Securities of such series or Tranches are present in person or by
proxy and if representatives of the Company and the Trustee are
present, or if notice is waived in writing before or after the
meeting by the Holders of all Outstanding Securities of such
series, or any Tranche or Tranches thereof, or by such of them as
are not present at the meeting in person or by proxy, and by the
Company and the Trustee.
SECTION 1203. PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders of
Securities of one or more, or all, series, or any Tranche or
Tranches thereof, a Person shall be (a) a Holder of one or more
Outstanding Securities of such series or Tranches, or (b) a
Person appointed by an instrument in writing as proxy for a
Holder or Holders of one or more Outstanding Securities of such
series or Tranches by such Holder or Holders. The only Persons
who shall be entitled to attend any meeting of Holders of
Securities of any series or Tranche shall be the Persons entitled
to vote at such meeting and their counsel, any representatives of
the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 1204. QUORUM; ACTION.
The Persons entitled to vote a majority in aggregate
principal amount of the Outstanding Securities of the series and
Tranches with respect to which a meeting shall have been called
as hereinbefore provided, considered as one class, shall
constitute a quorum for a meeting of Holders of Securities of
such series and Tranches; provided, however, that if any action
is to be taken at such meeting which this Indenture expressly
provides may be taken by the Holders of a specified percentage,
which is less than a majority, in principal amount of the
Outstanding Securities of such series and Tranches, considered as
one class, the Persons entitled to vote such specified percentage
in principal amount of the Outstanding Securities of such series
and Tranches, considered as one class, shall constitute a quorum.
In the absence of a quorum within one hour of the time appointed
for any such meeting, the meeting shall, if convened at the
request of Holders of Securities of such series and Tranches, be
dissolved. In any other case the meeting may be adjourned for
such period as may be determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a
quorum at any such adjourned meeting, such adjourned meeting may
be further adjourned for such period as may be determined by the
chairman of the meeting prior to the adjournment of such
adjourned meeting. Except as provided by Section 1205(e), notice
of the reconvening of any meeting adjourned for more than thirty
(30) days shall be given as provided in Section 106 not less than
ten (10) days prior to the date on which the meeting is scheduled
to be reconvened. Notice of the reconvening of an adjourned
meeting shall state expressly the percentage, as provided above,
of the principal amount of the Outstanding Securities of such
series and Tranches which shall constitute a quorum.
Except as limited by Section 1102, any resolution
presented to a meeting or adjourned meeting duly reconvened at
which a quorum is present as aforesaid may be adopted only by the
affirmative vote of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of the series and
Tranches with respect to which such meeting shall have been
called, considered as one class; provided, however, that, except
as so limited, any resolution with respect to any action which
this Indenture expressly provides may be taken by the Holders of
a specified percentage, which is less than a majority, in
principal amount of the Outstanding Securities of such series and
Tranches, considered as one class, may be adopted at a meeting or
an adjourned meeting duly reconvened and at which a quorum is
present as aforesaid by the affirmative vote of the Holders of
such specified percentage in principal amount of the Outstanding
Securities of such series and Tranches, considered as one class.
Any resolution passed or decision taken at any meeting
of Holders of Securities duly held in accordance with this
Section shall be binding on all the Holders of Securities of the
series and Tranches with respect to which such meeting shall have
been held, whether or not present or represented at the meeting.
SECTION 1205. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING
RIGHTS; CONDUCT AND ADJOURNMENT OF MEETINGS.
(a) Attendance at meetings of Holders of Securities
may be in person or by proxy; and, to the extent permitted by
law, any such proxy shall remain in effect and be binding upon
any future Holder of the Securities with respect to which it was
given unless and until specifically revoked by the Holder or
future Holder (except as provided in Section 104(g)) of such
Securities before being voted.
(b) Notwithstanding any other provisions of this
Indenture, the Trustee may make such reasonable regulations as it
may deem advisable for any meeting of Holders of Securities in
regard to proof of the holding of such Securities and of the
appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall deem appropriate. Except as otherwise permitted or
required by any such regulations and approved by the Company, the
holding of Securities shall be proved in the manner specified in
Section 104 and the appointment of any proxy shall be proved in
the manner specified in Section 104. Such regulations may
provide that written instruments appointing proxies, regular on
their face, may be presumed valid and genuine without the proof
specified in Section 104 or other proof.
(c) The Trustee shall, by an instrument in writing,
appoint a temporary chairman of the meeting, unless the meeting
shall have been called by the Company or by Holders as provided
in Section 1202(b), in which case the Company or the Holders of
Securities of the series and Tranches calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting
shall be elected by vote of the Persons entitled to vote a
majority in aggregate principal amount of the Outstanding
Securities of all series and Tranches represented at the meeting,
considered as one class.
(d) At any meeting each Holder or proxy shall be
entitled to one vote for each One Thousand Dollars ($1,000)
principal amount of Outstanding Securities held or represented by
such Holder; provided, however, that no vote shall be cast or
counted at any meeting in respect of any Security challenged as
not Outstanding and ruled by the chairman of the meeting to be
not Outstanding. The chairman of the meeting shall have no right
to vote, except as a Holder of a Security or proxy.
(e) Any meeting duly called pursuant to Section 1202
at which a quorum is present may be adjourned from time to time
by Persons entitled to vote a majority in aggregate principal
amount of the Outstanding Securities of all series and Tranches
represented at the meeting, considered as one class; and the
meeting may be held as so adjourned without further notice.
SECTION 1206. COUNTING VOTES AND RECORDING ACTION OF MEETINGS.
The vote upon any resolution submitted to any meeting
of Holders shall be by written ballots on which shall be
subscribed the signatures of the Holders or of their
representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities, of the series and Tranches
with respect to which the meeting shall have been called, held or
represented by them. The permanent chairman of the meeting shall
appoint two inspectors of votes who shall count all votes cast at
the meeting for or against any resolution and who shall make and
file with the secretary of the meeting their verified written
reports of all votes cast at the meeting. A record in duplicate
of the proceedings of each meeting of Holders shall be prepared
by the secretary of the meeting and there shall be attached to
such record the original reports of the inspectors of votes on
any vote by ballot taken thereat and affidavits by one or more
persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that such notice was given as
provided in Section 1202 and, if applicable, Section 1204. Each
copy shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one such copy
shall be delivered to the Company, and another to the Trustee to
be preserved by the Trustee, the latter to have attached thereto
the ballots voted at the meeting. Any record so signed and
verified shall be conclusive evidence of the matters therein
stated.
SECTION 1207. ACTION WITHOUT MEETING.
In lieu of a vote of Holders at a meeting as
hereinbefore contemplated in this Article, any request, demand,
authorization, direction, notice, consent, waiver or other action
may be made, given or taken by Holders by written instruments as
provided in Section 104.
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS
AND DIRECTORS
SECTION 1301. LIABILITY SOLELY CORPORATE.
No recourse shall be had for the payment of the
principal of or premium, if any, or interest, if any, on any
Securities, or any part thereof, or for any claim based thereon
or otherwise in respect thereof, or of the indebtedness
represented thereby, or upon any obligation, covenant or
agreement under this Indenture, against any incorporator,
stockholder, officer or director, as such, past, present or
future, of the Company or of any predecessor or successor
corporation (either directly or through the Company or a
predecessor or successor corporation), whether by virtue of any
constitutional provision, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise; it being
expressly agreed and understood that this Indenture and all the
Securities are solely corporate obligations and that no personal
liability whatsoever shall attach to, or be incurred by, any
incorporator, stockholder, officer or director, past, present or
future, of the Company or of any predecessor or successor
corporation, either directly or indirectly through the Company or
any predecessor or successor corporation, because of the
indebtedness hereby authorized or under or by reason of any of
the obligations, covenants or agreements contained in this
Indenture or in any of the Securities or to be implied herefrom
or therefrom; and such personal liability, if any, is hereby
expressly waived and released as a condition of, and as part of
the consideration for, the execution and delivery of this
Indenture and the issuance of the Securities.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above
written.
TUCSON ELECTRIC POWER COMPANY
By: /s/ Kevin P. Larson
-----------------------------------
Name: Kevin P. Larson
Title: Vice President and
Treasurer
BANK OF MONTREAL TRUST COMPANY, Trustee
By: /s/ Peter Morse
-----------------------------------
Name: Peter Morse
Title: Vice President
UNISOURCE ENERGY CORPORATION
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
June 30,
1998 1997
------ ------
- Thousands of Dollars -
(except per share data)
BASIC EARNINGS PER SHARE:
Net Income $1,058 $29,901
Average Shares of Common Stock Outstanding 32,138 32,138
--------- --------
Basic Earnings Per Share $ 0.03 $ 0.93
========= ========
DILUTED EARNINGS PER SHARE:
Net Income $1,058 $29,901
Average Shares of Common Stock Outstanding 32,138 32,138
Effect of Dilutive Securities:
Warrants* 127 -
Options 129 22
--------- --------
Total Shares 32,394 32,160
--------- --------
Diluted Earnings Per Share $ 0.03 $ 0.93
========= ========
*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.
UNISOURCE ENERGY CORPORATION
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Six Months Ended
June 30,
1998 1997
------ ------
- Thousands of Dollars -
(except per share data)
BASIC EARNINGS PER SHARE:
Net Income (Loss) $(5,977) $41,393
Average Shares of Common Stock Outstanding 32,138 32,138
--------- --------
Basic Earnings Per Share $ (0.19) $ 1.29
========= ========
DILUTED EARNINGS PER SHARE:
Net Income (Loss) $(5,977) $41,393
Average Shares of Common Stock Outstanding 32,138 32,138
Effect of Dilutive Securities:
Warrants* - -
Options - 27
--------- --------
Total Shares 32,138 32,165
--------- --------
Diluted Earnings Per Share $ (0.19) $ 1.29
========= ========
*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
------------------------------------------------------------------------------------
June 30, 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 71,392 63,573 59,647 69,174 69,353 68,053
Other Interest* 11,215 9,640 11,721 9,113 7,591 9,175
Interest on Capital Lease
Obligations** 86,839 83,019 84,383 83,986 82,511 81,932
------- ------ ------- ------- ------- -------
Total Fixed Charges 169,446 156,232 155,751 162,273 159,455 159,160
Net Income 48,645 83,572 120,852 54,905 20,740 (25,816)
Add (Deduct):
Income Taxes - Operating
Expense 18,486 19,297 9,795 8,920 (91) (91)
Income Taxes - Other (13,136) (41,401) (91,950) (29,356) (4,820) (5,186)
Total Fixed Charges 169,446 156,232 155,751 162,273 159,455 159,160
-------- -------- -------- -------- -------- --------
Total Earnings before Taxes and
Fixed Charges 223,441 217,700 194,448 196,742 175,284 128,067
Ratio of Earnings to Fixed 1.319 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 three-month and six-
month periods ended June 30, 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 June 30, 1998 is incorporated by reference in
Post-Effective Amendment No. 1 to Registration Statement No. 33-
55732 of TEP on Form S-3, and Registration Statement No. 333-
43765, No. 333-43767, No. 333-43769, No. 333-53309, No. 333-53333
and No. 333-53337 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 Statements 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
August 12, 1998
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