As filed with the Securities and Exchange
Commission on August 14, 1998
Registration No. 333-60809
=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
UNISOURCE ENERGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ARIZONA 86-0786732
(State or (I.R.S. Employer
other jurisdiction Identification No.)
of incorporation
or organization)
220 WEST SIXTH STREET
TUCSON, ARIZONA, 85701
(520) 571-4000
(Address, including zip code, and telephone number,
including area code,
of registrant's principal executive offices)
Dennis R. Nelson, Esq. John T. Hood, Esq.
UniSource Energy J. Anthony Terrell, Esq.
Corporation Thelen Reid & Priest LLP
220 West Sixth Street 40 West 57th Street
Tucson, Arizona, 85701 New York, New York 10019
(520) 571-4000 (212) 603-2000
(Names and addresses, including zip codes,
and telephone numbers, including area codes,
of agents for service)
----------------
Approximate date of commencement of proposed sale
of the securities to the public:
AS SOON AS PRACTICABLE AFTER THIS
REGISTRATION STATEMENT BECOMES EFFECTIVE.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
=================================================================
<PAGE>
Subject to completion, dated August 14, 1998
UNISOURCE ENERGY CORPORATION
OFFER TO EXCHANGE
ANY OR ALL
WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF
TUCSON ELECTRIC POWER COMPANY
FOR
WARRANTS EXPIRING IN 1999 TO PURCHASE SHARES OF COMMON STOCK OF
UNISOURCE ENERGY CORPORATION
AND
WARRANTS EXPIRING IN 2000 TO PURCHASE SHARES OF COMMON STOCK OF
UNISOURCE ENERGY CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, , 1998 UNLESS EXTENDED
---------------
UniSource Energy Corporation, an Arizona corporation (the
"Company"), hereby offers upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal") to exchange
(the "Exchange Offer") any and all outstanding warrants to
purchase shares of common stock of Tucson Electric Power Company,
an Arizona corporation and wholly-owned subsidiary of the Company
("TEP") (the "TEP Warrants") for Warrants expiring in 1999 to
purchase shares of common stock of the Company (the "1999 UNS
Warrants") and Warrants expiring in 2000 to purchase shares of
common stock of the Company (the "2000 UNS Warrants" and,
together with the 1999 UNS Warrants, the "UNS Warrants"). For
each TEP Warrant surrendered to and accepted by the Company
pursuant to the Exchange Offer, the Holder (as defined herein) of
such TEP Warrant will receive 0.20 1999 UNS Warrant and 2000
-----
UNS Warrant.
The UNS Warrants will be issued under and be entitled to all
of the rights and benefits of, and subject to the limitations
under, the Warrant Agreement, to be dated as of the Expiration
Date (as hereinafter defined), between the Company and The Bank
of New York, as Warrant Agent (the "Warrant Agent") (the "Warrant
Agreement"). See "DESCRIPTION OF THE UNS WARRANTS."
The form and terms of the 1999 UNS Warrants and 2000 UNS
Warrants are substantially the same as the form and terms of the
TEP Warrants except that each 1999 UNS Warrant will entitle the
Holder to purchase one share of Common Stock (the "Common Stock")
of the Company at a purchase price of $16.00 through and
including March 15, 1999 and each 2000 UNS Warrant will entitle
the Holder to purchase one share of Company Common Stock at a
purchase price of $16.00 through and including December 15, 2000.
See "DIFFERENCES BETWEEN THE TEP WARRANTS AND THE UNS WARRANTS."
The Company will accept for exchange any and all TEP
Warrants which are properly tendered to The Bank of New York, as
Exchange Agent, in the Exchange Offer prior to 5:00 p.m., New
York City time, on September , 1998, unless the Exchange Offer
----
is extended by the Company at its sole discretion (if and as
extended, the "Expiration Date"). Tenders of TEP Warrants may be
withdrawn at any time prior to 5:00 p.m., New York City time, on
the Expiration Date. See "THE EXCHANGE OFFER."
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME ON SEPTEMBER , 1998,
---
UNLESS THE EXCHANGE OFFER IS EXTENDED.
Holders of TEP Warrants not tendered and accepted in the
Exchange Offer will continue to hold such TEP Warrants and will
be entitled to all the rights and benefits of, and be subject to
the limitations under, the Warrant Agreement, dated December 15,
1992 among certain institutional investors (the "Initial
Registered Holders") and TEP (the "TEP Warrant Agreement"). The
Company will pay all the expenses incurred by it incident to the
Exchange Offer. See "THE EXCHANGE OFFER."
----------------
SEE "RISK FACTORS" ON PAGE 8 FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE UNS WARRANTS
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
---------------
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
<PAGE>
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . 3
SUMMARY INFORMATION. . . . . . . . . . . . . . . . . . . . . . 4
CERTAIN RISK FACTORS. . . . . . . . . . . . . . . . . . . . . 8
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 10
THE EXCHANGE OFFER. . . . . . . . . . . . . . . . . . . . . . 13
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . 17
DIFFERENCES BETWEEN THE TEP WARRANTS
AND THE UNS WARRANTS. . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF THE UNS WARRANTS. . . . . . . . . . . . . . . 17
DESCRIPTION OF CAPITAL STOCK. . . . . . . . . . . . . . . . . 22
PAGE
----
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. . . . 23
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
APPENDIX A - Form of Warrant Agreement relating
to the UNS Warrants
APPENDIX B - Form of Warrant Agreement relating
to the UNS Warrants marked to show
changes from Warrant Agreement
relating to the TEP Warrants
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
AVAILABLE INFORMATION
The Company and TEP are subject to the informational
requirements of the Securities Exchange Act of 1934 (the
"Exchange Act") and in accordance therewith the Company and TEP
file reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Such reports,
proxy statements and other information can be inspected and
copied at the offices of the SEC at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the Regional Offices of the SEC
located at 500 West Madison Street, 14th Floor, Chicago, Illinois
60661-2511 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such documents can be obtained from the
Public Reference Section of the SEC at prescribed rates by
writing to it at 450 Fifth Street, N.W., Washington, D.C. 20549.
The SEC maintains a web site on the Internet that contains
reports, proxy statements and other information regarding the
Company and TEP; the address of such site is http:www.sec.gov.
Reports, proxy statements and other information concerning the
Company and TEP are also available for inspection and copying at
the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Each of the Company's and TEP's Annual Report on Form 10-K
for the year ended December 31, 1997, as amended by Form 10-K/A,
dated March 5, 1998, (the "1997 10-K"), Quarterly Reports on Form
10-Q for the quarters ended March 31, 1998 and June 30, 1998 (the
"Second Quarter 10-Q") and Current Reports on Form 8-K dated
January 6, 1998, June 26, 1998, July 16, 1998 and July 22, 1998
which have been filed by the Company and TEP with the SEC
pursuant to the Exchange Act, are incorporated in this Prospectus
by reference. All documents subsequently filed by the Company or
TEP pursuant to Section 13 or 14 of the Exchange Act, prior to
the termination of the Exchange Offer made by this Prospectus,
shall be deemed to be incorporated herein by reference and to be
a part hereof from the respective dates of filing thereof. All
documents incorporated herein by reference, whether pursuant to
this paragraph or the immediately preceding paragraph, are
hereinafter referred to as the "Incorporated Documents". Any
statement contained in an Incorporated Document shall be deemed
to be modified or superseded for all purposes to the extent that
a statement contained in any subsequently filed Incorporated
Document modifies or replaces such statement.
THE COMPANY AND TEP WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON TO WHOM THE PROSPECTUS IS DELIVERED, UPON THE REQUEST OF
ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, EXCLUDING THE EXHIBITS THERETO.
REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO KEVIN P.
LARSON, VICE PRESIDENT AND TREASURER OF TEP, BY MAIL AT 220 WEST
SIXTH STREET, TUCSON, ARIZONA 85702, OR BY TELEPHONE AT (520)
884-3660.
3
<PAGE>
SUMMARY INFORMATION
The following summary information is qualified in its
entirety by the information contained elsewhere in this
Prospectus and in the Incorporated Documents.
THE COMPANY
The Company was incorporated under the laws of the State of
Arizona on March 8, 1995. The Company is a holding company which
owns all of the outstanding common stock of TEP and MEH
Corporation ("MEH"). On January 1, 1998, TEP and the Company
completed a statutory share exchange, pursuant to which the
outstanding common stock of TEP was exchanged, on a share-for-
share basis, for shares of Company common stock, no par value.
Following the share exchange, TEP transferred the stock of its
subsidiary, MEH, to the Company in exchange for a promissory note
in the approximate amount of $95 million. The Company's stock is
traded on the New York and Pacific Stock Exchanges under the
ticker symbol UNS.
TEP is the principal subsidiary of the Company and accounts
for substantially all of its assets, revenues and net income.
TEP is an operating public utility engaged in delivering energy
services to retail customers primarily in the Tucson, Arizona
metropolitan area and to wholesale customers throughout the
Western United States. As a public utility, TEP falls under the
jurisdiction of the Arizona Corporation Commission which has the
authority to approve rates and certain other corporate actions.
TEP provides electric power to approximately 317,000 retail
customers. In 1997, TEP generated and sold more than 7,400
gigawatt hours of energy to retail customers and 3,400 gigawatt
hours to other customers at wholesale. Operating revenues from
such sales exceeded $729 million. TEP owns or leases 1,896 MW of
generating capacity located in Arizona and New Mexico. TEP also
has transmission and distribution assets to transmit electricity
from TEP's remote generating facilities to the Tucson area for
use by TEP's retail customers and to provide interconnections to
neighboring utilities.
THE EXCHANGE OFFER
THE EXCHANGE
OFFER. . . . . . The Company is offering to exchange 0.20
1999 UNS Warrant and 2000 UNS
-------
Warrant for each TEP Warrant that is properly
tendered and accepted. The Company will
issue the 1999 UNS Warrants and 2000 UNS
Warrants on or promptly after the
Expiration Date. As of the date hereof,
there are 12,054,279 TEP Warrants
outstanding. See "THE EXCHANGE OFFER."
NO FRACTIONAL
WARRANTS. . . . . No certificate representing fractional
UNS Warrants shall be issued pursuant to
the Exchange Offer. Fractional UNS
Warrants that otherwise would be issued
in connection with the Exchange Offer
will be rounded up to the nearest whole
UNS Warrant. See "THE EXCHANGE OFFER --
No Fractional Warrants."
RIGHT TO
TERMINATE OR
AMEND THE
EXCHANGE
OFFER. . . . . . The Exchange Offer is subject to
termination or amendment by the Company
in its sole discretion. See "THE
EXCHANGE OFFER - Right to Terminate or
Amend."
EXPIRATION
DATE. . . . . . . The Exchange Offer will expire at 5:00
p.m., New York City time, on September
___, 1998, unless extended by the Company at
its sole discretion, in which case the
its sole discretion, in which case the
term "Expiration Date" shall mean the
latest date and time to which the
Exchange Offer is extended.
4
<PAGE>
PROCEDURES FOR
TENDERING TEP
WARRANTS. . . . . Each Holder of TEP Warrants wishing to
participate in the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of
Transmittal, or such facsimile, together
with such TEP Warrants and any other
required documentation to the Exchange
Agent.
SPECIAL
PROCEDURES FOR
BENEFICIAL
OWNERS. . . . . . Any beneficial owner whose interests in
the TEP Warrants are registered in the
name of a broker, dealer, commercial
bank, trust company, nominee, or other
securities intermediary and who wishes to
tender such TEP Warrants in the Exchange
Offer should contact such securities
intermediary promptly and instruct such
securities intermediary to tender on such
beneficial owner's behalf. If a
beneficial owner wishes to tender on such
owner's own behalf, such owner must,
prior to completing and executing the
Letter of Transmittal and delivering such
owner's TEP Warrants to the Exchange
Agent, either make appropriate
arrangements to register ownership of the
TEP Warrants in such owner's name or
obtain a properly completed assignment
from the registered Holder of the TEP
Warrants. The transfer of registered
ownership may take considerable time and
might not be completed prior to the
Expiration Date.
WITHDRAWAL
RIGHTS. . . . . . Tenders of TEP Warrants may be withdrawn
at any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
ACCEPTANCE OF TEP
WARRANTS AND
DELIVERY OF UNS
WARRANTS. . . . . The Company will accept for exchange any
and all TEP Warrants which are properly
tendered to the Exchange Agent prior to
5:00 p.m., New York City time, on the
Expiration Date. The UNS Warrants issued
pursuant to the Exchange Offer will be
delivered on or promptly after the
Expiration Date. See "THE EXCHANGE OFFER
- Terms of the Exchange Offer."
USE OF The Company will not receive any cash
PROCEEDS. . . . . proceeds from the issuance of the UNS
Warrants in the Exchange Offer. See "USE
OF PROCEEDS." To the extent that shares
of Common Stock are purchased from the
Company pursuant to the exercise of the
UNS Warrants, the Company intends to use
the net proceeds for general corporate
purposes.
TAX An exchange of UNS Warrants for TEP
CONSEQUENCES. . . Warrants should constitute a taxable
event for federal income tax purposes.
As a result, a U.S. Holder will recognize
gain or loss equal to the difference
between the amount realized upon the
exchange, and such U.S. Holder's adjusted
tax basis in the TEP Warrants
surrendered. See "CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES".
EXCHANGE AGENT. . The Bank of New York is the Exchange
Agent. Its telephone number is (212) 815-
2499. The address of the Exchange Agent
is set forth in "THE EXCHANGE OFFER -
Exchange Agent."
5
<PAGE>
THE TEP WARRANTS
TEP WARRANTS. . . TEP issued an aggregate of 12,054,279
Common Stock Purchase Warrants on
December 15, 1992, for the purchase of
approximately 2,410,855 shares of TEP
common stock (adjusted for TEP's one-for-
five reverse stock split in 1996)
pursuant to the TEP Warrant Agreement.
The exercise terms are five TEP Warrants
plus an exercise price of $16.00 per
share of TEP common stock. The TEP
Warrants are currently exercisable and
expire December 15, 2002.
On January 1, 1998, TEP and the Company
completed a statutory share exchange (the
"Share Exchange"), pursuant to which the
outstanding common stock of TEP was
exchanged, on a share-for-share basis,
for shares of the Company's Common Stock.
The consummation of the Share Exchange
did not convert the TEP Warrants into
warrants to purchase shares of Company
Common Stock. TEP common stock is no
longer listed on any stock exchange and
there is no established market for
trading shares of TEP common stock.
THE UNS WARRANTS
GENERAL. . . . . The form and terms of the UNS Warrants
are substantially the same as the form
and terms of the TEP Warrants except that
each 1999 UNS Warrant will entitle the
Holder to purchase one share of Company
Common Stock at a purchase price of
$16.00 through and including March 15,
1999 and each 2000 UNS Warrant will
entitle the Holder to purchase one share
of Company Common Stock at a purchase
price of $16.00 through and including
December 15, 2000. The UNS Warrants are
issued by the Company pursuant to the
Warrant Agreement.
1999 UNS
WARRANTS. . . . . Up to 2,411,000 1999 UNS Warrants to
purchase an equal number of shares of
Company Common Stock
2000 UNS
WARRANTS. . . . . Up to 2000 UNS Warrants
------------------
to purchase an equal number of shares of
Company Common Stock.
EXPIRATION. . . . The 1999 UNS Warrants and 2000 UNS
Warrants will expire on March 15, 1999
and December 15, 2000, respectively.
Each 1999 UNS Warrant and 2000 UNS
Warrant not exercised on or before the
Warrant Expiration Date shall become
void.
EXERCISE PRICE. . The exercise price of the 1999 UNS
Warrants and 2000 UNS Warrants shall be
$16.00 per share, subject to adjustments
in certain circumstances.
REDEMPTION. . . . The 1999 UNS Warrants and 2000 UNS
Warrants will not be subject to mandatory
redemption by the Company.
ANTIDILUTION. . . The number of shares of Company Common
Stock purchasable upon the exercise of
the UNS Warrants and the Exercise Price
shall be subject to adjustment from time
to time in certain circumstances. See
"DESCRIPTION OF THE UNS WARRANTS -
Adjustment of Exercise Price and Number
of Shares of Common Stock."
FORM OF WARRANT
CERTIFICATE. . . Certificates representing an aggregate of
up to 2,411,000 1999 UNS Warrants and
2000 UNS Warrants shall be
--------
issued substantially in the form annexed hereto
as Exhibits A and B to Appendix A.
6
<PAGE>
EFFECT OF NOT
TENDERING. . . . Any TEP Warrant not tendered in the
Exchange Offer will remain outstanding
and will be entitled to such rights and
benefits such Holders have under the TEP
Warrant Agreement.
WARRANT AGENT. . The Bank of New York
7
<PAGE>
CERTAIN RISK FACTORS
The UNS Warrants described herein and being offered hereby
are subject to a number of material risks, and, therefore,
involve a high degree of risk of loss. The following summary of
the principal factors that make the securities being offered an
investment of high risk is qualified in its entirety by reference
to the detailed information contained in the Incorporated
Documents. Prior to deciding whether or not to make an
investment in the UNS Warrants being offered, investors should
consider carefully all the information contained herein and in
the Incorporated Documents.
OVERVIEW
The financial condition and results of operations of TEP are
currently the principal factors affecting the financial condition
and results of operations of the Company on an annual basis since
TEP currently accounts for substantially all of the Company's
assets, revenues and net income.
The Company's and TEP's financial prospects are subject to
significant regulatory, economic, and other uncertainties, some
of which are beyond the Company's and TEP's control. These
uncertainties include the extent to which TEP, in light of its
continued high financial and operating leverage, can alter
operations and reduce costs in response to industry changes or
unanticipated economic downturns. The Company's and TEP's
success will depend, in part, on TEP's ability to contain and/or
reduce the costs of serving retail customers and the level of
sales to such customers. In a deregulated environment, revenues
from sales of energy may become less certain.
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-
months ended June 30, 1998.
Depending on the nature of future investment opportunities,
the Company expects to make additional investments in these
subsidiaries and in other energy-related ventures. The Arizona
Corporation Commission (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.
RETAIL COMPETITION
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. Among other things,
the rules state that "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." It is
difficult to predict the outcome of this process and the ultimate
impact of increased retail competition on TEP's and the Company's
future sales, revenues or profitability. See Item 2. --
Management's Discussion and Analysis of Financial Condition and
Results of Operations -- "Competition, Retail" and "Accounting
for the Effects of Regulation" in the Second Quarter 10-Q.
As discussed in the Second Quarter 10-Q, the ACC has issued
an order concerning stranded cost quantification and recovery.
The order provides TEP with two methods for quantifying and
recovering stranded costs: (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 Divestiture/Auction Methodology shall have the
opportunity to recover 100% of unmitigated stranded costs. TEP
must file its choice of options and preliminary plan with the ACC
by August 21, 1998. The amount of stranded costs 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
8
<PAGE>
recovery plan for TEP until at least the fourth quarter of 1998.
The Company and TEP are unable to predict the amount of write-
offs, if any, that may be incurred at that time.
DEBT LEVERAGE
The Company's and TEP's capital structure is highly
leveraged. Although TEP was able to refinance and extend the
maturities of certain debt obligations at favorable rates and
terms in 1997 and 1998, there can be no assurance that continued
access to the capital markets at such rates and terms will be
available. Despite a reduction in variable rate debt obligations
in 1997 and 1998, the Company's and TEP's earnings and cash flow
would still be affected by changes in interest rate levels on the
remaining variable rate debt. As of June 30, 1998, TEP had $329
million aggregate principal amount of variable rate debt
obligations. See Item 8. -- Consolidated Financial Statements
and Supplementary Data in the 1997 10-K, and Item 2. -
Management's Discussion and Analysis of Financial Condition and
Results of Operations -- "Overview" in the Second Quarter 10-Q.
TAX EXEMPT LOCAL FURNISHING BONDS
A substantial portion of TEP's utility plant assets qualify
as "facilities for the local furnishing of electric energy"
within the meaning of the Internal Revenue Code, and have been
financed with the proceeds from the issuance of industrial
development revenue bonds (approximately $580 million at the date
of this Prospectus). The interest on these bonds is, generally,
excluded from gross income for federal income tax purposes.
Should TEP's local furnishing system become disqualified, in
whole or in part, due to asset divestitures or unanticipated
changes in tax laws, industry structure or system operations, it
likely would be necessary for some or all of these bonds to be
redeemed or defeased. See Item 7. -- Management's Discussion and
Analysis of Financial Condition and Results of Operations --
"Liquidity and Capital Resources, Tax Exempt Local Furnishing
Bonds," in the 1997 10-K.
LOSSES FROM ENERGY-RELATED AFFILIATES
The Company's investments in MEH and its subsidiaries
(included in Investments and Other Property in the Company'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 the Company's income
statement. Almost all of MEH's losses in both the second quarter
and first six months of 1998 occurred at New Energy Ventures,
L.L.C. ("NEV"), a buyer's agent providing electric load
aggregation and advisory services to retail purchasers of
electric energy. 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. NEV may
continue to experience losses in future periods. In addition,
the Company's other energy-related ventures are in the
developmental and start-up stages, have limited operating
histories and, to date, have had limited profitability.
Consequently, there can be no assurance that the Company will not
experience additional losses from the activities of its energy-
related affiliates in future periods. See Item 2. --
Management's Discussion and Analysis of Financial Condition and
Results of Operations -- "Investments in Energy Related
Affiliates," in the Second Quarter 10-Q.
DIVIDENDS ON COMMON STOCK
UNISOURCE ENERGY
The Company's ability to pay dividends is dependent upon
cash flow from its subsidiaries, TEP and MEH. TEP comprises
substantially all of the Company's assets. As described below,
although TEP is currently unable to declare or pay dividends, it
has called for redemption in the third quarter of 1998 those
First Mortgage Bonds which have covenants restricting the payment
of dividends. No dividend on common stock has been declared or
paid by TEP since 1989. Until such time as TEP is able to pay
dividends to the Company, it is unlikely that the Company would
declare and pay dividends to holders of Common Stock.
9
<PAGE>
TEP
Five outstanding issues of First Mortgage Bonds
(aggregating $137 million in principal amount) prevent TEP from
paying dividends until 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 paid or redeemed
or the applicable mortgage indentures have been amended. The
latest maturity of these First Mortgage Bonds is in 2003. To
amend these bonds would require approval by 75% of all First
Mortgage Bond holders. During the third quarter of 1998, TEP
issued bonds to refinance all of the First Mortgage Bonds that
prohibit the payment of dividends and has called such First
Mortgage Bonds for redemption.
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. As of June 30,
1998, TEP is in compliance with the terms of the Credit
Agreement.
Pursuant to the Arizona Corporation Commission Holding
Company Order, until such time as TEP's equity ratio equals 37.5%
of total capital (excluding capital lease obligations), TEP may
not pay dividends to the Company in excess of 75% of TEP's
earnings. As of June 30, 1998, TEP's equity ratio, as so
calculated, 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 are unclear, TEP believes that there is a
reasonable basis to pay dividends from current year earnings.
See the Incorporated Documents for more information on
Common Stock dividends.
ABSENCE OF A PUBLIC TRADING MARKET FOR THE UNS WARRANTS
There can be no assurance that any significant trading
market in the UNS Warrants will develop or, if such a market
develops, that it will have any liquidity. The Company does not
currently intend to apply for listing of the UNS Warrants on any
securities exchange. Consequently, no assurance can be given
that a holder will be able to sell any UNS Warrants in the future
or as to the price at which any such sale may occur.
THE COMPANY
The Company was incorporated under the laws of the State of
Arizona on March 8, 1995. The Company is a holding company which
owns all of the outstanding common stock of TEP and MEH. On
January 1, 1998, TEP and the Company completed a statutory share
exchange, pursuant to which the outstanding common stock of TEP
was exchanged, on a share-for-share basis, for shares of Company
common stock, no par value. Following the share exchange, TEP
transferred the stock of its subsidiary, MEH, to the Company in
exchange for a promissory note in the approximate amount of $95
million. The Company's stock is traded on the New York and
Pacific Stock Exchanges under the ticker symbol UNS.
TEP is the principal subsidiary of the Company and accounts
for substantially all of its assets, revenues and net income.
TEP is an operating public utility engaged in delivering energy
services to retail customers primarily in the Tucson, Arizona
metropolitan area and to wholesale customers throughout the
Western United States. As a public utility, TEP falls under the
jurisdiction of the Arizona Corporation Commission which has the
authority to approve rates and certain other corporate actions.
TEP provides electric power to approximately 317,000 retail
customers. In 1997, TEP generated and sold more than 7,400
gigawatt hours of energy to retail customers and 3,400 gigawatt
hours to other customers at wholesale. Operating revenues from
such sales exceeded $729 million. TEP owns or leases 1,896 MW of
generating capacity located in Arizona and New Mexico. TEP also
has transmission and distribution assets to transmit electricity
from TEP's remote generating facilities to the Tucson area for
use by TEP's retail customers and to provide interconnections to
neighboring utilities.
10
<PAGE>
MEH owns all of the outstanding common stock of (i) Nations
Energy Corporation, which is active in the development of
independent power projects worldwide, (ii) Millennium Energy
Holdings, Inc., which holds a 50% interest in NEV, a buyer's
agent providing electric load aggregation and advisory services
to retail purchasers of electric energy, (iii) Advanced Energy
Technologies, Inc., which holds a 50% interest in Global Solar
Energy, L.L.C., a manufacturer of thin-film photovoltaic cells,
and (iv) Southwest Energy Solutions, Inc. ("SES"), a provider of
ancillary energy services to electric consumers. SES owns all of
the outstanding common stock of SWPP Investment Company and SWPP
International, Ltd., which hold ownership interests in businesses
engaged in the manufacture and sale of concrete power poles.
In 1997, earnings for the Company declined relative to 1996
primarily due to the lower recognition of non-cash income tax
benefits in 1997. Net income was $83.6 million in 1997, compared
with $120.9 million recorded in 1996 and $54.9 million recorded
in 1995. Income tax benefits related to prior period net
operating losses totaled $43.4 million in 1997, $88.6 million in
1996 and $23.3 million in 1995, accounting for the majority of
the fluctuation in reported net income for the last three years.
See Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Income Tax Position," in
the 1997 10-K. The Company's common stock equity was $216.9
million at year-end, compared to $133.3 million as of December
31, 1996, benefiting from a fourth consecutive year of
profitability.
In addition to the reduction in income tax benefits
described above, items having a one-time effect on earnings
resulted in net reductions to earnings of $2.4 million in 1997
and $6.1 million in 1996. Excluding each of these one-time items
from the periods in which they were recorded, ongoing net income
increased by 11% to $42.6 million in 1997 from $38.3 million in
1996. See Item 7. - Management's Discussion and Analysis of
Financial Condition and Results of Operations - "Overview" and
Item 8. - Consolidated Financial Statements and Supplementary
Data - Notes 4, 7 and 9 of Notes to Consolidated Financial
Statements in the 1997 10-K for information pertaining to certain
of these items.
The Company's net cash flows from operating activities were
$124.4 million in 1997, $151.3 million in 1996 and $119.4 million
in 1995. After capital expenditures, scheduled debt maturities
and payments to retire capital lease obligations, net cash flows
available for other investing and financing activities were $38.1
million in 1997, $36.9 million in 1996, and $25.9 million in
1995.
The Company recorded net income of $1.1 million for the
second quarter 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. The results in the second quarter of 1997 included the
effect of non-recurring tax benefits and a reversal of a loss
provision relating to the dissolution of one of TEP's former
investment subsidiaries, which were partially offset by non-
recurring expenses. See Item 2. -- Management's Discussion and
Analysis of Financial Condition and Results of Operations in the
Second Quarter 10-Q.
Excluding these one-time adjustments, the Company would have
recorded net income of $10.4 million in the second quarter of
1997. Results in the second quarter of 1998 were affected
primarily by lower tax benefit recognition, lower non-cash
regulatory revenues, higher interest expense and lower retail
sales due to mild weather conditions, as well as start-up costs
of new unregulated energy-related subsidiaries.
The results of the first six months of 1997 also included
the effects of non-recurring tax benefits, reversal of loss
provision and non-recurring expenses. Excluding these one-time
adjustments, the Company would have recorded net income of $10.0
millon in the first six months of 1997. Results in the first six
months of 1998 were effected primarily by losses from unregulated
energy-related subsidiaries, lower non-cash regulatory revenues,
and higher interest expense.
The unregulated 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.
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 due
mainly to the payment of $30 million in contract termination fees
to the coal supplier at the Company's Springerville Generating
Station in the first half of 1997 compared to only $10.0 million
11
<PAGE>
paid in the first half of 1998 and the receipt of $11.3 million
in June 1998 from the sale of emission allowances. During the
remainder of 1998 TEP expects to be able to fund operating
activities and construction expenditures with internal cash
flows, existing cash balances, and, if necessary, borrowings
under a revolving credit facility.
The principal executive offices of the Company and TEP are
located at 220 West Sixth Street, Tucson, Arizona 85702, where
the telephone number is (520) 571-4000.
12
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The TEP Warrants were issued at an initial exercise price of
$3.20 per share, pursuant to the TEP Warrant Agreement. In May
1996 TEP completed a one-for-five reverse split of its common
stock. Pursuant to the terms of the TEP Warrant Agreement, the
TEP Warrants are currently exercisable and expire December 15,
2002. The exercise terms are, giving effect to the reverse stock
split, five TEP Warrants plus an exercise price of $16.00 for
each share of TEP common stock.
On January 1, 1998, TEP and the Company completed the Share
Exchange, pursuant to which the outstanding common stock of TEP
was exchanged, on a share-for-share basis, for shares of the
Company's Common Stock. The consummation of the Share Exchange
did not convert the TEP Warrants into warrants to purchase shares
of Company Common Stock. TEP common stock is no longer listed on
any stock exchange and there is no established market for trading
shares of TEP common stock.
In order to provide TEP Warrant Holders with the opportunity
to obtain warrants exercisable into UNS Common Stock, which is
listed and has an established market, the Company is offering to
exchange UNS Warrants for TEP Warrants pursuant to the terms
presented herein. For each TEP Warrant surrendered to and
accepted by the Company pursuant to the Exchange Offer, the
Holder of such TEP Warrant will receive 0.20 1999 UNS Warrant and
2000 UNS Warrant. One 1999 UNS Warrant will entitle the
-------
Holder to purchase one share of Company Common Stock at a
purchase price of $16.00 through and including March 15, 1999 and
one 2000 UNS Warrant will entitle the Holder to purchase one
share of Company Common Stock at a purchase price of $16.00
through and including December 15, 2000.
TERMS OF THE EXCHANGE OFFER
As of the date of this Prospectus, there were outstanding
12,054,279 aggregate number of TEP Warrants. This Prospectus,
together with the Letter of Transmittal, is being sent to all
registered Holders of the TEP Warrants.
The Company has fixed the close of business on , 1998
-------
as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of
Transmittal will be mailed initially. Only a Holder of TEP
Warrants may tender such TEP Warrants in the Exchange Offer. The
term "Holder" with respect to the Exchange Offer means (i) any
person in whose name TEP Warrants are registered on the Company's
books, or (ii) any other person who has obtained a properly
completed assignment from a Holder.
Upon satisfaction or waiver of all the conditions set forth
in this Prospectus and in the Letter of Transmittal, the Company
will accept any and all TEP Warrants validly tendered to the
Exchange Agent and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue 1999
UNS Warrants and 2000 UNS Warrants on or promptly after the
Expiration Date in numbers equal to 0.20 1999 UNS Warrant and
2000 UNS Warrant in exchange for each TEP Warrant
--------
surrendered pursuant to the Exchange Offer.
In all cases, issuance of UNS Warrants for TEP Warrants that
are accepted for exchange pursuant to the Exchange Offer will be
made only after timely receipt by the Exchange Agent of a
properly completed and duly executed Letter of Transmittal and
all other required documents; provided, however, that the Company
reserves the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offer.
If any tendered TEP Warrants are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer, or if
TEP Warrants are submitted for a greater number than the Holder
desires to exchange, then such unaccepted or non-exchanged TEP
Warrants evidencing the unaccepted portion, as appropriate, will
be returned without expense to the tendering registered Holder
thereof as promptly as practicable after the expiration or
termination of the Exchange Offer. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly
tendered TEP Warrants for exchange if, as and when the Company
shall have given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering
Holders for the purposes of receiving the UNS Warrants from the
Company.
Holders who tender TEP Warrants in the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject
13
<PAGE>
to the instructions in the Letter of Transmittal, transfer taxes
with respect to the exchange pursuant to the Exchange Offer. The
Company will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the Exchange
Offer. See "Fees and Expenses."
The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act
and the rules and regulations of the SEC thereunder. Any and all
TEP Warrants acquired by the Company will be delivered to TEP for
cancellation. TEP Warrants that are not tendered for exchange in
the Exchange Offer will remain outstanding and will be entitled to
such rights and benefits such Holders have under the TEP Warrant
Agreement. Holders of TEP Warrants do not have any appraisal or
dissenters' rights under Arizona law or the TEP Warrant Agreement
in connection with the Exchange Offer. No TEP Warrants are to be
acquired from any officer, director or affiliate of TEP.
NO FRACTIONAL WARRANTS
No certificate representing fractional UNS Warrants will be
issued in connection with the Exchange Offer. Fractional UNS
Warrants that otherwise would be issued in exchange for TEP
Warrants pursuant to the Exchange Offer will be rounded up to the
nearest whole UNS Warrant.
EXPIRATION DATE
The term "Expiration Date," shall mean 5:00 p.m., New York
City time, on September , 1998, unless the Company, in its sole
---
discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which
the Exchange Offer is extended. In order to extend the Exchange
Offer the Company will notify the Exchange Agent of any extension
by oral or written notice and will mail to the registered Holders
an announcement thereof prior to 9:00 a.m., New York City time,
on the next business day after the then Expiration Date.
RIGHT TO TERMINATE OR AMEND
Notwithstanding any other term of the Exchange Offer, the
Company expressly reserves the right at any time prior to the
Expiration Date, in its sole discretion, (i) to delay accepting
any TEP Warrants and to extend the Exchange Offer, (ii) terminate
the Exchange Offer, or (iii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptances, extension,
termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered
Holders.
If the Company determines in its sole discretion to extend,
terminate or amend the Exchange Offer, the Company may (i) refuse
to accept any TEP Warrants and return all tendered TEP Warrants
to the tendering Holders, (ii) extend the Exchange Offer and
retain all TEP Warrants tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of Holders who
tendered such TEP Warrants to withdraw their tendered TEP
Warrants, or (iii) waive any unsatisfied conditions of tender and
accept all properly tendered TEP Warrants which have not been
withdrawn. If any such amendment or waiver constitutes a
material change to the Exchange Offer, the Company will promptly
disclose such amendment or waiver by means of a prospectus
supplement that will be distributed to the Holders, and the
Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the
amendment or waiver and the manner of disclosure to the Holders,
if the Exchange Offer would otherwise expire during such five to
ten business day period.
PROCEDURES FOR TENDERING
To tender TEP Warrants in the Exchange Offer, a Holder must
complete, sign and date the Letter of Transmittal, or facsimile
thereof, have the signatures thereon guaranteed if required by
the Letter of Transmittal, and mail or otherwise deliver such
Letter of Transmittal or such facsimile along with the
certificates for such TEP Warrants to the Exchange Agent prior to
the Expiration Date. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the
Exchange Agent at the address set forth below under "Exchange
Agent" prior to the Expiration Date.
A tender by a Holder which is not withdrawn prior to the
Expiration Date will constitute an agreement between such Holder
and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
14
<PAGE>
THE METHOD OF DELIVERY OF TEP WARRANTS AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE
AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF
DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT
OR HAND DELIVERY SERVICE AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR TEP WARRANTS SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose interests in the TEP Warrants are
registered in the name of a broker, dealer, commercial bank,
trust company, nominee or other securities intermediary and who
wishes to tender such TEP Warrants in the Exchange Offer should
contact such securities intermediary promptly and instruct such
securities intermediary to tender on such beneficial owner's
behalf. If any such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering such owner's
TEP Warrants, either make appropriate arrangements to register
ownership of the TEP Warrants in such owner's name or obtain a
properly completed assignment from the registered Holders of the
TEP Warrants. The transfer of ownership may take considerable
time and might not be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by an Eligible
Institution (as defined below) unless the TEP Warrants tendered
pursuant thereto are tendered (i) by a Holder who has not
completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal
or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantor must be a member firm of a registered
national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-
15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other
than the registered Holder(s), such TEP Warrants must be endorsed
or accompanied by a properly completed assignment signed by such
Holder as such Holder's name appears on such TEP Warrants.
If the Letter of Transmittal or any TEP Warrants or
assignments are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons
should so indicate when signing and, unless waived by the
Company, evidence satisfactory to the Company of their authority
to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility
(including time of receipt), acceptance of tendered TEP Warrants
and withdrawal of tendered TEP Warrants will be determined by the
Company in its sole discretion, which determination will be final
and binding. The Company reserves the absolute right to reject
any and all TEP Warrants not properly tendered or any TEP
Warrants the Company's acceptance of which would, in the opinion
of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or
conditions of tender as to particular TEP Warrants. The
Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders
of TEP Warrants must be cured within such time as the Company
shall determine. Although the Company intends to notify
registered Holders of defects or irregularities with respect to
tenders of TEP Warrants, none of the Company, the Exchange Agent
or any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of TEP
Warrants, nor shall any of them incur any liability for failure
to give such notification. Tenders of TEP Warrants will not be
deemed to have been made until such defects or irregularities
have been cured or waived. Any TEP Warrants received by the
Exchange Agent that are not properly tendered and as to which the
defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering registered
Holders, unless otherwise provided in the Letter of Transmittal,
as soon as practicable following the Expiration Date.
15
<PAGE>
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of TEP Warrants
may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date.
To withdraw a tender of TEP Warrants in the Exchange Offer,
a Holder must send to the Exchange Agent a telegram, facsimile
transmission or letter at its address set forth herein, prior to
5:00 p.m., New York City time, on the Expiration Date. Any such
withdrawal notice must (i) specify the name of such Holder,
(ii) identify the number of TEP Warrants delivered for exchange,
(iii) contain a statement that such Holder is withdrawing such
TEP Warrants for exchange and (iv) specifying the TEP Warrants to
be withdrawn (including the certificate number). Any such notice
of withdrawal must be signed by the Holder in the same manner as
the original signature on the Letter of Transmittal by which such
TEP Warrants were tendered (including any required signature
guarantees).
All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by
the Company in its sole discretion, which determination shall be
final and binding on all parties. Any TEP Warrants so withdrawn
will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no UNS Warrants will be issued with
respect thereto unless the TEP Warrants so withdrawn are validly
re-tendered. Any TEP Warrants which have been tendered but which
are not accepted for exchange will be returned to the registered
Holder thereof without cost to such Holder as soon as practicable
after withdrawal. Properly withdrawn TEP Warrants may be re-
tendered by following one of the procedures described above under
"Procedures for Tendering" at any time prior to the Expiration
Date.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent,
addressed as follows:
By Registered Mail or By Overnight Courier:
Certified Mail:
The Bank of New York Tender and Exchange Department
Tender and Exchange Department The Bank of New York
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
By Telephone: By Facsimile:
(212) 815-2499 (212) 815-6213
Originals of all documents submitted by facsimile should be
sent promptly by registered mail, overnight courier or hand.
Delivery to an address other than as set forth above will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be paid by the
Company. The principal solicitation is being made by mail;
however, additional solicitation may be made by telecopier,
telephone or in person by officers and regular employees of the
Company and its affiliates.
The Company has not retained any dealer-manager in
connection with the Exchange Offer and will not make any payments
to brokers-dealers or others soliciting acceptances of the
Exchange Offer. Beacon Hill Partners, Inc. has been engaged to
transmit copies of this Prospectus to beneficial owners of TEP
Warrants at a cost to the Company of approximately $1,000 plus
reasonable out-of-pocket expenses. The Company will pay the
Exchange Agent reasonable and customary fees for its services and
will reimburse the Exchange Agent for its reasonable out-of-
pocket expenses in connection therewith.
16
<PAGE>
The cash expenses to be incurred in connection with the
Exchange Offer will be paid by the Company. Such expenses
include fees and expenses of the Exchange Agent, accounting and
legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable
to the exchange of the TEP Warrants pursuant to the Exchange
Offer. If, however, certificates representing UNS Warrants for
warrants not tendered or accepted for exchange are to be
delivered to, or are to be issued in the name of, any person
other than the Holder of TEP Warrants tendered, or if tendered
TEP Warrants are registered in the name of any person other than
the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of the TEP
Warrants pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or
any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such
tendering Holder.
The Company will not receive any proceeds from the Exchange
Offer. In consideration of issuing the UNS Warrants in the
Exchange Offer, the Company will receive the TEP Warrants. TEP
Warrants that are properly tendered in the Exchange Offer and not
validly withdrawn will be accepted, and canceled and cannot be
reissued.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance
of the UNS Warrants or from the Exchange Offer. TEP Warrants that
are properly tendered in the Exchange Offer and not validly
withdrawn will be accepted and canceled and cannot be reissued.
To the extent that shares of Common Stock are purchased from the
Company pursuant to the exercise of the UNS Warrants, the Company
will receive all of the proceeds from such sales and intends to
use the proceeds for general corporate purposes.
DIFFERENCES BETWEEN THE TEP WARRANTS
AND THE UNS WARRANTS
The form and terms of the UNS Warrants are substantially the
same as the form and terms of the TEP Warrants except that one
1999 UNS Warrant will entitle the Holder to purchase one share of
Company Common Stock at a purchase price of $16.00 through and
including March 15, 1999 and one 2000 UNS Warrant will entitle
the Holder to purchase one share of Company Common Stock at a
purchase price of $16.00 through and including December 15, 2000.
The TEP Warrants were originally issued at an exercise price
of $3.20 per share, expiring in 2002, pursuant to the terms of
the TEP Warrant Agreement. The one share of TEP Common Stock
currently issuable upon exercise of five TEP Warrants and the
current exercise price of $16.00 per share give effect to the
one-for-five reverse stock split completed by TEP in May 1996.
The Bank of New York acts as initial Warrant Agent under the
Warrant Agreement. There is no warrant agent under the TEP
Warrant Agreement.
The statements contained herein concerning the TEP Warrants,
the UNS Warrants, the TEP Warrant Agreement and the Warrant
Agreement do not purport to be complete and are qualified in
their entirety by reference to the TEP Warrant Agreement and the
Warrant Agreement.
DESCRIPTION OF THE UNS WARRANTS
GENERAL
The 1999 UNS Warrants and 2000 UNS Warrants will be issued
in substantially the form annexed hereto as Exhibits A and B to
Appendix A, respectively. The UNS Warrants will be issued under
17
<PAGE>
and be entitled to all the rights and benefits of, and subject to
the limitations under, the Warrant Agreement.
TERMS OF THE UNS WARRANTS
Exercise and Expiration. Subject to adjustments in certain
circumstances, each 1999 UNS Warrant gives the registered holder
of such Warrant (the "Registered Warrant Holder") the right to
purchase one share of Company Common Stock at an initial price of
$16.00 per share (the "Exercise Price") at any time prior to 5:00
p.m. on March 15, 1999 and each 2000 UNS Warrant gives such
Registered Warrant Holder the right to purchase one share of
Company Common Stock at the Exercise Price at any time prior to
5:00 p.m. on December 15, 2000.
Registration and Transfer of the Warrants. UNS Warrant
certificates may be exchanged for other UNS Warrant certificates
representing an equal aggregate number of UNS Warrants of like
tenor and the transfer of UNS Warrant certificates may be
registered, in whole or in part, at the offices of the Warrant
Agent.
Redemption. The UNS Warrants are not subject to mandatory
redemption by the Company, except that the Registered Warrant
Holders have the option to require the Company to redeem the UNS
Warrants in the case of a merger, consolidation or sale, transfer
or lease of all or substantially all the assets of the Company,
as described below.
Method of Exercise. The UNS Warrants are exercisable by
surrendering to the Warrant Agent at its principal office a UNS
Warrant certificate signed by the Registered Warrant Holder or
his duly authorized agent indicating such Registered Warrant
Holder's election to exercise all or a portion of the UNS
Warrants evidenced by that certificate. Surrendered UNS Warrant
certificates have to be accompanied by the amount of the
aggregate Exercise Price. Payment of such amount has to be made
in lawful money of the United States in cash or by certified or
official bank check. The Company has reserved for issuance a
number of shares of Common Stock sufficient to provide for
exercise of the rights of purchase represented by the UNS
Warrants. When delivered, those shares of Common Stock will be
duly and validly authorized and issued, fully paid and
nonassessable, and will be free and clear of all liens,
encumbrances, equities and claims, and no preemptive rights or
rights of first refusal will exist with respect to the shares.
Adjustment of Exercise Price and Number of Shares of Common
Stock. The number and kind of shares purchasable upon the
exercise of UNS Warrants and the Exercise Price are subject to
adjustment from time to time as follows:
(a) Changes in Common Stock. In the event the company
shall (i) issue any shares of Common Stock as a stock dividend to
the holders of Common Stock, (ii) subdivide or combine the
outstanding shares Common Stock into a greater or lesser number
of shares or (iii) issue any shares of its capital stock in a
reclassification or reorganization of the Common Stock (any such
issuance, subdivision, combination, reclassification or
reorganization being herein called a "Change of Shares"), then
(A) in the case of (i) or (ii) above the number of shares of
Common Stock that may be purchased upon the exercise of each UNS
Warrant shall be adjusted to the number of shares of Common Stock
of the Company that the Registered Warrant Holder would have
owned or have been entitled to receive after the happening of
such event had such UNS Warrant been exercised immediately prior
to the record date (or, if there is no record date, the effective
date) for such event, and the Exercise Price shall be adjusted to
the price (calculated to the nearest 1,000th of one cent)
determined by multiplying the Exercise Price immediately prior to
such event by a fraction the numerator of which shall be the
number of shares of Common Stock purchasable with one UNS Warrant
immediately prior to such event and the denominator of which
shall be the number of shares of Common Stock purchasable with
one UNS Warrant after the adjustment referred to above and (B) in
the case of (iii) above, paragraph (h) below shall apply.
(b) Common Stock Distribution. In the event the
Company shall issue, sell or otherwise distribute any shares of
Common Stock (other than (x) pursuant to Change of Shares or (y)
upon the exercise of any Option, Convertible Security (each as
defined in paragraph (c) below) or UNS Warrant) (any such event,
including any event described in paragraphs (c) and (d) below,
being herein called a "Common Stock Distribution"), for a
consideration per share less than the current market price per
share of Common Stock (as defined in paragraph (f) below) on the
date of such Common Stock Distribution, then, effective upon such
Common Stock Distribution, the Exercise Price shall be reduced to
the price determined by multiplying the Exercise Price in effect
immediately prior to such Common Stock Distribution by a
fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding (exclusive of any
treasury shares) immediately prior to such Common Stock
Distribution multiplied by the current market price per share of
Common Stock on the date of such Common Stock Distribution, plus
(ii) the consideration, if any, received by the Company upon such
Common Stock Distribution, and the denominator of which shall be
18
<PAGE>
the product of (A) the total number of shares of Common Stock
outstanding (exclusive of any treasury shares) immediately after
such Common Stock Distribution multiplied by (B) the current
market price per share of Common Stock on the date of such Common
Stock Distribution.
If any Common Stock Distribution shall require an
adjustment to the Exercise Price, then, effective at the time
such adjustment is made, the number of shares of Common Stock
purchasable upon the exercise of each UNS Warrant shall be
increased to a number determined by multiplying the number of
such shares so purchasable immediately prior to such Common Stock
Distribution by a fraction, the numerator of which shall be the
Exercise Price in effect immediately prior to such adjustment and
the denominator of which shall be the Exercise Price in effect
immediately after such adjustment.
The provisions described in this paragraph (b),
including by operation of the provisions described in paragraph
(c) or (d) below, shall not operate to increase the Exercise
Price or reduce the number of shares of Common Stock purchasable
upon the exercise of any UNS Warrant.
(c) Issuance of Options. In the event the Company
shall issue, sell, distribute or otherwise grant in any manner
(including by assumption) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable
for Common Stock (any such rights, warrants or options being
herein called "Options" and any such convertible or exchangeable
stock or securities being herein called "Convertible
Securities"), and the price per share at which Common Stock is
issuable upon the exercise of such Options or upon the conversion
or exchange of such Convertible Securities shall be less than the
current market price per share of Common Stock on the date of the
issuance, sale, distribution or granting of such Options then,
for purposes of the provisions described in paragraph (b) above,
the total maximum number of shares of Common Stock issuable upon
the exercise of all such Options or upon the conversion or
exchange of the total maximum amount of the Convertible
Securities issuable upon the exercise of all such Options shall
be deemed to have been issued as of the date of the issuance,
sale, distribution or granting of such Options and thereafter
shall be deemed to be outstanding and the Company shall be deemed
to have received as consideration the price per share therefor.
Except in certain limited circumstances, no additional adjustment
of the Exercise Price shall be made upon the actual exercise of
such Options or conversion or exchange of the Convertible
Securities issuable upon the exercise of such Options.
(d) Issuance of Convertible Securities. In the event
the Company shall issue, sell or otherwise distribute (including
by assumption) any Convertible Securities (other than upon the
exercise of any Option), and the price per share at which Common
Stock is issuable upon the conversion or exchange of such
Convertible Securities shall be less than the current market
price per share of Common Stock on the date of such issuance,
sale or distribution, then, for purposes of the provisions
described in paragraph (b) above, the total maximum number of
shares of Common Stock issuable upon the conversion or exchange
of all such Convertible Securities shall be deemed to have been
issued as of the date of the issuance, sale or distribution of
such Convertible Securities and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as
consideration the price per share therefor. Except in certain
limited circumstances, no additional adjustment of the Exercise
Price shall be made upon the actual conversion or exchange of
such Convertible Securities.
(e) Dividends and Distributions. In the event the
Company shall distribute to the holders of Common Stock any
dividend or other distribution of cash, evidences of its
indebtedness, other securities or other properties or assets (in
each case other than (i) dividends payable in Common Stock,
Options or Convertible Securities and (ii) any cash dividend
that, when added to all other cash dividends paid in the one year
prior to the declaration date of such dividend (excluding any
such other dividend included in a previous adjustment of the
Exercise Price pursuant to the provisions described in this
paragraph (e)), does not exceed 10% of the current market price
per share of Common Stock on such declaration date), or any
options, warrants or other rights to subscribe for or purchase
any of the foregoing, then (A) the Exercise Price shall be
decreased to a price determined by multiplying the Exercise Price
then in effect by a fraction, the numerator of which shall be the
current market price per share of Common Stock on the record date
for such distribution less the sum of (X) the cash portion, if
any, of such distribution per share of Common Stock outstanding
(exclusive of any treasury shares) on the record date for such
distribution plus (Y) the then fair market value (as determined
in good faith by the Board of Directors of the Company) per share
of Common Stock outstanding (exclusive of any treasury shares) on
the record date for such distribution of that portion, if any, of
such distribution consisting of evidences of indebtedness, other
securities, properties, assets, options, warrants or subscription
or purchase rights, and the denominator of which shall be such
current market price per share of Common Stock and (B) the number
of shares of Common Stock purchasable upon the exercise of each
19
<PAGE>
UNS Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock so purchasable
immediately prior to the record date for such distribution by a
fraction, the numerator of which shall be the Exercise Price in
effect immediately prior to the adjustment required by the
provisions described in clause (A) of this sentence and the
denominator of which shall be the Exercise Price in effect
immediately after such adjustment.
(f) Current Market Price. For the purpose of any
computation described in paragraphs (b), (c), (d) and (e) above,
the current market price per share of Common Stock at any date
shall be the average of the daily closing prices for the shorter
of (i) the 20 consecutive trading days ending on the last full
trading day on the exchange or market specified in the second
succeeding sentence prior to the Time of Determination and (ii)
the period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or
granting in question through such last full trading day prior to
the Time of Determination. The term "Time of Determination"
shall mean the time and date of the earlier to occur of (A) the
date as of which the current market price is to be computed and
(B) the last full trading day on such exchange or market before
the commencement of "ex-dividend" trading in the Common Stock
relating to the event giving rise to the adjustment required by
the provisions described in paragraph (b), (c), (d) or (e). The
closing price for any day shall be the last reported sale price
regular way or, in case no such reported sale takes place on such
day, the average of the closing bid and asked prices regular way
for such day, in each case (1) on the principal national
securities exchange on which the shares of Common Stock are
listed or to which such shares are admitted to trading or (2) if
the Common Stock is not listed or admitted to trading on a
national securities exchange, in the over-the-counter market as
reported by NASDAQ or any comparable system or (3) if the Common
Stock is not listed on NASDAQ or a comparable system, as
furnished by two members of the NASD selected from time to time
in good faith by the Board of Directors of the Company for that
purpose. In the absence of all of the foregoing, or if for any
other reason the current market price per share cannot be
determined pursuant to the foregoing provisions described in this
paragraph (f), the current market price per share shall be the
fair market value thereof as determined in good faith by the
Board of Directors of the Company.
(g) Deferral of Certain Adjustments. No adjustment to
the Exercise Price (including the related adjustment to the
number of shares of Common Stock purchasable upon the exercise of
each UNS Warrant) shall be required unless such adjustment,
together with other adjustments carried forward as provided
below, would result in an increase or decrease of at least one
percent of the purchase price; provided, however, that any
adjustments which by reason of the provisions described in this
paragraph are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. No
adjustment need be made for a change in the par value of the
Common Stock.
(h) Other Adjustments. In the event that at any time,
as a result of an adjustment made pursuant to the anti-dilution
provisions of the Warrant Agreement, the Registered Warrant
Holders shall become entitled to receive any securities of the
Company other than shares of Common Stock, thereafter the number
of such other securities so receivable upon exercise of the UNS
Warrants and the Exercise Price applicable to such exercise shall
be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in the Warrant
Agreement.
(i) Excluded Transactions. Notwithstanding any
provision in this section to the contrary, no adjustment shall be
made as described above in respect of (A) the granting of any
Options or the issuance of any shares of Common Stock that may be
registered on Form S-8 or any successor form under the Securities
Act of 1933, as amended, to any officers, directors or employees
of, or any consultants or advisors to, the Company or any of its
affiliates, or (ii) the issuance of Common Stock pursuant to any
dividend reinvestment or direct stock purchase plan which
provides that the price of the Common Stock purchased for plan
participants from the Company will be the average of the high and
low sales prices of the Common Stock on the consolidated tape on
the investment date or, if no trading in the Common Stock occurs
on such date, the next preceding date on which trading occurred;
provided, however, that clause (A) of this paragraph (i) shall
-------- -------
not apply to any such grant or issuance, if, after giving effect
thereto, the aggregate amount of Common Stock issued in all
transactions covered by clause (A) of this paragraph (i)
(assuming the exercise of all then outstanding Options granted in
such transactions) would exceed 5% of the number of shares of
Common Stock then outstanding (after giving effect to the
exercise of all then outstanding Options so granted but before
giving effect to any other exercise of Options or Convertible
Securities).
Preservation of Purchase Rights upon Merger, Consolidation,
etc.; Mandatory Redemption of UNS Warrants. (a) In case of any
consolidation or merger of the Company with or into another
person or in case of any sale, transfer or lease to another
20
<PAGE>
person of all or substantially all the property of the Company,
the Company and such successor or purchasing person, as the case
may be, shall agree in writing (and such consolidation, merger,
sale, transfer or lease shall not be consummated without such
agreement) that each Registered Warrant Holder shall have the
right thereafter upon payment of the Exercise Price in effect
immediately prior to such action to purchase upon exercise of a
UNS Warrant the kind and amount of securities, cash and other
property that it would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale,
transfer or lease had such UNS Warrant been exercised immediately
prior to such action (provided that if the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or lease is not the same
for each share of Common Stock, then for the purposes of the
provisions described in this paragraph (a) the kind and amount of
securities, cash and other property receivable upon exercise of
the UNS Warrants immediately after such consolidation, merger,
sale, transfer or lease shall be the kind and amount so
receivable per share by the holders of a majority of the
outstanding shares of Common Stock).
(b) Each Registered Warrant Holder shall have the
option to require the Company (or its successor) to redeem all or
any part of such Registered Warrant Holder's UNS Warrants upon
the consummation of any consolidation or merger of the Company
with or into another person or any sale, transfer or lease to
another person of all or substantially all the property of the
Company. A Registered Warrant Holder may exercise such option by
giving to the Warrant Agent, within 10 business days after such
Registered Warrant Holder's receipt of the notice given by the
Company in respect of the consolidation, merger, sale, transfer
or lease in question (or, if such notice is not timely given by
the Company, at any time prior to such consummation), a written
notice (a "Notice of Exercise") specifying (i) that such option
is being exercised by such Registered Warrant Holder and (ii) the
number of UNS Warrants as to which such option is being
exercised.
From and after the giving of any Notice of Exercise, each
UNS Warrant covered thereby shall represent the right of the
Registered Warrant Holder thereof to receive from the Company (or
its successor), in immediately available funds on the date on
which the consolidation, merger, sale, transfer or lease in
question is consummated, an amount equal to the current market
price of such UNS Warrant. For purposes of this paragraph (b),
the current market price of each UNS Warrant shall equal the
average of the daily closing prices of the UNS Warrants for the
20 consecutive trading days ending on the last full trading day
on the exchange or market identified pursuant to the next
succeeding sentence prior to the first public announcement of the
consolidation, merger, sale, lease or transfer in question. The
closing price of the UNS Warrants for any day shall be determined
in the same manner as the closing price of the Common Stock is
determined under the anti-dilution provisions of the Warrant
Agreement (described above). If for any reason the daily closing
price of the UNS Warrants during such 20-trading day period
cannot be determined as provided in such sentence, current market
price of each UNS Warrant shall equal the average fair market
value for the 20 consecutive business days preceding such first
public announcement, as determined by two members of the NASD
selected in good faith by the Board of Directors of the Company.
The nonexercise of the foregoing option with respect to
any UNS Warrant in connection with any consolidation, merger,
sale, lease or transfer shall not preclude the exercise of such
option with respect to such UNS Warrant in connection with any
subsequent consolidation, merger, sale, lease or transfer. In
the case of any consolidation or merger in which the Company is
not the surviving entity or in the case of any sale, lease or
transfer, the Company shall cause its successor to agree in
writing (and such consolidation, merger, sale, lease or transfer
shall not be consummated without such agreement) that it shall be
responsible for the performance of the Company's obligations
described above.
Miscellaneous. Registered Warrant Holders will not be
entitled, by virtue of being holders, to receive dividends or to
consent or to receive notice as shareholders in respect of any
meeting of shareholders for the election of directors of the
Company or any other matter, or to vote at any such meeting, or
to exercise any rights whatsoever as shareholders.
The statements contained herein concerning the TEP Warrants,
the UNS Warrants, the TEP Warrant Agreement and the Warrant
Agreement do not purport to be complete and are qualified in
their entirety by reference to the TEP Warrant Agreement and the
Warrant Agreement.
WARRANT AGENT
The Bank of New York serves as the Warrant Agent under the
Warrant Agreement.
21
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company presently
consists of 76,000,000 shares, consisting of 75,000,000 shares of
Common Stock without par value, and 1,000,000 shares of preferred
stock without par value ("Preferred Stock"). As of August 7,
1998 there were 32,147,080 shares of Common Stock outstanding and
no shares of Preferred Stock outstanding.
The following is a summary of certain rights and privileges
of the holders of the Company's stock. This summary does not
purport to be complete. Reference is made to the Company's
Restated Articles of Incorporation and to the laws of the State
of Arizona, the following information being qualified in its
entirety by such reference.
COMMON STOCK
Dividend Rights. Subject to certain limitations, if any,
specified with respect to the Preferred Stock, or any series
thereof, dividends may be paid on shares of Common Stock, out of
any funds legally available therefor, when and as declared by the
Company's Board of Directors.
Liquidation Rights. Subject to the limitations, if any,
specified with respect to the Preferred Stock, or any series
thereof, in the event of any dissolution or other winding up of
the Company, whether voluntary or involuntary, the assets of the
Company available for payment and distribution to shareholders
shall be distributed ratably in accordance with their holdings to
the holders of shares of the Common Stock.
Voting Rights. All voting power is vested in the holders of
the Common Stock, except as and to the extent otherwise specified
with respect to the Preferred Stock, or any series thereof. Each
holder of the Common Stock shall, in the election of directors
and upon each other matter coming before any meeting of
shareholders, be entitled to one (1) vote for each share of such
stock outstanding in the name of such holder on the books of the
Company.
Miscellaneous. The Common Stock has no preemptive or
conversion rights or redemption or sinking fund provisions and
the outstanding Common Stock is fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors of the Company has authority to
divide the Preferred Stock into series and to determine the
designation, preferences, and voting powers of the shares of each
series so established and the restrictions and qualifications
thereof, all to the extent and in the manner provided by law.
22
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States
federal income tax consequences of the purchase, ownership and
disposition of the 1999 UNS Warrants and 2000 UNS Warrants as of
the date hereof. Except where noted, it deals only with 1999 UNS
Warrants and 2000 UNS Warrants held as capital assets and does
not deal with special situations, such as those of dealers in
securities or currencies, financial institutions, life insurance
companies, persons holding 1999 UNS Warrants and 2000 UNS
Warrants as a part of a hedging or conversion transaction or a
straddle, or persons who are not United States Holders (as
defined herein). In addition, this discussion does not address
the tax consequences to persons who acquire 1999 UNS Warrants and
2000 UNS Warrants other than pursuant to their initial issuance
and distribution. Furthermore, the discussion below is based
upon the provisions of the Internal Revenue Code of 1986, as
amended, and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified at any time, with either forward-
looking or retroactive effect, so as to result in United States
federal income tax consequences different from those discussed
below.
PROSPECTIVE HOLDERS OF 1999 UNS WARRANTS AND 2000 UNS
WARRANTS, INCLUDING PERSONS WHO ARE NOT UNITED STATES HOLDERS AND
PERSONS WHO PURCHASE 1999 UNS WARRANTS AND 2000 UNS WARRANTS IN
THE SECONDARY MARKET, ARE ADVISED TO CONSULT WITH THEIR TAX
ADVISORS AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF 1999 UNS WARRANTS
AND 2000 UNS WARRANTS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES,
AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
UNITED STATES HOLDERS
As used herein, a "United States Holder" means a Holder of a
TEP Warrant that is (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate, the income of
which is subject to United States federal income taxation
regardless of its source, or (iv) a trust, the administration of
which is subject to the primary supervision of a court within the
United States and for which one or more United States persons
have the authority to control all substantial decisions.
EXCHANGE OF UNS WARRANTS FOR TEP WARRANTS
An exchange of UNS Warrants for TEP Warrants should
constitute a taxable event for federal income tax purposes. As a
result, a U.S. Holder will recognize gain or loss equal to the
difference between the amount realized upon the exchange, and
such U.S. Holder's adjusted tax basis in the TEP Warrants
surrendered. The amount realized upon the exchange will
generally equal the fair market value of the UNS Warrants
received. A U.S. Holder's adjusted tax basis in the TEP Warrants
exchanged will be, in general, such Holder's cost of the TEP
Warrants. Any such gain or loss recognized upon the exchange of
UNS Warrants for TEP Warrants will be capital gain or loss.
The Taxpayer Relief Act of 1997 includes substantial changes
to the federal taxation of capital gains recognized by certain
noncorporate taxpayers, such as individuals, including a 20%
maximum rate for certain gains from the sale of capital assets
held for more than 18 months. The deductibility of capital
losses is subject to limitations.
SALE OR EXCHANGE OF THE UNS WARRANTS
Upon the sale or exchange of UNS Warrants, a United States
Holder will recognize gain or loss equal to the difference
between such Holder's adjusted tax basis in the UNS Warrants and
the amount realized upon the sale or exchange. A United States
Holder's adjusted tax basis in the UNS Warrants will be, in
general, the fair market value of such warrants at the time they
were received by such Holder.
23
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting will apply to payments to
U.S. Holders other than certain exempt recipients (such as
corporations) of the proceeds upon the sale of the UNS Warrants.
A 31% backup withholding tax will apply to such payments if the
U.S. Holder (i) fails to provide a taxpayer identification
number, (ii) furnishes an incorrect TIN, (iii) is notified by the
Internal Revenue Service ("IRS") that it has failed to properly
report payments of interest and dividends, or (iv) under certain
circumstances, fails to certify, under penalty of perjury, that
it has furnished a correct TIN and has not been notified by the
IRS that it is subject to backup withholding.
Any amounts withheld under the backup withholding rules will
be allowed as a refund or a credit against such U.S. Holder's
U.S. federal income tax liability provided the required
information is furnished to the IRS.
EXPERTS
The consolidated financial statements incorporated in this
Prospectus by reference from the 1997 10-K have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their
report included in the 1997 10-K which is incorporated herein by
reference, and have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in
accounting and auditing.
With respect to the unaudited consolidated financial
information of the Company and TEP for the three-month period
ended March 31, 1998 and the six-month period ended
June 30, 1998, incorporated by reference
in this Prospectus, PricewaterhouseCoopers LLP ("PwC") reported
that they have applied limited procedures in accordance with
professional standards for a review of such information.
However, their separate reports dated May 5, 1998 and August 4,
1998, incorporated by reference herein, state that they did not
audit and they do not express an opinion on that unaudited
consolidated financial information. PwC has not carried out any
significant or additional audit tests beyond those which would
have been necessary if their reports had not been included.
Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature
of the review procedures applied. PwC is not subject to the
liability provisions of section 11 of the Securities Act of 1933
for their reports on the unaudited consolidated financial
information because neither such is a "report" or a "part" of the
registration statement prepared or certified by PwC within the
meaning of sections 7 and 11 of the Act.
24
<PAGE>
APPENDIX A
WARRANT AGREEMENT dated as of ,
-------
1998, by and between UNISOURCE ENERGY CORPORATION,
an Arizona corporation (the "Company"), and THE
BANK OF NEW YORK, as warrant agent (in such
capacity, the "Warrant Agent").
WITNESSETH:
WHEREAS, the Company plans to make an offer (the
"Exchange Offer") to the holders of any and all warrants to
purchase shares of common stock of Tucson Electric Power Company
("TEP"), an Arizona corporation and wholly owned subsidiary of
the Company (the "TEP Warrants"), to exchange each of their TEP
Warrants for warrants expiring in 1999 to purchase shares of
common stock of the Company (the "1999 UNS Warrants") and
warrants expiring in 2000 to purchase shares of common stock of
the Company (the "2000 UNS Warrants" and, together with the 1999
UNS Warrants, the "Warrants"); and
WHEREAS, the Company desires the Warrant Agent to act
on behalf of the Company, and the Warrant Agent is willing to so
act, in connection with the issuance, registration, transfer,
exchange and redemption of the Warrants, the issuance of
certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof.
NOW, THEREFORE, in consideration of the foregoing, the
parties hereto hereby agree as follows:
SECTION 1. Definitions. As used herein, the following
-----------
terms shall have the following meanings:
(a) "Common Stock" shall mean stock of the Company of
any class, whether now or hereafter authorized, which has the
right to participate in the distribution of earnings and assets
of the Company without limit as to amount or percentage, which at
the date hereof consists of 75,000,000 shares of Common Stock,
without par value.
(b) "Corporate Office" shall mean, at any time, the
office of the Warrant Agent at which its principal [corporate
trust] business shall be administered, which office is located at
the date hereof at , New York, New York
-------------------------
10286].
(c) "Exercise Date" shall mean, as to each Warrant,
the date on which the Warrant Agent shall have received both (i)
the Warrant Certificate representing such Warrant, with a written
notice, in substantially the form of the Election to Purchase set
forth in Exhibits A and B hereto, which notice shall be completed
and duly executed by the Registered Holder thereof or his
attorney duly authorized in writing, and (ii) payment in cash, or
<PAGE>
by official bank or certified check made payable to the Company,
or by wire transfer, of an amount in lawful money of the United
States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean, as to
each Warrant, the date of issuance of such Warrant.
(e) "NASD" shall mean The National Association of
Securities Dealers, Inc.
(f) "NASDAQ" shall mean The National Association of
Securities Dealers, Inc. Automated Quotation System.
(g) "Purchase Price" shall mean the purchase price per
share of Common Stock to be paid upon exercise of each Warrant in
accordance with the terms hereof, which price shall initially be
$16.00 per share, subject to adjustment from time to time
pursuant to the provisions of Sections 8 and 10 hereof.
(h) "Registered Holder" shall mean each person in
whose name any certificate representing Warrants shall be
registered from time to time on the books maintained by the
Warrant Agent pursuant to Section 6 hereof.
(i) "Transfer Agent" shall mean The Bank of New York,
as the Company's transfer agent, or its authorized successor, as
such.
(j) "Warrant Certificates" shall mean, collectively,
warrant certificates for the 1999 UNS Warrants (the "1999 UNS
Warrant Certificates") and warrant certificates for the 2000 UNS
Warrants (the "2000 UNS Warrant Certificates").
(k) "Warrant Expiration Date" shall mean (i) with
respect to the 1999 UNS Warrants, 4:00 p.m. (Tucson, Arizona
time) on March 15, 1999, and (ii) with respect to the 2000 UNS
Warrants, 4:00 p.m. (Tucson, Arizona time) on December 15, 2000;
provided that if either such date shall in the State of Arizona
or the State of New York be a holiday or a day on which banks are
required or authorized to be closed, then 4:00 p.m. (Tucson,
Arizona time) on the next following day which in the State of
Arizona and the State of New York is not a holiday or a day on
which banks are required or authorized to be closed.
SECTION 2. Warrants and Issuance of Warrant
--------------------------------
Certificates. (a) Each Warrant shall initially represent the right
------------
to purchase from the Company, subject to the conditions contained
herein and in the related Warrant Certificate, one share of
Common Stock upon the exercise thereof, subject to adjustment
from time to time pursuant to the provisions of Sections 8 and 10
hereof.
2
<PAGE>
(b) Upon execution of this Agreement, Warrant
Certificates representing an aggregate of 1999 UNS Warrants
-----
and 2000 UNS Warrants shall be (i) executed on behalf of the
-----
Company in accordance with Section 3 and (ii) issued and
delivered to the Warrant Agent. Upon written order of the
Company signed by its President or any Vice President and by its
Secretary or an Assistant Secretary, the Warrant Certificates
shall be countersigned, issued and delivered by the Warrant
Agent.
(c) From time to time, up to the Warrant Expiration
Date, the Transfer Agent shall countersign and deliver stock
certificates in required whole number denominations representing
one share of Common Stock for each Warrant exercised, subject to
adjustment as described herein, upon the exercise of Warrants in
accordance with this Agreement.
(d) From time to time through the Warrant Expiration
Date, the Warrant Agent shall countersign and deliver Warrant
Certificates to the persons entitled thereto in connection with
any registration of transfer or exchange permitted under this
Agreement; provided that no Warrant Certificates shall be issued
except (i) those issued pursuant to Section 2(b), (ii) those
issued on or after the Initial Warrant Exercise Date, upon the
exercise of fewer than all Warrants represented by any Warrant
Certificate, to evidence any unexercised Warrants held by the
exercising Registered Holder, (iii) those issued upon any
registration of transfer or exchange pursuant to Section 6, (iv)
those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7 and (v) at
the option of the Company, in such form as may be approved by its
Board of Directors, to reflect any adjustment made pursuant to
Section 8 or 10 hereof.
SECTION 3. Form and Execution of Warrant Certificates.
------------------------------------------
The 1999 UNS Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A and the 2000 UNS Warrant
Certificates shall be substantially in the form annexed hereto as
Exhibit B, and such Warrant Certificates may have such letters,
numbers or other marks of identification or designation and such
legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may
be required to comply with any law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock
exchange on which the Warrants may be listed, or to conform to
usage. Each Warrant Certificate shall be dated the date of
issuance thereof (whether upon initial issuance, registration of
transfer, exchange or replacement) and issued in registered form.
Warrant Certificates shall be numbered serially with the letter W
on Warrant Certificates of all denominations.
Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice
President and by its Treasurer or an Assistant Treasurer or its
Secretary or an Assistant Secretary, by manual signatures or by
facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. Warrant Certificates
shall be manually countersigned by the Warrant Agent and shall
3
<PAGE>
not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer of the
Company before the date of issuance or before countersignature by
the Warrant Agent and issue and delivery thereof to the
applicable Registered Holders, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and
delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such
officer of the Company. After countersignature by the Warrant
Agent, Warrant Certificates shall be delivered by the Warrant
Agent to the Registered Holder without further action by the
Company, except as otherwise provided by Section 4 hereof. In
case the Company shall change its name or its state of
incorporation, Warrant Certificates bearing the Company's
previous name or state of incorporation shall continue to be
valid for all purposes.
SECTION 4. Exercise, Each Warrant may be exercised by
--------
the Registered Holder thereof at any time on or after the Initial
Warrant Exercise Date, but not after the Warrant Expiration Date,
upon the terms and subject to the conditions set forth herein and
in the related Warrant Certificate. As soon as practicable on or
after the Exercise Date the Warrant Agent shall deposit the
proceeds received from the exercise of a Warrant and shall notify
the Company in writing of the exercise of the Warrants. Promptly
following, and in any event within seven days after the date of
such notice from the Warrant Agent, the Warrant Agent, on behalf
of the Company, shall cause to be issued and delivered by the
Transfer Agent, to the person or persons entitled to receive the
same, a certificate or certificates for the securities
deliverable upon such exercise, unless prior to the date of
issuance of such certificates the Company shall instruct the
Warrant Agent to refrain from causing such issuance of
certificates pending clearance of checks received in payment of
the Purchase Price pursuant to such Warrants. The stock
certificate or certificates so delivered shall be in such
denominations as may be specified in such notice or, if such
notice shall not specify denominations, a single certificate
representing all the shares of Common Stock issuable upon such
exercise shall be delivered, and in either case such certificate
or certificates shall be issued in the name of the exercising
Registered Holder or such other name or names as shall be
designated in such notice. Such certificate or certificates
shall be deemed to have been issued, and such Registered Holder
or any other person so designated to be named therein shall be
deemed for all purposes to have become a holder of record of such
shares, as of the related Exercise Date. If a Warrant shall have
been exercised only in part, the Company shall, at the time of
delivery of the applicable stock certificate or certificates,
deliver to the applicable Registered Holder a new Warrant
Certificate to evidence any unexercised Warrants held by such
Registered Holder, which new Warrant Certificate shall in all
other respects be identical with the Warrant Certificate
surrendered. Upon the exercise of any Warrant and clearance of
the funds received, the Warrant Agent shall promptly remit the
payment received for the Warrant to the Company or as the Company
may direct in writing, subject to the provisions of Section 4
hereof.
SECTION 5. Reservation of Shares; Listing; Payment of
------------------------------------------
Taxes, etc. (a) The Company covenants that it will at all times
-----------
reserve and keep available out of its authorized Common Stock,
4
<PAGE>
solely for the purpose of issue upon exercise of Warrants, such
number of shares of Common Stock as shall then be issuable upon
the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock issued from time to time upon the
exercise of Warrants shall be duly and validly issued, fully
paid, nonassessable and free from all taxes, liens and other
charges, and that upon issuance such shares shall be listed on
each national securities exchange (including NASDAQ), if any, on
which any other shares of outstanding Common Stock of the Company
are then listed.
(b) The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation,
issuance and delivery of stock certificates and Warrant
Certificates; provided, however, that (i) if stock certificates or
-------- -------
new Warrant Certificates are to be delivered in a name other
than the name of the related Registered Holder, all transfer taxes
payable as a result of such transfer shall be paid by such
Registered Holder and (ii) delivery by the Company of stock
certificates or new Warrant Certificates in connection with
such transfer shall not be required hereunder unless such
transfer taxes, if any, shall have been paid.
(c) The Warrant Agent is hereby irrevocably authorized
to requisition the Company's Transfer Agent from time to time for
certificates representing shares of Common Stock issuable upon
exercise of the Warrants, and the Company will authorize the
Transfer Agent to comply with all such proper requisitions. The
Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company
for shares of Common Stock issuable upon exercise of the Warrants
if the Transfer Agent is other than that named in Section 1(i).
SECTION 6. Exchange and Registration of Transfer.
-------------------------------------
(a) Warrant Certificates for 1999 UNS Warrants may be exchanged
for other 1999 UNS Warrant Certificates representing an equal
aggregate number of 1999 UNS Warrants and Warrant Certificates
for 2000 UNS Warrants may be exchanged for other 2000 UNS Warrant
Certificates representing an equal aggregate number of 2000 UNS
Warrants. The transfer of Warrant Certificates may be
registered, in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corpo-
rate Office, and upon satisfaction of the terms and provisions
hereof, the Company shall execute, and the Warrant agent shall
countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates requested by the Registered Holder
making the exchange.
(b) The Warrant Agent shall keep at its Corporate
Office books in which, subject to such reasonable regulations as
it may prescribe, it shall register Warrant Certificates and the
transfer thereof. Upon due presentment for registration of
transfer of any Warrant Certificate at such office or agency, the
Company shall execute, and the Warrant Agent shall countersign,
issue and deliver to the transferee or transferees a new 1999 UNS
Warrant Certificate or Certificates or a new 2000 UNS Warrant
Certificate or Certificates, as the case may be, representing an
equal aggregate number of 1999 UNS Warrants or 2000 UNS Warrants,
5
<PAGE>
as the case may be. Notwithstanding the foregoing, a Warrant may
be exercised by a new Registered Holder without a new Warrant
Certificate having been issued.
(c) With respect to all Warrant Certificates presented
for registration of transfer, (i) an assignment in substantially
the form of the Assignment set forth in Exhibits A and B hereto
shall be duly executed, or (ii) such Warrant Certificates shall
be accompanied by a written instrument or instruments of transfer
in form satisfactory to the Company and the Warrant Agent and
duly executed by the Registered Holder or its attorney-in-fact
duly authorized in writing.
(d) All Warrant Certificates presented for
registration of transfer or surrendered for exchange shall be
promptly canceled by the Warrant Agent and thereafter retained by
the Warrant Agent until termination of this Agreement, or
resignation of the Warrant Agent, or until destroyed, at the
discretion of the Company.
(e) Prior to due presentment for registration of
transfer thereof, the Company and the Warrant Agent may deem and
treat the Registered Holder of any Warrant Certificate as the
absolute owner and holder thereof and of each Warrant represented
thereby (notwithstanding any notations of ownership or writing
thereon made by any person other than a duly authorized officer
of the Company or Warrant Agent) for all purposes and shall not
be affected by any notice to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the
------------------
Company and the Warrant Agent of evidence satisfactory to them of
the ownership of and loss, theft, destruction or mutilation of
any Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to them or (in the case of
mutilation) upon surrender and cancellation thereof, the Company
shall execute and the Warrant Agent shall (in the absence of
notice to the Company and/or Warrant Agent that the Warrant
Certificate has been acquired by a bona fide purchaser)
countersign and deliver to the applicable Registered Holder in
lieu thereof a new 1999 UNS Warrant Certificate or a new 2000 UNS
Warrant Certificate, as the case may be, of like tenor, repre-
senting an equal aggregate number of Warrants. Applicants for a
substitute Warrant Certificate under this Section 7 shall comply
with such other reasonable regulations and pay such reasonable
charges as the Company and the Warrant Agreement may prescribe.
SECTION 8. Adjustment of Exercise Price and Number of
------------------------------------------
Shares of Common Stock. The number and kind of shares purchasable
----------------------
upon the exercise of Warrants and the Purchase Price shall be
subject to adjustment from time to time as follows:
(a) Changes in Common Stock, In the event the Company
-----------------------
shall, at any time or from time to time after the date hereof,
(i) issue any shares of Common Stock as a stock dividend to the
holders of Common Stock, (ii) subdivide or combine the
outstanding shares of Common Stock into a greater or lesser
number of shares or (iii) issue any shares of its capital stock
in a reclassification or reorganization of the Common Stock (any
6
<PAGE>
such issuance, subdivision, combination, reclassification or
reorganization being herein called a "Change of Shares"), then
(A) in the case of (i) or (ii) above, the number of shares of
Common Stock that may be purchased upon the exercise of each
Warrant shall be adjusted to the number of shares of Common
Stock that the Registered Holder of such Warrant would have owned
or have been entitled to receive after the happening of such
event had such Warrant been exercised immediately prior to the
record date (or, if there is no record date, the effective date)
for such event, and the Purchase Price shall be adjusted to the
price (calculated to the nearest 1,000th of one cent) determined
by multiplying the Purchase Price immediately prior to such event
by a fraction the numerator of which shall be the number of
shares of Common Stock purchasable with one Warrant immediately
prior to such event and the denominator of which shall be the
number of shares of Common Stock purchasable with one Warrant
after the adjustment referred to above and (B) in the case of
(iii) above, paragraph (l) below shall apply. An adjustment made
pursuant to clause (A) of this paragraph (a) shall become
effective retroactively immediately after the record date in the
case of a dividend and shall become effective immediately after
the effective date in other cases. Any shares of Common Stock
purchasable solely as a result of such adjustment shall not be
issued prior to the effective date of such event.
(b) Common Stock Distribution. In the event the Company
-------------------------
shall, at any time or from time to time after the date hereof,
issue, sell or otherwise distribute any shares of Common Stock
(other than pursuant to a Change of Shares or the exercise of any
Option, Convertible Security (each as defined in paragraph (c)
below) or Warrant (any such event, including any event described
in paragraphs (c) and (d) below, being herein called a "Common
Stock Distribution"), for a consideration per share less than the
current market price per share of Common Stock (as defined in
paragraph (f) below) on the date of such Common Stock
Distribution, then, effective upon such Common Stock
Distribution, the Purchase Price shall be reduced to the price
(calculated to the nearest 1,000th of one cent) determined by
multiplying the Purchase Price in effect immediately prior to
such Common Stock Distribution by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding (exclusive of any treasury shares) immediately
prior to such Common Stock Distribution multiplied by the current
market price per share of Common Stock on the date of such Common
Stock Distribution, plus (ii) the consideration, if any, received
by the Company upon such Common Stock Distribution and the
denominator of which shall be the product of (A) the total number
of shares of Common Stock outstanding (exclusive of any treasury
shares) immediately after such Common Stock Distribution
multiplied by (B) the current market price per share of Common
Stock on the date of such Common Stock Distribution.
If any Common Stock Distribution shall require an
adjustment to the Purchase Price pursuant to the foregoing
provisions of this paragraph (b) including by operation of
paragraph (c) or (d) below, then, effective at the time such
adjustment is made, the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be increased
to a number determined by multiplying the number of such shares
so purchasable immediately prior to such Common Stock
Distribution by a fraction, the numerator of which shall be the
7
<PAGE>
Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the Purchase Price in effect
immediately after such adjustment. In computing adjustments
under this paragraph, fractional interests in Common Stock shall
be taken into account to the nearest 1,000th of a share.
The provisions of this paragraph (b), including by
operation of paragraph (c) or (d) below, shall not operate to
increase the Purchase Price or reduce the number of shares of
Common Stock purchasable upon the exercise of any Warrant.
(c) Issuance of Options. In the event the Company
-------------------
shall, at any time or from time to time after the date hereof
issue, sell, distribute or otherwise grant in any manner
(including by assumption) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable
for Common Stock (any such rights, warrants or options being
herein called "Options" and any such convertible or exchangeable
stock or securities being herein called "Convertible
Securities"), whether or not such Options or the rights to
convert or exchange such Convertible Securities are immediately
exercisable, and the price per share at which Common Stock is
issuable upon the exercise of such Options or upon the conversion
or exchange of such Convertible Securities (determined by
dividing (i) the aggregate amount, if any, received or receivable
by the Company as consideration for the issuance, sale, distribu-
tion or granting of such Options, plus the minimum aggregate
amount of additional consideration, if any, payable to the
Company upon the exercise of all such Options, plus, in the case
of Options to acquire Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable
upon the conversion or exchange of all such Convertible
Securities, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of all such Options or upon the
conversion or exchange of all Convertible Securities issuable
upon the exercise of all such Options) shall be less than the
current market price per share of Common Stock on the date of the
issuance, sale, distribution or granting of such Options then,
for purposes of paragraph (b) above, the total maximum number of
shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of the total maximum
amount of the Convertible Securities issuable upon the exercise
of all such Options shall be deemed to have been issued as of the
date of the issuance, sale, distribution or granting of such
Options and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration such
price per share, determined as provided above, therefor. Except
as otherwise provided in paragraphs (j) and (k) below, no
additional adjustment of the Purchase Price shall be made upon
the actual exercise of such Options or upon conversion or
exchange of the Convertible Securities issuable upon the exercise
of such Options.
(d) Issuance of Convertible Securities. In the event
----------------------------------
the Company shall, at any time or from time to time after the
date hereof, issue, sell or otherwise distribute (including by
assumption) any Convertible Securities (other than upon the
exercise of any Option), whether or not the rights to convert or
exchange such Convertible Securities are immediately exercisable,
and the price per share at which Common Stock is issuable upon
8
<PAGE>
the conversion or exchange of such Convertible Securities
(determined by dividing (i) the aggregate amount, if any,
received or receivable by the Company as consideration for the
issuance, sale or distribution of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange of
all such Convertible Securities, by (ii) the total maximum number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than
the current market price per share of Common Stock on the date of
such issuance, sale or distribution, then, for purposes of
paragraph (b) above, the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of
the date of the issuance, sale or distribution of such
Convertible Securities and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as
consideration such price per share, determined as provided above,
therefor. Except as otherwise provided in paragraphs (j) and (k)
below, no additional adjustment of the Purchase Price shall be
made upon the actual conversion or exchange of such Convertible
Securities.
(e) Dividends and Distributions. In the event the
---------------------------
Company shall, at any time or from time to time after the date
hereof, distribute to the holders of Common Stock any dividend or
other distribution of cash, evidences of its indebtedness, other
securities or other properties or assets in each case other than
(i) dividends payable in Common Stock Options or Convertible
Securities and (ii) any cash dividend that, when added to all
other cash dividends paid in the one year prior to the
declaration date of such dividend (excluding any such other
dividend included in a previous adjustment of the Purchase Price
pursuant to this paragraph (e), does not exceed 10% of the
current market price per share of Common Stock on such
declaration date), or any options, warrants or other rights to
subscribe for or purchase any of the foregoing, then (A) the
Purchase Price shall be decreased to a price determined by
multiplying the Purchase Price then in effect by a fraction, the
numerator of which shall be the current market price per share of
Common Stock on the record date for such distribution less the
sum of (X) the cash portion, if any, of such distribution per
share of Common Stock outstanding (exclusive of any treasury
shares) on the record date for such distribution plus (Y) the
then fair market value (as determined in good faith by the Board
of Directors of the Company) per share of Common Stock
outstanding (exclusive of any treasury shares) on the record date
for such distribution of that portion, if any, of such
distribution consisting of evidences of indebtedness, other
securities, properties, assets, options, warrants or subscription
or purchase rights, and the denominator of which shall be such
current market price per share of Common Stock and (B) the number
of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying
the number of shares of Common Stock so purchasable immediately
prior to the record date for such distribution by a fraction, the
numerator of which shall be the Purchase Price in effect
immediately prior to the adjustment required by clause (A) of
this sentence and the denominator of which shall be the Purchase
Price in effect immediately after such adjustment. The
adjustments required by this paragraph (e) shall be made whenever
any such distribution is made and shall become effective as of
9
<PAGE>
the date of such distribution retroactive to the record date for
the determination of stockholders entitled to receive such
distribution.
(f) Current Market Price. For the purpose of any
--------------------
computation under paragraphs (b), (c), (d) and (e) of this
Section, the current market price per share of Common Stock at
any date shall be the average of the daily closing prices for the
shorter of (i) the 20 consecutive trading days ending on the last
full trading day on the exchange or market specified in the
second succeeding sentence prior to the Time of Determination and
(ii) the period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or
granting in question through such last full trading day prior to
the Time of Determination. The term "Time of Determination" as
used herein shall be the time and date of the earlier to occur of
(A) the date as of which the current market price is to be
computed and (B) the last full trading day on such exchange or
market before the commencement of "ex-dividend" trading in the
Common Stock relating to the event giving rise to the adjustment
required by paragraph (b), (c), (d) or (e). The closing price
for any day shall be the last reported sale price regular way or,
in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such
day, in each case (1) on the principal national securities
exchange on which the shares of Common Stock are listed or to
which such shares are admitted to trading or (2) if the Common
Stock is not listed or admitted to trading on a national
securities exchange, in the over-the-counter market as reported
by NASDAQ or any comparable system or (3) if the Common Stock is
not listed on NASDAQ or a comparable system, as furnished by two
members of the NASD selected from time to time in good faith by
the Board of Directors of the Company for that purpose. In the
absence of all of the foregoing, or if for any other reason the
current market price per share cannot be determined pursuant to
the foregoing provisions of this paragraph (f), the current
market price per share shall be the fair market value thereof as
determined in good faith by the Board of Directors of the
Company.
(g) Certain Distributions. If the Company shall pay a
---------------------
dividend or make any other distribution payable in Options or
Convertible Securities, then, for purposes of paragraph (b) above
(by operation of paragraph (c) or (d) above, as the case may be),
such Options or Convertible Securities shall be deemed to have
been issued or sold without consideration.
(h) Consideration Received. If any shares of Common
----------------------
Stock, Options or Convertible Securities shall be issued, sold or
distributed for cash, the consideration received in respect
thereof shall be deemed to be the amount received by the Company
therefor, after deduction from such amount of any expenses incurred
and any underwriting commissions or concessions paid or allowed by
the Company in connection therewith; provided, however, that the
-------- -------
expenses, commissions and concessions relating to any particular
issuance, sale or distribution for cash shall not be so deducted
if, on or prior to the date thereof, the Company furnishes each
Registered Holder with an officer's certificate representing that
such expenses, commissions and concessions are recoverable
through customer rates. If any shares of Common Stock, Options
or Convertible Securities shall be issued, sold or distributed
10
<PAGE>
for a consideration other than cash, the amount of the
consideration other than cash received by the Company in respect
thereof shall be deemed to be the then fair market value of such
consideration (as determined in good faith by the Board of
Directors of the Company), after deduction of any expenses
incurred and any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. If any Options
shall be issued in connection with the issuance and sale of other
securities of the Company together comprising one integral
transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration.
(i) Deferral of Certain Adjustments. No adjustment to
-------------------------------
the Purchase Price (including the related adjustment to the
number of shares of Common Stock purchasable upon the exercise of
each Warrant) shall be required hereunder unless such adjustment,
together with other adjustments carried forward as provided below,
would result in an increase or decrease of at least one percent of
the Purchase Price; provided, however, that any adjustments which
-------- -------
by reason of this paragraph (i) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment. No adjustment need be made for a change in the par
value of the Common Stock.
(j) Changes in Options and Convertible Securities. If
---------------------------------------------
the exercise price provided for in any Options referred to in
paragraph (c) above, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible
Securities referred to in paragraph (c) or (d) above, or the rate
at which any Convertible Securities referred to in paragraph (c)
or (d) above are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution upon an event
which results in a related adjustment pursuant to this Section
8), the Purchase Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of,each Warrant shall
forthwith be readjusted (effective only with respect to any
exercise of any Warrant after such readjustment) to the Purchase
Price and number of shares of Common Stock so purchasable that
would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or
Convertible Securities been made based upon such changed purchase
price, additional consideration or conversion rate, as the case
may be, but only with respect to such Options and Convertible
Securities as then remain outstanding.
(k) Expiration of Options and Convertible Securities.
------------------------------------------------
If, at any time after any adjustment to the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall
have been made pursuant to paragraph (c), (d) or (j) above or
this paragraph (k), any Options or Convertible Securities shall
have expired unexercised, the number of such shares so
purchasable shall, upon such expiration, be readjusted and shall
thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of Common
Stock deemed to have been issued in connection with such Options
or Convertible Securities were the shares of Common Stock, if
11
<PAGE>
any, actually issued or sold upon the exercise of such Options or
Convertible Securities and (ii) such shares of Common Stock, if
any, were issued or sold for the consideration actually received
by the Company upon such exercise plus the aggregate consideration,
if any, actually received by the Company for the issuance, sale,
distribution or granting of all such Options or Convertible
Securities, whether or not exercised; provided, however, that no
-------- -------
such readjustment shall have the effect of decreasing the number
of such shares so purchasable by an amount (calculated by
adjusting such decrease to account for all other adjustments
made pursuant to this Section 8 and Section 10 following the
date of the original adjustment referred to above) in excess of
the amount of the adjustment initially made in respect of the
issuance, sale, distribution orgranting of such Optionsor
Convertible Securities.
(l) Other Adjustments. In the event that at any time,
-----------------
as a result of an adjustment made pursuant to this Section 8 or
Section 10, the Registered Holders shall become entitled to
receive any securities of the Company other than shares of Common
Stock, thereafter the number of such other securities so
receivable upon exercise of the Warrants and the Purchase Price
applicable to such exercise shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of
Common Stock contained in this Section 8 and Section 10.
(m) Excluded Transactions. Notwithstanding any
---------------------
provision in this Section 8 to the contrary, no adjustment shall
be made pursuant to this Section 8 in respect of (i) the granting
of any Options or the issuance of any shares of Common Stock that
may be registered on Form S-8 or any successor form under the
Securities Act of 1933, as amended, to any officers, directors or
employees of, or any consultants or advisors to, the Company or
any of its affiliates, or (ii) the issuance of Common Stock
pursuant to any dividend reinvestment or direct stock purchase
plan which provides that the price of the Common Stock purchased
for plan participants from the Company will be the average of the
high and low sales prices of the Common Stock as reported on the
consolidated transaction reporting system on the day the
investment is made or, if no trading in the Common Stock occurs
on such date, the next preceding date on which trading occurred;
provided, however, that clause (i) of this paragraph (m) shall not
-------- -------
apply to any such grant or issuance if, after giving effect
thereto, the aggregate amount of Common Stock issued in all
transactions covered by clause (i) of this paragraph (m)
(assuming the exercise of all then outstanding Options
granted in such transactions) would exceed 5% of the number of
shares of Common Stock then outstanding (after giving effect
to the exercise of all then outstanding Options so granted but
before giving effect to any other exercise of Options or Convertible
Securities).
SECTION 9. Notice of Adjustment. Whenever the Purchase
--------------------
Price or the number of shares of Common Stock or other property
purchasable upon the exercise of any Warrant is required to be
adjusted as herein provided, the Company promptly shall deliver
to the Warrant Agent, and the Warrant Agent shall promptly
forward to each Registered Holder, notice of such adjustment and
a certificate of a firm of independent public accountants
selected by the Board of Directors of the Company (who may be the
12
<PAGE>
regular accountants employed by the Company) setting forth in
reasonable detail (a) the Purchase Price and the number of shares
of Common Stock or other property purchasable upon the exercise
of each Warrant after such adjustment, (b) a brief statement of
the facts requiring such adjustment and (c) the computation by
which such adjustment was made and the methods and underlying
assumptions utilized.
SECTION 10. Preservation of Purchase Rights upon Merger,
--------------------------------------------
Consolidation, etc.; Mandatory Redemption of Warrants. (a) In case
-----------------------------------------------------
of any consolidation or merger of the Company with or into
another person or in case of any sale, transfer or lease to
another person of all or substantially all the property of the
Company, the Company and such successor or purchasing person, as
the case may be, shall agree in writing (and such consolidation,
merger, sale, transfer or lease shall not be consummated without
such agreement) that each Registered Holder shall have the right
thereafter upon payment of the Purchase Price in effect
immediately prior to such action to purchase upon exercise of a
Warrant the kind and amount of securities, cash and other
property that it would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale,
transfer or lease had such Warrant been exercised immediately
prior to such action (provided that if the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or lease is not the same
for each share of Common Stock of the Company, then for the
purposes of this paragraph (a) the kind and amount of securities,
cash and other property receivable upon exercise of the Warrants
immediately after such consolidation, merger, sale, transfer or
lease shall be the kind and amount so receivable per share by the
holders of a majority of the outstanding shares of Common Stock).
Such written agreement shall provide for adjustments which shall
be as nearly equivalent as practicable to the adjustments
provided for in Section 8 and this paragraph (a) and shall
provide that such adjustments shall similarly apply to successive
consolidations, mergers, sales, transfers and leases.
(b) Each Registered Holder shall have the option to
require the Company (or its successor) to redeem all or any part
of such Registered Holder's Warrants upon the consummation of any
consolidation or merger of the Company with or into another
person or any sale, transfer or lease to another person of all or
substantially all the property of the Company. A Registered
Holder may exercise such option by giving to the Company, within
10 Business Days after such Registered Holder's receipt of the
notice given by the Company pursuant to Section 18 hereof in
respect of the consolidation, merger, sale, transfer or lease in
question (or, if such notice is not timely given by the Company,
at any time prior to such consummation), a written notice (a
"Notice of Exercise") substantially in the form attached to the
Warrant Certificates.
From and after the giving of any Notice of Exercise,
each Warrant covered thereby shall represent the right of the
Registered Holder thereof to receive from the Company (or its
successor), on the date on which the consolidation, merger, sale,
transfer or lease in question is consummated, an amount equal to
the current market price of such Warrant; provided, however, that
-----------------
the Registered Holder shall have the right to revoke such Notice of
13
<PAGE>
Exercise and instead exercise such Warrant prior to such date in
lieu of receiving such amount. For purposes of this paragraph
(b), the current market price of each Warrant shall equal the
average of the daily closing prices of the Warrants for the 20
consecutive trading days ending on the last full trading day on
the exchange or market identified pursuant to the next succeeding
sentence prior to the first public announcement of the
consolidation, merger, sale, lease or transfer in question. The
closing price of the Warrants for any day shall be determined in
the same manner as the closing price of the Common Stock is
determined under the third sentence of Section 8(f). If for any
reason the daily closing prices of the Warrants during such 20-
trading day period cannot be determined as provided in such
sentence, the current market price of each Warrant shall equal
the average fair market value for the 20 consecutive Business
Days preceding such first public announcement, as determined by
two members of the NASD selected in good faith by the Board of
Directors of the Company.
The nonexercise of the foregoing option with respect to
any Warrant in connection with any consolidation, merger, sale,
lease or transfer shall not preclude the exercise of such option
with respect to such Warrant in connection with any subsequent
consolidation, merger, sale, lease or transfer. In the case of
any consolidation or merger in which the Company is not the
surviving entity or in the case of any sale, lease or transfer,
the Company shall cause its successor to agree in writing (and
such consolidation, merger, sale, lease or transfer shall not be
consummated without such agreement) that it shall be responsible
for the performance of the Company's obligations under this
paragraph (b).
SECTION 11. Statement Concerning Warrant Certificates.
-----------------------------------------
The Company may, but shall not be obligated to, issue replacement
Warrant Certificates upon any adjustment to the Purchase Price or
the number or kind of shares purchasable upon exercise of the
Warrants. Irrespective of any such adjustment, the Warrant
Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant
Certificates pursuant to this Section 11, continue to express the
same Purchase Price per share, and the same number of shares
purchasable thereunder, as were expressed in the Warrant
Certificates when the same were originally issued.
SECTION 12. Common Stock. As used in Sections 8, 9, 10
------------
and 11, the term "Common Stock" shall mean and include the
Company's Common Stock authorized on the Initial Warrant Exercise
Date and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution or winding up of
the Company; provided, however, that subject to Sections 8 and 10,
-------- -------
the shares issuable upon exercise of the Warrants shall include only
shares of such class designated in the Company's Certificate of
Incorporation as Common Stock on the Initial Warrant Exercise
Date or (a) in the case of any consolidation, merger, sale,
transfer or lease described in Section 10, the stock, securities
or property provided for in such Section or (b) in the case of
any reclassification or change in the outstanding shares of
Common Stock issuable upon exercise of the Warrants as a result
14
<PAGE>
of a subdivision or combination or consisting of a change in par
value, or from par value to no par value, or from no par value to
par value, such shares of Common Stock as so reclassified or
changed. Notwithstanding any other provision of this Agreement
to the contrary, before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take all corporate action
necessary, in the opinion of its counsel, in order that the
Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at the adjusted Purchase
Price.
SECTION 13. Warrant Expiration Date. Each Warrant not
-----------------------
exercised on or before the Warrant Expiration Date shall become
void and all rights of the Registered Holder thereof thereunder
and under this Agreement in respect of such Warrant shall cease.
SECTION 14. Fractional Warrants and Fractional Shares.
-----------------------------------------
If the number of Warrants or the number of shares of Common Stock
purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 8 or 10, the Company shall nevertheless not
be required to issue fractions of Warrants or fractions of shares
of Common Stock, upon exercise of the Warrants or otherwise, or
to distribute certificates that evidence fractional Warrants or
fractional shares of Common Stock. With respect to any fraction
of a Warrant called for in the aggregate Warrant position of any
Registered Holder upon any adjustment pursuant to Section 8 or 10
or any fraction of a share of Common Stock called for given the
aggregate number of shares issuable upon any exercise by a
Registered Holder of Warrants, such fraction shall be rounded to
the nearest whole number (.50 being rounded upward).
SECTION 15. Registered Holders Not Deemed Share-holders.
-------------------------------------------
No Registered Holder of Warrants shall, as such, be entitled to
vote or to receive dividends or be deemed the holder of Common
Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained
herein be construed to confer upon the Registered Holders of the
Warrants, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of stock,
change of par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive
dividends or subscription rights until such Registered Holder
shall have exercised Warrants in accordance with the provisions
hereof.
SECTION 16. Cancellation of Warrant Certificates. If
------------------------------------
the Company shall purchase or acquire any Warrant or Warrants,
the Warrant Certificate or Warrant Certificates evidencing the
same shall thereupon be canceled by it and retired. The Company
shall also cancel Warrant Certificates following exercise of any
or all of the Warrants represented thereby or delivered to it for
registration of transfer or exchange.
SECTION 17. Rights of Action. All rights of action with
----------------
respect to this Agreement are vested in the respective Registered
15
<PAGE>
Holders of the Warrants, and any Registered Holder of a Warrant,
without consent of the Warrant Agent or of the holder of any
other Warrant, may, in his, her or its own behalf and for his,
her or its own benefit, enforce against the Company such
Registered Holder's right to exercise his, her or its Warrants
for the purchase of shares of Common Stock in the manner provided
in the Warrant Certificate and this Agreement.
SECTION 18. Agreement of Warrantholders. Every holder
---------------------------
of a Warrant, by such holder's acceptance thereof, consents and
agrees with the Company, the Warrant Agent and every other holder
of a Warrant that:
(a) The Warrants are transferable only on the registry
books of the Warrant Agent by the Registered Holder thereof in
person or by his, her or its attorney duly authorized in writing
and only if the Warrant Certificates representing such Warrants
are surrendered at the office of the Warrant Agent, duly endorsed
or accompanied by a proper instrument of transfer satisfactory to
the Warrant Agent and the Company in their sole discretion,
together with payment of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and
treat the person in whose name the Warrant Certificate is
registered as the Registered Holder and as the absolute, true and
lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be
affected by any notice or knowledge to the contrary, except as
otherwise expressly provided in Section 6 hereof.
SECTION 19. Cancellation of Warrant Certificates. If
------------------------------------
the Company shall purchase or acquire any Warrant or Warrants,
the Warrant Certificate or Certificates evidencing the same shall
thereupon be delivered to the Warrant Agent and canceled by it
and retired. The Warrant Agent shall also cancel the Warrant
Certificates following exercise of any or all of the Warrants
represented thereby or delivered to it for transfer, split-up,
combination or exchange.
SECTION 20. Warrant Agent. (a) Duties and Liabilities.
------------- ----------------------
The Warrant Agent hereby accepts the agency established by this
Agreement and agrees to perform the same upon the terms and
conditions herein set forth, by all of which the Company and the
Registered Holders of the Warrants, by their acceptance thereof,
shall be bound. The Warrant Agent shall not, by countersigning
Warrant Certificates or by any other act hereunder, be deemed to
make any representations as to the validity or authorization of
the Warrants or the Warrant Certificates (except as to its
countersignature thereon) or of any securities or other property
delivered upon exercise or repurchase of any Warrant, or as to
the accuracy of the computation of the Purchase Price or exercise
or repurchase of any Warrant, or the correctness of the
representations of the Company made in the certificates that the
Warrant Agent receives. The Warrant Agent shall not be
accountable for the use or application by the Company of the
proceeds of the exercise of any Warrant. The Warrant Agent shall
not have any duty to calculate or determine any adjustments with
respect to either the Purchase Price or the kind and amount of
shares or other securities or any property receivable by
16
<PAGE>
Registered Holders upon the exercise or repurchase of Warrants
required from time to time and the Warrant Agent shall have no
duty or responsibility in determining the accuracy or correctness
of such calculation. The Warrant Agent shall not be (a) liable
for any recital or statement of fact contained herein or in the
Warrant Certificates or for any action taken, suffered or omitted
by it in good faith in the belief that any Warrant Certificate or
any other documents or any signatures are genuine or properly
authorized, (b) responsible for any failure on the part of the
Company to comply with any of its covenants and obligations
contained in this Agreement or in the Warrant Certificates or (c)
liable for any act or omission in connection with this Agreement
except for its own gross negligence or willful misconduct. The
Warrant Agent is hereby authorized to accept instructions with
respect to the performance of its duties hereunder from the
President, any Vice President or the Secretary or Treasurer or an
Assistant Treasurer of the Company and to apply to any such
officer for instructions (which instructions will be promptly
given in writing when requested) and the Warrant Agent shall not
be liable for any action taken or suffered to be taken by it in
good faith in accordance with the instructions of any such
officer; however, in its discretion, the Warrant Agent may in
lieu thereof accept other evidence of such or may require such
further or additional evidence as it may deem reasonable. The
Warrant Agent shall not be liable for any action taken with
respect to any matter in the event it requests instructions from
the Company as to that matter and does not receive such
instructions within a reasonable period of time after the request
therefor.
The Warrant Agent may execute and exercise any of the
rights and powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys, agents or
employees, and the Warrant Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees, provided reasonable care has
--------
been exercised in the selection and in the continued employment
of any such attorney, agent or employee. The Warrant Agent shall
not be under any obligation or duty to institute, appear in or
defend any action, suit or legal proceeding in respect hereof,
unless first indemnified to its satisfaction, but this provision
shall not affect the power of the Warrant Agent to take such action
as the Warrant Agent may consider proper, whether with or without
such indemnity. The Warrant Agent shall promptly notify the
Company in writing of any claim made or action, suit or
proceeding instituted against it arising out of or in connection
with this Agreement.
The Company will perform, execute, acknowledge and
deliver or cause to be delivered all such further acts
instruments and assurances as are consistent with this Agreement
and as may reasonably be required by the Warrant Agent in order
to enable it to carry out or perform its duties under this
Agreement.
The Warrant Agent shall act solely as agent of the
Company hereunder. The Warrant Agent shall not be liable except
for the failure to perform such duties as are specifically set
forth herein, and no implied covenants or obligations shall be
read into this Agreement against the Warrant Agent, whose duties
and obligations shall be determined solely by the express
provisions hereof.
17
<PAGE>
(b) Right to Consult Counsel. The Warrant Agent may at
------------------------
any time consult with legal counsel acceptable to the Company
(who may be legal counsel for the Company), and the opinion or
advice of such counsel shall be full and complete authorization
and protection to the Warrant Agent and the Warrant Agent shall
incur no liability or responsibility to the Company or to any
Registered Holder for any action taken, suffered or omitted by it
in good faith in accordance with the opinion or advice of such
counsel.
(c) Compensation; Indemnification. The Company agrees
-----------------------------
promptly to pay the Warrant Agent from time to time, on demand of
the Warrant Agent, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to
reimburse it for reasonable expenses and counsel fees incurred in
connection with the execution and administration of this
Agreement, and further agrees to indemnify the Warrant Agent and
save it harmless against any losses, liabilities or expenses
arising out of or in connection with the acceptance and
administration of this Agreement, including the costs and
expenses of investigating or defending any claim of such
liability, except that the Company shall have no liability
hereunder to the extent that any such loss, liability or expense
results from the Warrant Agent's own gross negligence or willful
misconduct. The obligations of the Company under this Section
shall survive the exercise and the expiration of the Warrants and
the resignation or removal of the Warrant Agent.
(d) No Restrictions on Actions. The Warrant Agent and
--------------------------
any stockholder, director, officer or employee of the Warrant
Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in
transactions in which the Company may be interested, or contract
with or lend money to the Company or otherwise act as fully and
freely as though it were not the Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other
legal entity.
(e) Discharge or Removal; Replacement Warrant Agent.
-----------------------------------------------
The Warrant Agent may resign from its position as such and be
discharged from all further duties and liabilities hereunder
(except liability arising as a result of the Warrant Agent's own
gross negligence or willful misconduct), after giving one month's
prior written notice to the Company. The Company may remove the
Warrant Agent upon one month's written notice specifying the date
when such discharge from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent or the Company
shall cause to be mailed to each Registered Holder of a Warrant a
copy of said notice of resignation or notice of removal, as the
case may be. Upon such resignation or removal the Company shall
appoint in writing a new warrant agent. If the Company shall
fail to make such appointment within a period of 30 calendar days
after it has been notified in writing of such resignation by the
resigning Warrant Agent or after such removal, then the resigning
Warrant Agent or the Registered Holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a
new warrant agent. Pending appointment of a successor to the
original Warrant Agent, either by the Company or by such a court,
the duties of the Warrant Agent shall be carried out by the
Company. Any new warrant agent, whether appointed by the Company
18
<PAGE>
or by such a court, shall be a bank or trust company doing
business under the laws of the United States or any state
thereof, in good standing and having a combined capital and
surplus of not less than $25,000,000. The combined capital and
surplus of any such new warrant agent shall be deemed to be the
combined capital and surplus as set froth in the most recent
annual report of its condition published by such warrant agent
prior to its appointment, provided that such reports are published
--------
at least annually pursuant to law or the requirements of
a federal or state supervising or examining authority. After
acceptance in writing of such appointment by the new warrant
agent, it shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named herein
as the Warrant Agent, without any further assurance, conveyance,
act or deed; however, the original Warrant Agent shall in all
events deliver and transfer to the successor Warrant Agent all
property, if any, at the time held hereunder by the original
Warrant Agent and if for any reason it shall be necessary
or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of
the Company and shall be legally and validly executed and delivered
by the resigning or removed Warrant Agent. Not later than the
effective date of any such appointment, the Company shall file
notice thereof with the resigning or removed Warrant Agent and
shall forthwith cause a copy of such notice to be mailed to
each Registered Holder of a Warrant. Failure to give any
notice provided for in this paragraph (e), however, or any
defect therein, shall not affect the legality or validity of
the resignation of the Warrant Agent or the appointment of a
new warrant agent, as the case may be.
(f) Successor Warrant Agent. Any corporation into which
-----------------------
the Warrant Agent or any new warrant agent may be merged, or any
corporation resulting from any consolidation to which the Warrant
Agent or any new warrant agent shall be a party, shall be a
successor Warrant Agent under this Agreement without any further
act, provided that such corporation would be eligible for
--------
appointment as successor to the Warrant Agent under the
provisions of paragraph (e) above. Any such successor Warrant
Agent shall promptly cause notice of it succession as Warrant
Agent to be mailed to each Registered Holder of a Warrant.
SECTION 21. Waivers; Amendments. No failure or delay of
-------------------
the Registered Holders or any of them in exercising any right or
power under this Agreement or the Warrants shall operate as a
waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power preclude any other or
further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Registered Holders are
cumulative and not exclusive of any rights or remedies that they
would otherwise have. The Warrant Agent and the Company may by
supplemental agreement make any changes or corrections in this
Agreement (a) that they shall deem appropriate to cure any
ambiguity or to correct any defective or inconsistent provisions
or manifest mistake or error herein contained; or (b) that they
may deem necessary or desirable and which shall not adversely
affect the interests of the holders of UNS Warrant Certificates;
provided, however, that this Agreement shall not otherwise be
-------- -------
amended, modified or waived except with the consent in writing
of the Company and the Registered Holders of Warrant Certificates
19
<PAGE>
representing more than 50% of the Warrants then outstanding; and
provided, further, that no change in the number or kind of the
-----------------
securities purchasable upon the exercise of any Warrant, or the
Purchase Price, or the Warrant Expiration Date, and no amendment,
waiver or modification of the provisions of this Section 18 or of
Section 8 or 10, shall be made without the written consent of the
Registered Holders of all Warrants then outstanding, other than
such adjustments as are contemplated by the provisions of
Sections 8 and 10.
In the event of any such amendment, modification or
waiver, the Warrant Agent shall give prompt notice thereof to all
Registered Holders and, if appropriate, notation thereof shall be
made on all Warrant Certificates thereafter surrendered for
registration of transfer or exchange.
No notice or demand on the Company in any case shall
entitle the Company to any other or future notice or demand in
similar or other circumstances.
SECTION 22. Notice of Certain Events. In case at any time:
------------------------
(a) the Company shall pay any dividend upon, or make
any distribution in respect of, its Common Stock that would
give rise to an adjustment pursuant to Section 8(e);
(b) the Company shall offer for subscription to
holders of its Common Stock any additional shares of stock
of any class or other rights;
(c) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with or into, or
sale, transfer or lease of all or substantially all of its
property to, another entity; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give
notice to the Warrant Agent, and the Warrant Agent shall give
notice to the Registered Holders, of the date on which (i) the
books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale,
transfer, lease, dissolution, liquidation or winding up shall
take place, as the case may be. Such notice to Registered
Holders shall be given not less than 10 days prior to the record
date or the date on which the books of the Company are to be
closed in respect thereto in the case of an action specified in
clause (i) and at least 20 days prior to the action in question
(or as soon as the Company has knowledge of the action) in the
case of an action specified in clause (ii).
20
<PAGE>
SECTION 23. Notices. All notices, requests, consents
-------
and other communications hereunder shall be in writing and shall
be deemed to have been made when delivered or mailed first class,
registered or certified mail, postage prepaid to a Registered
Holder at the address of such holder as shown on the registry
books maintained by the Company and to the Company or the Warrant
Agent, as follows:
To the Company:
Tucson Electric Power Company
220 West Sixth Street
Tucson, Arizona 85702
Attention: Treasurer
To the Warrant Agent:
The Bank of New York
P.O. Box 11002
Church Street Station
New York, New York 10286-1281
or at such other address as may have been furnished to the party
giving or making such notice in writing.
SECTION 24. Governing Law. This Agreement shall be
-------------
governed by and construed in accordance with the laws of the
State of Arizona, without reference to principles of conflict of
laws.
SECTION 25. Binding Effect. This Agreement shall be
--------------
binding upon and inure to the benefit of the Company and its
successors and assigns, and the Registered Holders from time to
time of Warrant Certificates. Each Registered Holder, by its
acceptance of a Warrant Certificate, agrees to be bound by the
provisions of this Agreement as if it were a party hereto.
Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in
equity or at law or to impose upon any other person any duty,
liability or obligation.
SECTION 26. Severability. In case any one or more of
------------
the provisions contained in this Agreement or the Warrant
Certificates issued hereunder shall be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby.
The parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
21
<PAGE>
SECTION 27. Counterparts. This Agreement may be
------------
executed in several counterparts, which taken together shall
constitute a single document.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
UNISOURCE ENERGY CORPORATION,
by
------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Warrant Agent
by
------------------------------
Name:
Title:
23
<PAGE>
EXHIBIT A
[Form of 1999 UNS Warrant Certificate]
--------------------------------------
No. W - 1999 Warrants
------ --------
Warrant Certificate
-------------------
UNISOURCE ENERGY CORPORATION
THIS CERTIFIES THAT , or
its registered assigns, is the registered owner (the "Registered
Holder") of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase from UniSource Energy
Corporation (the "Company') at any time prior to 4:00 p.m.
(Tucson, Arizona time) on March 15, 1999, at the principal office
of the Company, at 220 West Sixth Street, Tucson, Arizona 85702,
one fully paid and nonassessable share of the Common Stock,
without par value ("Common Stock"), of the Company at a purchase
price of $16.00 per share (the "Purchase Price") upon
presentation and surrender of this Warrant Certificate with the
Form of Election to Purchase duly executed, together with payment
in cash, or by official bank or certified check made payable to
the Company, or by wire transfer, of an amount in lawful money of
the United States of America equal to the applicable Purchase
Price. The number of Warrants evidenced by this Warrant
Certificate (and the number of shares of Common Stock that may be
purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number and
Purchase Price as of , 1999, based on the shares of
---------
Common Stock as constituted at such date. As provided in the
Warrant Agreement referred to below, upon the happening of
certain events, (a) the Purchase Price and the number of shares
of Common Stock that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are subject to
modification and adjustment and (b) the registered holder of the
Warrants evidenced by this Warrant Certificate may require the
redemption thereof.
This Warrant Certificate is subject to all of the terms
and conditions of a Warrant Agreement dated as of , 1998
-------
(the "Warrant Agreement"), between the Company and the Warrant
Agent. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to
the Warrant Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities
thereunder of the Company and the registered holders of the
Warrant Certificates. Copies of the Warrant Agreement are on
file at the office of the Company referred to above.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the office of the Warrant Agent,
may be exchanged for another Warrant Certificate or Warrant
Certificates evidencing Warrants entitling the Registered Holder
A-1
<PAGE>
to purchase a like aggregate number of shares of Common Stock as
the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered shall have entitled the Registered
Holder to purchase. If this Warrant Certificate shall be
exercised or redeemed in part, the Registered Holder shall be
entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of whole
Warrants not exercised.
If the Warrants evidenced by this Warrant Certificate
remain unexercised or unredeemed at the expiration of the period
during which Warrants are exercisable, as set forth in the first
paragraph hereof, such Warrants shall thereupon become void and
all rights of the Registered Holder hereunder and under the
Warrant Agreement in respect of such Warrants shall cease.
No fractional Warrants will be issued upon any
adjustment pursuant to Section 8 or 10 of the Warrant Agreement
and no fractional shares of Common Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby. With
respect to any fraction of a Warrant called for in the aggregate
Warrant position of the Registered Holder upon any adjustment
pursuant to Section 8 or 10 of the Warrant Agreement or any
fraction of a share of Common Stock called for given the
aggregate number of shares issuable upon any exercise by the
Registered Holder of Warrants, such fraction shall be rounded to
the nearest whole number (.50 being rounded upward).
Until the Warrant or Warrants evidenced by this Warrant
Certificate are exercised as provided in the Warrant Agreement,
no Registered Holder of this Warrant Certificate, as such, shall
be entitled to vote or receive dividends or be deemed for any
purpose the holder of Common Stock or of any other securities of
the Company that may at any time be issuable on the exercise
hereof, nor shall anything contained in the Warrant Agreement or
herein be construed to confer upon the Registered Holder hereof,
as such, any of the rights of a shareholder of the Company or any
right to vote upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate
action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or, except as provided in the
Warrant Agreement, to receive notice of meetings, or to receive
dividends or subscription rights or otherwise.
A-2
<PAGE>
This Warrant Certificate shall not be valid for any
purpose until it shall have been countersigned by the Warrant
Agent.
Dated as of
UNISOURCE ENERGY CORPORATION
by
--------------------------
Name:
Title:
Countersigned:
THE BANK OF NEW YORK
as Warrant Agent
by:
-------------------
Name:
Title:
A-3
<PAGE>
ASSIGNMENT
(To be executed by the Registered Holder if such
Registered Holder desires to register the transfer of
the Warrant Certificate.)
FOR VALUE RECEIVED, hereby sells,
-------------------------
assigns and transfers unto this Warrant
-------------------------
Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
-----------
Attorney to transfer this Warrant Certificate on the books of the
Warrant Agent with full power of substitution.
Dated: .
--------------------
Signature:
----------------------------
Signature Guaranteed:
----------------------------
NOTICE
The signature on the foregoing Assignment must conform
in all respects to the name of the Registered Holder as specified
on the face of this Warrant Certificate.
A-4
<PAGE>
ELECTION TO PURCHASE
(To be executed if the Registered Holder desires to
exercise any 1999 UNS Warrant represented by this
Warrant Certificate.)
TO: UNISOURCE ENERGY CORPORATION
The undersigned hereby irrevocably elects to exercise
1999 UNS Warrants represented by this
--------------------------
Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such number of Warrants and
requests that certificates for such shares be issued in the name
of:
----------------------------------------------------------------
(Print name, address and social security
or other identifying number)
and in the following denominations:
----------------------------------------------------------------
Dated: .
------------
Signature:
------------------------------
(Signature must conform in all
respects to the name of the
Registered Holder as specified on
the face of this Warrant
Certificate)
Signature Guaranteed:
------------------------------
A-5
<PAGE>
NOTICE OF EXERCISE
(To be executed if the Registered Holder desires to
have redeemed any 1999 UNS Warrant represented by this
Warrant Certificate.)
TO: UNISOURCE ENERGY CORPORATION
The undersigned hereby elects to have redeemed
------
Warrants represented by this Warrant Certificate and requests
that the redemption price for such Warrants be paid to:
----------------------------------------------------------------
(Print name, address and social security
or other identifying number)
The undersigned has the right to revoke this Notice of
Exercise as provided in Section 10(b) of the Warrant Agreement.
Dated: .
------------
Signature:
------------------------------
(Signature must conform in all
respects to the name of the
Registered Holder as specified on
the face of this Warrant
Certificate)
Signature Guaranteed:
------------------------------
A-6
<PAGE>
EXHIBIT B
[Form of 2000 UNS Warrant Certificate]
--------------------------------------
No. W - 2000 Warrants
------ --------
Warrant Certificate
-------------------
UNISOURCE ENERGY CORPORATION
THIS CERTIFIES THAT , or
its registered assigns, is the registered owner (the "Registered
Holder") of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase from UniSource Energy
Corporation (the "Company') at any time prior to 4:00 p.m.
(Tucson, Arizona time) on December 15, 2000, at the principal
office of the Company, at 220 West Sixth Street, Tucson, Arizona
85702, one fully paid and nonassessable share of the Common
Stock, without par value ("Common Stock"), of the Company at a
purchase price of $16.00 per share (the "Purchase Price") upon
presentation and surrender of this Warrant Certificate with the
Form of Election to Purchase duly executed, together with payment
in cash, or by official bank or certified check made payable to
the Company, or by wire transfer, of an amount in lawful money of
the United States of America equal to the applicable Purchase
Price. The number of Warrants evidenced by this Warrant
Certificate (and the number of shares of Common Stock that may be
purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number and
Purchase Price as of , 2000, based on the shares of
---------
Common Stock as constituted at such date. As provided in the
Warrant Agreement referred to below, upon the happening of
certain events, (a) the Purchase Price and the number of shares
of Common Stock that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are subject to
modification and adjustment and (b) the registered holder of the
Warrants evidenced by this Warrant Certificate may require the
redemption thereof.
This Warrant Certificate is subject to all of the terms
and conditions of a Warrant Agreement dated as of , 1998
---------
(the "Warrant Agreement"), between the Company and the Warrant
Agent. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to
the Warrant Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities
thereunder of the Company and the registered holders of the
Warrant Certificates. Copies of the Warrant Agreement are on
file at the office of the Company referred to above.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the office of the Warrant Agent,
may be exchanged for another Warrant Certificate or Warrant
Certificates evidencing Warrants entitling the Registered Holder
B-1
<PAGE>
to purchase a like aggregate number of shares of Common Stock as
the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered shall have entitled the Registered
Holder to purchase. If this Warrant Certificate shall be
exercised or redeemed in part, the Registered Holder shall be
entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of whole
Warrants not exercised.
If the Warrants evidenced by this Warrant Certificate
remain unexercised or unredeemed at the expiration of the period
during which Warrants are exercisable, as set forth in the first
paragraph hereof, such Warrants shall thereupon become void and
all rights of the Registered Holder hereunder and under the
Warrant Agreement in respect of such Warrants shall cease.
No fractional Warrants will be issued upon any
adjustment pursuant to Section 8 or 10 of the Warrant Agreement
and no fractional shares of Common Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby. With
respect to any fraction of a Warrant called for in the aggregate
Warrant position of the Registered Holder upon any adjustment
pursuant to Section 8 or 10 of the Warrant Agreement or any
fraction of a share of Common Stock called for given the
aggregate number of shares issuable upon any exercise by the
Registered Holder of Warrants, such fraction shall be rounded to
the nearest whole number (.50 being rounded upward).
Until the Warrant or Warrants evidenced by this Warrant
Certificate are exercised as provided in the Warrant Agreement,
no Registered Holder of this Warrant Certificate, as such, shall
be entitled to vote or receive dividends or be deemed for any
purpose the holder of Common Stock or of any other securities of
the Company that may at any time be issuable on the exercise
hereof, nor shall anything contained in the Warrant Agreement or
herein be construed to confer upon the Registered Holder hereof,
as such, any of the rights of a shareholder of the Company or any
right to vote upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate
action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or, except as provided in the
Warrant Agreement, to receive notice of meetings, or to receive
dividends or subscription rights or otherwise.
B-2
<PAGE>
This Warrant Certificate shall not be valid for any
purpose until it shall have been countersigned by the Warrant
Agent.
Dated as of
UNISOURCE ENERGY CORPORATION
by
--------------------------
Name:
Title:
Countersigned:
THE BANK OF NEW YORK
as Warrant Agent
by:
-------------------
Name:
Title:
B-3
<PAGE>
ASSIGNMENT
(To be executed by the Registered Holder if such
Registered Holder desires to register the transfer of
the Warrant Certificate.)
FOR VALUE RECEIVED, hereby sells,
-------------------------
assigns and transfers unto this Warrant
-------------------------
Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
-----------
Attorney to transfer this Warrant Certificate on the books of the
Warrant Agent with full power of substitution.
Dated: .
--------------------
Signature:
----------------------------
Signature Guaranteed:
----------------------------
NOTICE
The signature on the foregoing Assignment must conform
in all respects to the name of the Registered Holder as specified
on the face of this Warrant Certificate.
B-4
<PAGE>
ELECTION TO PURCHASE
(To be executed if the Registered Holder desires to
exercise any 2000 UNS Warrant represented by this
Warrant Certificate.)
TO: UNISOURCE ENERGY CORPORATION
The undersigned hereby irrevocably elects to exercise
2000 UNS Warrants represented by this
---------------------------
Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such number of Warrants and
requests that certificates for such shares be issued in the name
of:
----------------------------------------------------------------
(Print name, address and social security
or other identifying number)
and in the following denominations:
----------------------------------------------------------------
Dated: .
------------
Signature:
------------------------------
(Signature must conform in all
respects to the name of the
Registered Holder as specified on
the face of this Warrant
Certificate)
Signature Guaranteed:
------------------------------
B-5
<PAGE>
NOTICE OF EXERCISE
(To be executed if the Registered Holder desires to
have redeemed any 2000 UNS Warrant represented by this
Warrant Certificate.)
TO: UNISOURCE ENERGY CORPORATION
The undersigned hereby elects to have redeemed
------
Warrants represented by this Warrant Certificate and requests
that the redemption price for such Warrants be paid to:
----------------------------------------------------------------
(Print name, address and social security
or other identifying number)
The undersigned has the right to revoke this Notice of
Exercise as provided in Section 10(b) of the Warrant Agreement.
Dated: .
------------
Signature:
------------------------------
(Signature must conform in all
respects to the name of the
Registered Holder as specified on
the face of this Warrant
Certificate)
Signature Guaranteed:
------------------------------
B-6
<PAGE>
APPENDIX B
Deletions appear in bracketted text.
Additions appear as double underlined text.
WARRANT AGREEMENT dated as of [December
15, 1992] , 1998, by and between [TUCSON
-------
=============
ELECTRIC POWER COMPANY] UNISOURCE ENERGY
================
CORPORATION, an Arizona corporation (the
===========
"Company"), and [the Registered Holders (as herein
defined).] THE BANK OF NEW YORK, as warrant
================================
agent (in such capacity, the "Warrant Agent").
==============================================
WITNESSETH:
[Subject to the terms and conditions set forth below,
the] WHEREAS, the Company [shall issue an aggregate of 12,054,278
============
Common Stock Purchase Warrants (the "Warrants") to the Registered
Holders. Each Warrant shall represent the right to ]plans to make
=============
an offer (the "Exchange Offer") to the holders of any and all
==============================================================
warrants to purchase shares of common stock of Tucson Electric
===============================================================
Power Company ("TEP"), an Arizona corporation and wholly owned
===============================================================
subsidiary of the Company (the "TEP Warrants"), to exchange each
=================================================================
of their TEP Warrants for warrants expiring in 1999 to purchase
======================================================
[from] shares of common stock of the Company (the "1999 UNS
=====================================================
Warrants") and warrants expiring in 2000 to purchase shares of
===============================================================
common stock of the Company (the "2000 UNS Warrants" and,
==========================================================
together with the 1999 UNS Warrants, the "Warrants"); and
=========================================================
WHEREAS, the Company desires the Warrant Agent to act
======================================================
on behalf of the Company, [at an initial price of $3.20, one
=========
share of the Company's Common Stock, no par value per share,
subject to adjustment under certain circumstances.] and the
========
Warrant Agent is willing to so act, in connection with the
===========================================================
issuance, registration, transfer, exchange and redemption of the
=================================================================
Warrants, the issuance of certificates representing the Warrants,
=================================================================
the exercise of the Warrants, and the rights of the holders
============================================================
thereof.
========
[The Company and the Registered Holders] NOW,
=====
THEREFORE, in consideration of the foregoing, the parties hereto
=================================================================
hereby agree as follows:
======
SECTION 1. Definitions. As used herein, the following
-----------
terms shall have the following meanings:
(a) "Common Stock" shall mean stock of the Company of
any class, whether now or hereafter authorized, which has the
right to participate in the distribution of earnings and assets
of the Company without limit as to amount or percentage, which at
the date hereof consists of [160,723,700] 75,000,000 shares of
==========
Common Stock, without par value.
(b) "Corporate Office" shall mean, at any time, the
office of the [Company ]Warrant Agent at which its principal
=============
<PAGE>
[corporate trust] business shall be administered, which office is
=================
located at the date hereof at [220 West Sixth Street, Tucson,
Arizona 85701.] , New York, New York
-------------------------
==============================================
10286].
=======
(c) "Exercise Date" shall mean, as to each Warrant,
the date on which the [Company] Warrant Agent shall have received
=============
both (i) the Warrant Certificate representing such Warrant, with
a written notice, in substantially the form of the Election to
Purchase set forth in [Exhibit ]Exhibits A and B hereto, which
==============
notice shall be completed and duly executed by the Registered
Holder thereof or his attorney duly authorized in writing, and
(ii) payment in cash, or by official bank or certified check made
payable to the Company, or by wire transfer, of an amount in
lawful money of the United States of America equal to the
applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean, as to
each Warrant, the date of issuance of such Warrant.
(e) "NASD" shall mean The National Association of
Securities Dealers, Inc.
(f) "NASDAQ" shall mean The National Association of
Securities Dealers, Inc. Automated Quotation System.
[(g) "Participation Agreement" shall mean the Participation
Agreement dated as of June 30, 1992, among the Company, the owner
participants and loan participants listed in Schedule I thereto,
Wilmington Trust Company, as owner trustee, and LaSalle National
Bank, as indenture trustee, as the same may be amended modified
or supplemented from time to time.]
[(h)](g) "Purchase Price" shall mean the purchase
===
price per share of Common Stock to be paid upon exercise of each
Warrant in accordance with the terms hereof, which price shall
initially be [$3.20] $16.00 per share, subject to adjustment from
======
time to time pursuant to the provisions of Sections 8 and 10
hereof.
[(i)](h) "Registered Holder" shall mean each person in
===
whose name any certificate representing Warrants shall be
registered from time to time on the books maintained by the[
Company] Warrant Agent pursuant to Section 6 hereof.
=============
[Initially, the Registered Holders shall be those
parties appearing on the signature pages hereof (other than the
Company).]
[(j)](i) "Transfer Agent" shall mean [the Company acting as its
===
own] The Bank of New York, as the Company's transfer agent, or
======================================
[such other transfer agent hereafter appointed by the Company.]
its authorized successor, as such.
==================================
2
<PAGE>
(j) "Warrant Certificates" shall mean, collectively,
=== =================================================
warrant certificates for the 1999 UNS Warrants (the "1999 UNS
==============================================================
Warrant Certificates") and warrant certificates for the 2000 UNS
=================================================================
Warrants (the "2000 UNS Warrant Certificates").
===============================================
(k) "Warrant Expiration Date" shall mean (i) with
=========
respect to the 1999 UNS Warrants, 4:00 p.m. (Tucson, Arizona
=================================
time) on [ , 2002] March 15, 1999, and (ii) with
-------------- ==============================
respect to the 2000 UNS Warrants, 4:00 p.m. (Tucson, Arizona
=============================================================
time) on December 15, 2000; provided that if either such date
========================== ======
shall in the State of Arizona or the State of New York be a
holiday or a day on which banks are required or authorized to be
closed, then 4:00 p.m. (Tucson, Arizona time) on the next
following day which in the State of Arizona and the State of New
York is not a holiday or a day on which banks are required or
authorized to be closed.
SECTION 2. Warrants and Issuance of Warrant
---------------------------------
Certificates. (a) Each Warrant shall initially represent the
------------
right to purchase from the Company, subject to the conditions
contained herein and in the related Warrant Certificate, one
share of Common Stock upon the exercise thereof, subject to
adjustment from time to time pursuant to the provisions of
Sections 8 and 10 hereof.
(b) Upon execution of this Agreement, Warrant
Certificates representing an aggregate of [12,054,278] 1999
-----
===========
UNS Warrants and 2000 UNS Warrants shall be (i) executed on
-----
===============================
behalf of the Company in accordance with Section 3 and (ii)
issued and delivered to the [Registered Holders appearing on
Exhibit A in the respective amounts indicated beside their
names.] Warrant Agent. Upon written order of the Company signed
=========================================================
by its President or any Vice President and by its Secretary or an
=================================================================
Assistant Secretary, the Warrant Certificates shall be
=======================================================
countersigned, issued and delivered by the Warrant Agent.
=========================================================
(c) From time to time, up to the Warrant Expiration
=== ================================================
Date, the Transfer Agent shall countersign and deliver stock
=============================================================
certificates in required whole number denominations representing
=================================================================
one share of Common Stock for each Warrant exercised, subject to
=================================================================
adjustment as described herein, upon the exercise of Warrants in
=================================================================
accordance with this Agreement.
===============================
[(c)](d) From time to time through the Warrant
===
Expiration Date, the [Company ]Warrant Agent shall [issue]
=============
countersign and deliver Warrant Certificates to the persons
===========
entitled thereto in connection with any registration of transfer
or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those issued
pursuant to Section 2(b), (ii) those issued on or after the
Initial Warrant Exercise Date, upon the exercise of fewer than
all Warrants represented by any Warrant Certificate, to evidence
any unexercised Warrants held by the exercising Registered
Holder, (iii) those issued upon any registration of transfer or
exchange pursuant to Section 6, (iv) those issued in replacement
of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Section 7 and (v) at the option of the Company, in
such form as may be approved by its Board of Directors, to
reflect any adjustment made pursuant to Section 8 or 10 hereof.
3
<PAGE>
SECTION 3. Form and Execution of Warrant Certificates.
------------------------------------------
The 1999 UNS Warrant Certificates shall be substantially in the
========
form annexed hereto as Exhibit A and the 2000 UNS Warrant
===========================
Certificates shall be substantially in the form annexed hereto as
=================================================================
Exhibit B, and such Warrant Certificates may have such letters,
======= = =========================
numbers or other marks of identification or designation and such
legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement [or the
Participation Agreement], or as may be required to comply with
any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. Each Warrant
Certificate shall be dated the date of issuance thereof (whether
upon initial issuance, registration of transfer, exchange or
replacement) and issued in registered form. Warrant Certificates
shall be numbered serially with the letter W on Warrant
Certificates of all denominations.
Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice
President and by its Treasurer or an Assistant Treasurer or its
Secretary or an Assistant Secretary, by manual signatures or by
facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. Warrant Certificates
=====================
shall be manually countersigned by the Warrant Agent and shall
===============================================================
not be valid for any purpose unless so countersigned. In case
=====================================================
any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer of the
Company before the date of issuance or before countersignature by
==============================================
the Warrant [Certificates so signed shall have been issued by the
===
Company and delivered] Agent and issue and delivery thereof to
====================================
the applicable Registered Holders, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and
===================================
delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such
officer of the Company. After countersignature by the Warrant
======================================
Agent, Warrant Certificates shall be delivered by the Warrant
==============================================================
Agent to the Registered Holder without further action by the
=============================================================
Company, except as otherwise provided by Section 4 hereof. In
==========================================================
case the Company shall change its name or its state of
incorporation, Warrant Certificates bearing the Company's
previous name or state of incorporation shall continue to be
valid for all purposes.
SECTION 4. Exercise, Each Warrant may be exercised by
--------
the Registered Holder thereof at any time on or after the Initial
Warrant Exercise Date, but not after the Warrant Expiration Date,
upon the terms and subject to the conditions set forth herein and
in the related Warrant Certificate. [Upon each such exercise of
Warrants, the Company shall, as promptly as practicable] As soon
========
as practicable on or after the Exercise Date the Warrant Agent
===============================================================
shall deposit the proceeds received from the exercise of a
===========================================================
Warrant and shall notify the Company in writing of the exercise
================================================================
of the Warrants. Promptly following, and in any event within
=====================================
seven days [thereafter, execute and cause ]after the date of such
======================
notice from the Warrant Agent, the Warrant Agent, on behalf of
===============================================================
the Company, shall cause to be issued and delivered by the
======================================================
Transfer Agent [to countersign and deliver, in accordance with
the related notice of election to purchase], to the person or
===================
persons entitled to receive the same, a certificate or
====================================
certificates [ representing the aggregate number of shares of
4
<PAGE>
Common Stock issuable] for the securities deliverable upon such
==============================
exercise, [as such number shall be adjusted from time to time
pursuant to the provisions of Sections 8 and 10 hereof] unless
=======
prior to the date of issuance of such certificates the Company
================================================================
shall instruct the Warrant Agent to refrain from causing such
==============================================================
issuance of certificates pending clearance of checks received in
=================================================================
payment of the Purchase Price pursuant to such Warrants. The
========================================================
stock certificate or certificates so delivered shall be in such
denominations as may be specified in such notice or, if such
notice shall not specify denominations, a single certificate
representing all the shares of Common Stock issuable upon such
exercise shall be delivered, and in either case such certificate
or certificates shall be issued in the name of the exercising
Registered Holder or such other name or names as shall be
designated in such notice. Such certificate or certificates
shall be deemed to have been issued, and such Registered Holder
or any other person so designated to be named therein shall be
deemed for all purposes to have become a holder of record of such
shares, as of the related Exercise Date. If a Warrant shall have
been exercised only in part, the Company shall, at the time of
delivery of the applicable stock certificate or certificates,
deliver to the applicable Registered Holder a new Warrant
Certificate to evidence any unexercised Warrants held by such
Registered Holder, which new Warrant Certificate shall in all
other respects be identical with the Warrant Certificate
surrendered. Upon the exercise of any Warrant and clearance of
====================================================
the funds received, the Warrant Agent shall promptly remit the
================================================================
payment received for the Warrant to the Company or as the Company
=================================================================
may direct in writing, subject to the provisions of Section 4
==============================================================
hereof.
=======
SECTION 5. Reservation of Shares; Listing; Payment of
-------------------------------------------
Taxes, etc. (a) The Company covenants that it will at all times
-----------
reserve and keep available out of its authorized Common Stock,
solely for the purpose of issue upon exercise of Warrants, such
number of shares of Common Stock as shall then be issuable upon
the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock issued from time to time upon the
exercise of Warrants shall be duly and validly issued, fully
paid, nonassessable and free from all taxes, liens and other
charges, and that upon issuance such shares shall be listed on
each national securities exchange (including NASDAQ), if any, on
which any other shares of outstanding Common Stock of the Company
are then listed.
(b) The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation,
issuance and delivery of stock certificates and Warrant
Certificates; provided, however, that (i) if stock certificates
-------- -------
or new Warrant Certificates are to be delivered in a name other
than the name of the related Registered Holder, all transfer
taxes payable as a result of such transfer shall be paid by such
Registered Holder and (ii) delivery by the Company of stock
certificates or new Warrant Certificates in connection with such
transfer shall not be required hereunder unless such transfer
taxes, if any, shall have been paid.
(c) The Warrant Agent is hereby irrevocably authorized
=== ==================================================
to requisition the Company's Transfer Agent from time to time for
=================================================================
certificates representing shares of Common Stock issuable upon
===============================================================
exercise of the Warrants, and the Company will authorize the
=============================================================
Transfer Agent to comply with all such proper requisitions. The
================================================================
Company will file with the Warrant Agent a statement setting
=============================================================
5
<PAGE>
forth the name and address of the Transfer Agent of the Company
================================================================
for shares of Common Stock issuable upon exercise of the Warrants
=================================================================
if the Transfer Agent is other than that named in Section 1(i).
===============================================================
SECTION 6. Exchange and Registration of Transfer.
-------------------------------------
(a) Warrant Certificates for 1999 UNS Warrants may be exchanged
=====================
for other 1999 UNS Warrant Certificates representing an equal
========
aggregate number of 1999 UNS Warrants and [the] Warrant
======== ========
Certificates for 2000 UNS Warrants may be exchanged for other
==============================================================
2000 UNS Warrant Certificates representing an equal aggregate
==============================================================
number of 2000 UNS Warrants. The transfer of Warrant
=================================
Certificates may be registered, in whole or in part. Warrant
Certificates to be exchanged shall be surrendered to the
[Company] Warrant Agent at its Corporate Office, and upon
==============
satisfaction of the terms and provisions hereof, the Company
shall execute, and the Warrant agent shall countersign, issue and
=========================================
deliver in exchange therefor the Warrant Certificate or
Certificates requested by the Registered Holder making the
exchange.
(b) The [Company] Warrant Agent shall keep at its
=============
Corporate Office books in which, subject to such reasonable
regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such
office or agency, the Company shall execute, and the Warrant
================
Agent shall countersign, issue and deliver to the transferee or
========================
transferees a new 1999 UNS Warrant Certificate or Certificates or
======== ==
a new 2000 UNS Warrant Certificate or Certificates, as the case
================================================================
may be, representing an equal aggregate number of 1999 UNS
======= ========
Warrants or 2000 UNS Warrants, as the case may be.
========================================
Notwithstanding the foregoing, a Warrant may be exercised by a
new Registered Holder without a new Warrant Certificate having
been issued.
(c) With respect to all Warrant Certificates presented
for registration of transfer, (i) an assignment in substantially
the form of the Assignment set forth in [Exhibit] Exhibits A and
===============
B hereto shall be duly executed, or (ii) such Warrant
Certificates shall be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and
====
the Warrant Agent and duly executed by the Registered Holder or
=================
its attorney-in-fact duly authorized in writing.
(d) All Warrant Certificates presented for
registration of transfer or surrendered for exchange shall be
promptly canceled by the [Company] Warrant Agent and thereafter
=============
retained by the [Company] Warrant Agent until termination of this
=============
Agreement, or resignation of the Warrant Agent, or until
====================================
destroyed, at the discretion of the Company.
(e) Prior to due presentment for registration of
transfer thereof, the Company and the Warrant Agent may deem and
=====================
treat the Registered Holder of any Warrant Certificate as the
absolute owner and holder thereof and of each Warrant represented
thereby (notwithstanding any notations of ownership or writing
thereon made by any person other than a duly authorized officer
of the Company [)] or Warrant Agent) for all purposes and shall
=================
not be affected by any notice to the contrary.
6
<PAGE>
SECTION 7. Loss or Mutilation. Upon receipt by the
------------------
Company and the Warrant Agent of evidence satisfactory to [it]
=====================
them of the ownership of and loss, theft, destruction or
====
mutilation of any Warrant Certificate and (in case of loss, theft
or destruction) of indemnity satisfactory to [it] them or (in the
====
case of mutilation) upon surrender and cancellation thereof, the
Company shall execute and the Warrant Agent shall (in the absence
=======================================
of notice to the Company and/or Warrant Agent that the Warrant
===============================================================
Certificate has been acquired by a bona fide purchaser)
========================================================
countersign and deliver to the applicable Registered Holder in
===============
lieu thereof a new 1999 UNS Warrant Certificate or a new 2000 UNS
======== =================
Warrant Certificate, as the case may be, of like tenor,
========================================
representing an equal aggregate number of Warrants. Applicants
for a substitute Warrant Certificate under this Section 7 shall
comply with such other reasonable regulations and pay such
reasonable charges as the Company and the Warrant Agreement may
=========================
prescribe.
SECTION 8. Adjustment of Exercise Price and Number of
-------------------------------------------
Shares of Common Stock. The number and kind of shares
----------------------
purchasable upon the exercise of Warrants and the Purchase Price
shall be subject to adjustment from time to time as follows:
(a) Changes in Common Stock, In the event the Company
-----------------------
shall, at any time or from time to time after the date hereof,
(i) issue any shares of Common Stock as a stock dividend to the
holders of Common Stock, (ii) subdivide or combine the
outstanding shares of Common Stock into a greater or lesser
number of shares or (iii) issue any shares of its capital stock
in a reclassification or reorganization of the Common Stock (any
such issuance, subdivision, combination, reclassification or
reorganization being herein called a "Change of Shares"), then
(A) in the case of (i) or (ii) above, the number of shares of
Common Stock that may be purchased upon the exercise of each
Warrant shall be adjusted to the number of shares of Common
Stock that the Registered Holder of such Warrant would have owned
or have been entitled to receive after the happening of such
event had such Warrant been exercised immediately prior to the
record date (or, if there is no record date, the effective date)
for such event, and the Purchase Price shall be adjusted to the
price (calculated to the nearest 1,000th of one cent) determined
by multiplying the Purchase Price immediately prior to such event
by a fraction the numerator of which shall be the number of
shares of Common Stock purchasable with one Warrant immediately
prior to such event and the denominator of which shall be the
number of shares of Common Stock purchasable with one Warrant
after the adjustment referred to above and (B) in the case of
(iii) above, paragraph (l) below shall apply. An adjustment made
pursuant to clause (A) of this paragraph (a) shall become
effective retroactively immediately after the record date in the
case of a dividend and shall become effective immediately after
the effective date in other cases. Any shares of Common Stock
purchasable solely as a result of such adjustment shall not be
issued prior to the effective date of such event.
(b) Common Stock Distribution. In the event the
-------------------------
Company shall, at any time or from time to time after the date
hereof, issue, sell or otherwise distribute any shares of Common
Stock (other than pursuant to a Change of Shares or the exercise
of any [option] Option, Convertible Security (each as defined in
======
paragraph (c) below) or Warrant (any such event, including any
7
<PAGE>
event described in paragraphs (c) and (d) below, being herein
called a "Common Stock Distribution"), for a consideration per
share less than the current market price per share of Common
Stock (as defined in paragraph (f) below) on the date of such
Common Stock Distribution, then, effective upon such Common Stock
Distribution, the Purchase Price shall be reduced to the price
(calculated to the nearest 1,000th of one cent) determined by
multiplying the Purchase Price in effect immediately prior to
such Common Stock Distribution by a fraction, the numerator of
which shall be the sum of (i) the number of shares of Common
Stock outstanding (exclusive of any treasury shares) immediately
prior to such Common Stock Distribution multiplied by the current
market price per share of Common Stock on the date of such Common
Stock Distribution, plus (ii) the consideration, if any, received
by the Company upon such Common Stock Distribution and the
denominator of which shall be the product of (A) the total number
of shares of Common Stock outstanding (exclusive of any treasury
shares) immediately after such Common Stock Distribution
multiplied by (B) the current market price per share of Common
Stock on the date of such Common Stock Distribution.
If any Common Stock Distribution shall require an
adjustment to the Purchase Price pursuant to the foregoing
provisions of this paragraph (b) including by operation of
paragraph (c) or (d) below, then, effective at the time such
adjustment is made, the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be increased
to a number determined by multiplying the number of such shares
so purchasable immediately prior to such Common Stock
Distribution by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and
the denominator of which shall be the Purchase Price in effect
immediately after such adjustment. In computing adjustments
under this paragraph, fractional interests in Common Stock shall
be taken into account to the nearest 1,000th of a share.
The provisions of this paragraph (b), including by
operation of paragraph (c) or (d) below, shall not operate to
increase the Purchase Price or reduce the number of shares of
Common Stock purchasable upon the exercise of any Warrant.
(c) Issuance of Options. In the event the Company
-------------------
shall, at any time or from time to time after the date hereof
issue, sell, distribute or otherwise grant in any manner
(including by assumption) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, Common
Stock or any stock or securities convertible into or exchangeable
for Common Stock (any such rights, warrants or options being
herein called "Options" and any such convertible or exchangeable
stock or securities being herein called "Convertible
Securities"), whether or not such Options or the rights to
convert or exchange such Convertible Securities are immediately
exercisable, and the price per share at which Common Stock is
issuable upon the exercise of such Options or upon the conversion
or exchange of such Convertible Securities (determined by
dividing (i) the aggregate amount, if any, received or receivable
by the Company as consideration for the issuance, sale,
distribution or granting of such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of all such Options, plus, in the
8
<PAGE>
case of Options to acquire Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable
upon the conversion or exchange of all such Convertible
Securities, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of all such Options or upon the
conversion or exchange of all Convertible Securities issuable
upon the exercise of all such Options) shall be less than the
current market price per share of Common Stock on the date of the
issuance, sale, distribution or granting of such Options then,
for purposes of paragraph (b) above, the total maximum number of
shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of the total maximum
amount of the Convertible Securities issuable upon the exercise
of all such Options shall be deemed to have been issued as of the
date of the issuance, sale, distribution or granting of such
Options and thereafter shall be deemed to be outstanding and the
Company shall be deemed to have received as consideration such
price per share, determined as provided above, therefor. Except
as otherwise provided in paragraphs (j) and (k) below, no
additional adjustment of the Purchase Price shall be made upon
the actual exercise of such Options or upon conversion or
exchange of the Convertible Securities issuable upon the exercise
of such Options.
(d) Issuance of Convertible Securities. In the event
----------------------------------
the Company shall, at any time or from time to time after the
date hereof, issue, sell or otherwise distribute (including by
assumption) any Convertible Securities (other than upon the
exercise of any Option), whether or not the rights to convert or
exchange such Convertible Securities are immediately exercisable,
and the price per share at which Common Stock is issuable upon
the conversion or exchange of such Convertible Securities
(determined by dividing (i) the aggregate amount, if any,
received or receivable by the Company as consideration for the
issuance, sale or distribution of such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange of
all such Convertible Securities, by (ii) the total maximum number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than
the current market price per share of Common Stock on the date of
such issuance, sale or distribution, then, for purposes of
paragraph (b) above, the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of
the date of the issuance, sale or distribution of such
Convertible Securities and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as
consideration such price per share, determined as provided above,
therefor. Except as otherwise provided in paragraphs (j) and (k)
below, no additional adjustment of the Purchase Price shall be
made upon the actual conversion or exchange of such Convertible
Securities.
(e) Dividends and Distributions. In the event the
---------------------------
Company shall, at any time or from time to time after the date
hereof, distribute to the holders of Common Stock any dividend or
other distribution of cash, evidences of its indebtedness, other
securities or other properties or assets in each case other than
(i) dividends payable in Common Stock[,] Options or Convertible
Securities and (ii) any cash dividend that, when added to all
other cash dividends paid in the one year prior to the
declaration date of such dividend (excluding any such other
9
<PAGE>
dividend included in a previous adjustment of the Purchase Price
pursuant to this paragraph (e), does not exceed 10% of the
current market price per share of Common Stock on such
declaration date), or any options, warrants or other rights to
subscribe for or purchase any of the foregoing, then (A) the
Purchase Price shall be decreased to a price determined by
multiplying the Purchase Price then in effect by a fraction, the
numerator of which shall be the current market price per share of
Common Stock on the record date for such distribution less the
sum of (X) the cash portion, if any, of such distribution per
share of Common Stock outstanding (exclusive of any treasury
shares) on the record date for such distribution plus (Y) the
then fair market value (as determined in good faith by the Board
of Directors of the Company) per share of Common Stock
outstanding (exclusive of any treasury shares) on the record date
for such distribution of that portion, if any, of such
distribution consisting of evidences of indebtedness, other
securities, properties, assets, options, warrants or subscription
or purchase rights, and the denominator of which shall be such
current market price per share of Common Stock and (B) the number
of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying
the number of shares of Common Stock so purchasable immediately
prior to the record date for such distribution by a fraction, the
numerator of which shall be the Purchase Price in effect
immediately prior to the adjustment required by clause (A) of
this sentence and the denominator of which shall be the Purchase
Price in effect immediately after such adjustment. The
adjustments required by this paragraph (e) shall be made whenever
any such distribution is made and shall become effective as of
the date of such distribution retroactive to the record date for
the determination of stockholders entitled to receive such
distribution.
(f) Current Market Price. For the purpose of any
--------------------
computation under paragraphs (b), (c), (d) and (e) of this
Section, the current market price per share of Common Stock at
any date shall be the average of the daily closing prices for the
shorter of (i) the 20 consecutive trading days ending on the last
full trading day on the exchange or market specified in the
second succeeding sentence prior to the Time of Determination and
(ii) the period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or
granting in question through such last full trading day prior to
the Time of Determination. The term "Time of Determination" as
used herein shall be the time and date of the earlier to occur of
(A) the date as of which the current market price is to be
computed and (B) the last full trading day on such exchange or
market before the commencement of "ex-dividend" trading in the
Common Stock relating to the event giving rise to the adjustment
required by paragraph (b), (c), (d) or (e). The closing price
for any day shall be the last reported sale price regular way or,
in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such
day, in each case (1) on the principal national securities
exchange on which the shares of Common Stock are listed or to
which such shares are admitted to trading or (2) if the Common
Stock is not listed or admitted to trading on a national
securities exchange, in the over-the-counter market as reported
by NASDAQ or any comparable system or (3) if the Common Stock is
not listed on NASDAQ or a comparable system, as furnished by two
members of the NASD selected from time to time in good faith by
10
<PAGE>
the Board of Directors of the Company for that purpose. In the
absence of all of the foregoing, or if for any other reason the
current market price per share cannot be determined pursuant to
the foregoing provisions of this paragraph (f), the current
market price per share shall be the fair market value thereof as
determined in good faith by the Board of Directors of the
Company.
(g) Certain Distributions. If the Company shall pay a
---------------------
dividend or make any other distribution payable in Options or
Convertible Securities, then, for purposes of paragraph (b) above
(by operation of paragraph (c) or (d) above, as the case may be),
such Options or Convertible Securities shall be deemed to have
been issued or sold without consideration.
(h) Consideration Received. If any shares of Common
----------------------
Stock, Options or Convertible Securities shall be issued, sold or
distributed for cash, the consideration received in respect
thereof shall be deemed to be the amount received by the Company
therefor, after deduction from such amount of any expenses
incurred and any underwriting commissions or concessions paid or
allowed by the Company in connection therewith; provided,
--------
however, that the expenses, commissions and concessions relating
-------
to any particular issuance, sale or distribution for cash shall
not be so deducted if, on or prior to the date thereof, the
Company furnishes each Registered Holder with an officer's
certificate representing that such expenses, commissions and
concessions are recoverable through customer rates. If any
shares of Common Stock, Options or Convertible Securities shall
be issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash received by
the Company in respect thereof shall be deemed to be the then
fair market value of such consideration (as determined in good
faith by the Board of Directors of the Company), after deduction
of any expenses incurred and any underwriting commissions or
concessions paid or allowed by the Company in connection
therewith. If any Options shall be issued in connection with the
issuance and sale of other securities of the Company[,] together
comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued without
consideration.
(i) Deferral of Certain Adjustments. No adjustment to
-------------------------------
the Purchase Price (including the related adjustment to the
number of shares of Common Stock purchasable upon the exercise of
each Warrant) shall be required hereunder unless such adjustment,
together with other adjustments carried forward as provided
below, would result in an increase or decrease of at least one
percent of the Purchase Price; provided, however, that any
-------- -------
adjustments which by reason of this paragraph (i) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. No adjustment need be made
for a change in the par value of the Common Stock.
(j) Changes in Options and Convertible Securities. If
---------------------------------------------
the exercise price provided for in any Options referred to in
paragraph (c) above, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible
Securities referred to in paragraph (c) or (d) above, or the rate
11
<PAGE>
at which any Convertible Securities referred to in paragraph (c)
or (d) above are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution upon an event
which results in a related adjustment pursuant to this Section
8), the Purchase Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of,each Warrant shall
forthwith be readjusted (effective only with respect to any
exercise of any Warrant after such readjustment) to the Purchase
Price and number of shares of Common Stock so purchasable that
would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or
Convertible Securities been made based upon such changed purchase
price, additional consideration or conversion rate, as the case
may be, but only with respect to such Options and Convertible
Securities as then remain outstanding.
(k) Expiration of Options and Convertible Securities.
------------------------------------------------
If, at any time after any adjustment to the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall
have been made pursuant to paragraph (c), (d) or (j) above or
this paragraph (k), any Options or Convertible Securities shall
have expired unexercised, the number of such shares so
purchasable shall, upon such expiration, be readjusted and shall
thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of Common
Stock deemed to have been issued in connection with such Options
or Convertible Securities were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such Options or
Convertible Securities and (ii) such shares of Common Stock, if
any, were issued or sold for the consideration actually received
by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for the
issuance, sale, distribution or granting of all such Options or
Convertible Securities, whether or not exercised; provided,
--------
however, that no such readjustment shall have the effect of
-------
decreasing the number of such shares so purchasable by an amount
(calculated by adjusting such decrease to account for all other
adjustments made pursuant to this Section 8 and Section 10
following the date of the original adjustment referred to above)
in excess of the amount of the adjustment initially made in
respect of the issuance, sale, distribution or granting of such
Options or Convertible Securities.
(l) Other Adjustments. In the event that at any time,
-----------------
as a result of an adjustment made pursuant to this Section 8 or
Section 10, the Registered Holders shall become entitled to
receive any securities of the Company other than shares of Common
Stock, thereafter the number of such other securities so
receivable upon exercise of the Warrants and the Purchase Price
applicable to such exercise shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of
Common Stock contained in this Section 8 and Section 10.
(m) Excluded Transactions. Notwithstanding any
---------------------
provision in this Section 8 to the contrary, no adjustment shall
be made pursuant to this Section 8 in respect of (i) the granting
of any Options or the issuance of any shares of Common Stock that
12
<PAGE>
may be registered on Form S-8 or any successor form under the
Securities Act of 1933, as amended, to any officers, directors or
employees of, or any consultants or advisors to, the Company or
===
any of its affiliates, or (ii) the issuance of Common Stock
=====================
pursuant to any dividend reinvestment or direct stock purchase
=========================
plan which provides that the price of the Common Stock purchased
for plan participants from the Company will be the average of the
high and low sales prices of the Common Stock as reported on the
===========
consolidated [tape] transaction reporting system on the day the
============================ ========
investment [date] is made or, if no trading in the Common Stock
=======
occurs on such date, the next preceding date on which trading
occurred; provided, however, that clause (i) of this paragraph
-----------------
(m) shall not apply to any such grant or issuance if, after
giving effect thereto, the aggregate amount of Common Stock
issued in all transactions covered by clause (i) of this
paragraph (m) (assuming the exercise of all then outstanding
Options granted in such transactions) would exceed 5% of the
number of shares of Common Stock then outstanding (after giving
effect to the exercise of all then outstanding Options so granted
but before giving effect to any other exercise of Options or
Convertible Securities).
SECTION 9. Notice of Adjustment. Whenever the
--------------------
Purchase Price or the number of shares of Common Stock or other
property purchasable upon the exercise of any Warrant is required
to be adjusted as herein provided, the Company promptly shall
deliver to the Warrant Agent, and the Warrant Agent shall
===============================================
promptly forward to each Registered Holder, notice of such
=================== =
adjustment and a certificate of a firm of independent public
accountants selected by the Board of Directors of the Company
(who may be the regular accountants employed by the Company)
setting forth in reasonable detail (a) the Purchase Price and the
number of shares of Common Stock or other property purchasable
upon the exercise of each Warrant after such adjustment, (b) a
brief statement of the facts requiring such adjustment and (c)
the computation by which such adjustment was made and the methods
and underlying assumptions utilized.
SECTION 10. Preservation of Purchase Rights upon
-------------------------------------
Merger, Consolidation, etc.; Mandatory Redemption of Warrants.
-------------------------------------------------------------
(a) In case of any consolidation or merger of the Company with
or into another person or in case of any sale, transfer or lease
to another person of all or substantially all the property of the
Company, the Company and such successor or purchasing person, as
the case may be, shall agree in writing (and such consolidation,
merger, sale, transfer or lease shall not be consummated without
such agreement) that each Registered Holder shall have the right
thereafter upon payment of the Purchase Price in effect
immediately prior to such action to purchase upon exercise of a
Warrant the kind and amount of securities, cash and other
property that it would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale,
transfer or lease had such Warrant been exercised immediately
prior to such action (provided that if the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, sale, transfer or lease is not the same
for each share of Common Stock of the Company, then for the
purposes of this paragraph (a) the kind and amount of securities,
cash and other property receivable upon exercise of the Warrants
immediately after such consolidation, merger, sale, transfer or
13
<PAGE>
lease shall be the kind and amount so receivable per share by the
holders of a majority of the outstanding shares of Common Stock).
Such written agreement shall provide for adjustments which shall
be as nearly equivalent as practicable to the adjustments
provided for in Section 8 and this paragraph (a) and shall
provide that such adjustments shall similarly apply to successive
consolidations, mergers, sales, transfers and leases.
(b) Each Registered Holder shall have the option to
require the Company (or its successor) to redeem all or any part
of such Registered Holder's Warrants upon the consummation of any
consolidation or merger of the Company with or into another
person or any sale, transfer or lease to another person of all or
substantially all the property of the Company. A Registered
Holder may exercise such option by giving to the Company, within
10 Business Days after such Registered Holder's receipt of the
notice given by the Company pursuant to Section 18 hereof in
respect of the consolidation, merger, sale, transfer or lease in
question (or, if such notice is not timely given by the Company,
at any time prior to such consummation), a written notice (a
"Notice of Exercise") substantially in the form attached to the
Warrant Certificates.
From and after the giving of any Notice of Exercise,
each Warrant covered thereby shall represent the right of the
Registered Holder thereof to receive from the Company (or its
successor), on the date on which the consolidation, merger, sale,
transfer or lease in question is consummated, an amount equal to
the current market price of such Warrant; provided, however, that
-----------------
the Registered Holder shall have the right to revoke such Notice
of Exercise and instead exercise such Warrant prior to such date
in lieu of receiving such amount. For purposes of this paragraph
(b), the current market price of each Warrant shall equal the
average of the daily closing prices of the Warrants for the 20
consecutive trading days ending on the last full trading day on
the exchange or market identified pursuant to the next succeeding
sentence prior to the first public announcement of the
consolidation, merger, sale, lease or transfer in question. The
closing price of the Warrants for any day shall be determined in
the same manner as the closing price of the Common Stock is
determined under the third sentence of Section 8(f). If for any
reason the daily closing prices of the Warrants during such 20-
trading day period cannot be determined as provided in such
sentence, the current market price of each Warrant shall equal
the average fair market value for the 20 consecutive Business
Days preceding such first public announcement, as determined by
two members of the NASD selected in good faith by the Board of
Directors of the Company.
The nonexercise of the foregoing option with respect to
any Warrant in connection with any consolidation, merger, sale,
lease or transfer shall not preclude the exercise of such option
with respect to such Warrant in connection with any subsequent
consolidation, merger, sale, lease or transfer. In the case of
any consolidation or merger in which the Company is not the
surviving entity or in the case of any sale, lease or transfer,
the Company shall cause its successor to agree in writing (and
such consolidation, merger, sale, lease or transfer shall not be
consummated without such agreement) that it shall be responsible
for the performance of the Company's obligations under this
paragraph (b).
14
<PAGE>
SECTION 11. Statement Concerning Warrant Certificates.
-----------------------------------------
The Company may, but shall not be obligated to, issue replacement
Warrant Certificates upon any adjustment to the Purchase Price or
the number or kind of shares purchasable upon exercise of the
Warrants. Irrespective of any such adjustment, the Warrant
Certificates theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrant
Certificates pursuant to this Section 11, continue to express the
same Purchase Price per share, and the same number of shares
purchasable thereunder, as were expressed in the Warrant
Certificates when the same were originally issued.
SECTION 12. Common Stock. As used in Sections 8, 9,
------------
10 and 11, the term "Common Stock" shall mean and include the
Company's Common Stock authorized on the Initial Warrant Exercise
Date and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends and in the distribution of
assets upon the voluntary liquidation, dissolution or winding up
of the Company; provided, however, that subject to Sections 8 and
-------- -------
10, the shares issuable upon exercise of the Warrants shall
include only shares of such class designated in the Company's
Certificate of Incorporation as Common Stock on the Initial
Warrant Exercise Date or (a) in the case of any consolidation,
merger, sale, transfer or lease described in Section 10, the
stock, securities or property provided for in such Section or (b)
in the case of any reclassification or change in the outstanding
shares of Common Stock issuable upon exercise of the Warrants as
a result of a subdivision or combination or consisting of a
change in par value, or from par value to no par value, or from
no par value to par value, such shares of Common Stock as so
reclassified or changed. Notwithstanding any other provision of
this Agreement to the contrary, before taking any action that
would cause an adjustment reducing the Purchase Price below the
then par value, if any, of the shares of Common Stock issuable
upon exercise of the Warrants, the Company shall take all
corporate action necessary, in the opinion of its counsel, in
order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock at the adjusted Purchase
Price.
SECTION 13. Warrant Expiration Date. Each Warrant not
-----------------------
exercised on or before the Warrant Expiration Date shall become
void and all rights of the Registered Holder thereof thereunder
and under this Agreement in respect of such Warrant shall cease.
SECTION 14. Fractional Warrants and Fractional Shares.
-----------------------------------------
If the number of Warrants or the number of shares of Common Stock
purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 8 or 10, the Company shall nevertheless not
be required to issue fractions of Warrants or fractions of shares
of Common Stock, upon exercise of the Warrants or otherwise, or
to distribute certificates that evidence fractional Warrants or
fractional shares of Common Stock. With respect to any fraction
of a Warrant called for in the aggregate Warrant position of any
Registered Holder upon any adjustment pursuant to Section 8 or 10
or any fraction of a share of Common Stock called for given the
aggregate number of shares issuable upon any exercise by a
Registered Holder of Warrants, such fraction shall be rounded to
the nearest whole number (.50 being rounded upward).
15
<PAGE>
SECTION 15. Registered Holders Not Deemed
------------------------------
Shareholders. No Registered Holder of Warrants shall, as such,
------------
be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon
exercise of such Warrants for any purpose whatsoever, nor shall
anything contained herein be construed to confer upon the
Registered Holders of the Warrants, as such, any of the rights of
a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of
par value, consolidation, merger or conveyance or otherwise), or
=
to receive notice of meetings, or to receive dividends or
subscription rights until such Registered Holder shall have
exercised Warrants in accordance with the provisions hereof.
SECTION 16. Cancellation of Warrant Certificates. If
------------------------------------
the Company shall purchase or acquire any Warrant or Warrants,
the Warrant Certificate or Warrant Certificates evidencing the
same shall thereupon be canceled by it and retired. The Company
shall also cancel Warrant Certificates following exercise of any
or all of the Warrants represented thereby or delivered to it for
registration of transfer or exchange.
SECTION 17. Rights of Action. All rights of action
----------------
==========================================
with respect to this Agreement are vested in the respective
============================================================
Registered Holders of the Warrants, and any Registered Holder of
=================================================================
a Warrant, without consent of the Warrant Agent or of the holder
=================================================================
of any other Warrant, may, in his, her or its own behalf and for
================================================================
his, her or its own benefit, enforce against the Company such
==============================================================
Registered Holder's right to exercise his, her or its Warrants
===============================================================
for the purchase of shares of Common Stock in the manner provided
=================================================================
in the Warrant Certificate and this Agreement.
==============================================
SECTION 18. Agreement of Warrantholders. Every holder
---------------------------
=======================================================
of a Warrant, by such holder's acceptance thereof, consents and
================================================================
agrees with the Company, the Warrant Agent and every other holder
=================================================================
of a Warrant that:
==================
(a) The Warrants are transferable only on the registry
=== ==================================================
books of the Warrant Agent by the Registered Holder thereof in
===============================================================
person or by his, her or its attorney duly authorized in writing
================================================================
and only if the Warrant Certificates representing such Warrants
=================================================================
are surrendered at the office of the Warrant Agent, duly endorsed
=================================================================
or accompanied by a proper instrument of transfer satisfactory to
=================================================================
the Warrant Agent and the Company in their sole discretion,
============================================================
together with payment of any applicable transfer taxes; and
===========================================================
(b) The Company and the Warrant Agent may deem and
=== ===============================================
treat the person in whose name the Warrant Certificate is
==========================================================
registered as the Registered Holder and as the absolute, true and
=================================================================
lawful owner of the Warrants represented thereby for all
=========================================================
purposes, and neither the Company nor the Warrant Agent shall be
=================================================================
affected by any notice or knowledge to the contrary, except as
===============================================================
otherwise expressly provided in Section 6 hereof.
=================================================
16
<PAGE>
SECTION 19. Cancellation of Warrant Certificates. If
------------------------------------
=======================================================
the Company shall purchase or acquire any Warrant or Warrants,
================================================================
the Warrant Certificate or Certificates evidencing the same shall
=================================================================
thereupon be delivered to the Warrant Agent and canceled by it
===============================================================
and retired. The Warrant Agent shall also cancel the Warrant
==============================================================
Certificates following exercise of any or all of the Warrants
==============================================================
represented thereby or delivered to it for transfer, split-up,
===============================================================
combination or exchange.
========================
SECTION 20. Warrant Agent. (a) Duties and
------------- -----------
=============================================
Liabilities. The Warrant Agent hereby accepts the agency
-----------
==========================================================
established by this Agreement and agrees to perform the same upon
=================================================================
the terms and conditions herein set forth, by all of which the
===============================================================
Company and the Registered Holders of the Warrants, by their
=============================================================
acceptance thereof, shall be bound. The Warrant Agent shall not,
================================================================
by countersigning Warrant Certificates or by any other act
===========================================================
hereunder, be deemed to make any representations as to the
===========================================================
validity or authorization of the Warrants or the Warrant
=========================================================
Certificates (except as to its countersignature thereon) or of
===============================================================
any securities or other property delivered upon exercise or
============================================================
repurchase of any Warrant, or as to the accuracy of the
========================================================
computation of the Purchase Price or exercise or repurchase of
===============================================================
any Warrant, or the correctness of the representations of the
==============================================================
Company made in the certificates that the Warrant Agent receives.
=================================================================
The Warrant Agent shall not be accountable for the use or
==========================================================
application by the Company of the proceeds of the exercise of any
=================================================================
Warrant. The Warrant Agent shall not have any duty to calculate
=================================================================
or determine any adjustments with respect to either the Purchase
=================================================================
Price or the kind and amount of shares or other securities or any
=================================================================
property receivable by Registered Holders upon the exercise or
===============================================================
repurchase of Warrants required from time to time and the Warrant
=================================================================
Agent shall have no duty or responsibility in determining the
==============================================================
accuracy or correctness of such calculation. The Warrant Agent
================================================================
shall not be (a) liable for any recital or statement of fact
=============================================================
contained herein or in the Warrant Certificates or for any action
=================================================================
taken, suffered or omitted by it in good faith in the belief that
=================================================================
any Warrant Certificate or any other documents or any signatures
=================================================================
are genuine or properly authorized, (b) responsible for any
============================================================
failure on the part of the Company to comply with any of its
=============================================================
covenants and obligations contained in this Agreement or in the
================================================================
Warrant Certificates or (c) liable for any act or omission in
==============================================================
connection with this Agreement except for its own gross
========================================================
negligence or willful misconduct. The Warrant Agent is hereby
===============================================================
authorized to accept instructions with respect to the performance
=================================================================
of its duties hereunder from the President, any Vice President or
=================================================================
the Secretary or Treasurer or an Assistant Treasurer of the
============================================================
Company and to apply to any such officer for instructions (which
=================================================================
instructions will be promptly given in writing when requested)
===============================================================
and the Warrant Agent shall not be liable for any action taken or
================================================================
suffered to be taken by it in good faith in accordance with the
================================================================
instructions of any such officer; however, in its discretion, the
=================================================================
Warrant Agent may in lieu thereof accept other evidence of such
================================================================
or may require such further or additional evidence as it may deem
=================================================================
reasonable. The Warrant Agent shall not be liable for any action
=================================================================
taken with respect to any matter in the event it requests
==========================================================
instructions from the Company as to that matter and does not
=============================================================
receive such instructions within a reasonable period of time
=============================================================
after the request therefor.
===========================
The Warrant Agent may execute and exercise any of the
======================================================
rights and powers hereby vested in it or perform any duty
==========================================================
hereunder either itself or by or through its attorneys, agents or
=================================================================
17
<PAGE>
employees, and the Warrant Agent shall not be answerable or
============================================================
accountable for any act, default, neglect or misconduct of any
===============================================================
such attorneys, agents or employees, provided reasonable care has
--------
=================================================================
been exercised in the selection and in the continued employment
=================================================================
of any such attorney, agent or employee. The Warrant Agent shall
=================================================================
not be under any obligation or duty to institute, appear in or
===============================================================
defend any action, suit or legal proceeding in respect hereof,
===============================================================
unless first indemnified to its satisfaction, but this provision
=================================================================
shall not affect the power of the Warrant Agent to take such
=============================================================
action as the Warrant Agent may consider proper, whether with or
=================================================================
without such indemnity. The Warrant Agent shall promptly notify
=================================================================
the Company in writing of any claim made or action, suit or
============================================================
proceeding instituted against it arising out of or in connection
=================================================================
with this Agreement.
====================
The Company will perform, execute, acknowledge and
===================================================
deliver or cause to be delivered all such further acts
========================================================
instruments and assurances as are consistent with this Agreement
================================================================
and as may reasonably be required by the Warrant Agent in order
================================================================
to enable it to carry out or perform its duties under this
===========================================================
Agreement.
==========
The Warrant Agent shall act solely as agent of the
===================================================
Company hereunder. The Warrant Agent shall not be liable except
=================================================================
for the failure to perform such duties as are specifically set
===============================================================
forth herein, and no implied covenants or obligations shall be
===============================================================
read into this Agreement against the Warrant Agent, whose duties
=================================================================
and obligations shall be determined solely by the express
==========================================================
provisions hereof.
==================
(b) Right to Consult Counsel. The Warrant Agent may
------------------------
=== =================================================
at any time consult with legal counsel acceptable to the Company
=================================================================
(who may be legal counsel for the Company), and the opinion or
===============================================================
advice of such counsel shall be full and complete authorization
================================================================
and protection to the Warrant Agent and the Warrant Agent shall
================================================================
incur no liability or responsibility to the Company or to any
==============================================================
Registered Holder for any action taken, suffered or omitted by it
=================================================================
in good faith in accordance with the opinion or advice of such
===============================================================
counsel.
========
(c) Compensation; Indemnification. The Company agrees
-----------------------------
=== ==================================================
promptly to pay the Warrant Agent from time to time, on demand of
=================================================================
the Warrant Agent, compensation for its services hereunder as the
=================================================================
Company and the Warrant Agent may agree from time to time, and to
=================================================================
reimburse it for reasonable expenses and counsel fees incurred in
=================================================================
connection with the execution and administration of this
==========================================================
Agreement, and further agrees to indemnify the Warrant Agent and
================================================================
save it harmless against any losses, liabilities or expenses
=============================================================
arising out of or in connection with the acceptance and
========================================================
administration of this Agreement, including the costs and
==========================================================
expenses of investigating or defending any claim of such
=========================================================
liability, except that the Company shall have no liability
===========================================================
hereunder to the extent that any such loss, liability or expense
=================================================================
results from the Warrant Agent's own gross negligence or willful
=================================================================
misconduct. The obligations of the Company under this Section
===============================================================
shall survive the exercise and the expiration of the Warrants and
=================================================================
the resignation or removal of the Warrant Agent.
================================================
(d) No Restrictions on Actions. The Warrant Agent and
--------------------------
=== ==================================================
any stockholder, director, officer or employee of the Warrant
==============================================================
Agent may buy, sell or deal in any of the Warrants or other
============================================================
18
<PAGE>
securities of the Company or become pecuniarily interested in
==============================================================
transactions in which the Company may be interested, or contract
================================================================
with or lend money to the Company or otherwise act as fully and
================================================================
freely as though it were not the Warrant Agent under this
==========================================================
Agreement. Nothing herein shall preclude the Warrant Agent from
=================================================================
acting in any other capacity for the Company or for any other
==============================================================
legal entity.
=============
(e) Discharge or Removal; Replacement Warrant Agent.
-----------------------------------------------
=== ==================================================
The Warrant Agent may resign from its position as such and be
==============================================================
discharged from all further duties and liabilities hereunder
==============================================================
(except liability arising as a result of the Warrant Agent's own
=================================================================
gross negligence or willful misconduct), after giving one month's
=================================================================
prior written notice to the Company. The Company may remove the
=================================================================
Warrant Agent upon one month's written notice specifying the date
=================================================================
when such discharge from all further duties and liabilities
=============================================================
hereunder, except as aforesaid. The Warrant Agent or the Company
=================================================================
shall cause to be mailed to each Registered Holder of a Warrant a
=================================================================
copy of said notice of resignation or notice of removal, as the
================================================================
case may be. Upon such resignation or removal the Company shall
=================================================================
appoint in writing a new warrant agent. If the Company shall
==============================================================
fail to make such appointment within a period of 30 calendar days
=================================================================
after it has been notified in writing of such resignation by the
=================================================================
resigning Warrant Agent or after such removal, then the resigning
=================================================================
Warrant Agent or the Registered Holder of any Warrant may apply
================================================================
to any court of competent jurisdiction for the appointment of a
================================================================
new warrant agent. Pending appointment of a successor to the
==============================================================
original Warrant Agent, either by the Company or by such a court,
=================================================================
the duties of the Warrant Agent shall be carried out by the
============================================================
Company. Any new warrant agent, whether appointed by the Company
=================================================================
or by such a court, shall be a bank or trust company doing
===========================================================
business under the laws of the United States or any state
==========================================================
thereof, in good standing and having a combined capital and
============================================================
surplus of not less than $25,000,000. The combined capital and
================================================================
surplus of any such new warrant agent shall be deemed to be the
================================================================
combined capital and surplus as set froth in the most recent
=============================================================
annual report of its condition published by such warrant agent
===============================================================
prior to its appointment, provided that such reports are
--------
=========================================================
published at least annually pursuant to law or the requirements
================================================================
of a federal or state supervising or examining authority. After
=================================================================
acceptance in writing of such appointment by the new warrant
=============================================================
agent, it shall be vested with the same powers, rights, duties
===============================================================
and responsibilities as if it had been originally named herein as
=================================================================
the Warrant Agent, without any further assurance, conveyance, act
=================================================================
or deed; however, the original Warrant Agent shall in all events
================================================================
deliver and transfer to the successor Warrant Agent all property,
=================================================================
if any, at the time held hereunder by the original Warrant Agent
================================================================
and if for any reason it shall be necessary or expedient to
============================================================
execute and deliver any further assurance, conveyance, act or
==============================================================
deed, the same shall be done at the expense of the Company and
===============================================================
shall be legally and validly executed and delivered by the
===========================================================
resigning or removed Warrant Agent. Not later than the effective
=================================================================
date of any such appointment, the Company shall file notice
============================================================
thereof with the resigning or removed Warrant Agent and shall
==============================================================
forthwith cause a copy of such notice to be mailed to each
===========================================================
Registered Holder of a Warrant. Failure to give any notice
============================================================
provided for in this paragraph (e), however, or any defect
===========================================================
therein, shall not affect the legality or validity of the
==========================================================
resignation of the Warrant Agent or the appointment of a new
=============================================================
warrant agent, as the case may be.
==================================
19
<PAGE>
(f) Successor Warrant Agent. Any corporation into
-----------------------
=== ===============================================
which the Warrant Agent or any new warrant agent may be merged,
================================================================
or any corporation resulting from any consolidation to which the
=================================================================
Warrant Agent or any new warrant agent shall be a party, shall be
=================================================================
a successor Warrant Agent under this Agreement without any
===========================================================
further act, provided that such corporation would be eligible for
--------
=================================================================
appointment as successor to the Warrant Agent under the
========================================================
provisions of paragraph (e) above. Any such successor Warrant
===============================================================
Agent shall promptly cause notice of it succession as Warrant
==============================================================
Agent to be mailed to each Registered Holder of a Warrant.
==========================================================
SECTION 21. Waivers; Amendments. No failure or delay
-------------------
===========
of the Registered Holders or any of them in exercising any right
or power under this Agreement or the Warrants shall operate as a
waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power preclude any other or
further exercise thereof or the exercise of any other right or
power. The rights and remedies of the Registered Holders are
cumulative and not exclusive of any rights or remedies that they
would otherwise have. The [provisions of this Agreement ]Warrant
=======
Agent and the [Warrants may be amended, modified or waived with
=====
(and only with) the written consent of ]the Company and the
Registered Holders of Company may by supplemental agreement make
===========================================
any changes or corrections in this Agreement (a) that they shall
=================================================================
deem appropriate to cure any ambiguity or to correct any
=========================================================
defective or inconsistent provisions or manifest mistake or error
=================================================================
herein contained; or (b) that they may deem necessary or
=========================================================
desirable and which shall not adversely affect the interests of
================================================================
the holders of UNS Warrant Certificates [representing more than
=================
50% of the Warrants then outstanding;] provided, however, that
-------- -------
=====
this Agreement shall not otherwise be amended, modified or waived
=================================================================
except with the consent in writing of the Company and the
===========================================================
Registered Holders of Warrant Certificates representing more than
=================================================================
50% of the Warrants then outstanding; and provided, further,
-----------------
=============================================================
that no change in the number or kind of the securities
purchasable upon the exercise of any Warrant, or the Purchase
Price, or the Warrant Expiration Date, and no amendment, waiver
or modification of the provisions of this Section 18 or of
Section 8 or 10, shall be made without the written consent of the
Registered Holders of all Warrants then outstanding, other than
such adjustments as are contemplated by the provisions of
Sections 8 and 10.
In the event of any such amendment, modification or
waiver, the [Company ]Warrant Agent shall give prompt notice
=============
thereof to all Registered Holders and, if appropriate, notation
thereof shall be made on all Warrant Certificates thereafter
surrendered for registration of transfer or exchange.
No notice or demand on the Company in any case shall
entitle the Company to any other or future notice or demand in
similar or other circumstances.
SECTION [18] 22. Notice of Certain Events. In case at
== ------------------------
any time:
20
<PAGE>
(a) the Company shall pay any dividend upon, or make
any distribution in respect of, its Common Stock that would
give rise to an adjustment pursuant to Section 8(e);
(b) the Company shall offer for subscription to
holders of its Common Stock any additional shares of stock
of any class or other rights;
(c) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with or into, or
sale, transfer or lease of all or substantially all of its
property to, another entity; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give
notice to the Warrant Agent, and the Warrant Agent shall give
================================================
notice to the Registered Holders, of the date on which (i) the
============= =
books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale,
transfer, lease, dissolution, liquidation or winding up shall
take place, as the case may be. Such notice to Registered
==============
Holders shall be given not less than 10 days prior to the record
=======
date or the date on which the books of the Company are to be
closed in respect thereto in the case of an action specified in
clause (i) and at least 20 days prior to the action in question
(or as soon as the Company has knowledge of the action) in the
case of an action specified in clause (ii).
SECTION [19.] 23. Notices. All notices, requests,
=== -------
consents and other communications hereunder shall be in writing
and shall be deemed to have been made when delivered or mailed
first class, registered or certified mail, postage prepaid [as
follows: if] to a Registered Holder[,] at the address of such
holder as shown on the registry books maintained by the Company
[; if] and to the Company[, at] or the Warrant Agent, as follows:
=== =================================
To the Company:
===============
Tucson Electric Power Company
[,] 220 West Sixth Street
[,] Tucson, Arizona 85702
[,] Attention: Treasurer
[,] To the Warrant Agent:
=====================
The Bank of New York
====================
P.O. Box 11002
==============
Church Street Station
=====================
21
<PAGE>
New York, New York 10286-1281
=============================
or at such other address as may have been furnished to the
[Registered Holders ]party giving or making such notice in
==================================
writing [by the Company].
SECTION [20] 24. Governing Law. This Agreement shall
== -------------
be governed by and construed in accordance with the laws of the
State of Arizona, without reference to principles of conflict of
laws.
SECTION [21] 25. Binding Effect. This Agreement shall
== --------------
be binding upon and inure to the benefit of the Company and its
successors and assigns, and the Registered Holders from time to
time of Warrant Certificates. Each Registered Holder, by its
acceptance of a Warrant Certificate, agrees to be bound by the
provisions of this Agreement as if it were a party hereto.
Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in
equity or at law or to impose upon any other person any duty,
liability or obligation.
SECTION [22.] 26. Severability. In case any one or
=== ------------
more of the provisions contained in this Agreement or the Warrant
Certificates issued hereunder shall be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby.
The parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
SECTION [23.] 27. Counterparts. This Agreement may be
=== ------------
executed in several counterparts, which taken together shall
constitute a single document.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
[TUCSON ELECTRIC POWER COMPANY,
by
------------------------------
Susan R. Wallach
Vice President and Treasurer
CHRYSLER CAPITAL] UNISOURCE ENERGY CORPORATION,
================
by
------------------------------
Name:
Title:
THE BANK OF NEW YORK,
=====================
as Warrant Agent [CILCORP LEASE
=================
MANAGEMENT INC.]
by
------------------------------
Name:
Title:
23
<PAGE>
[MWR CAPITAL INC.,
by
------------------------------
Name:
Title:
NORTHERN LEASING COMPANY, INC.
by
------------------------------
Name:
Title:
U S WEST FINANCIAL SERVICES, INC.
by
------------------------------
Name:
Title:
PHILIP MORRIS CAPITAL CORPORATION
by
------------------------------
Name:
Title:]
EXHIBIT A
[INITIAL REGISTERED HOLDERS
Name and Address Number of Warrants
Chrysler Capital Corporation 2,131,244
225 High Ridge Road
Stamford, Connecticut 06905
CILCORP Lease Management, Inc. 895,115
300 Hamilton Boulevard (Suite 300)
Peoria, Illinois 61602
A-1
<PAGE>
MWR Capital Inc. 852,491
666 Grand Avenue
Des Moines, Iowa 50309
Northern Leasing Company, Inc. 1,278,742
c/o PacifiCorp Financial
Services,, Inc.
825 NE - Multnomah Street (Suite 775)
Portland, Oregon 97232
Philip Morris Capital Corporation 5,191,693
800 Westchester Avenue
Rye Brook, New York 10573-1301
U S WEST Financial Services, Inc. 1,704,993
One Canterbury Green (4th Floor)
Stamford, Connecticut 06901
EXHIBIT B]
[Form of 1999 UNS Warrant Certificate]
--------------------------------------
========
No. W - 1999 Warrants
------------ --------
======
Warrant Certificate
-------------------
[TUCSON ELECTRIC POWER COMPANY] UNISOURCE ENERGY CORPORATION
============================
THIS CERTIFIES THAT , or
its registered assigns, is the registered owner (the "Registered
Holder") of the number of Warrants set forth above, each of which
entitles the owner thereof to purchase from [Tucson Electric
Power Company] UniSource Energy Corporation (the "Company') at
============================
any time prior to 4:00 p.m. (Tucson, Arizona time) on[, 2002]
March 15, 1999 , at the principal office of the Company, at 220
==============
West Sixth Street, Tucson, Arizona 85702, one fully paid and
nonassessable share of the Common Stock, without par value
("Common Stock"), of the Company at a purchase price of [$3.20]
$16.00 per share (the "Purchase Price") upon presentation and
======
surrender of this Warrant Certificate with the Form of Election
to Purchase duly executed, together with payment in cash, or by
official bank or certified check made payable to the Company, or
by wire transfer, of an amount in lawful money of the United
States of America equal to the applicable Purchase Price. The
number of Warrants evidenced by this Warrant Certificate (and the
number of shares of Common Stock that may be purchased upon
exercise thereof) set forth above, and the Purchase Price per
A-2
<PAGE>
share set forth above, are the number and Purchase Price as of
[1992] , 1999, based on the shares of Common Stock as
---------
===============
constituted at such date. As provided in the Warrant Agreement
referred to below, upon the happening of certain events, (a) the
Purchase Price and the number of shares of Common Stock that may
be purchased upon the exercise of the Warrants evidenced by this
Warrant Certificate are subject to modification and adjustment
and (b) the registered holder of the Warrants evidenced by this
Warrant Certificate may require the redemption thereof.
This Warrant Certificate is subject to all of the terms
and conditions of a Warrant Agreement dated as of
[ , 1992] , 1998 (the "Warrant Agreement"),
-------------- =============
between the Company and the [initial registered holders] Warrant
======
Agent. The Warrant Agreement is hereby incorporated herein by
=====
reference and made a part hereof. Reference is hereby made to
the Warrant Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities
thereunder of the Company and the registered holders of the
Warrant Certificates. Copies of the Warrant Agreement are on
file at the office of the Company referred to above.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the [principal] office of the
[Company] Warrant Agent, may be exchanged for another Warrant
=============
Certificate or Warrant Certificates evidencing Warrants entitling
the Registered Holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered shall have
entitled the Registered Holder to purchase. If this Warrant
Certificate shall be exercised or redeemed in part, the
Registered Holder shall be entitled to receive upon surrender
hereof another Warrant Certificate or Warrant Certificates for
the number of whole Warrants not exercised.
If the Warrants evidenced by this Warrant Certificate
remain unexercised or unredeemed at the expiration of the period
during which Warrants are exercisable, as set forth in the first
paragraph hereof, such Warrants shall thereupon become void and
all rights of the Registered Holder hereunder and under the
Warrant Agreement in respect of such Warrants shall cease.
No fractional Warrants will be issued upon any
adjustment pursuant to Section 8 or 10 of the Warrant Agreement
and no fractional shares of Common Stock will be issued upon the
exercise of any Warrant or Warrants evidenced hereby. With
respect to any fraction of a Warrant called for in the aggregate
Warrant position of the Registered Holder upon any adjustment
pursuant to Section 8 or 10 of the Warrant Agreement or any
fraction of a share of Common Stock called for given the
aggregate number of shares issuable upon any exercise by the
Registered Holder of Warrants, such fraction shall be rounded to
the nearest whole number (.50 being rounded upward).
Until the Warrant or Warrants evidenced by this Warrant
Certificate are exercised as provided in the Warrant Agreement,
no Registered Holder of this Warrant Certificate, as such, shall
be entitled to vote or receive dividends or be deemed for any
A-3
<PAGE>
purpose the holder of Common Stock or of any other securities of
the Company that may at any time be issuable on the exercise
hereof, nor shall anything contained in the Warrant Agreement or
herein be construed to confer upon the Registered Holder hereof,
as such, any of the rights of a shareholder of the Company or any
right to vote upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate
action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value, consolidation,
merger, conveyance, or otherwise) or, except as provided in the
Warrant Agreement, to receive notice of meetings, or to receive
dividends or subscription rights or otherwise.
A-4
<PAGE>
[WITNESS, the signature of the proper officers of the
Company and its corporate seal.] This Warrant Certificate shall
===============================
not be valid for any purpose until it shall have been
======================================================
countersigned by the Warrant Agent.
===================================
Dated as of
[TUCSON ELECTRIC POWER COMPANY,]
UNISOURCE ENERGY CORPORATION
============================
by
--------------------------
[Susan R. Wallach] Name:
=====
[Vice President and ]Title:
======
[Treasurer] Countersigned:
==============
[Attest:] THE BANK OF NEW YORK
====================
as Warrant Agent
==================
by:
=== -------------------
Name:
Title:
A-5
<PAGE>
ASSIGNMENT
(To be executed by the Registered Holder if such
Registered Holder desires to register the transfer of
the Warrant Certificate.)
FOR VALUE RECEIVED, hereby sells,
-------------------------
assigns and transfers unto this Warrant
-------------------------
Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
-----------
Attorney to transfer this Warrant Certificate on the books of
[Tucson Electric Power Company] the Warrant Agent with full power
=================
of substitution.
Dated: .
--------------------
Signature:
----------------------------
Signature Guaranteed:
----------------------------
NOTICE
The signature on the foregoing Assignment must conform
in all respects to the name of the Registered Holder as specified
on the face of this Warrant Certificate.
A-6
<PAGE>
ELECTION TO PURCHASE
(To be executed if the Registered Holder desires to
exercise any 1999 UNS Warrant represented by this
========
Warrant Certificate.)
TO: [TUCSON ELECTRIC POWER COMPANY] UNISOURCE ENERGY CORPORATION
============================
The undersigned hereby irrevocably elects to exercise
1999 UNS Warrants represented by this
---------------------------
====================================
Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such number of Warrants and
requests that certificates for such shares be issued in the name
of:
----------------------------------------------------------------
(Print name, address and social security
or other identifying number)
and in the following denominations:
----------------------------------------------------------------
================================================================
Dated: .
------------
Signature:
------------------------------
(Signature must conform in all
respects to the name of the
Registered Holder as specified
on the face of this Warrant
Certificate)
Signature Guaranteed:
------------------------------
A-7
<PAGE>
NOTICE OF EXERCISE
(To be executed if the Registered Holder desires to
have redeemed any 1999 UNS Warrant represented by this
========
Warrant Certificate.)
TO: [TUCSON ELECTRIC POWER COMPANY] UNISOURCE ENERGY CORPORATION
============================
The undersigned hereby elects to have redeemed
-------
Warrants represented by this Warrant Certificate and requests
that the redemption price for such Warrants be paid to:
----------------------------------------------------------------
(Print name, address and social security
or other identifying number)
The undersigned has the right to revoke this Notice of
Exercise as provided in Section 10(b) of the Warrant Agreement.
Dated: .
------------
Signature:
------------------------------
(Signature must conform in all
respects to the name of the
Registered Holder as specified
on the face of this Warrant
Certificate)
Signature Guaranteed:
------------------------------
A-8
<PAGE>
EXHIBIT B
=========
[Form of 2000 UNS Warrant Certificate]
--------------------------------------
======================================
No. W - 2000 Warrants
------ --------
================= =================
Warrant Certificate
-------------------
===================
UNISOURCE ENERGY CORPORATION
============================
THIS CERTIFIES THAT , or
=====================================================
its registered assigns, is the registered owner (the "Registered
=================================================================
Holder") of the number of Warrants set forth above, each of which
=================================================================
entitles the owner thereof to purchase from UniSource Energy
=============================================================
Corporation (the "Company') at any time prior to 4:00 p.m.
===========================================================
(Tucson, Arizona time) on December 15, 2000, at the principal
==============================================================
office of the Company, at 220 West Sixth Street, Tucson, Arizona
================================================================
85702, one fully paid and nonassessable share of the Common
============================================================
Stock, without par value ("Common Stock"), of the Company at a
===============================================================
purchase price of $16.00 per share (the "Purchase Price") upon
===============================================================
presentation and surrender of this Warrant Certificate with the
================================================================
Form of Election to Purchase duly executed, together with payment
=================================================================
in cash, or by official bank or certified check made payable to
================================================================
the Company, or by wire transfer, of an amount in lawful money of
================================================================
the United States of America equal to the applicable Purchase
==============================================================
Price. The number of Warrants evidenced by this Warrant
=========================================================
Certificate (and the number of shares of Common Stock that may be
=================================================================
purchased upon exercise thereof) set forth above, and the
==========================================================
Purchase Price per share set forth above, are the number and
=============================================================
Purchase Price as of , 2000, based on the shares of
---------
=============================================================
Common Stock as constituted at such date. As provided in the
==============================================================
Warrant Agreement referred to below, upon the happening of
===========================================================
certain events, (a) the Purchase Price and the number of shares
================================================================
of Common Stock that may be purchased upon the exercise of the
===============================================================
Warrants evidenced by this Warrant Certificate are subject to
==============================================================
modification and adjustment and (b) the registered holder of the
================================================================
Warrants evidenced by this Warrant Certificate may require the
===============================================================
redemption thereof.
===================
This Warrant Certificate is subject to all of the terms
=======================================================
and conditions of a Warrant Agreement dated as of , 1998
---------
=================================================================
(the "Warrant Agreement"), between the Company and the Warrant
===============================================================
Agent. The Warrant Agreement is hereby incorporated herein by
===============================================================
reference and made a part hereof. Reference is hereby made to
===============================================================
the Warrant Agreement for a full description of the rights,
============================================================
limitations of rights, obligations, duties and immunities
==========================================================
thereunder of the Company and the registered holders of the
============================================================
Warrant Certificates. Copies of the Warrant Agreement are on
==============================================================
file at the office of the Company referred to above.
====================================================
This Warrant Certificate, with or without other Warrant
=======================================================
Certificates, upon surrender at the office of the Warrant Agent,
=================================================================
may be exchanged for another Warrant Certificate or Warrant
============================================================
Certificates evidencing Warrants entitling the Registered Holder
=================================================================
B-1
<PAGE>
to purchase a like aggregate number of shares of Common Stock as
=================================================================
the Warrants evidenced by the Warrant Certificate or Warrant
=============================================================
Certificates surrendered shall have entitled the Registered
============================================================
Holder to purchase. If this Warrant Certificate shall be
==========================================================
exercised or redeemed in part, the Registered Holder shall be
==============================================================
entitled to receive upon surrender hereof another Warrant
==========================================================
Certificate or Warrant Certificates for the number of whole
=============================================================
Warrants not exercised.
=======================
If the Warrants evidenced by this Warrant Certificate
======================================================
remain unexercised or unredeemed at the expiration of the period
=================================================================
during which Warrants are exercisable, as set forth in the first
=================================================================
paragraph hereof, such Warrants shall thereupon become void and
================================================================
all rights of the Registered Holder hereunder and under the
============================================================
Warrant Agreement in respect of such Warrants shall cease.
==========================================================
No fractional Warrants will be issued upon any
===============================================
adjustment pursuant to Section 8 or 10 of the Warrant Agreement
================================================================
and no fractional shares of Common Stock will be issued upon the
================================================================
exercise of any Warrant or Warrants evidenced hereby. With
=============================================================
respect to any fraction of a Warrant called for in the aggregate
================================================================
Warrant position of the Registered Holder upon any adjustment
==============================================================
pursuant to Section 8 or 10 of the Warrant Agreement or any
============================================================
fraction of a share of Common Stock called for given the
=========================================================
aggregate number of shares issuable upon any exercise by the
=============================================================
Registered Holder of Warrants, such fraction shall be rounded to
================================================================
the nearest whole number (.50 being rounded upward).
====================================================
Until the Warrant or Warrants evidenced by this Warrant
=======================================================
Certificate are exercised as provided in the Warrant Agreement,
================================================================
no Registered Holder of this Warrant Certificate, as such, shall
=================================================================
be entitled to vote or receive dividends or be deemed for any
==============================================================
purpose the holder of Common Stock or of any other securities of
=================================================================
the Company that may at any time be issuable on the exercise
=============================================================
hereof, nor shall anything contained in the Warrant Agreement or
================================================================
herein be construed to confer upon the Registered Holder hereof,
=================================================================
as such, any of the rights of a shareholder of the Company or any
=================================================================
right to vote upon any matter submitted to shareholders at any
===============================================================
meeting thereof, or to give or withhold consent to any corporate
=================================================================
action (whether upon any recapitalization, issue of stock,
===========================================================
reclassification of stock, change of par value, consolidation,
===============================================================
merger, conveyance, or otherwise) or, except as provided in the
================================================================
Warrant Agreement, to receive notice of meetings, or to receive
================================================================
dividends or subscription rights or otherwise.
==============================================
B-2
<PAGE>
This Warrant Certificate shall not be valid for any
====================================================
purpose until it shall have been countersigned by the Warrant
==============================================================
Agent.
======
Dated as of
===========
UNISOURCE ENERGY CORPORATION
============================
by
--------------------------
=============================
Name:
=====
Title:
======
Countersigned:
==============
THE BANK OF NEW YORK
====================
as Warrant Agent
==================
by:
-------------------
=== ===================
Name:
=====
Title:
======
B-3
<PAGE>
ASSIGNMENT
==========
(To be executed by the Registered Holder if such
=================================================
Registered Holder desires to register the transfer of
======================================================
the Warrant Certificate.)
=========================
FOR VALUE RECEIVED, hereby sells,
-------------------------
=============================================================
assigns and transfers unto this Warrant
-------------------------
=================================================================
Certificate, together with all right, title and interest therein,
=================================================================
and does hereby irrevocably constitute and appoint
-----------
===============================================================
Attorney to transfer this Warrant Certificate on the books of the
=================================================================
Warrant Agent with full power of substitution.
==============================================
Dated: .
--------------------
============================
Signature:
========== ----------------------------
============================
Signature Guaranteed:
===================== ----------------------------
============================
NOTICE
======
The signature on the foregoing Assignment must conform
=======================================================
in all respects to the name of the Registered Holder as specified
=================================================================
on the face of this Warrant Certificate.
========================================
B-4
<PAGE>
ELECTION TO PURCHASE
====================
(To be executed if the Registered Holder desires to
====================================================
exercise any 2000 UNS Warrant represented by this
==================================================
Warrant Certificate.)
=====================
TO: UNISOURCE ENERGY CORPORATION
=== ============================
The undersigned hereby irrevocably elects to exercise
=======================================================
2000 UNS Warrants represented by this
-------------------------
================================================================
Warrant Certificate to purchase the shares of Common Stock
===========================================================
issuable upon the exercise of such number of Warrants and
==========================================================
requests that certificates for such shares be issued in the name
=================================================================
of:
===
----------------------------------------------------------------
================================================================
(Print name, address and social security
=========================================
or other identifying number)
============================
and in the following denominations:
===================================
----------------------------------------------------------------
================================================================
Dated: .
------------
=====================
Signature:
========= ------------------------------
==============================
(Signature must conform in all
==============================
respects to the name of the
============================
Registered Holder as specified
==============================
on the face of this Warrant
============================
Certificate)
=============
Signature Guaranteed:
===================== ------------------------------
==============================
B-5
<PAGE>
NOTICE OF EXERCISE
==================
(To be executed if the Registered Holder desires to
====================================================
have redeemed any 2000 UNS Warrant represented by this
======================================================
Warrant Certificate.)
=====================
TO: UNISOURCE ENERGY CORPORATION
=== ============================
The undersigned hereby elects to have redeemed
------
=======================================================
Warrants represented by this Warrant Certificate and requests
==============================================================
that the redemption price for such Warrants be paid to:
=======================================================
----------------------------------------------------------------
================================================================
(Print name, address and social security
=========================================
or other identifying number)
============================
The undersigned has the right to revoke this Notice of
=======================================================
Exercise as provided in Section 10(b) of the Warrant Agreement.
===============================================================
Dated: .
------------
=====================
Signature:
========== ------------------------------
==============================
(Signature must conform in all
==============================
respects to the name of the
============================
Registered Holder as specified
==============================
on the face of this Warrant
============================
Certificate)
============
Signature Guaranteed:
===================== ------------------------------
==============================
B-6
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS.
Reference is made to the Exhibit Index on page II-4 hereof.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused this Amendment No. 1 to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tucson,
State of Arizona on August 14, 1998.
UNISOURCE ENERGY CORPORATION
By: /s/ Ira R. Adler
------------------------------------------
IRA R. ADLER
Executive Vice President
Principal Financial Officer
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 1 to the Registration Statement has been
signed by the following persons in the capacities and on the
dates indicated.
Date: August 14, 1998 *James S. Pignatelli
-----------------------------------
James S. Pignatelli
Chairman of the Board,
President and
Principal Executive Officer
Date: August 14, 1998 /s/Ira R. Adler
-----------------------------------
Ira R. Adler
Executive Vice President,
Principal Financial
Officer and Director
Date: August 14, 1998 *Karen G. Kissinger
-----------------------------------
Karen G. Kissinger
Principal Accounting Officer
Date: , 1998 -----------------------------------
-------- Elizabeth T. Bilby
Director
Date: August 14, 1998 *Larry W. Bickle
-----------------------------------
Larry W. Bickle
Director
Date: August 14, 1998 *Harold W. Burlingame
-----------------------------------
Harold W. Burlingame
Director
Date: August 14, 1998 *Jose L. Canchola
-----------------------------------
Jose L. Canchola
Director
Date: August 14, 1998 *John L. Carter
-----------------------------------
John L. Carter
Director
Date: , 1998 -----------------------------------
-------- Daniel W.L. Fessler
Director
II-2
<PAGE>
Date: August 14, 1998 *John A. Jeter
-----------------------------------
John A. Jeter
Director
Date: August 14, 1998 *R. B. O'Rielly
-----------------------------------
R. B. O'Rielly
Director
Date: August 14, 1998 *Martha R. Seger
-----------------------------------
Martha R. Seger
Director
Date: August 14, 1998 *H. Wilson Sundt
-----------------------------------
H. Wilson Sundt
Director
By: /s/ Ira R. Adler
-----------------------------------
IRA R. ADLER, as
Attorney-in-fact for each
of the persons indicated by an asterisk
II-3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
*3(a) -- Amended and Restated Articles of
Incorporation (filed with the Commission
on January 30, 1998 as Exhibit 2(a) to
Registrant's Amendment No. 1 to Form 8-A
and incorporated herein by reference
thereto).
*3(b) -- Bylaws (filed with the Commission on
December 23, 1997 as Exhibit 2(b) to
Registrant's Form 8-A and incorporated
herein by reference thereto).
*4(a) -- Form of Warrant Agreement relating to
the UNS Warrants is contained in
Appendix A to the Prospectus included in
this Registration Statement.
*4(b) -- Form of Letter of Transmittal.
*5(a) -- Opinion of Dennis R. Nelson, Esq. (filed
with the Commission on August 6, 1998
as Exhibit 5(a) to the Registration
Statement).
*5(b) and 8 -- Opinion of Thelen Reid & Priest LLP
(filed with the Commission on August 6,
1998 as Exhibit 5(b) and 8 to the
Registration Statement).
15(a) -- Letter of Deloitte & Touche LLP
regarding unaudited interim financial
information
15(b) -- Letter of PricewaterhouseCoopers
regarding unaudited interim financial
information
*23(a) -- The Consents of Dennis R. Nelson and
Thelen Reid & Priest LLP were contained
in their opinions as Exhibit 5(a) and
5(b), respectively.
23(b) -- The Consent of Deloitte & Touche LLP.
*24 -- Power of Attorney is contained at page
II-4 of the previously filed
Registration Statement.
* Previously filed.
II-4
Exhibit 15(a)
UniSource Energy Corporation
220 West Sixth Street
Tucson, Arizona 85701
Ladies and Gentlemen:
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) for the periods ended March 31, 1997 and
June 30, 1997 as indicated in our reports dated February 23, 1998; because
we did not perform an audit, we express no opinion on that information.
We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended March 31, and
June 30, 1998, respectively are incorporated by reference in this
Pre-Effective Amendment No. 1 to Registration Statement No. 333-60809
of the Company on Form S-4.
We also are aware that the aforementioned reports, pursuant to Rule 436(c)
under the Securities Act of 1933, are not considered a part of the
Registration Statement prepared or certified by an accountant or reports
prepared or certified by an accountant within the meaning of Sections 7 and
11 of that Act.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Tucson, Arizona
August 14, 1998
Exhibit 15(b)
August 14, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that UniSource Energy Corporation has included our
reports dated May 5, 1998 and August 4, 1998 (issued pursuant to
the provisions of Statement on Auditing Standards No. 71) in the
Prospectus constituting part of its Pre-Effective Amendment No. 1
to the Registration Statement on Form S-4 (No. 333-60809) to be
filed on or about August 14, 1998. We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
UNISOURCE ENERGY CORPORATION:
We consent to the incorporation by reference in this Pre-Effective
Amendment No. 1 to Registration Statement No. 333-60809 of Unisource
Energy Corporation on Form S-4 of our report dated February 23, 1998,
appearing in the Annual Report on Form 10-K of Unisource Energy
Corporation, as amended by Form 10K/A, dated March 5, 1998, for the
year ended December 31, 1997 and to the reference
to us under the heading "Experts" in the Prospectus, which is a part
of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Tucson, Arizona
August 4, 1998
